Leather’s supply chain has numerous issues with sustainability, but what else makes the supply chain particularly difficult for importers?
In this post, we’re going to look at the 5 key risks importers face in the leather supply chain, and finally offer some advice on how to overcome them, thereby improving your production and quality.
Risk 1: Leather’s dependence on the meat production & supply chain, and its peculiarity
One negative peculiarity of leather’s value chain is its dependence on another supply chain, meat production. In other words, its main input relies on animal production rates and the ability to collect and preserve the skins.
While leather is often mistakenly said to be a byproduct of the meat industry, it is not. Essentially, the leather industry is an important co-product of the global meat production industry.
There are two sources of raw skins and hides:
- Industrial animals (cows, pigs, sheep, goats). These make up the majority of the leather industry materials. Since the animals are reared quickly, their skins have lower mechanical properties than animals raised in as per organic principles, or wild animals.
These skins are far more readily available, being produced in most countries where there is mass farming of dairy or meat livestock, but on the other hand, they’re at the mercy of the issues which affect the animal production supply chains, especially those in the developing world which are challenged by infrastructure, the environment, knowledge and skills, economy, and more.
- Wild animals (kangaroo, ostrich, crocodile, alligator, snake, zebra, bison, elephant, and lizard).
These skins are far more exotic and sometimes are only available from rare species and fairly remote and undeveloped regions and countries, such as Ethiopia, for example. As a result, costs are relatively high, and your supply chain will be very long. They won’t necessarily be as affected by the animal production value chain’s issues as commercial animals’ hides, as many of these animals will be hunted or bred only for their skins, and so economic pressures arising from, say, the meat industry won’t affect them as acutely.
As meat costs rise, so does that of leather.
Unlike, say, cotton, which is grown for the one purpose of being used to produce textiles, leather is immediately at a disadvantage regarding accessibility as it only exists alongside meat.
Therefore, your leather supply availability and price is dependant on the global meat demand and supply context, regulation on trade, and government policies.
In this ‘Modern Farmer’ interview, leathercrafter Alan Dungey states: “So beef prices in general, the higher the price of beef, the lower the consumption, and thus the farmer tends to have smaller herds, which means less availability of good hides, which means you have fewer to choose from, and everything tumbles downhill. Every time the economy tends to get a little tight, beef prices will go up, and in recent years there are other things that have caused shrinkage of herd size, anything from the drought to the increase in feed costs.”
Even if global demand for meat on the table is growing as more consumers in developing countries flex their financial muscles, this doesn’t assure that meat production and costs will remain stable, and if the market fluctuates, so may your leather supply.
Risk 2: Little vertical organization in the leather supply chain
The global leather value chain is complex. It includes :
- Animal husbandry
- Industrial and assembly processes
- semi-finished and finished products sold and exported between companies & countries
With many links in the chain, there is, of course, greater risk of problems for the importer, and a lot to be done to manage risks, and protect your brand.
Even though India is one of the world’s largest producers of raw skins for the leather industry, it is fair to say that it is a good example of a leather supply chain which lacks vertical organization.
India: A good example of a supply chain with little vertical organization
India is in the top 5 of global leather producers, producing almost 13% of hides and 10% of leather footwear. It’s highly likely that importers in Europe and North America will have sourced leather from India at times.
Yet, despite its status as one of the largest producers of hides, skins and leather, India still has little to no vertical organization in its supply chain which causes all kinds of issues for importers.
These are the typical stages in the Indian leather supply chain:
- Individual butchers slaughter the animals and produce the raw skins ready for production into leather. These are then usually purchased in bulk by agents.
- Agents stock the skins which are then sold to local tanneries (in India) for blue processing. These may be mixed batches from differing butchers.
- Finally, the leather will be shipped to countries like Italy or South Korea for value addition processes to finish the leather as per customer (brand or finished goods maker) requirements.
As a brand or quality manager, you can see that your control over this supply chain is limited because third parties such as butchers and agents are in control of many of the processes. This leaves you open to issues which can ultimately affect your bottom line.
Let’s highlight some of the usual disadvantages importers have when sourcing Indian leather:
Typical importer disadvantages which lead to issues when sourcing from India
Bearing in mind that importers are often ‘on the outside’ when it comes to the Indian leather supply chain, these are typical disadvantages that cause importers to get a bad deal:
- Lack of local knowledge: Importers need consulting services to improve their knowledge about the leather industry in the country which they’re sourcing from; in this case, India.
Example of what can go wrong: Tricky bargaining: Importers do not know the cost structure of the tanning. This can lead to them paying more than necessary.
- Importers do not always specify the scientific name of animals: Therefore they end up purchasing a certain type of leather without even knowing which species, or type of animal, it originated from.
Example of what can go wrong: The animals have a scientific name that you need to know to understand what you are buying.
- Importers have a hard time expressing their specific needs: Language, cultural barriers and buyer’s skills in leather may prevent effective communication when dealing with foreign suppliers.
Example of what can go wrong: Communication issues may lead to the lack of consensus around what quality means for buyer and supplier.
- Prices, processes, and facts are manipulated by the agents (who do not always follow acceptable procedures and ethics): Their behaviour cannot be directly controlled, but issues are more likely to be predicted or caught if you are familiar with how agents operate there.
Example of what can go wrong: Importers may be given unfair pricing, leading to overspending and ill will.
- Grey market hides, skins and batches from different sources or even species may make up your order: This is also connected to agents who may not know, or care, about the origin of your order’s hides and skins. It’s very hard for you to know if this is the case unless you can audit the supply chain and conduct follow-up inspections.
These disadvantages can be overcome by working with a quality control partner on the ground in India who has the local knowledge which you may be lacking in, for instance, SgT.
Risk 3: Lack of traceability of hides and skins
In general, skins and hides will come from the country where the tanning process takes place (in the EU it is the rule of the “add value”), but traceability in countries like Ethiopia for example is lacking.
Agents and tanneries may not be able to, or will not, tell you the origin of your leather as they purchase batches from many butchers in different places at the same time. Therefore tracing your leather’s origin will be difficult at best due to the industry’s lack of regulation surrounding the sourcing of raw materials.
What can importers do?
We can only inspect the leather at the tannery, and we cannot audit the leather’s origin because suppliers regularly mix skins and hides from multiple sources.
Once leather has been tanned and quality is apparent, it will be possible to pull the plug on suppliers who have not delivered on their promise, concentrating efforts on building an even better relationship with those who are more reliable.
Risk 4: Leather quality issues
Discovering leather’s quality can be somewhat of a gamble. You may only know the quality of the skin or hide once it has been processed, because the dying process will reveal any defects.
Here is the typical range of quality issues that may occur with leather:
- Skin size disagreement, the size must be clearly specified in terms of Minimum + average expected size per skin
- Skins or hides may have differing degrees of suppleness depending on the animal’s gender
- They may be too fine or thick
- There can be colour conformity issues
- Over its lifetime the animal may pick up scars or damage from its environment
- Production may leave salt stains (leather not cleaned properly)
- Issues with the Chromium cleaning process where, during the inspection, you find that the salt or fatty part has come through the leather and is visible (this phenomenon appears 2 to 4 weeks after tanning).
Tanneries may do an inadequate job of cleaning and producing finished leather as it is not in their economic interests to be too concerned about this, instead, they wish to produce as much as possible for the best price. Therefore importers need to keep a close eye on this stage of the process.
Risk 5: Usage of damaging chemicals
Three different methods of tanning can be used and a combination of the three serves
as a fourth.
- Vegetable tanning (the oldest method used to produce, for example, sole leather)
- Mineral tanning (where chromium tanning is used in 80-90% of all cases)
- Others (e.g. oil tanning)
- Combination of the three (in order to achieve desired leather properties)
Environmental auditing of tanneries will help to assure that tanneries in your supply chain are not breaking pollution rules and therefore putting your organisation or brand at risk.
Chemical waste from mineral tanning, in particular, Chromium, is a great danger to the environment if dumped by the tanneries, either into water or soil.
Chromium III and IV are typically used in tanning, but if allowed to oxidize Chromium III will become the highly toxic Chromium VI, or hexavalent Chromium.
Not only is this a human carcinogen, but it is also responsible for major losses in biodiversity where it is allowed to enter the environment.
White leather, which is in fashion today, exacerbates Chromium’s use, as the production of this leather cannot use vegetable tanning at all (arguably less environmentally hazardous than mineral tanning), because it will not clean the fat from white leather properly, leaving unacceptable visual flaws.
In the Western world controls on the processing of wastewater containing Chromium are stringent and usually adhered to, however in the developing world, such as in India, the dumping of Chromium-laced water into local water courses is still fairly commonplace and of course, represents a major CSR problem.
The solution to the leather supply chain risks?
Some luxury brands, such as Hermes or Louis Vuitton, have found the best solution to the issue of leather’s supply chain risks: To control their leather supply chain by managing it from beginning to end. But it is not easy or cheap.
For example, let’s look at Crocodile skin used for luxury bags, belts, or shoes.
The brands need to contend with the following:
- Managing a crocodile farm (large organization, high cost, specific expertise, remote location).
- Crocodiles are hard to grow. They take a reasonably long time to grow and will often be killed or injured in fights with other crocs.
- Only the belly area can be processed for leather making, that’s why the output is limited. Crocodile leather is not by ft², or m², but by the cm (length of the useful belly skin).
Owning the supply chain is a great way to assure quality for large brands, but it does create drawbacks for other importers.
- The pool of independent tanneries able to operate at luxury level is narrowing, leaving importers with less options to supply from. Large brands (such as Hermes and Louis Vuitton) are actively purchase tanning capabilities, and therefore squeezing out others from using them.
- In the same way, the pool of suppliers is narrowing as large brands take ownership of them, and so the availability of quality skins is decreasing for others.
SgT’s expert’s recommendation for leather supply chain risk management
Importers should do the following to control leather production and quality and mitigate or solve the 5 risks explained above:
- Improve your knowledge of the suppliers, their country, laws, and customs. This will help you to be savvier when sourcing leather products from agents who may not have your best interests in mind.
- Understand which animals and breeds are being used for the hides and skins. Are they wild or industrial? Are batches mixed? Is the leather from the animal the supplier says it is?
- Choose the best agents. This underpins all other points really, as the goal is to have a trustworthy partner.
- Look for good indicators of reliability and compliance. Auditing suppliers may help in this case, in particular for CSR, as their adherence to laws and consciousness of their client’s need to be compliant are good signs of their reliability.
- Thoroughly check the quality of semi-finished and final products with comprehensive quality inspections.
Today it’s now becoming impossible, as an importer of leather material or products, to ‘look the other way’ when it comes to your wider supply chain.
“Society increasingly expects companies to take responsibility, not only for their own operations but also for the supply chain. Better control over the sustainability of the leather supply chain is essential for the long term.”
SgT can offer you two types of inspection suited to leather products:
Which of the challenges mentioned in this post are you facing in your leather supply chain? Do you have any additional experiences or tips that can help fellow importers to control quality and production?
Please leave your questions, tips, and experiences as a comment below and we will be pleased to answer them.