Mykola Sychenko, Chairman of the Supervisory Board of PrJSC “Lesya”, told LDaily about the formation of production and the successful application of advanced Japanese business of technology.
LDaily: Please tell us about the LESYA factory, the staff and working conditions.
M. Sychenko: The company was established in Soviet period — in 1965. Our garment factory, among other things, sewed robes for the needs of the entire Soviet Union: they were sold to Kazakhstan, Uzbekistan and other republics. After the collapse of the USSR, when the planned economy disappeared, the company was in need of looking for other customers under the tolling scheme, among them were the Germans.
I started my journey with the company in 2002 and we immediately reviewed what kind of trends and tendencies in clothing would be relevant. We were convinced that the whole world was moving away from classic clothes towards casual style. There was no enterprise in Ukraine at that time that could provide a quality casual product. We visited a number of exhibitions, talked to potential customers, including HUGO BOSS. In the end, we attracted an investor who built a factory for heat treatment of manufactured products, because the casual style requires not only tailoring, but also additional processing: washing, boiling, painting. In Ukraine then no one was professionally engaged in this, and we directly attracted an investor with extensive experience, who worked in this field for 18 years in Germany and Romania for HUGO BOSS and other well-known brands. Therefore, we revamped the enterprise with a high-performance production line, which can process about 30 thousand products per day.
The global crisis of 2008 caused the loss of markets for many companies and led to a decrease in production, including in Ukraine. However, our main partner, LEINEWEBER, a BRAX brand, not only remained afloat but also increased in sales. Consequently, we have developed very quickly and now produce almost a million products a year. The company has about 550 employees. We see the potential and are planning further growth.
LDaily: Have you reconsidered your development strategy due to the crisis?
M. Sychenko: We perfectly understand that the economic system tends to balance but never actually does it. Therefore, periods of decline in economic activity (recession) is a usual time in the economy, as well as the season in nature when the temperature is below a comfortable level for us. We predicted and expected it. But such phenomena in nature as tornadoes are spontaneous, so they can lead to worsening of conditions. Such a crisis was caused by the corona-storm. It was difficult to predict. We can only talk about the consequences. While the coronavirus is raging, we are careful with activities, including investments. We are thinking about saving jobs, observing the main players and the development of the situation in the fashion industry and fashion retail, we analyze information and constantly learn something new.
LDaily: You recently started implementing a Kaizen strategy in production. How is it performing?
M. Sychenko: First, we organized a book club: twice a month people gather and discuss some interesting business literature. That was when we learned about the Kaizen philosophy upon which Toyota built their success. This inspired us, and we discussed how it could be applied in the enterprise and whether we could implement it on our own factory. We found the Kaizen Institute representative office, and then Ivan Sarwar, the Managing Director of Kaizen Institute Ukraine. He showed one of the most successful enterprises of different profiles in the country where this strategy had already been implemented. We signed an agreement with the Kaizen Institute and started cooperating in November last year. We had very ambitious plans and planned to implement the pilot in six months. Today, eight months have passed since its beginning, but, unfortunately, we have not yet reached halfway. The corona crisis does not allow us to achieve our targets. In addition, not all questions of the Kaizen Approach are resolved. There are industries with clear tools where Kaizen methodologies work easier. However, this is difficult to do in the garment industry because we have to be very flexible. This is a market demand, and we constantly need to readjust. For example, we had trouble implementing this concept in terms of the teams’ organization.
We spent a lot of time with the consultants of the Kaizen Institute changing the composition and tasks for the teams several times. Finally, the format that has worked, begins to give the first results. We have done a good, painstaking job and I hope we are on the right track.
Many companies experimenting with Kaizen expect the effect of a magic pill, but fundamentally kaizen is first and foremost a change in thinking style. And this is a long process.
Kaizen is the maximum involvement of the whole team and continuous improvement, and there are no limits to perfection! It is mutual help and support, it is a long-term and careful attitude to resources.
LDaily: Why did you decide to implement lean manufacturing?
M. Sychenko: For several years our company has been winning the championship of Ukraine as a garment company №1. However, we need to constantly improve to stay in this position. We have already reached a high level of productivity in the GRD system. When the Kaizen project started, the average productivity was 102%. The goal is to increase labor productivity by 10%, as well as to improve quality indicators by 10%. It’s not that we make low-quality products — our percentage of the second grade does not exceed 1% (0.5-0.6% are second-class products that have minor defects). But to produce such high-quality products, we sometimes spend extra resources, including time. After all, during the control phase, up to 4% of the product returns for re-processing to correct defects.
According to my forecasts, the new Kaizen philosophy will change how our employees approach work. And the model in terms of quality is very simple: I do not take a defective part, do not make a defect and do not pass a defective part — the principle of three “no”. This principle in everyone’s mind frees up time to produce additional products and makes us more competitive.
LDaily: How did the corona crisis affect the company? Did you cut the staff? How have sales and orders for products changed?
M. Sychenko: The corona crisis has affected many companies, including world leaders. Former volumes are lost. The market is receding. Consumer activity of the population of all countries is declining, especially in fashion. We have a lot of women who have children. When quarantine was announced in Ukraine, it meant that schools and kindergartens would be closed and children would stay at home. We were well aware that the presence of employees would decrease, so we decided to release them on paid leave. After all, our company does it twice a year — in spring and autumn, when moving from one collection to another (spring-summer or autumn-winter) — all our employees have a two-week paid vacation when the company’s production line stops. There is only a team working on repairs, maintenance of premises and equipment to prepare for the new season. But due to the force majeure my partners and I decided to postpone the new collection.
LDaily: How do you manage also helping the doctors in these difficult times?
M. Sychenko: In Novohrad-Volynskyi, where our company is located, there is a hospital that serves 105 thousand people. At the time of quarantine it had only three ventilators. Despite the economic “storms”, our company is successful, we make a profit. There was no doubt about helping those who needed it the most, so we bought a ventilator.
When the ventilator was transferred at the end of March, the chief doctor reported another problem: there were only 20 overalls and protective suits for the entire hospital. And for one shift for one crew three such sets are required, moreover three crews must work during the day. The sets would last only two working days, and on the third day the doctors would have no protection.
But our entire enterprise was on vacation! Therefore, we informed our employees that those under the age of 35 could join the social project and make masks and protective overalls. A large number of employees responded — about fifty workers came immediately. We urgently started looking for relevant materials around the world, but the largest share of countries banned the export. Eventually, we found everything in Odessa. All authorities contributed to certifying these overalls instantly: the regional state administration, the National Medical Academy, and even the National Security and Defense Council. What usually takes six months, we managed to overcome in 10 days. In late March we donated to our hospital the first batch of 100 sets of overalls.
The next day, as soon as the event appeared on Facebook, our phone was blowing up. All Ukraine appealed to us asking for help. We had to divide the daily production volume between different customers in order to ship something at least partially within 4-5 days from the moment of ordering.
We tried to provide those regions where there were already cases of infection. During the several weeks of March-April, we made almost 100,000 overalls, aprons, boot covers, oversleeves and various kits to enable the protection of our doctors at least in the first stage. This greatly consolidated the team, especially during the first steps, when we worked on a voluntary basis. I realized that these products need to be produced in large quantities, therefore, I encouraged everyone to come back to work. We worked two shifts seven days a week. And we perfectly were aware that the issue was not in business, but in the protection of our medical workers. Eventually, we decided that everyone who worked on a voluntary basis would also be paid for their working days. At the same time, I was very pleased that everyone came to the first call to work for the benefit of society for free!
LDaily: You work with the BRAX brand. How did you start collaborating? Or maybe they were the ones who fond you?
M. Sychenko: In 2003 we visited the Frankfurt exhibition and realized that the market is shifting to the casual segment. As for the classics, there was already a ratio of 55 to 45 and every year casual won 2-3%. The market was growing rapidly, and there was no laundry in Ukraine, so no one worked in this segment due to no possibility of boiling. Something was boiling in some basement or dry cleaners, but had nothing to do with industrial production. Thanks to HUGO BOSS, we found RGT, which already had a certain reputation and technology in this market. Its representatives came to Ukraine, discussed the potential and strategy of cooperation, while being ready to invest. The model of cooperation was as follows: they create a laundry company, we have a garment factory, they bring a customer and we work together.
I met and visited Dr. Dietrich Bock, who owns laundry and sewing companies, and I really liked the high level of organization of work, as well as the technology used there. Now he is my friend and partner. We agreed on the following strategy: I help him build our laundry, and he helps organize the right business processes in my garment factory. Busche became a supplier of equipment for us, and provided credit for it. At the same time, Dr. Dietrich Bock recommended me a customer — BRAX. In such a way we started cooperation in 2004.
Our first step was up to 300 products per week. And now we have reached 4 thousand a day. In 2013, they joined our company as shareholders. There was a period of disappointment when the crisis of 2008 led to the consequences that we suffered for several years afterwards. In addition to the LESYA factory, there were two more, built with Dr. Dietrich Bock for various European customers. I needed to constantly invest in companies to increase the authorized capital and to be able to pay wages, cover costs. And we did it for a few years while we had savings. But it ran out, and I was interested in selling all the businesses. BRAX company was not happy because we cooperated and had reached an amount of 2 thousand products. They offered another format — access to Ukrainian shareholders: they offered to buy back their shares, providing support for me, so that we work together to turn the company from unprofitable to profitable business.
I believed them, and I did not regret it. The negotiations were conducted in 2012, and already in 2013 we completed the process of redistribution of shares. In October 2012, we began consolidated cooperation to increase productivity, optimize costs, and implement German technology for doing business processes.
In 2013, they received their first profit, and during 2014-2015 they made a kind of quantum leap. If in 2012 we produced up to 300 thousand products, in 2015 we reached 700-800 thousand. After two years the production increased more than double.
According to the results of 2019, the company BRAX before the crown crisis produced more than 6 million pants. Last year we sewed 911 thousand pants for them and about 18 thousand for the domestic market. At that time, we were the second largest manufacturing company for them. The largest manufacturer is located in Morocco, and in general in 16 countries. But due to the corona crisis, their volumes also decreased up to 20%, that is about 1 million pieces are not produced. Cooperation with factories in Romania and Bulgaria has been completely suspended and production volumes in other countries — Morocco, Tunisia, and Turkey — have been reduced. The only company where they left the whole volume is our LESYA. We do not reduce production by any unit, on the contrary, we are talking about increasing.
Although at the same time we understand perfectly well that there are difficulties, and first of all with the fact that the decrease in sales leads to an expansion of the range of production. If during the season we used to make 15-20 different models, now their number wold double. If the average order, for example, has been 1,000 units and allowed employees to adapt, now the number of products in one order is decreasing, while the number of models is increasing. This requires increasing our flexibility and cohesion. Business of Kaizen-style is very appropriate right now because the model itself provides flexibility. So we can simultaneously produce a large number of different models and at the same time increase efficiency.
LDaily: In the world of the past 15 years the production of clothes has doubled, while at the same time, CO2 emissions from the textile industry have exceeded by using maritime transport and international flights. What does the factory do in order to minimize the damage caused to nature?
M. Sychenko: The world trend today is environmental friendliness and sociality. The textile industry is known to be second (after oil production) in terms of environmental pollution.
For five years now, these two areas — social security and global environmental standards — are trends for us as well.
We live in the center of Europe. In the Western way, we are focused primarily on the result, but at the same time we choose the Eastern philosophy and technology focused on the process and every person in this process. It is clear that the child labor, low pay, overtime work, low level of labor safety and many other things make production cheaper. But people-oriented and future-oriented brands maintain their reputation. We are among them and work with several companies that meet international social standards. Every two years we go through social expertise. Specialists come here, in particular from abroad or from their representative office in Ukraine, evaluate and provide different levels: A, B, C. Level C is also the level of a socially responsible company. According to the last two inspections in four years, we have level A — the highest one.
We received the second certificate after passing an environmental audit, that is, how environmentally friendly the company is. Here, unfortunately, we still have “silver”. For the first time we received “bronze” together with recommendations for improvement, and only after that we received “silver”. However, we strive for “gold” and know what needs to be done. One of the conditions for the gold level of certification is actually our own source of energy recovery. So now we are talking about solar panels and thinking about collecting rainwater for recycling and use.
In addition, my team and I are very interested in sustainability — a modern trend of recycling. My daughter recently started an interesting startup in Berlin — her own brand of making lingerie from completely recycled raw materials (or with a certain percentage of recycled and organic raw materials). It seriously inspired me. In Ukraine, we also want to introduce such a line of products from completely processed raw materials. There are no prototypes yet, it is still at the level of an idea, but I think we will move on to implementation soon. At least to the model project.
LDaily: What other plans does your factory have right now?
M. Sychenko: The plans are grandiose for the present time. We plan to build 4,000 m2 of production space, which will increase the volume to 1.5 million products per year, and the number of employees — from 500 to 1,000. Scaling will have a serious economic effect for the company: increasing production by 30-40% will reduce administrative costs per unit of output, and this will significantly affect its cost. In addition, the production complex will have an architecturally perfect look. Every craftswoman will feel protected, while style and comfort will become more accessible for every consumer. Would everyone be healthy!
The first LDaily’s CEO breakfast was held together with the International Turkish Ukrainian Businessmen Association (TUID) at the Hyatt Regency Kyiv hotel. Leaders of large Turkish companies gathered to discuss how companies can operate during the crisis and how to act in the new realities caused by the COVID-19 pandemic. The partner of the event […]29.10.2020 Next