Financial Times

Revamp at Sara Lee-MAS Holdings

The Sara Lee Courtaulds-MAS Holdings joint venture in the island that supplies some of the best lingerie brand names and retail chains in the West, such as Victoria's Secret, is to be restructured to make it more dynamic and better able to cope with the increased competition expected with the end of textile quotas next year.

"We're looking at restructuring the organisation," said Dian Gomes, group director of MAS Holdings, who is in charge of the Sara Lee Courtaulds/MAS Holdings joint venture cluster of apparel export firms consisting of Slimline, Unichela, Leisureline and Casualline.

The group, which makes lingerie, sportwear and baby clothes, has seven sites here and in Bangalore and the Maldivian island of Gan employing 6,500 people and an annual turnover of Rs 12 billion.

The company is a Sri Lankan-US-British joint venture between the US retailer, The Limited Inc. and Mast Industries Inc., British apparel manufacturer Sara Lee Courtaulds, and the local firm MAS Holdings.

Gomes said the aim of the re-organisation is to make the enterprise "more agile" and be able to react faster and be much more leaner in structure "so we're very well ready for the non-quota era after 2005."

He said the company, which already exports about half of its products to the US outside the quota, sees the phasing out of textile quotas as an opportunity. The restructuring would involve bringing all of the group's manufacturing plants under one entity.

The company is also focusing on and has been investing heavily in improving its product design and development processes. It has nearly 25 expatriate designers on its payroll.

The company has a modern computer system to monitor production and distribution that puts the factory in direct touch with retail clients abroad and last year made a $500,000 investment in getting an automated cutter.
"We have taken the precaution to invest in things which make a difference to us."

Gomes said the modern computer links were important because the company's retailers "want to react faster and faster to customer demand" and make orders while lead times were "getting shorter and shorter".

Gomes said it was important for the garment industry's survival after quotas end that the government strikes a free trade deal with the US, Sri Lanka's largest market, to provide duty free access to its apparel exports.

Apparel exporters are bracing for an onslaught of cheap clothing from producers like China as textile quotas are phased out by January 1, 2005.

The full impact of the quota-free era is likely to be felt starting around the middle of this year when orders are placed for seasonal shipments.

The current US import duty ranges from 13-19 percent depending on the product.

The industry should aim to develop more high value products aimed at niche markets and improve its design and development as well as its backward and forward linkages.

"We need to market, do product development," said Gomes. "We need to get our supply chain sorted out -from the fabric to the finished product."

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