Easing the supply chain for tanners9 October 2002
A major supplier of raw and wet-blue hides, KT Trading was formed at the end of 1999 in Hüenenberg, Switzerland, which is exactly half way between Lucerne and Zurich. The location was chosen specifically as it is centrally located close to Europe's major tanning and logistical centres. KT Trading acquire most of their raw materials on a rotational basis extensively from European slaughterhouses.
Worldwide, KT Trading purchase hides from Scandinavia, Germany, the Netherlands, France, central Europe, Indonesia, Spain, Canada and the US.
KT Trading is a family-owned business. As well as raw and wet-blue hides, KT Trading are also suppliers of splits, crust and finished leather. When the company were established, one of their prime aims was to become the world's leading supplier of wet-blue hides. Production is fully automated and all hides are subjected to rigorous quality checks before being shipped in one of four standard grades. Calf, veal, blue, US selection, croupons and shoulders are all included in the range, as is a wet-white tannage.
The wet-blue Java hides have been widely accepted by the worldwide leather industry and are supplied in four weight ranges from 10-16kg to 27kg+ hides.
Splits are also sold in the lime or blue from lighter Dutch or Scandinavian hides or heavier European bull hides.
KT supply raw or part processed hides and splits to more than 40 other companies worldwide. Groups of customers are invited to inspect the company's raw materials at their storage facility in Holland every six months, to provide feedback on quality standards.
Such feedback, both negative and positive alike, forms the basis of their in-house quality improvement programme, and allows for greater quality consistency throughout the company's operations.
To find out more about the company, Leather International asked Michael Rubinovitz for his opinions from the perspective of a hide supplier to tanners:
About KT Trading
Who are the other major buyers of your products and do you predict any changes in buying patterns in the future?
'KT Trading's customer base is quite elaborate. We sell to all major countries involved on the world's leather stage. KT Trading representatives are working every day to invite new customers to try our products and services. Our aim is to provide the right types of wet-blue for the exact purpose of the customer with efficient logistical backing. Buying patterns in the shoe trade are changing daily as the sourcing possibilities are shifting from traditional types of hides in the US and Europe to alternative/more competitive raw materials.
The low cattle slaughter figures combined with the rising automotive and upholstery sectors are largely the cause of this change for the shoe business, which is much more competitive.'
Where are your major markets?
'KT Trading's largest markets are Europe and Asia. Inroads are being made into central and Latin America as these markets are developing for the USA supply chain under the NAFTA and other trade association/agreements.'
Where do you source your products and how are they shipped?
'We receive most of our raw materials from slaughterhouses and hide warehouses by truck from all over Europe. In some cases, for instance from the United States, hides arrive by ship.'
How and what do you do to add value to your product range?
'We receive every parcel of raw materials and we select them according to several criteria: weight, sex, size, trim and supplier. We then process every hide type according to our customers' normal requirement of substance and size.
All our products are available to our customers, selected by grain quality and packaged for specific end product types. The customers, then, do not need to buy their raw materials in the old traditional way of having to buy 100% of the day's kill which makes for an inefficient tanning process in the final stages of leather-making.'
Is KT Trading doing anything to improve raw material quality for the leather maker?
'We work very closely with our hide suppliers. We have key suppliers who are also related directly back to the farming/slaughter process, who receive regular information from us as to the specific problems and damages and the financial incentive to improve the hide quality.'
What makes KT Trading different from other companies in the hide, skin and leather supply business?
'We provide tanners with a raw material which is tanned according to their needs physically and chemically but also, and very importantly, according to the quality/price ratio needed to fulfil specific leather orders.'
If I was a tanner, how could I be assured that what I was buying was what I had ordered from KT?
'All customers are invited to visit KT Trading at any time to inspect both our facilities and our products. Our transparency towards our customers is so that strong trust is built. Every effort is made to solve/minimise any after-sales problems in order to avoid headaches.'
What are the future plans for the company in the medium and long term?
'KT Trading is looking at ways to help other sectors of the industry benefit from our model and we are looking at working closer with our suppliers and customers to provide mutual benefits for the supply chain.'
Opinions on the raw materials and the tanning industries
In your opinion, please explain how the past twelve months have been for the tanning industry?
'The past twelve months have had enormous swings in both prices supply and demand for cattle hides. The disease era (BSE and foot and mouth) of 2000/2001 in Europe showed that negative press reports were able to influence major consumption patterns of beef cattle. However, finally, consumers were not interested in long term problems on animals and beef and so a quiet period brought consumers of beef back to the table. Farmers, however, were having to witness entire stock wipeouts with little financial subsidy or intervention by their governments. They found that the selling of farmland or redeveloping land for rent or sale meant a better return than corn crops or cattle herding.
Tanners who rely on increasing supply of cattle hides for the stabilising of hide prices have had to swallow the increase on prices as the slaughterhouses, for the first time worldwide, toughened their stance.'
Have the BSE and foot and mouth epidemics in Europe and other countries affected the raw materials market? If so, how?
'The raw materials in Europe were tremendously affected by the BSE problems as prices were going up in percentages never seen. Leather manufacturers saw the rapid increases initially as a excuse for tanners to raise prices. When leather manufacturers finally got themselves to pay increases towards March of 2001, the climate in the leather trade itself on a consumer level got so bad, many manufacturers decided to reduce production. This situation left the tanners with few orders and increases in purchase prices for raw materials. This made for direct losses for the tanners by the time replacements of hides set in and sales of leather started again towards the fall of 2001 - at losses. The end of 2001 we all know.'
Do you think that there have been any significant steps to improve raw material quality for tanners in your industry? Give an example(s)?
'In general, bans or reductions introduced by the US and EU governments on steps to reduce damage prior to slaughter, has meant that baths and dipping of cattle today hardly ever takes place. We are seeing increased parasite damage to hides even as far north as Scandinavia.'
Are you worried by protest groups such as Peta (People for the Ethical Treatment of Animals) and the effect on the meat and leather industries?
Are you doing anything to combat the claims?
'The leather and tanning industry needs to work much harder at coming together to solve this problem in a positive light for the industry. Showbiz is being used to manipulate consumers to not use products made with leather. Surely the tanning and other related sectors can come together to give some sort of formal response to the accusations which give a negative image and bring down the value and status down of leather.'
How do you predict that the slowdown in the US and world economies will effect the leather making industry and, therefore, your own business?
'The slowdown in the world economy may have some repercussions on the leather industry. It is also widely believed that industrial output is slowing down in these sectors and, while not reducing in numbers of footage being put out, certainly the number of players is going to be heavily reduced in the next 2-4 years. Business failures will increase at a higher percentage than we have seen in the past ten years. We are also studying at the possibility of re-engineering our business to suit the changes, which are coming forth today. Only the efficient and customer driven companies will survive the climate.'
Is there anything that can be to stabilise raw material prices to prevent the constant 'boom and bust' cycles?
'I don't have the answer to this.'