David Blair | China Daily | Updated: 2017-06-19 07:56
Workshop of Cotte, a brand owned by Qingdao Kutesmart, has
been transformed from a traditional garment factory
into a high-tech unit
capable of making customized products. [Photo provided to China Daily]
manufacturing is usually thought to be the prototypical low-wage industry.
Companies in the industry move to wherever the labor is cheapest.
Kutesmart Co in East China's Shandong province is proving that by using the
right technology and a smart business model, it's possible to be highly
competitive in a traditional industry, even as wages rise.
"smile curve", proposed in the early 1990s by Stan Shih, the founder
of Acer Inc in Taiwan, says that most of the profits from a product are captured
by designers, brand owners or retail channels, not by the manufacturers. By
contrast, Zhang Daili, chairman and founder of Kutesmart, argues that by using
direct contacts with customers and efficient production processes,
manufacturers can get most of the profits.
Through its Red Collar and Cotte brands, the
company's "customer-to-manufacturer", information-intensive and
integrated process boosts profits by providing highly customized business suits
below mass market off-the-shelf costs, cutting out the middlemen.
customer experience center of Cotte, a brand owned by Kutesmart, in Qingdao,
Shandong province. [Photo provided to China Daily]
can either go to one of the company's brick-and-mortar measurement sites or
give detailed measurements online. They can also choose such things as the type
of cloth, styles and stitching. This personalized information is then fed into
Kutesmart's automated precision cutting machines, then to the embroiders,
joiners, ironers and others. The suit is electronically tracked until it is
ready for the customer, seven days later.
to research by Lu Yinghan of Jinan University Management School, Kutesmart's
profits increased by more than 25 percent per year in 2014 and 2015. By
contrast, public companies in the clothing industry saw average revenue fall by
2.6 percent and net profits fall by 3.6 percent in those years. The company is
privately held and does not disclose profit information directly.
employs about 3,000 people, paying wages approximately 20 percent higher than
the industry average, according to He Wei, a company representative in the
branding and public relations department.
in 1995, the company was at first a traditional clothing manufacturer. Zhang,
its chairman, worked for many years developing what the company calls its
"source data engineering" or SDE process, which links custom orders
to a finished product.
Kutesmart's founder, personally checks measurements of a custom-made suit
finishing line. [Photo provided to China Daily]
deeply integrates industry and information, using production process networking
and intelligent management to achieve synchronous production of personalized
products. It is data-driven, on-demand, zero-inventory, with a flat management
structure－a very lean production process," said He. The company uses
radio frequency identification tags to track products through the process.
a company video, Zhang said: "In 2003, Chinese were struggling for
razor-thin margins from processing orders from New York. Red Collar used to be
a traditional enterprise group. As contradictions between production and the
market increased, the only way out was to open up a new path by ourselves. We
began to consider the transformation from mass production to personalized
customization. It lasted 12 years and cost hundreds of millions. Based on deep
integration of informatization and industrialization, we formed a complete
internet-of-things system and made it our core value."
Shaozhi, a senior journalist who heads the Made in China 2025 team at Xinhua
News Agency's Economy and the Nation Weekly, stresses that the company's
success is based on its appropriate use of information systems.
uses typical machines, but they do customized production at the same time. Some
companies might think about using robots for this role. Kutesmart did not
reduce its worker count, but enhanced its profit margin a lot. This model is
very appropriate for China's current situation," Chen said.
tailors at Qingdao Kutesmart factory verify custom specifications received
through online channels. [Photo provided to China Daily]
has created another core line of business in which it advises other
manufacturers about the SDE production process.
present, we've contracted pilot upgrading plans with nearly 100 enterprises in
jeans, clothing, hats, shoes, furniture, casting and electrical
appliances," He said.
the company video, Zhang Yunlan, Kutesmart's president and daughter of the
founder, said: "Around 2014, the inventory in China's clothing market was
conservatively estimated to be worth about 400 billion yuan ($59 billion)－enough to
cover three years of sales in the Chinese market. But Kutesmart managed to have
zero inventory. When other garment enterprises were suffering because of high
inventory, Kutesmart achieved rapid growth year-on-year.
"Behind these good numbers is the unique
internet-industry model of this enterprise－manufacturing personalized products by means of
industrialization, efficiency, and cost-reduction."