Leather Making - Material vs Processing vs Art

According to a veteran of leather industry who supplies machinery and machine tools to tannery leather making is

• 33% material
• 33% art
• 33% technology

In India, cost of finished leather comprises of

a. Raw material ~ 60%

b. Chemicals ~ 20%

Investment on machinery, plant overheads, labour, selling expenses and PROFIT all are covered in remaining meagre 20%.

With this formula, tannery managers and owners spend most of their time on procuring raw material. One who has a good control on raw material purchase (in terms of quality and prices) is successful. Investment in advanced technology, modern management methods OR brand building exercise are not given priority as these would affect only 20% of the business revenue.

Even with this structure, improvement programs are implemented focusing mainly on optimum utilization of leather and chemicals. Innovative processing methods, improving energy efficiency, reducing labour cost all are counter intuitive in this situation.

In a positive scenario where creativity is encouraged and brand building is under taken, we can aspire for a ratio of

Leather - 30%

Chemicals - 20%

Processing - 20% (machinery, salaries, tools)

Marketing - 20% (brand building etc)

Profit - 10%

How does one move from material dominated business to innovation dominated business. The later one generates more value for the business for sure.