Standardization For Creative Manufacturing And Handmade Industry

Creative Manufacturing - Integrating value through Every Step Today, around 300 million people depend on the informal and low-paying CMH industry for their livelihood. These workers are mostly women, youth, and migrants from rural regions. Many of them already supply some of the biggest stores in the world. The advent of ethically-minded, responsibly-sourced companies and the rapidly shifting tastes of today's consumers are all factors fuelling the sector's expansion. Knitwear, carpets, needlework, textiles, jewelry, and other details already come from the CMH sector for many stores, both high-end and mass market, but this still constitutes a tiny proportion of overall product variety, with the vast majority still coming from assembly-line manufacturers. Inconvenient access to artisan producers is a barrier to trade. Consequently, the CMH industry is at a turning point. It can keep expanding at the same rate, avoid becoming digital and deny its employees the benefits that come with a thriving corporation. Or it may be at the vanguard of a big transition towards boutique manufacturing and ethically sourced items manufactured by brilliant producers and artists, living in varied communities with long-standing design traditions, provided it adopts the correct digital tools, supported by funding and investment. CMH can now compete successfully in international markets because of innovations in technology and entrepreneurial spirit.

Executive Summary

With over $500 billion in annual revenue, today, the creative manufacturing and handmade (CMH) sector is projected to grow by 20% per year, reaching $1 trillion by 2024.

The bulk of the 191 businesses, which employ nearly 35,000 people across four continents, has significant growth potential. However, the majority lack the resources and services needed to compete in a global retail market. They encounter three main obstacles: a lack of enough funding, a lack of access to markets, and a lack of technology for business automation and scalability.

This report seeks the benefits of integrating standards into the complete value chain of the growing industry to maximize the output and incline toward long-term and sustainable goals. The industry is in a nascent stage and needs to empower with industry standards while integrating the supply chain, market entities, and final consumers.

They also clearly benefit from having in-demand talents and widespread smartphone utilization. The market is thus prime for products that leverage data gathering and analysis to assist better company management. As a result, market access will be improved, and funding and investment will be attracted.

Part-1

Industry Deep Dive

1.1: Industry Market Size at Global Level 

The cultural, moral, and traditional values of a country or area are reflected in its handicrafts. They play a pivotal role in economic development as they are a prominent means for foreign exchange revenue. Because of their one-of-a-kind design, high quality, and incorporation of organic components like metal, wood, natural fibers, beads, stones, wrought iron, fabrics, paper, and ceramics, they are also seen as a status symbol.

The global industry size of handmade products reached US$ 500 B in 2020. Looking forward, the IMRC group expects the market to reach US$ 1T by 2024 exhibiting a growth rate of 20% CAGR.

1.2: Product Segmentation

One of the driving forces behind the expansion of the industry is the trend toward more modern designs, which has coincided with the rising demand for handicrafts in institutional settings including workplaces, healthcare facilities, and hotels. With the rise of the internet and the development of several e-commerce platforms, handicrafts are now more readily available to customers than ever before. Besides this, the flourishing travel and tourism business is offering attractive development prospects to local craftsmen and handicraft manufacturers for making commoditized goods and selling them to visitors who are prepared to spend heavily on souvenirs and other craft items. Moreover, unlike machine-made goods, which need the use of electricity and other fuels, the energy requirements of handicrafts are far lower. In addition to these benefits, making handmade goods has been shown to improve mental health by lowering blood pressure and stress levels, and fostering more openness, empathy, and cooperation among group members. The market is expected to grow as a result of the sector's minimal capital expenditure needs, diverse job options, and high growth potential.

Breakup by Product Type:

• Woodware

• Art metal Ware

• Handprinted Textiles and Scarves

• Embroidered and Crocheted Goods

• Metal Weaving Goods

• Imitation Jewelry

• Sculptures

• Pottery and Glasswares

• Incense

• Others

1.3: Market Segmentation

According to estimates, the worldwide market for the handmade industry is growing at a high pace. The United States, Germany, France, the United Kingdom, Spain, the Netherlands, Japan, and Hong Kong are the major markets, followed by several other West European nations. Additionally, according to industry analysts, local and regional markets in emerging nations will expand, creating new potential for companies to boost sales.

Key Export Market

China- The majority of industry analysts concur that China currently enjoys a leading position as an exporter in the worldwide market for home accessories and that this trend is unlikely to alter any time soon. An estimated 70% of all handmade accessory goods sold in the US in April 2005 were made in China.  China's large manufacturing capacity and cheap labor make it difficult for companies from other nations to compete on both price and volume. Due to cutting-edge machinery and increased efficiency, Chinese manufacturers can supply big product quantities swiftly, on schedule, and at affordable rates.

Vietnam- Vietnam in particular is becoming a viable option to China because of its competitive cost, competent and diligent labor force, excellent quality, on-time delivery, and cheap minimum order requirements. Government funding for the home accessories sector and improvements to the transportation and infrastructure systems both assist the sector. Accent pieces of furniture, lacquerware, woodenware, ceramics, and goods with eggshell accents are among the increasingly well-liked Vietnamese exports. Although purchasers have highlighted variations in the finishing and packaging quality, industry analysts think Vietnamese items, particularly in the high-end market, have a lot of promise due to their distinctive appearance and creative attributes.

India- India has a long history of producing quality handicrafts and is currently a significant exporter of decorative goods. Exports of handicrafts to the United States reached $1.9 billion in 2003 after growing consistently at a rate of 15% per year for the preceding 10 years.

Although each of the other developing Asian nations - Indonesia, Thailand, Cambodia, and the Philippines—offers distinctive goods and skill sets, they are all less competitive than China, India, and Vietnam overall. Customers agree that while these nations have a lot to offer, prices tend to be expensive, and many goods may be produced more affordably in either China or Vietnam.

On the international market, many African producers—Ghana, South Africa, Mozambique, Malawi, Kenya, and Tanzania—offer a variety of popular handmade items. Experts in the business believe that Ghana and South Africa have the most competitive designs and quality as well as the biggest export capacities. Consistent delivery and the capacity to maintain sales based on established connections are the cornerstones of their success.

The top exporters of handicrafts in Latin America are Peru, Mexico, Colombia, Honduras, Guatemala, Bolivia, and El Salvador. Based on the number of exporters capable of handling big order quantities in their facilities or by subcontracting to smaller companies, market analysts consider Mexico, Peru, Columbia, Honduras, and Guatemala as nations with especially strong export capacities. When it comes to product quality and depth of design, Mexico and Peru are regarded as industry leaders.

Part-2

Standardization

Any method used to create and apply measurements (i.e., "standards") that outline crucial features of anything whose control and uniformity are sought is known as standardization. Businesses can gain a competitive advantage from standardization in a variety of ways, including increased manufacturing production line efficiency, enormous untapped productivity gains for knowledge workers, and adoption of cutting-edge performance-enhancing technologies like robotic process automation (RPA), business intelligence (BI), advanced analytics, and customer journey mapping for improved customer experience (CX).

2.1: Importance of Standardization in the CHM Industry

The CHM industry value chain is a long undefined play. It is a long tail of fragmented and non-unified segments that leads to its fragility, unlike other industries.

Supply Side

The supply side of the CHM industry is fragmented into smaller regions. Mainly it is controlled by smaller unregistered individuals or family-owned business entities that are incapable of incorporating the much-needed changes that are required to take the industry to a much-needed level. Most of these mini-scale entities lack a basic level of technology, finance, and economy of scales and scopes which ultimately leads to a much lower level of profits.

To establish Fisher’s framework, the CHM industry needs to develop the “Agile supply chain”, which can cater to both demand and supply uncertainty.

The agile and resilient supply chain which is driven by certain standards will help the industry first-level empowerment and give them an upper hand in certain value creation.

CHM Entities Side

The CHM industry side consists of new emerging entities that are playing a role in connecting links between suppliers and final customers. Most often backed by the latest technology, and an upper hand in finance supported by individual investors, these organizations want to transform the industry into well defined yet niche industry segment. Based on the basic ‘Tripple P frameworks of the supply chain”, the CHM market players lie in between process complexity and product complexity i.e. Partnership complexity.

Market Side

Because of advances in technology, lower trade barriers, and more competitive transportation and communication costs, global markets are becoming more and more linked. From another angle, handcraft manufacturers now have access to a variety of substantial new markets. The rapidity at which fashion trends, product designs, and color trends change, leading to shorter product life cycles, is a major feature of today's global home accessory industry. The market is anticipated to continue shifting away from indigenous (also known as ethnic or traditional) designs in favor of more modern aesthetics for at least a few more years.

While there may be few prospects for entirely indigenous designs, there is undoubtedly room for goods that combine traditional features with modern aesthetics. The fusion of modern and ethnic patterns is known as global (or world) style, and it is seen to be a firmly established and increasing sector that offers new and expanding prospects for handmade items.

The expansion of the high-end market, in particular, offers manufacturers in developing nations the chance to sell handcrafted items with modern styling—sophisticated, fashionable commodities manufactured by craftsmen all around the globe. As the luxury market sector expands, customers have shown they are prepared to pay more for specialized goods. A unique treatment, a particular adornment, such as hand beading or embroidery; a mix of materials (for instance, wood and metal, metal and stone); or a layering of colors, patterns, and textures are examples of things that buyers are becoming more interested in.

2.2: Implementation of Standardization in the CHM Industry

The standardization in the CHM industry can be directed from mainly two sides. The whole game of the process is integrating the value chain to drive maximum output from this. On the first side implementation of certain certifications like B Corp, ISO 9001, ISO 14001, BSCI, and Fair Trade can work as an interlink in taking things in a single string.  

B Corps

B Lab, a private non-profit organization located in the United States and established in 2006, issues B Corp certifications. For-profit businesses known as B Corps incorporate social and environmental objectives into their business strategy and initiatives. More than half of B Corp-certified firms have less than 10 workers, and more than 80% have fewer than 50 employees, indicating that B Corp certification is more common in smaller businesses. To quantify and manage the company's beneficial effect on its employees, community, customers, and environment, both at the operational and business model level, companies seeking to become B Corps must first complete a B Impact Assessment (BIA).

ISO 9001 and ISO 14001 

ISO 9001 and ISO 14001 MSs can be audited and certified by independent external certification bodies (CBs) that, by performing a third-party audit, assess whether the applicable MS complies with the international reference and achieves the intended results. Academic research posits that ISO 9001 certification generates both internal and external benefits such as improved product quality and process performance, cost reductions, and higher quality awareness, leading to improved customer satisfaction, a strong market image, and a more favorable competitive position. When environmental aspects are methodically identified and managed through pollution prevention, improved environmental performance, and compliance with applicable laws, better environmental performance can be achieved, according to ISO 14001, which makes a significant contribution to sustainability. Compliance with specific environmental laws increased environmental performance, and awareness, reduced waste, emissions, and resource consumption, improved corporate image, risk mitigation, and responsiveness to stakeholder expectations are some of the factors that contribute to ISO 14001 certification.

BSCI 

The Business Social Compliance Initiative (BSCI) is an industry-driven movement aiming to monitor and assess workplace standards across the global supply chain.[10]

Established by the Brussels-based Foreign Trade Association, the BSCI is the European social monitoring system for ethical sourcing (FTA). The Business Supply Chain Initiative (BSCI) is a business-led effort to enhance labor standards across the international supply chain. By offering a development-oriented approach that is adaptable across industries and countries of origin, BSCI helps hundreds of businesses join under a single Code of Conduct and advance their shared goal of creating an ethical supply chain.

The International Labor Organization's conventions and guidelines serve as the foundation for the BSCI Code of Conduct's emphasis on safeguarding employees' rights. All BSCI members agree to apply the Code across their supply chains. To help businesses create a socially responsible supply chain, BSCI offers a wide variety of programs and resources that work together.

Fair Trade

Fairtrade is a global movement made up of a diverse network of producers, companies, consumers, advocates, and organizations putting people and the planet first [12]. 

Fairtrade is a means to consciously choose to improve the world by recognizing that the things we buy and sell every day affect the lives of others. Selecting Fair Trade Certified products is a simple way to show your support for ethical businesses, improve the lives of farmers, factory workers, and fishermen, and save the planet. It's a game-changing approach to business, to put it another way.

SMETA (Sedex Member Ethical Trade Audit)

SMETA is Sedex’s social auditing methodology, enabling businesses to assess their sites and suppliers to understand working conditions in their supply chain [13].

By doing social audits, firms may evaluate their suppliers, check in on employee health and safety, and send a message that they will not tolerate human rights violations like child or forced labor. The client will get insight into the workplace thanks to this audit, and they will be given a Corrective Action Plan (CAPR) to implement thereafter. As a result, this may increase the likelihood of new clients deciding to do business with you.

2.3: Impact of standardization on the CHM Industry

All three B Corp, ISO 9001, and ISO 14001 will lead to improved value on the stakeholder ladder.

1. Governance: adoption of a social or environmental purpose; ethics; responsibility; openness; involvement of staff, board, community, and consumers; a variety of governing bodies.

2. Workers: Workplace conditions, communication, health and safety, career growth, and employment flexibility; worker ownership and involvement. Compensation, benefits, training, and ownership opportunities.

3. Community: Supplier relationships, diversity, and community participation, such as volunteer work and charity donations; if a company's product or service is intended to address a social problem.

4. Environment: Impacts on climate, water, land, and life; if a company's goods or services are intended to address an environmental problem. Environmental management, products, and services. Emissions, water, waste; resource preservation; energy efficiency; suppliers, and transportation.

5. Customers: if a business's product or service promotes public benefit and whether it is intended to help underrepresented communities; whether a company's product or service is intended to remedy a social or environmental problem; and the influence of the firm on its consumers.

The CMH industry is still "young" and undeveloped. It has the potential to provide enormous growth in a new global economy and is ready for investment. This Sector is Vital for achieving the sustainable and most desirable area of development by circling it with SDGs principles. The adherence to SDG’s principles will take this upcoming industry to new heights of development but also binds it with certain desirable goals making it resilient and agile.

The CMH sector has the scope and growth potential to have a tangible impact on most SDGs: 

• CMH livelihoods in rural areas underpin progress towards ‘no poverty (SDG 1). 

• High rates of participation by women and youth are critical to ‘global equality’ (SDG 5). 

• The scale and global growth potential of CMH deliver ‘good jobs and economic growth (SDG 8). 

• Digital, finance, logistics, and training activities contribute to ‘Innovation and Infrastructure (SDG 9). They also ‘reduce inequalities in and among countries' (SDG 10).

• CMH businesses protect and safeguard the world’s cultural and natural heritage (SDG 11). 

• CMH also ensures ‘sustainable consumption and production patterns (SDG 12). 

• By empowering producers, CMH can contribute indirectly to ‘zero hunger’ (SDG 2), ‘good health and well-being (SDG 3), ‘quality education (SDG 4), and ‘clean water and sanitation (SDG 6). 

• Sector-wide CMH collaboration is also a powerful form of ‘partnership for the goals (SDG 17).

Implementation of the BSCI pledge to adhere to the eleven principles of the Code of Conduct in the supply chains of CHM, which are as follows [10]. This principle will translate the newly crawling supply chain of this industry to attain long-term sustainable goals while moving forward. The strengthening of individual stakeholders of the value chain will result in sustaining the right spirit in due course of time. 

1. The rights to Freedom of Association and Collective Bargaining

2. No Discrimination

3. Fair Remuneration`

4. Decent Working Hours

5. Occupational Health and Safety

6. No Child Labour

7. Protection of Young Workers

8. No Precarious Employment

9. No Bonded Labour

10. Protection of the Environment

11. Ethical Business Behaviour

Fairtrade certification is an award-winning, rigorous, and globally recognized sustainable sourcing certification program that improves livelihoods protects the environment, and builds resilient, transparent supply chains.

A Fairtrade product with the Fair Trade Certified label, means it meets rigorous social, environmental, and economic standards [12].

That means:

• Safe working conditions

• Environmental protection

• Sustainable livelihoods

• Community Development Funds

Since the origin point of the value chain of the CHM industry is mainly individual artisans or small-scale manufacturing facilities, a Fairtrade certification can make a major impact while safeguarding the interest of all.

Standardization in CHM Industry- Product Category Wise

The requirement and standardization implications are different based on different product categories. The value chain of the CHM industry starting from raw material to final good delivery can be grouped into three parts.

The main goal of grouping the whole value chain into three groups is-

1. Classify the requirements of each group- Demand mapping

2. Based on demand mapping finalization of standardization is required for each group and its subsequent group

3. Tech-based innovation required

1-Furniture Industry

Market Place to Tier-1 

Operational Ethics Management Tool

Implementation of the BSCI pledge to adhere to the eleven principles of the Code of Conduct in the supply chains of CHM, which are as follows [10]. This principle will translate the newly crawling supply chain of this industry to attain long-term sustainable goals while moving forward. The strengthening of individual stakeholders of the value chain will result in sustaining the right spirit in time. 

1. The rights to Freedom of Association and Collective Bargaining

2. No Discrimination

3. Fair Remuneration

4. Decent Working Hours

5. Occupational Health and Safety

6. No Child Labour

7. Protection of Young Workers

8. No Precarious Employment

9. No Bonded Labour

10. Protection of the Environment

11. Ethical Business Behaviour

The marketplace industry player should be mandated to update the BSCI audit report by the competent authority at the company site annually. 

The tool that can be deployed by enterprises to ensure the right implementation of BSCI principles is the “Amfori BSCI platform”.

In operational management, contract creation is one of the most critical parts while developing the supply chain. The practices that can be adapted to navigate and implement the operational ethics management tools while going for a smart contract are as prescribed below-

Quality Deployment

1- Implementation of ISO 9001 and ISO 14001to improve product quality and process performance, cost reductions, and higher quality awareness, leading to improved customer satisfaction, a strong market image, and a more favorable competitive position.

1. Cradle to Grave Assessment tool- This tool helps in considering the impacts at each stage of a product's life cycle, from the time natural resources are extracted from the ground and processed through each subsequent stage of manufacturing, transportation, product use, and ultimately, disposal.

     2-Lean Management Tools:[13] Lean management can be implemented in five steps-

1- Identify Value- It must first determine the value of the team's work to create the groundwork for a lean process. Value is anything that your consumer is paying you for, by definition.

Lean categorizes waste into 7 different categories. Activities that result in waste may be characterized as pure and essential. The major distinction between them is that whereas pure waste activities only impair the Lean flow of work, certain waste activities are required to assist the value-adding ones.

2-Map Value Stream- This illustrates the route to a consumer. This is often accomplished in Lean management with the use of Kanban boards. The Kanban board is a tool for mapping each stage of your process and, therefore, visualizing your team's value stream. 

           

3-Create flow- In the world of Lean, flow is a key concept. When creating a flow of value, your aim should be to ensure smooth delivery from the moment you receive an order to the moment you deliver it to the customer because any kind of waiting is a waste. 

Identification of bottlenecks helps in maximizing the operational efficiency of marketplace players thus helping in realizing overall better profits in longer terms.

4-Establish Pull- The 4th of the Lean principle is to establish a pull system. The premise is simple, start new work only when there is a demand for it and your team has spare capacity. Producing just the value that your clients truly need can help you avoid overproducing. 

Catering to variable demand while establishing an agile supply chain in CHM products will lead to faster adoption of the customer’s changing requirements. The concepts of the Zara supply chain are proportionally applied here.

5-Seek Constant Improvement- The 5th lean principle is most applicable in the CHM industry. It will implicate the customer to manufacturer connect via marketplace players. The constant feedback and suggestions will help in achieving the 360* improvements in different aspects.

Tier-1 to Sub-tier

The connecting link between Tier-1 suppliers to sub-tier suppliers is very critical as it connects the different types of sub-tier suppliers. This classification can be based on various terms 

1. Permanent Sub-tier supplier

2. Part-timeline (Single/Multiple frequencies of supply) Sub-tier supplier

3. Manufacturer (Farmers or Agri related persons)

4. Small size business entity performing sub-assembly

The management of the supply chain from  Tier-1 to sub-tier is challenging. These challenges can be categorized into 3 groups-

Ways to handle risks and implement Standardization

1- Connect: Create a Connect Platform

Advantages of Connect Platform

1-Small-scale raw material providers connect helps them to attain economies of scale, knowledge transfer, and bargaining power.

2- Due to the presence of all raw materials at a single stage, It is easy to compare and grade based on quality.

3- The discontinuity in the supply of raw materials can be resolved.

4- Due to the presence of all subcontractors, sub-tier, and tier-1, It increases transparency and knowledge transfer.

2- Contract Formulation and Best Practices Adoption

In order to go one step down and map the standardization, the CHM industry is needed to adopt and implement best practice guidelines while sourcing with artisans. The brief of practice guidelines is as below-

Best practices Used

4- Operational Ethics and Management Tool

The complex and interlinking structural relationship between Tier-1 suppliers to sub-tier suppliers and the lack of proper capital and other infrastructure makes the process of standardization implication a little difficult. In order to gain overall control and by accessing the feasibility factor, a combination of regulations can be adopted.

Sustainability Standards in the Furniture Category of the CHM industry using Programme for the Endorsement of Forest Certification (PEFC) certification

1- Supplier Section- Sourcing PEFC Certified Products

Market players (Rural Handmade) need to develop and implement a procurement policy to include a preference for PEFC-certified materials. Setting out the requirement for PEFC within procurement policy will provide  a clear pathway to increase the share of certified sustainable material, helping to achieve responsible sourcing goals. [14]

Procurement Policy Sample: https://cdn.pefc.org/igen/pefc.org/media/2019-04/ee2b3895-319a-4c60-ab43-828d5101511d/c6a6d7dd-4b47-50c2-8339-30577d42cec9.jpg?m%5B%5D=t%28inside%2C900%2C900%29

Supplier Check- PEFC supplier database can be utilized by Rural handmade in checking the right certification of supplier networks around different countries.

Online Database: https://pefc.org/find-certified

If the suppliers do not hold a PEFC certificate, It can encourage them to obtain PEFC Chain of Custody certification and supply you with PEFC-certified material.

PEFC authorized body: https://cdn.pefc.org/pefc.org/media/2022-09/4a770037-fecc-46ae-a7f4-644a4d223edd/91215d52-0d82-5766-acf4-5f620446094e.pdf

2- Consumer Section- Integrating PEFC-certified products

The supplied furniture category product from rural handmade should be marked by the PEFC label which means that it comes from a PEFC-certified forest. A forest that is managed in line with the strictest environmental, social, and economic requirements. 

The company needs to emphasize more focus on the PEFC label on the company site itself while finalizing the customer requirement document.

2.3: Future Outlook

When most consumers sought the same items, centralized factories emerged as the industry norm. Nowadays, consumers are looking for distinctive, custom, creative items with a narrative. This new developing industry is capable of fulfilling this new wave of customer demand for ethical and genuine goods thanks to digitally enabled CMH, which offers smaller-batch boutique production. Due to its inherent circularity, CMH relies largely on renewable agricultural inputs and uses less industrial, more environmentally friendly manufacturing techniques including small-batch production and boutique manufacturing.

 It offers enormous potential for job creation and income generation, especially (but not just) for low-income areas in Africa, the Middle East, Asia, Latin America, and the Caribbean.

Technology, which was a strong facilitator even before the worldwide pandemic, is now a distinguishing aspect of CMH’s success. Because mobile phones and the internet are widely available, CMH businesses may advance quickly to a key position in the new economy even in rural regions. The industry’s digital divide must be closed to eliminate poverty and support global development.

Part-3

Additional Resources

1. https://ruralhandmade.com/productdetails/square-decorative-throw-pillow-covers-soft-velvet-outdoor-2

2. https://forms.iimk.ac.in/libportal/atozlist.php

3. https://www.statista.com/outlook/consumer-markets

4. https://www.statista.com/study/43820/crafts-and-creative-activities-in-the-united-states/

5. https://industryoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&nvdt=20211112080805320&nvpc=055000000000&nvtype=TIDINGS&icode=0101012045400000

6. https://www.imarcgroup.com/handicrafts-market

7. https://pdf.usaid.gov/pdf_docs/PNADN210.pdf

8. https://www.poweredbypeople.com/blogs/crafted/creative-manufacturing-and-handmade-a-sector-whose-time-has-come

9. https://thelabconsulting.com/standardization/

10. https://www.tuvsud.com/en-in/services/auditing-and-system-certification/amfori-business-social-compliance-initiative

11. https://www.fairtradecertified.org/why-fair-trade/

12. https://www.sedex.com/our-services/smeta-audit/

13. https://kanbanize.com/lean-management/implementing-lean

14. https://pefc.org/for-business/brands-and-retailers/source-pefc-certified-products