Post on 13-Apr-2018
AMERICAN APPARELPRODUCERS’ NETWORK
RE-ENGINEERING YOUR SUPPLY CHAINMike TodaroNew YorkFebruary 3, 2009
It is how you affect business that determines your value.....
It is not do we have good laws,....do you have work?....are you staying in business?....are you making money?
PIECES – The Supply Chain
“What you see on our retail storefloor is the result of hundreds ofsupply chains.......”
AAPN Members SurveyedRETAILERLands EndNordstromKohl’sBRANDAramarkCarharttDickiesJockeyKellwoodLevi’sLion UniformOxford IndustriesPVHStandard TextilesSuperior UniformTimberlandVF FACTORYArgus GroupGreco ApparelKoramsa Palm ApparelRocedes
AGENTFashion SourcesSource-IFABRICBeal Mfg.BuhlerCarmel KnitsCarolina CottonContemporaGreen TextilesHamrick MillsMilliken Vertical TextilesYARNBuhler Yarns LenzingRadiciSpandexTuscarora YarnsUnited KnittingTECHNOLOGYGerberLectraTradeCardTukaTech
TRIMA&EAsheboro ElasticsAvery DenisonCOATSFinotex Ideal Fastener Premier QST YKK SHIPPINGCaribExCEVA LogisticsCTSCrowleyDHLMaersk Seaboard MarineUPSINDUSTRYBureau VeritasC.I.T.SGS Testing
WHAT HAPPENED?Yesterday was “Easy”
--The Industry Changed1.Quota system eliminated 2.Asia (China) redefined global competition 3.More styles, smaller orders4.Greater emphasis on speed-to-market5.Fewer and bigger brands and retailers 6.Shift of risk to factories7.From CMT (FOB) to Full Package (LDP)8.More sophistication in sourcing 9.Going factory-direct
The Big Four Criteria1.Speed to Market
– infrastructure
2.Access to Raw Materials – cycle times and financing
3.Flexibility– products with margin
4.Cost Competitiveness – company and country
SUPPLY CHAIN: “There is extreme value in looking further back into the supply chain into raw materials management”
SPEED TO ‘MARGIN’:“You have to be a SPEED thinker. You have to build SPEED into your corporate culture”
PARTNERSHIP:“... most suppliers are capable of quick response if their customers commit to capacity and raw materials. The occasional losses appear to be more tangible than the far greater opportunity losses due to markdowns and stockouts at the other end of the supply chain”.
INFORMATION:“We preach to the brand and retailer that they should involve us early in the game. They wait too long. They sell, then PO to factory, then PO to knitter, then PO to spinner. Days are lost.
The spinner just needs total pounds to spin”.
RESPONSIBILITY:“I would need in place … a person… logged into a whatever collaborative software is used … an employeededicated to facilitating the informationflow.”
RELATIONSHIPS:“...The days of beating up your suppliers for price concessions are dead. It leads to constant supplier turnover, decreased service levels, and damaged relationships”.
EXPERIENCE:“Since the Brand/Retailer does not own manufacturing plants any longer, there are no more experienced factory managers who understand operations”
Garment Value Chain AS IT USED TO BE Under the Quota System
2000 Retail Stores
Retail DC Store Buyer Importer Agent Local Offices Factories
Post ProductionDistribution to Branches
Pre-ProductionTech DesignFabric DevelopmentTrim DevelopmentRaw Material PurchasingPattern MakingSamplesLocal TransportLOC PaymentCredit (if any)
Post ProductionShippingCustoms ClearanceDuty PaymentLocal Transport
ProductionCommunicationOrder TrackingInspection
Post ProductionShipping
ProductionCMT(Many just MT)FOB
Pre-ProductionTrend AnalysisConceptDesign
New Value Chain: Factory Responsibilities Changed Drastically
2000 Retail Stores
Retail DC Store Buyer Factories
Pre-Production ProductionCollaborative Trend Dev. CommunicationsCollaborative Concept Order TrackingCollaborative Design RM PurchasingTech Design CMTFabric Development InspectionTrim Development Floor Ready PrepPattern Making Post-ProductionSamplesLocal Transport Post ProductionLOC Payments LDPCredit (if any) Distribution to Stores
Customs ClearanceDuty
Pre-ProductionCollaborative Trend AnalysisCollaborative ConceptCollaborative Design
A CAFTA Producer’s Program Flow
ProducerProducer
Trading DivisionTrading Division
Sewing Factory Sewing Factory
ClientClient
Mill (USA)Fabric and
Trims
Cut Piecesand Trims
Invoice Full Package DDPImp. of Record: Logistics Division
ExportFinished Product
Invoice Full Package
Flow of Goods
Invoice
TRIMS (USA)
Invoice Sew + Laundry
Invoice Cut + Transportation
Invoice Fabric FOB Mill
Invoice Trims (USA) + Fabric
Logistics
Local Trims
Invoice Trims
Invoice Trims
Cutting DivisionCutting Division
Laundry Supplier
Finished Product for
Laundry
Washed Finished Product
InvoiceLaundry
Finished Productin Client’s DC
Trims
Factory Selection Criteria1. Strong product development and design2. Technically competent3. Capable multiple product in multiple fabrics4. Financially sound5. Good communication flow (email, no faxes)6. Appropriate infrastructure 7. Have and follow a compliance program8. Have a quality assurance program9. Must be "right sized"
It Starts with DesignThe Forgotten 85% of the Process
Friedman, “Today, what you make is quickly copied. But how you engage your customers, how you keep your promises and how you collaborate with partners,that’s not so easy to copy, and that is where companies can now really differentiate themselves”.
It Starts with DesignDesign is the ultimate consultative selling, the ultimate ‘us’
Barbara Zeins, "There are lots of companies who make clothing.But it is the design element that gets you working outside thecost sheet. The product is the key....If I cut as late as possible,I am always better off. In fact, when I track this with my customer,I always watch the mark downs decline”.
9 BIG FAT GARMENT LIES1. Vendors are substitutable 2. There is no cost in setting up a new vendor 3. Costs are linear, increasing in direct proportion
to quantity produced 4. Last years performance is a good prediction
of next year’s performance 5. Your people are a variable cost -- when there is
a downturn in business just lay them off 6. Customization is always expensive 7. All costs are either fixed or variable 8. As long as you are competitively priced you will survive 9. The only way to lower product costs is
through cheaper labor or materials
Time to rethink offshoring? “Consider sharply scaling back offshore production plans and bringing manufacturing back or close .... determine the total landed cost of each productproduced offshore, understand the shifting trade-offsbetween cost savings from offshoring (such as lower
wages) and rising logistics charges”.
“The greatest problem solvers today are the factories”
“You’ll make money from the factory you pick”
Advantages of ‘Near Sourcing’1. Ability to react quickly to home runs
– sell more of what’s hot, drop what’s not2. Lower inventory levels
- more turns, lower carrying costs, faster pipeline3. Lower markdown risk
– attack markdowns and stockouts, dynamic inventory4. Lower fashion risk
– closer collaboration, cut later, make what’s selling5. Higher product success
- more relevance, more visits, more colors and mix6. Better reaction to supply chain shocks
- proximity, same time zone, common language
PRODUCT – Retail
“the faster the turns, the more importantthe data and the harder it is to get itright. This is no time for amateurs, youhave to really crunch the data.”
Threats – from one’s annual report.....competition .....consumers .....vendors .....foreign sources .....loss of key personnel .....information systems .....failure to react to fashion trends.....(there might even be a recession)
“What I admire about Zara is their ability to charge a fair price for what they sell. They do this by creating a beautiful product as quickly as possible then bring itto a customer who has money to spend and knows they are getting a fair price and having a great shopping experience. Zara has built a huge barrier to entry by anyone else in their space”.
Andrew Grossman, CEO, Georgia Armani, USA
Zara overtakes Gap to become world's largest clothing retailer
...Beloved by proponents of fast-fashion,
...Zara's recorded a 9% increase in sales
...through innovative management and logistics techniques,
...time is the principal factor to take into account,
...more so than the costs of production."
NEW RETAIL GOALSDo You Agree?
Product developmentSmaller ordersMore frequent deliveryFaster cycle timesCloser productionFloor-ready merchandiseStrategic partnerships
STRATEGIES“.....retailers want speed to market. They want to shift product development to the factory. They really need to know the cost of one week in their cycle”.
Attack MarkdownsSource Factory DirectNear Here vs. Far EastMore Trials, fast, constantFlexible LogisticsShared InventoryCommitment to Fabric
Tom Peters .RE-IMAGINE!: Business Excellence in a Disruptive Age“If you don’t like change, you’re going to like irrelevance even less.”
Slow but sure.......fast but sureTechnology supports change.......technology drives changeMeetings as scheduled.........AAPNetworks as neededSame old gang.......ever expanding AAPNetwork Technology links everyone.....an AAPNetwork of everyoneMinimize expense.....maximize value addManufacturing rules.......the supply chain is seamless A sales department.......everyone is the sales department Information: need to know........information: want to share
HTS CODE:
16.00%
12000
17404746
60
Womens Fashion Matte Jersey DressDR China
FABRIC yieldTOP FAB & TRIM 56.5 3.60$ 2.50 9.00$ 9.00$
9.00$ 9.00$
LABOR AND OVERHEAD0.25$ 0.13$ 9.00$ 6.75$ 9.25$ 6.88$
FREIGHT, DUTY AND CLEARANCE
-$ 2.54$ QUOTA -$ -$
0.15$ 0.40$ 0.15$ 2.94$
18.40$ 18.81$
Direct Costs
CuttingSewing (.$.15/SAM)
Duty rate from AsiaAssume Short SupplyAssume 40 foot containerUnits per Container:
Puerto Plata to MiamiShanghai to MiamiSAM VALUE
Total Direct, Manufacturing and Country Costs
Manufacturing Costs
Duty
Freight and ClearanceCountry (Macro) Costs
HTS CODE: 6109.90
32.00%
30000
17404746
15
Poly Span (MMF) Fashion TopDR Asia
FABRIC yieldTOP FAB & TRIM 60 3.90$ 1.25 4.88$ 4.88$
4.88$ 4.88$
LABOR AND OVERHEAD
0.05$ 0.03$ 1.80$ 1.35$ 1.85$ 1.38$
FREIGHT, DUTY AND CLEARANCE
-$ 2.00$ QUOTA -$ 0.29$
0.06$ 0.16$ 0.06$ 2.16$
6.78 8.41$ Total Direct, Manufacturing and Country Costs
Manufacturing Costs
Duty
Freight and ClearanceCountry (Macro) Costs
Direct Costs
CuttingSewing (.$.12/SAM )
Duty rate from Asia
Assume 40 foot containerAssume Short Supply
SAM VALUE
Units per Container:
Puerto Plata to MiamiShanghai to Miami
Duty rate from Asia 32.00%
15000
Puerto Plata to Miami 17404746
45
Man Made Fiber Yoga Top
DR AsiaFABRIC Price YieldTOP FAB,LINING, TRIM 56.5 6.00$ 1.25 7.50$ 7.50$
7.50$ 7.50$
LABOR AND OVERHEAD0.25$ 0.156.30$ 4.73$
6.55$ 4.88$
14.05$ 12.38$ FREIGHT, DUTY AND CLEARANCE
-$ 4.08$ 0.29$
0.70$ 1.89$ 0.70$ 5.97$
14.75$ 18.35$
Direct Costs
CuttingSewing (.$.14)
Assume 40 foot containerUnits per Container:
Container Freight to MiamiCountry (Macro) Costs
Total Direct, Manufacturing and Country Costs
Manufacturing Costs
Duty
Shanghai to MiamiSAM VALUE
Assume Short Supply
HTS CODE: 6109.10
16.50%
36000
17404746
15
SAM VALUE 6
Cotton Tee Shirt DR HONDURAS Asia
FABRIC yieldTOP FAB & TRIM 56.5 1.50$ 0.50 0.75$ 0.60$ 0.60$
0.75$ 0.60$ 0.60$
LABOR AND OVERHEAD
0.05$ 0.05$ 0.03$ 0.72$ 0.72$ 0.54$ 0.77$ 0.77$ 0.57$
quota
1.52$ 1.37$ 1.17$ FREIGHT, DUTY AND CLEARANCE
-$ 0.19$ QUOTA 0.18$
0.05$ 0.05$ 0.13$ 0.05$ 0.05$ 0.32$
1.57$ 1.42$ 1.67$
Puerto Plata to MiamiShanghai to MiamiSAM VALUE
Duty rate from AsiaAssume Short SupplyAssume 40 foot containerUnits per Container:
Direct Costs
CuttingSewing (.$.12/SAM vs $.15/SAM VS. $.06/SAM)
Freight and ClearanceCountry (Macro) Costs
Total Direct, Manufacturing and Country Costs
Manufacturing Costs
Duty
Duty Free for CaftaDuty Rate from Asia: 8.4%Duty Rate from Columbia 18% Materials + Labor40 foot container: 16,000 units by Ocean
Girls Woven DressFABRIC p/yrd yield EL SAL COL DRDRESS POPLIN PRINT 56 2.25$ 9.75 21.94$ 21.94$ 21.94$ WAIST POPLIN DOT 58 2.50$ 2.60 6.50$ 6.50$ 6.50$ RUFFLE NETTING 54 0.85$ 9.00 7.65$ 7.65$ 7.65$ LINING BATISTE 58 1.00$ 1.25 1.25$ 1.25$ 1.25$
TRIM 37.34$ 37.34$ 37.34$ BOW 4" H X 2"T hc DZ 1.59$ 1.86 2.96$ 2.96$ 2.96$ RIBBON 1/2 " GROSGRN YRD 0.13$ 6.00 0.78$ 0.78$ 0.78$ ZIPPER STANDARD PC 0.18$ 0.05 0.01$ 0.01$ 0.01$ LABELS etc STANDARD DZ 6.00$ 1.00 6.00$ 6.00$ 6.00$
9.75$ 9.75$ 9.75$ 47.08$ 47.08$ 47.08$
LABOR AND OVERHEAD4.50$ 4.50$ 4.50$
27.84$ 34.80$ 27.84$ 5.50$ 6.68$ 5.50$ -$ -$ -$
37.84$ 45.98$ 37.84$
FREIGHT, DUTY AND CLEARANCE6.58$
3.72$ 10.44$ 1.56$ 3.72$ 17.02$ 1.56$
88.64 110.09 86.48
7.39$ 9.17$ 7.21$ per unit
FinishingManufacturing Costs
Duty
CuttingSewing (.$.12/SAM vs $.15/SAM)
Labor Overhead
Direct Costs
Freight and ClearanceCountry (Macro) Costs
Total Direct, Manufacturing and Country Costs