leather sector

8/7/2019 Leather Sector

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INTRODUCTION

Pakistan leather industry is one of the major foreign exchange earners for the country.

About 90% of its products are exported infinished form

Animal skins which are the basis of the leather industry are largely obtained from the provincesof the Punjab and Sindh.

The season of peak activity begins around Eid-ul-Azha and extends for between two to threemonths



OVERVIEW OF THE INDUSTRY

Leather industry, including leather products, is thesecond largest export-earning sector of Pakistan after textiles.

Leather industry’s major areas include leather garments,leather gloves and leather footwear. this sector is contributing around $800 million a year but

has the potential to multiply volume of exports. Currently, Leather sector is operating at 20% below

capacity, if it is made to run to the full capacity; theleather sector has the potential to fetch one billion dollar a year.



TANNERIES

Tannery is a place where the basic raw materials for the whole industry i.e. raw hidesof animals are processed and tanned Leather is produced. The term ‘tanned’ is usedbecause the raw hide is chemically transformed into different colors.

PROCESSING

The tanned leather is then processed into the various product forms.

RETAIL Retail is the area where the transformed goods are sold. This is a very important area

for the industry as the focus is on marketing and service. Here, nearness to thecompetitor and determination of the market segment is very necessary.



THE VALUE CHAIN CONCEPT

The value chain, also called the commodity

chain and production-consumption chain, isdescribed as a comprehensive set of

activities that are required to bring a produc

from a concept stage to marketing andconsumption of end products (Gereffi1999)



VALUE CHAIN OF LEATHER INDUSTRY



Spot Analysis

Tanneries 800

Leather Garments/Apparels 355

Leather Gloves 347

Leather Footwear 523

Leather Goods 142

Leather Sports Goods 160

Number of Industrial Units Operating inthe Sector

(approx)



Industry Structure

The types of leather manufactures are depicted in table below.

Commodities No. Of Industrial Units Total Capacities

Tanneries 800 Major Units 150 Million Sq. Meter

Leather Garments/Apparel 355 Major Units 15.39 Million Pieces

Footwear 523 Major Units 205 Million Pairs

Leather Gloves 347 Major Units 89.12 Million PairsCommodities No. Of Industrial Units Total CapacitiesCommodities No. Of Industrial Units Total Capacities

Commodities No. Of Industrial Units Total Capacities



CONTRIBUTION OF LEATHER INDUSTRY TO

ECONOMY OF PAKISTAN

Share of leather sector in exports earnings 5.4%

Share of leather sector in manufacturing GDP 5%



Leather Tanning Production in Pakistan

Cities Units Cities Employment

Kasur 223 Gujrat 2

Sialkot 210 Hyderabad 2

Karachi 174 Dadu 2

Gujranwala 51 Sakkur 2

Multan 43 Bahawalpur 1

Shekhupura 28 Charsadda 1

Lahore 15 Jehlum 1

Sahiwal 8 Khushab 1

Faisalabad 7 Mirpur 1

Peshawar 6 Sawabi 1

Sargodha 5 Total 770



GLOBAL IMPORTS

COUNTRY ( $ Million)

USA 1449

Germany 687

France 240

UK 224

Italy 237

Japan 171

Hong Kong 165



SWOT ANALYSIS OF THE PAKISTAN LEATHER INDUSTRY

STRENGTHS WEAKNESSES

Large raw material base.Local availability of hides and skin.High growth potentialDynamic manpower Self financed industry

Lack of warehousing support from the governmentInternational price fluctuationUnawareness of international standards by many playersUnorganized footwear and goods industry.Lack of skilled and efficient labor.Lack of marketing skills

OPPORTUNITIES THREATS

•Rising potential in the domestic market•Use of information technology and decision support software to helpeliminate the length of the production cycle for different products•Shift of production centers from developed to developing countries.•Potential to move into high end market unexploited USA market.

•Major part of the industry is unorganized•Difficulty in obtaining bank loans resulting in high cost of private borrowing•High competition from East European countries and other Asiancountries(china and India)



ISSUES / PROBLEMS

The industry is unorganized. Lack of communication skills and facilities. Lack of warehousing support from the government. Smuggling of live animals to Iran and Afghanistan. Electricity and gas shortage. High labor costs resulting in high costs. Lack of small presence in global international markets.

Most local players are not aware of international standards.



RECOMMENATIONS

Training of the labor force to the need of the worldsmarkets.

A percentage of profit invested on training of labor

should be made mandatory. Leather exhibitions should be organized both in countryand abroad

Improve image in USA Europe to bring our customersback.

Waste discharge should be used as byproduct tomanufacturer chemicals. More incentive should be offered to organized sector.

leather sector

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