LocationsWhat did we learn #InTheField - Part 1
Before, the lack of organization delayed production; we had to stop to look for a single item, or we lost fabric pieces. Now, we record the number of pieces we receive and have our supplies organized. This helps us meet delivery deadlines. It’s more enjoyable to work here now. - Workshop Owner
Promoting national small and medium manufacturing industries, particularly the apparel sector, is a highly priority for Paraguay. The Local Program addresses the multidimensional barriers to the formalization of businesses and employment by integrating interventions about market access, associationalism, labor productivity, and decent work for SMEs and local lead firms in the sector.
The program included more than 1,000 hours of work, the manufacture of around 22,000 products, and training sessions involving over 100 workshop owners and workers, technical staff, and instructors.
UNDP Paraguay's Accelerator Lab (AccLabPY) conceived Local as a prototype of value-chain driven industrial policy focussed on linking local lead firms to micro, small, and medium-sized enterprises (MSMEs) that provide assembly services, reducing the barriers to consolidating these relationships, and turning them into sustainable engines for industrial growth and formalization.
The program worked with 13 apparel workshops selected in three territories: Mariano Roque Alonso, Yaguarón, and Pilar. The UNDP AccLab and a technical support team implemented the program between August 2023 and June 2024, in coordination with national and municipal government institutions, and with financial support from the Poverty and Inequality Funding Window.
The goal of Paraguay’s AccLab is to generate evidence and lessons from practice about what works and what doesn't in sustainable development programs and projects.
So, what did we learn from implementing Local? How can we improve SME formalization and promotion policies? How might we leverage local characteristics and relationships with lead firms to drive a combination of productive and social upgrading in textile manufacturing clusters? We will answer these questions in a series of four blogs, beginning with this one, which explores the findings of Local regarding productivity improvements.
One of Local’s central hypotheses was that lead firms, due to their greater formality, production, commercial, and technical knowledge, as well as their stable and secure connection to the market, could drive a process of productive improvement and create incentives for the formalization of their suppliers. Three key insights emerged regarding this hypothesis that should inform the design of industrial policies and supplier development programs.
First, program’s like local should incorporate into their focus interventions to strengthen lead firms’ capacities to outsource effectively. Second, without this step, integrating MSMEs into value chains may not provide them with incentives to overcome the 'productivity trap' driven by their lack of specialized managerial capacity and limited capital for fixed investments. We explain these insights below. A third insight will be the focus of our next blog about how, in the social setting of apparel clusters, barriers to productivity growth and barriers to promoting decent work are intertwined.
The Needs and Conditions of Lead Firms
The Local’s design assumed that lead firms have the capacity to maintain a stable flow of orders for their suppliers and to reward efficient SME suppliers with larger, more complex, or more profitable orders. However, implementing the program we discovered that, for it to work, Local must integrate interventions to help executives and managers more efficiently utilize the available production capacity in the SME clusters by developing closer relationships with suppliers and by improving the coordination between lead firms’ product development and production planning departments.
For example, it was observed that the product specification format used by the companies did not provide key information that workshops need in order to produce products with the expected quality.
Incomplete product development generates high costs for both the lead firms and their suppliers, because it increases production times, rejection rates, and makes the division of responsibilities between buyer and supplier ambiguous. Local’s technical team pointed out these issues and provided training sessions on cost and value chain structures to develop and implement short-term measures to mitigate these costs for both parties. A workshop owner participating in the program shared a story about how she learned to value and negotiate the cost of new product development.
Before, I didn’t charge for developing new garments. I considered it part of the regular work and always ended up losing out. I had to take one of the operators off the production team to make adjustments and test new garments. When a key person is missing, instead of producing 100 garments a day, we only make 50. After the cost structure training and assistance from the Local team, I realized that this development involved a different price, so I negotiated with my client, and we reached a new agreement. - Workshop Owner
In another case, the technical team communicated and made explicit these problems and their effects on productivity, leading the lead firm to improve communication with the workshops and make its product development manager available to advise the workshop owners when developing new products.
Workshops owners wear “too many hats”: The small scale and limited managerial capacity of the workshops
At a minimum, every owner of a small apparel workshop must explicitly or implicitly define strategies for production, financial management, human resources, and product marketing. In large companies, these tasks are typically divided among different departments, each with a manager and specialized staff. In contrast, in small workshops, owners often "do it all":
I work almost 24 hours a day. When I have a lot of production and fixed delivery dates, I stay working until 11 p.m. I don't just stay in the workshop; I also have to go to the buyer to get the fabric pieces or buy supplies, then prepare everything for the operators. - Workshop Owner
This overload of responsibilities, including operational duties, limits the time workshop owners have to formalize their managerial practices, planning, and to acquire specialized knowledge to improve efficiency, diversify production within their workshops, adopt administrative tools to control costs, measure productivity, evaluate the profitability of alternative investments, or promote their services to gain new clients.
For this reason, Workshop owners especially appreciated the trainings they received on where their workshop fit into the value chain structure of the apparel industry and to design their workshops’ organizational charts. These exercises raised awareness of the internal organization of the workshops, the multiplicity of roles the owners were fulfilling, and the need to delegate responsibilities to subordinates in their workshops so that tasks could be carried out properly without direct intervention from the owners.
A workshop owner from Mariano Roque Alonso shared how the experience of technical support and training changed her view of her business:
They explained the importance of the service we provided and all the areas we covered. I realized I was managing many more areas in my business than I had noticed, such as administration, production, and even logistics. It was a process that showed me how many responsibilities I had without realizing it, and that it was necessary to delegate some tasks, like delivering orders. - Workshop Owner
In two cases, this awareness prompted workshop owners to respond to personal emergencies by delegating authority and responsibility to other family members or operators instead of closing their workshops or rejecting orders.
In a third case, the daughter of a workshop owner studying business administration attended Local's training sessions and began applying what she learned by taking on more responsibility in managing the workshop.
The Need for Investment and Changes in Infrastructure
Generally, apparel workshops operate within one or two rooms of the family home. Thus, infrastructure is shared between family members and the workshop, and the need for productive investment gets entangled and competes with household needs. In general, both homes and workshops require basic improvements such as wall repairs, painting, better lighting, electrical upgrading, ventilation, and air conditioning.
Although most of these investments were outside the scope of Local, the need for basic infrastructure and improved layout in the workshops were one of the areas most successfully addressed by Local, with technical advice tailored to each workshop, training in lean production (5S) methodology, and the provision of electrical installations, furniture, shelves, and ergonomic chairs.
Through these actions, we observed improvements in layout and production flow in all participating workshops. Rocio, a workshop owner from Mariano Roque Alonso, shared how the application of the 5S methodology significantly improved her workshop’s efficiency:
It’s more enjoyable to work here since we improved the order and organization. Now we organize supplies and fabric pieces, throw away what we no longer need, and classify by color, fabric type, and size. Before, the lack of organization delayed production. For example, we would open multiple bags of fabric pieces at once and lose pieces. Now, we record the number of pieces we receive and organize our supplies, which helps us meet delivery deadlines. - Workshop Owner
Another example of a successful intervention in production infrastructure was the training on the adjustment and maintenance of sewing machines, a critical issue raised by workshops in the Pilar cluster in the early exploratory meetings of Local.
Local’s team taught us how to do general maintenance, how to use, clean, and how often we should perform maintenance [on the machines]. This helped us a lot because before we didn’t know or do any of it, so the machines would get stuck or make noise, and that has improved. –Workshop Owner
The Impact of Local on Productivity
Overall, Local's interventions successfully raised awareness about management weaknesses in the workshops and introduced new practices in some cases.
At the beginning of the program, many workshop owners accepted orders without assessing their profitability, driven by the need to maintain liquidity and avoid gaps in production. After receiving training on cost structures and value chains, several participants began evaluating their costs, rejecting unprofitable orders, and negotiating fairer prices to compensate for their work and investments.
I’m working with more companies, and I’ve managed to get them to increase prices. This year, I was able to set my own prices. If companies accept, I take the job; if not, I don't. It’s a big, big change. With one company, we couldn't reach an agreement because they didn’t want to pay the price I asked for. To calculate prices, I used some of the lessons I was taught, like timing the production of each part and determining the cost of the garments. I started doing this at the beginning of this year. - Workshop Owner
Training on the use of basic spreadsheets to monitor their income and expenses allowed workshop owners to visualize their costs for the first time. In some workshops, this led to a reassessment of roles, staff reductions, and increased awareness of the impact of “invisible expenses,” the daily expenses that often go unnoticed. This enabled them to identify and control such costs:
It helped us a lot, especially in management and expense control, which was what I needed the most. Before, I didn’t know where the money was going, but now, thanks to that control, I’ve been able to adjust better. With that, I was able to invest in new machinery, which allows us to work faster. - Workshop Owner
Workshop owners placed a high value on the training about pattern-making carried out in each of the workshops in Yaguarón and Mariano Roque Alonso, was highly valued by the workshop owners. It allowed them to improve the accuracy of their garment production by correcting existing patterns, resulting in time savings and reduced rejection rates.
Before, I used to do it by eye, and it took time to adjust the garments to each size. I had to make them smaller, then larger, then smaller again... but now the garments fit better because I learned how to standardize sizes with exact measurements, and they fit better when worn. - Workshop Owner
In summary, the results of Local’s implementation confirmed the value of interventions aimed at improving the managerial, administrative, operational, and productive capacities of workshop owners. Training on workshop management and delegation of responsibilities, infrastructure improvements, workspace organization, as well as cost control and pattern-making training, all contributed to increasing the productivity of operations.
The key lessons for future versions of Local include the need to incorporate interventions targeted at upgrading lead firms capacities, and additional interventions to address barriers for improved labor efficiency, which will be the focus of our next blog on decent work.
