It is time for the publication of financial statements, and MASCOT is ready with our financial statements for 2013.
The figures clearly say something about what is happening right now in the workwear market, says owner and CEO Michael Grosbøl: “Production costs have increased dramatically and MASCOT has chosen not to pass on the full cost increase to customers. We are constantly working to improve production efficiency in order to reduce costs, rather than raising the prices on workwear in conjunction with the costs.”
Workwear is much more expensive to produce than, for example, fashion clothing. Each product takes longer to make, as there are many seams, quality controls and procedures. For this reason, the industry is constantly searching for countries where salaries are low. MASCOT doesn’t move production around from order to order, but has for many years chosen a completely different strategy. In 2008, MASCOT opened the first of their now four factories, in which MASCOT has their own employees producing workwear. Three of these factories are located in northern Vietnam, and there are significant benefits to having their own production with their own policies.
"We have the opportunity to have maximum focus on product quality - both in terms of fabrics and construction – and this naturally pays off in the end as with high quality products, we create satisfied customers and low levels of complaints," said Michael Grosbøl.
Having in-house production also has a major impact on the delivery performance. MASCOT is not, in the same way as others in the industry, dependent on subcontractor’s planning. "If there are capacity constraints, e.g., due to large new orders that clear stocks of one or more items, we can simply establish new sewing lines and quickly replenish stock levels. This results in MASCOT being able to ship approx. 97% of all orders from our finished goods warehouse within 24 hours. This flexibility would not be possible if we didn’t have our own factories," said Michael Grosbøl.
As a countermeasure to the steadily increasing wages in manufacturing countries, MASCOT has, with its own factories, the possibility to continuously work on an efficiency improvement program that, in brief, helps them invest their way out of wage increases by increasing efficiency. The increased efficiency will ultimately benefit customers, as increased efficiency decreases
production costs and thus the selling price of the final product. "We have invested a great deal of money, e.g., in a highly automated transport system on the sewing lines so the sewing parts are set on clamps attached to a conveyor belt in the ceiling and are transported to the next seamstress, thereby avoiding costly manual processes. And that's just one example of how we continually analyze how the seamstresses may be able to sew more efficiently. It is beneficial both for our customers' purchase price and for the individual seamstress who sews piecework," says Michael Grosbøl.
Unlike the workwear suppliers that base production on changing subcontractors, MASCOT has another decisive advantage: MASCOT can make the production of workwear a socially responsible matter, and this has been done since day one in our factories. The 1,700 employees at the factories, with European leadership, have free healthcare at the factory’s own medical clinic, free canteen, trade unions and health and safety campaigns - just as it is in European companies. But it is far from standard in Vietnam, and when both the working and social conditions are excellent, MASCOT receives one more tangible reward. A concrete result of CSR policies is that the there is higher efficiency and a very low staff turnover in the factories, which ultimately makes them more profitable. It is once again helping to keep the price down on finished products.
In recent years, MASCOT has had to acknowledge that wage pressures in Vietnam have been great. A sewer's salary has increased threefold over the past five years and MASCOT has had to look for alternatives for the long term, in order to improve competitiveness. Therefore, MASCOT has in the past year, invested more than 37 million kroner in a new factory in Laos, which was opened at the end of the year and is expected to employ approximately 800 employees by the end of 2014. Laos neighbors Vietnam, but the salaries are approximately half the wages of Vietnam. "We needed to ensure that we can continue to keep production costs low and hence prices at a reasonable level. I'm fine with the fact that we make use of the cheaper labour, as we have seen distinctly in Vietnam how we simultaneously are helping to develop the local communities and raise national prosperity levels" says Michael Grosbøl. As of now, the director has no plans to close down in Vietnam, but as with everything else, MASCOT will follow developments closely.
The director expressed overall satisfaction with the year’s results for 2013, for one must take into account that we find ourselves in a recession. "We are on track according to our ambitious long-term organic growth target, but it is not the only parameter for success. Product quality and social responsibility are the building blocks on which we must base our growth, and we must take care to take growth at a pace that does not go beyond either. And to hold dedicated focus on both product quality and social responsibility costs, but I have no doubt that it is worth the money in the long run - both for us and for the buyers of our clothing. It should still be a good deal in terms of durability, comfortable fit, unique design and good conscience, to invest in MASCOT’s workwear," emphasises Michael Grosbøl.