Gerhard Flatz is charting a new course for performance wear specialist KTC

Gerhard Flatz is charting a new course for performance wear specialist KTC

Backed by his belief that the current apparel sourcing model is broken, Gerhard Flatz, managing director at high end performance wear specialist KTC, is charting a new course for the company. He's trying to change the perception of what it means to be 'Made in China' by losing the factory tagline and instead building on the firm's ethical credentials, its skilled workmanship, and repositioning it as a key ingredient of a high quality garment.

By his own admission Gerhard Flatz is "very vocal" about the challenges facing apparel manufacturers – especially those in China.

Not just the pressure from rising costs and worker shortages, but what he believes is a sourcing model broken by the loss of integrity in the relationship between retailers, brands and their suppliers, and a short-sighted focus on price that not only undermines the real value of the products these companies sell but also leads many factories to be "treated like slaves."

That said, he's certainly not feeling sorry for himself. Instead, he's fizzing with ideas to build on the reputation of the high-end outdoor performance and sportswear specialist as the supplier of choice for key customers such as premium cycling, mountaineering, hunting and sailing brands like Rapha, Mammut, Musto and BlackYak.

He's playing up the strengths of producing in the high wage supplier powerhouse that is China. "Made in China needs a different interpretation. We're producing higher quality products; efficiencies are very high as the people are very skilled. Yes, great quality comes at a price, [but] the industry should recognise that what China has to offer cannot be replicated anywhere else.

"The market is segmenting; we are going down the craftsmanship route, the others are pushing automation and lean manufacturing."

And he's building on the company's long-standing commitment to corporate social responsibility (CSR) and the welfare of the 2,000 people employed at each of its two factories in China and Laos as the foundation for the future – pointing out that engaged and motivated workers are less likely to leave, they learn more skills and are more productive.

"We are proclaiming that we are different: a company that really cares about its workers," Flatz explains, adding: "For many companies CSR is a hassle. But if you are able to commit to ethical production then this becomes a competitive advantage in the long run."

The KTC logo has even been trademarked to try to emphasise the difference between its workshop approach to production and that of a traditional factory, giving workers the confidence they are working for a quality supplier.

"We have to put the person at the centre again. We're losing the 'factory' tagline and are instead a 'Manufaktur' with skilled workers. From 2016, we will no longer 'Made in China', but 'Crafted in the Pearl River Delta of the People's Republic of China.'

Crucially, he hopes the move will also make KTC an employer of choice in a sector where employee turnover rates are as high as 70% per year and workers are increasingly hard to find, recruit and retain.

Another cornerstone of his vision is to establish KTC as an ingredient brand as well-recognised as Polartec or Gore-Tex as a key component of a high quality garment. Indeed, Mountain Force, which has been a customer for the past decade, already carries the 'Made by KTC' label in all of its products.

Flatz is also trying to raise awareness of the company's name through other means, including a collaboration with Chinese designer Yang Li, whose garment hang-tags are co-branded with both the KTC and Yang Li names. And a first foray into brand territory has seen the launch of the UVU extreme performance sportswear line, which is made exclusively by KTC and slots into the factory's non-peak production periods.

Fight for survival

The decision to chart a new course for the company and change the perception of what it means to be 'Made in China' stems from Flatz's belief that "the more traditional brands don't need us, because they need executors, somebody who can cut and sew their garments.

"They're fighting for survival, and they are leaving us [the manufacturers in China] one by one because they can't afford us any more.

"It all comes down to price. The only thing most of these corporations know at the moment is the bottom line; most are run by either marketers or financial people, so the passion is gone. Everyone is just chasing margins, but the margins are wrong from the start."

Since joining KTC 18 years ago, the last eight spent as managing director, Flatz has taken matters into his own hands – including walking away from some long-standing customers who had been with the company since it was founded 40 years ago.

"The apparel field has always wandered from one country to another, chasing the so-called cheap needle. They're mostly moving to Vietnam and Bangladesh, but China is so much more efficient, so much more flexible than Vietnam. Compare China with Vietnam and Vietnam is not cheaper at all because the cheap labour is basically eaten up by the inefficiency."

Another lament is that suppliers "live in constant fear of losing business; they don't have the guts to stand up to the buyer. They are basically treated as slaves," he says, adding that "short-sighted actions" on the part of retailers and brands are among the biggest problems – especially terminating orders with little or no warning.

"I don't have a problem when they give me a year's notice, but nowadays it's within a couple of weeks, and then you stand there with a huge workforce and a hole in production and you have to try to fill that hole. No chance."

Perfect partnership

Instead, Flatz would like to see "manufacturers and brands to become one entity again: two parties working together in a partnership, not like a dictatorship as it is now."

And it's not just a pipe dream. "We have our niche where we're operating now, with stable partners for the next five years."

Next year is KTC's tenth anniversary working with premium cycle wear brand Rapha, but its biggest account is German workwear company Engelbert Strauss. "They do more than half of my turnover and occupy a whole factory in Laos, so there are no peaks, no slowdowns, it is continuously running. This is the lead brand in my customer portfolio; and it's [ironic] that the lead brand is in workwear, which is particularly cheap.

"They are outperforming everybody in terms of innovation, in terms of the social approach to the business, in terms of price stability. We're also becoming a development partner. This is the perfect partnership: they fill the factory, we deliver."

Mega sample room

With an annual production capacity of 1.8m pieces – but an average run of just 500-600 pieces across 3,000 different styles per year – Flatz likens the company's factory in Shaping Town in Heshan City, in the southern part of Guangdong province, to "a mega sample room instead of a factory."

Indeed, one of the five sewing floors is entirely given over to product development and sample production, with 250 workers dedicated to making single samples and sales samples. There are also two sewing floors – each with 10-12 lines – for jackets, one for knitwear such as base layers and fleeces, and one for woven pants.

Manufacturing on a cut and sew basis, the company is able to do everything in-house from marker-making to cutting (including laser cutting), sewing, embroidery, transfer printing, applying reflective strips, seam taping and seam sealing, ironing, inspection and packing. The only exception seems to be screen-printing.

Once each process is completed it is quality checked at the end of the line – with Flatz estimating that 20% of workers are responsible for quality. Accessories such as zippers, buttons, labels and sewing threads are also randomly checked for quality too.  

While it doesn't source the specialist and high performance fabrics used by its customers, KTC inspects every single centimetre of material before being cut. "When the ingredient basket is wrong, I can't do my job," Flatz explains, adding that 65% of incoming materials are rejected for visual defects and colour shading issues, with the final decision on whether to use them or not lying with the customer.

He also believes that "the heart and soul of good quality is ensuring the fabrics are rested before use." And because multiple fabrics are used in each garment, all fabrics – even laminates – are pre-shrunk: "We are the only ones doing it in sportswear."

This attention to detail is key when it comes to the production of highly technical garments used in extreme conditions and on which the wearer's life may ultimately depend.

A ski jacket, for example, consists of up to 350 individual parts and up to 1,500 work-steps – including stitching, taping, bonding, and welding ­– which can take 12 working hours to complete according to the complexity of the product. Processing a laser-cut logo alone involves 12 work-steps, takes 8 to 10 minutes, and has to be done by hand, requiring high levels of skill.

Transparent business

As the first independent performance wear manufacturer to become a factory member of the Fair Wear Foundation in 2011 (it is also a member of the Fair Labor Association), KTC operates a fully transparent business.

Not only are audit reports available publically, but its "open door" policy means customers, the media (and even tourists in Laos, where the company supports a foundation set up by a former KTC manager that runs three schools offering free education for around 1,500 children near its facility in Vientiane) are encouraged to visit its factories in a bid to dispel the industry's 'sweatshop' image and the idea that products produced in the Far East are inferior, cheap and badly made.

It also means that wages at KTC are benchmarked to the living wage level set by the Asia Floor Wage Alliance.

"For two consecutive years we have achieved 90% of our workers on living wages," Flatz explains. The average wage at KTC over the past 12 months was CNY3734 including overtime – 277% higher than the minimum wage of CNY1320.

On the sewing floor this has largely been achieved through increased productivity: "They are skilled workers [and] when we do a lot of small quantities they get a lot of subsidies. But we believe in quality input for quality output. The next step in our initiative is making them multi-skilled and gauging up the efficiency."

Ongoing efforts to engage and motivate the workforce mean that around 65% of workers at its factory have been with the company for more than three years, while an average seamstress has seven years' service – "which in our industry is an important indicator because the longer they are with you, the higher quality and productivity."

Changing role

As well as showcasing its current strengths as a manufacturer, KTC is also looking closely at its changing role as a supplier of the future – in particular how to raise its profile with the 1 million people who wear the clothes made each year in its factories.

"We produce 1m pieces of garments, so indirectly there are 1m customers a year out there. But they don't know us. Imagine if you could convert these 1m customers into direct consumers: you would be one of the most powerful brands on the planet."

Its co-branded collaboration with Chinese designer Yang Li, whose collections are shown on the Paris catwalks, is now in its second season. Offering an "everyday wardrobe to climb a mountain," the designs fuse style and functionality, combining high quality material tested in extreme conditions but with the look of classic tailoring.

And while still in its infancy, the UVU extreme performance sportswear initiative is taking KTC even deeper into brand territory. The line is owned by the same family business that founded KTC, but operates as an independent company called UVU Holdings, of which Flatz is a director.

Its UVU +40/­40 Race Waterproof Jacket has been developed with some of the world's elite athletes, tested at the North Pole, and delivers high performance protection and durability in temperatures ranging from +40°C to -40°C.

It is available online for US$600, and showcases the 'Knowledge, Technology and Craft' which the KTC name stands for, with features including sonic-welded seams for weight reduction and increased strength, a durable water repellent (DWR) coated zipper that allows water to bead off and ensures the zippers don't freeze up in sub-zero temperatures, and a touch screen compatible phone pocket.

"We are not producing fashion here; we are producing something that enables you to be a better sportsman through function, or protecting you from harsh environments," Flatz explains.

"This will be the future; a new breed where we merge a bit from the fashionable side with the functional side.

"I call it 'utileisure' – utility and leisure merged together. That is the new thing that all of us will need. I'm going into a new position where nobody was before; playing a bit from the fashion side and on the fully-functional side."

Click on the following link for further information on research being carried out at KTC into the link between internal corporate social responsibility and work attitudes at a Chinese manufacturer: 

Why worker engagement is key to China competitiveness