KTC

Made in China

KTC (which stands for Knowledge, Technology and Craft) are manufacturers of quality performance clothing for several well-known brands, with factories in the Guangdong province of China and in Laos.

And they’re on a mission to challenge the perception of what ‘Made in China’ means, as well as improving the conditions and treatment of their workforce. As members of the Fair Wear Foundation and Fair Labour Association, they are the exception in the sector and the region. The membership criteria for these organisations are extremely demanding — requiring full company audit reports and a degree of openness that is rare in this manufacturing world.

We talked to Gerhard Flatz, Managing Director of KTC, about the challenges of operating in the developing Chinese economy. He told us just how much KTC has changed since it was set up and explained his passion for two things— quality and people.

KTC

“The company was set up in 1971 by two Austrians, Hans Kremmel and Dieter Waibel, importing Swiss yarns to make turtlenecks for a company called Benedikt Maeser, who were predominant in the 70s and 80s for high quality ski wear. Then in 1973 we began working with Adidas, at one point becoming their exclusive sourcing partner for production out of Thailand, Macau, China and Hong Kong. We then got more involved in luxury ski wear and premium functional apparel.”

After joining the company in 1997, Gerhard took over as MD in 2008, when he began reconfiguring the business and started on the initiative of seriously looking into compliance and sustainability issues.

“Business is absolutely about people in our industry. What is interesting is that craft interacts automatically with this kind of compliance, sustainability and how you treat people. We did an internal satisfaction survey last year where we measured how happy the workforce is, and we noticed that, because of generational change and the one-child policy, some needs of the people have totally changed. It’s much harder to get really skilful people now, I think of these younger people as the so-called lost generation, who just apply for a job because the basic conditions are good, and we are pay well in our sector. They stay for a short time — around four weeks — and then move to another company. This is common in the manufacturing industry all over China.

KTC

“So we launched an Apprenticeship Programme in 2011, and this year 100%
 of the workforce in our China factory achieved the first stage — a state recognised apprenticeship. We have a beginner, an intermediate and then a master level. 
For me, it’s important to get the younger generation behind the machines, so that when they get to nineteen, they get a state recognised certificate. We need to get real stability within the workforce, especially as craftsmen, because at the moment younger people are more interested in working in the service industry than in craft and trade. Whenever economies are developing, the manufacturing industries are the first ones to lose people.”

“Being premium payers in this industry is helping us, and it’s interesting that we can see that it is not a bottom line negative when you pay the highest salary. By paying more, our people are more efficient, because they are more motivated. And because of this, a lot of the talent stays longer, and the longer they stay the more efficient they get. We definitely want to celebrate our work force more. Our five year plan is that, as salaries are increasing all over China, we want to employ 80% locals behind the machines and reduce migrant labour to 20%. This will help us move forward, because people will stay longer and there will be less fluctuation in the workforce.”

Gerhard’s plan is already starting to work — retaining workers is vital, and the actions taken have helped to reduce the level of people leaving for other jobs from 45% to below 20% within six months.

To underpin their commitment to quality, their workforce, and good practice,
 KTC has joined the Fair Wear Foundation, a non-profit organisation that works with companies and factories to improve labour conditions for garment workers.

“Before we convinced the Fair Wear Foundation to accept us, factories were not generally considered for membership because it was only open to brands, and the couple of factories that were members were attached to existing brands. We were accepted for membership in 2011, and then this year we decided to take the next step and joined the Fair Labour Association. 
I think in the manufacturing world we are the only company that’s a member of both organisations.”

A full company audit into working practices and conditions is mandatory to become a member of the Fair Wear Foundation, and shows just how much KTC is prepared to be open and transparent with their employees, customers and other suppliers and partners. The audit report67 covers production planning, training capabilities, transparency, and other management and employer practices — and it’s available online for anyone to read. Not exactly what you’d expect from a clothing manufacturer in China, given the long-standing perception of the industry.

As Gerhard says: “I need the outside world to monitor me and tell me what 
I am doing wrong, because when you are running an operation daily because you get operationally blind. The media is also invited to monitor us and we have several journalists visiting us regularly. For me this is the most important thing to go forwards and to safeguard this operation is to be as transparent as possible and to get as many comments as possible to go into the next century.”

When re-configuring the business, Gerhard Flatz also had to consider the brands and partners that they supply.

“This was very important in the transformation period; when partners don’t stand behind a transforming company then it is a bit of a problem. There is a potential risk in case we failed, and the brands could have chosen not to stay with us. When we started the transformation, we had forty partners, and we now have ten, because some got cold feet. The guys who remained on board, who saw that it could be beneficial for them made up the shortfall of the thirty who were gone. In the end I brought in business where I could get much larger volumes, so that I could balance out the production and longer time frames.
 The benefit in the end was that we had better quality output, but at the same time, we could then sell it for a lower price. Before we had the problem that we always worked with small quantities, so the work in itself was always a learning curve. I once joked that KTC is not a factory, it is the biggest sample studio on the planet. We are true design and development partners.”

Our current partners are the guys that understood the path that I was going on and were really grateful that I was doing it. It gives them a unique position in the market as they can showcase the superb quality, which helps them sell more at a higher price point. The sustainability and transparency parts are also becoming increasingly important because consumers are becoming more and more interested in it.”

Gerhard intends to continue along this path, and is currently working with someone from the organic food industry, to develop KTC’s own sustainability programme, adopting the practices from farming, and learning from the fact that they are even more restricted and regulated than the manufacturing industry.

KTC

“The next thing is not just taking care of people, but also to consider the chemicals used in the garments. It’s the next step forward and my next big project: ultimate transparency by implementing a system demonstrating the possibilities we have, and not just relying on old established approaches.”

KTC continues to work with some of the most premium brands in the world, especially in the sports sector, and Gerhard continues to campaign for a re-interpretation of what ‘Made in China’ means. He wants it be a badge of pride, giving performance sportswear products a feeling of the highest quality, expressing the sentiment in KTC’s phrase “the art of performance manufacture”.

This why KTC is different: standing fast to their principles, demonstrating poise and leading the way to a new understanding of ‘Made in China’ that will hopefully spread around the world, and not least inside China itself where, culturally, businesses shy away from showcasing success or working methods and practices. As Gerhard says,

“There are definitely a lot of beautiful businesses in China, they just don’t showcase themselves as such. 
They are hiding behind the cultural curtain. After all, in history, 2,500 years ago, the Chinese were the first craftsmen.”

We’ve identified five hallmarks of beautiful business and explored stories from an array of companies from all over the world. Today, we continue to talk to businesses with an alternative approach, which you can read more about here.