Duty-free access and proximity to key consumer markets alongside a well-established textile supply chain helped Hela’s expansion to Egypt - CEO, Hela Kids Cluster | Sunday Observer

Duty-free access and proximity to key consumer markets alongside a well-established textile supply chain helped Hela’s expansion to Egypt - CEO, Hela Kids Cluster

22 January, 2023
Sanath Amaratunga -  CEO, Hela Kids Cluster
Sanath Amaratunga - CEO, Hela Kids Cluster

Hela Apparel Holdings PLC- a social capital-focused company – has come a long way on an adventurous journey, to reach the heights it enjoys today. A company that believes that strategic partnerships and collaborations play a vital role in shaping the future, Hela has nurtured relationships with some of the world’s leading apparel brands, cementing a competitive global manufacturing footprint across Sri Lanka and Africa.

Recently, the Sunday Observer interviewed Sanath Amaratunga, the CEO of the Hela Kids Cluster, who was instrumental in steering Hela’s expansion to Egypt

Q: Hela has come a long way from its early days, and you are credited with much of its current success and expansion. Can you tell us about how Hela zeroed in on Egypt as a manufacturing destination? 

A: As Sri Lanka’s only listed apparel manufacturer, it is our job to operate strategically to maximize returns – both financial and non-financial – for the benefit of our stakeholders. The expansion to Egypt is part of this business strategy. Egypt is an untapped destination with great potential to become one of the world’s leading apparel-sourcing destinations. The country’s geographic location in close proximity to Europe, the UK and the USA is one of itskey advantages, alongside the Free Trade Agreements (FTAs) they have with key consumer markets such as the USA. 

In the global apparel business, quick turnaround and shorter lead times are crucial. For example, if we were to ship an order from Sri Lanka to the USA, it takes approximately 40-45 days to reach the buyer, but from Egypt, it only takes around 18 days. It’s a similar story to the UK and Europe. Orders from Egypt reach our buyers within just 6-9 days, giving us a massive advantage in terms of speed to market.

Q: What are the immediate business goals in Egypt, and what does the future hold? 

A: We aim to become the preferred apparel manufacturer in Egypt for global apparel brands in the shortest time possible. We already have the geographical advantage, and the country has a conducive environment with strong support from authorities for businesses. The plant we are operating in currently is being setup in a way that will allow further expansion. We are also investing heavily in the social capital aspect within Hela, as well as in technology, to help us take the next leap in our growth.

One of our first crucial tasks in Egypt was to build a team with the right skills and drive - to be able to achieve our business goals. We currently have 1,700 employees and are working on increasing this to 3,000. As a social capital-focused company, the well-being of our employees across ourglobal footprint and investing in their development is important to us. It is our priority to ensure equality and inclusivity across the organization, and we work actively towards achieving this. To further strengthen our value proposition, we are working with our network of supply chain partners to explore expansion into multiple verticals in Egypt including fabric manufacturing, panel printing, washing, and label printing. The objective is to ensure a more streamlined supply chain and undisrupted workflow, which is crucial when it comes to meeting customer expectations.

Q: Many businesses are investing in digitalization now. Hela recently launched the implementation of the advanced ERP system, SAP S4/Hana. Is this part of your long-term strategy? How will its successful implementation impact your business?

A: Yes, the SAP S4/Hana implementation is definitely a long-term investment. As a business, we already operate out of four countries, with different environments and unique challenges. There are many instances where we may face similar issues in different locations and end up ‘reinventing the wheel’ trying to resolve the problem. A groupwide ERP of this nature, where information is readily available for all teams across the group to be accessed at any given time will help us replicate our best practices in any one location, across the company. 

The implementation of SAP S4/Hana will also help us extract actionable and scalable information, linking our businesses across geographies. In a competitive business such as this, it’s important to make precise, on-time decisions to ensure that we stay one step ahead. Often organisations miss opportunities due to the lack of real-time management information and up-to-date reports, crucial in making timely decisions. These factors drove the decision to invest in an ERP that will reap long-term benefits for the organisation and help us face the challenges ahead.

I must also add that having a good ERP system in place has become a business need in terms of integrating more closely with our customers and suppliers. In the global context of the apparel industry, it benefits us greatly to be able to bring in every aspect of our business operations within the scope of a system that gives each party access to vital information, whilst cutting down on repetitive processes. For example, our customers are looking to us more and more for solutions to common issues that come up from time to time, and an integrated ERP will make it possible for them to call on various reports directly from the system. This gives us the benefit of a more transparent relationship with stronger information security, as well as the ability to effortlessly scale our business.

Q: The way we do business has certainly been altered in the past couple of years, with the pandemic and its lasting effects felt by industries globally. Locally too, we have taken a big hit and are fighting our way back. Could you share your sentiments about the status quo of the local apparel industry?

A: The apparel industry is Sri Lanka’s largest foreign exchange earner, and it employs over 400,000 people directly, as well as 2 million indirectly. The industry took a hit at the beginning of the pandemic but was able to quickly recover and remained commendably resilient during the worst of the country’s economic crisis earlier this year. However, we are now seeing a softening in demand in our key export markets due to the impact of high rates of inflation and tighter monetary policy on consumer demand in these economies. As such, the immediate focus for the industry will be navigating through this challenging period, while strengthening its value proposition to ensure we remain a preferred global apparel sourcing destination for major brands in the medium term. Nonetheless, I believe one of the defining characteristics of the Sri Lanka apparel manufacturing industry is its resilience. This has been demonstrated many times throughout its history and reflects the dedication and commitment of apparel workers to ensuring that we stay afloat and continue to deliver value to our customers. I’m confident that this will support the industry through this period also and ensure it emerges in a stronger position as demand recovers. 

One thing that would provide additional support to the industry going forward, and this is something that the Joint Apparel Association Forum Sri Lanka (JAAFSL) has also been vocal about, is a stronger network of free trade agreements. Alongside a stable economic and political environment, and a strengthened supply chain, this would help Sri Lankan manufacturers to compete with other sourcing destinations such as Bangladesh, Vietnam, and India. Global buyers are drawn to destinations which offer the best cost benefits and quick turnaround times.

Q: Sri Lanka was one of the frontrunners in the apparel industry and built up a formidable reputation for quality and reliability. Is this still true? What are the challenges and opportunities for Sri Lanka as a manufacturing destination?

A: Yes, Sri Lanka is still a trusted manufacturer not only for high-quality garments but also for its technical capabilities and ethical and sustainable manufacturing practices. There are top brands that seek out Sri Lankan manufacturers for our products for these reasons. 

Sri Lanka’s biggest strength is its skilled labour force, which over the past thirty years or so, has gained expertise in apparel that exceeds many other major sourcing destinations. Our management cadre is of high calibre, and our technical know-how with a strong drive towards innovation is world renowned. Global brands approach Sri Lanka for their more technically challenging garments as they know that we have the technical capabilities in producing them. We have also evolved as an industry with time and are more accommodating to changing customer needs.

For example, a decade ago the lead time would have been 120 days, but today we have been able to reduce it to 60 days in some cases. Adaptations such as this keep us competitive globally. Having said that, we are currently facing one of the most challenging periods in the industry’s history. I have already spoken about the opportunity cost of not having the basics right. In addition, the economic crisis the country continues to face poses challenges to customer confidence in our ability to deliver. 

As an export-oriented industry competing in an extremely competitive market we need to address some basic shortcomings in our business model such as a strong supply chain for raw materials. We are still mostly reliant on imported fabrics and accessories, as we don’t have a large enough production base in Sri Lanka. The initiation of the Fabric Park in Punnakuda, in the Batticaloa district in my opinion was a decision made on the right path for the industry. We need more progressive and beneficial initiatives such as this to take the industry to its next phase.

Q: Finally, as a seasoned industry veteran, what would you say is the key to building a successful business in the apparel sector?

A: If we hark back to our journey so far, the first learning that stands out is to get the basics right. We must build from the ground up, ensuring both our people and our processes are best in class, and our operations are of the highest integrity. The second thing is to look for new out-of-the-box solutions to our problems when the old ways of doing things do not yield results. 

Historically, you’ll see that the organisations that make their own path are the ones that survive and prosper through crises. Finally, as an industry, we must adapt to a speed model. Gone are the days of lengthy turnaround times and slow movement. The market is looking for faster and more agile production and delivery, and that will be the key to staying ahead of the curve and delivering customer requirements.