Mr Maniwanen Marimutu, chairman of Busana Apparel Group

Mr Maniwanen Marimutu, chairman of Busana Apparel Group

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For a business that even its chairman Maniwanen Marimutu admits is "low profile," Busana Apparel Group has high ambitions. Here he tells just-style how Indonesia's largest woven apparel exporter is on a drive to expand its domestic capacity, has set up its first factory in Ethiopia, is exploring opportunities in Vietnam, and eyeing new products as it builds the business to lead in each of its categories.

"We are now one of the core suppliers to PVH for their dress shirts and ladies' wear; we aspire to be the preferred supplier for each of our buyers. That is our aim," explains Busana Apparel Group chairman Maniwanen Marimutu.

"So for that reason we're increasing our capacity with expansions here in Indonesia and in Ethiopia. And of course we're looking at one more category which we are not in: we are not in the knits category, we are only in wovens, so once our expansion is completed, this is one more category we are looking at."

As with any large apparel manufacturing group, the numbers are mind-boggling. Established in 1975, Busana has an annual turnover of approximately US$350 million, operates 23 world-class factories and two laundries at seven sites in West, Central and East Java, and employs 26,165 people.

Its production capacity can handle almost 50 million pieces per year of woven formal, casual and active clothing, also making it one of the largest garment manufacturers and exporters in South East Asia, not just Indonesia.

Garments produced include shirts, blouses, dresses, denim, formal and casual bottoms, jackets, suits and outerwear – which are supplied to leading brands such as PVH, Tommy Hilfiger, Calvin Klein, Ann Taylor, Macy's, Ralph Lauren, JJill, Kohl's, Perry Ellis, J Crew, Hugo Boss, Wrangler, Lee, Nautica, Berghaus and Jack Wolfskin. US-based customers account for around 70% of Busana's business followed by Japan at 15% and the rest going to those in the EU and Australia.

The company has differentiated itself by moving away from the high volume, low cost mass market, instead focusing on value-added innovation, customised in-house product development, and vertical fabric sourcing (it has a separate fabric sourcing arm in Shanghai).

It also has dedicated facilities by product type where it offers technologies such as laser cutting, bonding, seam sealing, down filling, specialty denim washes, garment dyeing, non-iron dress shirts with post cure and pre-cure process, sport-shirts with special novelty washes, high skill ladies' garments in silks, linen, cotton, rayon and synthetic blends with novelty stitches, embroideries and special washes. Its business units include PT Ungaran Sari Garments (dress shirts, blouses and skirts), PT Citra Abadi Sejati (outerwear and bottoms), PT Eratex Djaja (denim and casual bottoms), and the Busana Vintage Creations laundry facility

"We are not designing 100% at this moment, but we work very closely with the buyers' designers and we give a lot of input to the designers," Maniwanen tells just-style. "We used to do only CMT [cut, make and trim]; today we do almost everything extra, the designing on the silhouette, colours…most of the work that used to be done by the buyers' side is now being forwarded to us."

The strategy is also helping the company to remain competitive in Indonesia where, Maniwanen explains, "in some factories, the productivity is as good as China or Vietnam, so we are winning on efficiency and timely execution. Secondly, we are competing directly with China on value-added products – not with low cost countries."

He also expects to see more Chinese companies invest in setting up fabric mills in Indonesia. "There has not been much investment on the fabric side for the last 15-20 years, and in Indonesia there are not many [fabric] suppliers for the products we are making, so we depend very much on imports from China." He is hopeful the Indonesian government will soon introduce incentives to encourage investors.

Expansion plans

Maniwanen's optimism is reflected in his company's expansion plans. "We produce about 50 million garments in Indonesia and we are making about 2 million dress shirts a month. If you look at the main dress shirt players, we are in the top three in the world.

"Our second category is bottoms, more refined bottoms as well as denim and washed garments. We have a capacity of over 1 million per month and we are in the process of expanding it in Indonesia by another 1 million.

"And then the third category is ladies' blouses and soft dressings, more in polyester, silk, rayon, and that capacity now is about 750,000 pieces per month, and this also we are going to increase to 1 million this year in Indonesia.

"The last category we're in is fashion outerwear and activewear; ski-wear, golf wear, yoga wear...our capacity is about 500,000 per month, which will grow also to 1 million."

Add in its planned production in Ethiopia, and dress shirt production will rise to 2.5 million per month.

Investment in Ethiopia

Busana Apparel Group was one of the first manufacturers to scope out the country three years ago, joining apparel giants PVH Corp and VF Corp on a joint tour of East Africa to look at the opportunities on offer in Ethiopia, Kenya and Uganda.

With its duty-free benefits on exports to both the US and Europe, the company joined PVH – one of its largest customers – to settle on Ethiopia, and was one of the first to sign up for factory units in the flagship Hawassa Industrial Park.

Among other reasons for the decision Maniwanen is also confident that Ethiopians can be trained in making "fine apparel products," and cites the commitment from the Ethiopian government in getting the park built and for focusing on the apparel industry as the driving force for economic growth and employment.

Busana's new operation here, under the name Century Garments, occupies four 5,500 square metre sheds and will make dress shirts for PVH.

"On 1 April we started our first production line and now we are expanding very aggressively. In fact, we have already made our first export shipment from Ethiopia to the US in June 2017. We are planning to put up 36 lines, which will contribute production of 500,000 shirts per month once we complete, and then we will employ about 2,000 people."

Busana tackled the lack of skilled labour near the park by taking 50 Ethiopian workers for three months' training in Indonesia, and also sending 50 workers from Indonesia to Hawassa "so they've trained the trainers."

The aim is to add a new production line every month, and "our expectation is that between 18 months and a maximum of two years we will be in full operation. We've put a lot of investment into this; training alone has cost US$300,000."

He estimates setting up a dress shirt factory in Indonesia with a capacity of 300,000 pieces per month would require an investment of US$7 million including land. Whereas the equivalent facility in Ethiopia will cost considerably less "because you only need the machines and the management team."

Tenants in the Hawassa Industrial Park lease the sheds, so "the major savings are on the land and building in terms of capital investment." 

Heading to Vietnam

The Indonesian giant is also looking at Vietnam as it attempts to shore up orders with some of its customers who, in a race to cut lead-time, increasingly require garments to be made in the same country where the fabric is produced.

While Indonesia lacks fabric mills, Vietnam has benefited from an influx of textile investment in anticipation of the now abandoned Trans-Pacific Partnership (TPP) trade agreement. So Busana is planning to take advantage of the presence of textile mills in Vietnam with some mutually beneficial partnerships and set up a garment facility to match buyers' expectations.

"Vietnam has proximity to Japan and China, and Vietnam may emerge as a major supplier of garments to these two countries, so this country is in our future plans."

The company also stands to benefit from improved access to the EU market once the EU-Vietnam free trade agreement comes into force – as well as through its operations in Ethiopia.

Increased collaboration

The move also ties in to a wider industry trend for increased collaboration across the supply chain, and especially between buyers and a smaller number of suppliers.

"Today every buyer is trying to reduce their vendor base. Earlier, customers considered pricing as critical, but now they understand that more than pricing it's about partnership, because they are looking at a long-term base for the future. Today it's the engagement of both sides with mutual benefits and obligations."

Maniwanen adds: "In five years' time I believe wages will no longer be the criteria for business to be moving around, because the playing field will be more equalised on salaries and wages."

Instead: "Newness is very, very important. This is the only way for you to stay competitive with your buyers. I tell my R&D teams to collaborate with the fabric mills and then supply the customers with new items. If a product is being made by everybody then it means you are losing to competition."

He also believes there is still plenty of room for the apparel supply chain to become more efficient. All buyers are looking for shorter lead times and that requires speed and efficiency from the whole supply chain.

Presently, garment factories take 180 days or more from concept to delivery to retailers. The changing business dynamics and speed requirements call for relooking at the complete process from conceptualisation to manufacturing. It requires finding opportunities to reduce timelines with leveraged resources and avoiding duplication of activities with focus on developing talent.

"Automation and multiple-skilled workers are key to improving speed and efficiency, which in turn keeps operations cost competitive," he explains. "It will take time, but you have to become efficient, otherwise you'll be left behind."

Change is also being driven by e-commerce. Platforms such as Amazon are making a more aggressive push into apparel and footwear. And for Busana, which is exploring to work with such e-commerce players and emphasises the relationship is in its early stages, there are already signs of how the online retailers plans to shake-up apparel supply too.