Supply Chain -Menswear process book

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ABLE OF CONTENTS 1. Executive Summary 2. Introduction 3. Company Overview 4. Product Specification 5. Sourcing Guidelines 6. Sourcing Strategy A. Country Selection B. Country Ranking C. Supplier Ranking D. Cost Sheet by Country E. Line Plan by Product 7. Placement Strategy A. Production Strategy B. Supply Chain Solutions 8. Final Strategy Summary 9. Conclusion 10. Appendix 11. Bibliography

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XECUTIVE SUMMARY

EnvironMentality offers sustainable garments for the dynamic life of our consumers. We have a sustainable advantage over an array of brands who are equally involved in sustainability and ethical practices. EnvironMentality not only recognizes the current demand for hassle-free clothing but also the desire of the consumer to know the origin of their clothing as well. Today, technology has enabled the development of plant-based fibers that are not only a sustainable alternative to synthetic fibers, but also enhance quality of individual sustainability.

Our dedicated team ensures quality and ethical practices at each step of the supply chain, from design to manufacturing, to the time when it gets to the customer, and even beyond with after sales services. We want our target customers, corporate professionals who frequently travel for work, to be able to pack clothes without worrying about them wrinkling. Our wrinkle-free shirts are designed to be multi-functional, whether that be for the board room or the informal evening soiree.

Our manufacturing suppliers have been selected after careful analysis of our sourcing guidelines, which are in accord with the United Nations Code of Conduct for Imports and Exports. They follow sustainable and ethical methods of manufacturing. Our suppliers are based in China, India and Honduras.

EnvironMentality has chosen Seattle as base location as it tops the annual list of most sustainable cities in the United States of America. Seattle, Washington is well developed in terms of infrastructure as well as other aspects such as vicinity to Port of Seattle and Tacoma. Our distribution center is located in Dallas in Texas. The city is strategically located in terms of ports such as Houston as well as the cluster of supply chain solutions providers. It is also possible to ship orders to anywhere in the USA within 48 hours with Dallas as our distribution center. For efficient supply chain management, we have collaborated with a supply chain solutions provider, based in USA for effective flow of products from point of origin to the point of consumption. Our approach is strategic and sustainable, and we are proud of our associations with our overseas partners to provide the perfect sustainable wardrobe item for our customers.

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NTRODUCTION

Founded in Seattle Washington, EnvironMentality was created with the aim to meet the needs of our customers, men who are environmentally conscious, yet, on-the-go business travelers. With hectic lifestyles, it is important that EnvironMentality provide sustainable clothing options that are wrinkle resistant for ease of travel. With this in mind, EnvironMentality has created a global sourcing strategy that utilizes sustainable sourcing practices, and ensures accessibility for our customers through our brick and mortar stores and e-commerce site. The following sourcing strategy will detail our process including: product development, country and supplier research and analysis, our placement strategy, and logistics and warehousing. Through EnvironMentality’s global sourcing strategy, we strive to not only remain committed to our founding values and vision, but to also service our customers in the most efficient way possible.

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OMPANY OVERVIEW

EnvironMentality is a sustainable clothing brand based in Seattle, Washington. We are a Limited Liability Corporation (LLC). It is one of the most preferred forms of business organizations, which have been able to retain the tax benefits of sole proprietorship and has allowed our owners to have the advantages of a corporate firm. Our customers shop online from a desktop or mobile device, or in a bricks and mortar store.

At EnvironMentality, we humbly approach the recent growing popularity of sustainability in all walks of life. People around the world have become highly aware of the products they are consuming and interested in knowing where the products come from, tracing back to the point of origin. The need for accepting sustainably produced goods and services has become one of the fasting growing trends since the past few years.

At EnvironMentality, we understand your clothing requirements in the most basic sense. Garments are an inevitable part of our lives, and the satisfaction of wearing clothes that have been ethically manufactured is deemed high. Inspired by the likeness of clothing brands such as ASOS, Zara and Gucci who have been remarkably adding more sustainable merits to their portfolio, we have developed a new range of garments that are not only ethically produced, but are also sustainable.

Our new product line is inspired from the idea of capsule wardrobes.

We understand your travel requirements, such as when on a business trip and the need to carry just enough pieces of clothing. It occurred to us that your business formals wrinkled enough for you to not be able to wear them for that evening soiree post meeting. Even though there are many wrinkle resistant options available in the market, how many of them are really sustainable? We took it upon us to find an ethically produced fabric that could not only be made wrinkle free in a harmless manner, but also suffice the ‘formal’ agendas.

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OMPANY VALUES

The core values of EnvironMentality have been embedded in each of our employees as well as our business processes. We abide by: • Creativity • Knowledge • Environment • Teamwork

• Communication • Prosperity • Belongingness • Perseverance

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ISSION STATEMENT

“Create a convenient capsule wardrobe ingredient to enable travel without care”.

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ISION STATEMENT

“We strive to creatively bring awareness through sustainable fashion, to reduce the negative impact on the ecosystem. Throughout the organization, the essence of ethical living is imbibed and transcended into environmental gain”.

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ARGET CONSUMER

For EnvironMentality’s newest range of products, i.e. Men’s Wrinkle Free shirts for business, travel and leisure, our customers are Globetrotters. Globetrotters believe in a harmonious balance between business, travel and socializing. Aged between 22 to 35 years, they live in an urban metropolitan setting. Their income is between US$65,000 to US$90,000. They are single, focusing on their career and/or business. They are employed in corporate firms that allow them bi-monthly travels. All of them have a Bachelor’s degree; some may even hold a Masters.

Most of all, they are environmental as well as health conscious, providing them the willingness to spend on sustainable products.

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ERSONA

Demographic Traits – Mr. Smith is a 30 years old and unmarried. He works as a Senior Project Manager for a corporate firm in Seattle, WA. He holds double Bachelors in Business Management and Finance & Administration. His income is upwards of $80,000.

Lifestyle Traits – Mr. Smith travels bi-weekly for project related meetings; his team member may accompany him on an ad-hoc basis. His trips split between the West coast and the East coast.

As part of limited leisure time, he likes to relax, socialize, read business magazines, etc. He shops at Zara, Polo Ralph Lauren, Abercrombie & Fitch for the most part of his wardrobe. On the Personal Sustainability Index, he ranks himself a 6 on 10. He believes in contributing to sustainable initiatives and is on the path to it.

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RODUCT SPECIFICATION

EnvironMentality provides men’s lyocell cotton blend shirts in six styles with four color and print options per style. Our shirts are wrinkle resistant for up to forty washes, designed to make the busy lives of our customers easier. The target price range for our products is between $40-$60.

Our shirts will be made with a blend of 90% lyocell and 10% cotton. The lyocell cotton blend adds sturdiness to lyocell’s silky texture. Lyocell is the best sustainable fabric for our customers as its small fibers make the fabric good at absorbing moisture, and therefore more breathable, soft, and less prone to wrinkling. These qualities are important in a shirt worn by business travelers who may need to step off a plane and into a meeting or want more versatility in their clothing to fit their busy lifestyle.

In addition to fabric qualities, lyocell is also a sustainable fabric. Lyocell is a manmade eco-friendly fabric made from the cellulose of wood pulp created using a closed loop process. This process is what makes lyocell so environmentally friendly; the closed-loop process decomposes all solvents and emissions from the process.

To explain further, amine oxide is used as a non-toxic solvent which is continually recycled during the production process. In addition to this, air emissions and water usage are significantly less than other manmade fibers. Lyocell is 100% biodegradable as well. All elements of our shirts are eco-friendly including recycled plastic buttons and wood buttons. See teck packs in the appendix for further product details.

Long sleeve no pocket Retail Price: $52.99

Long sleeve with patch pocket Retail price: $50.99

Long sleeve with concealed pocket Retail price: $54.99

Short sleeve no pocket Retail price: $44.99

Short sleeve with double pocket Retail price: $50.99

Short sleeve with patch pocket Retail price: $47.99

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OURCING GUIDELINES

EnvironMentality’s sourcing guidelines serve to enforce our company’s mission and values. To ensure transparency, our internal review committee will analyze and report on business partners and EnvironMentality’s adherence to our sourcing guidelines once a year.

EnvironMentality’s sourcing guidelines reflect the United Nations Compact on International Labor as well as the Apparel Industry Agreement Partnership. In addition to international standards of conduct, we also abide by internal guidelines based on our core values.

These include: • Transparency about our sourcing and code of conduct.

• Engagement with customers to educate and promote sustainable practices.

• Support the growth of knowledge for our craftsmen and source material communities.

• All sourced materials must meet our compliance process.

• EnvironMentality’s suppliers should provide meal provision for their workers.

• EnvironMentality’s suppliers should provide a regularized health care plan.

• EnvironMentality’s suppliers should recycle waste materials.

CODE OF CONDUCT - LABOR

• EnvrionMentality does not accept child labor. Neither us nor our business partners will employ anyone under the age of 18.

• EnvironMentality upholds the policy of free labor association for our company as well as business partners.

• EnvironMentality supports equal pay for its employees and associates of business partners.

• The maximum hours employees and associates can work is 48 hours plus 8 hours of overtime.

• EnvironMentality and its business partners will handle compensation case by case.

• Sourcing and Quality

• EnvironMentality’s sourced fabric will meet quality guidelines and will vary by the fabric type.

• EnvironMentality’s business partners will follow and meet the specifications of the tech pack.

• EnvironMentality’s raw material will be sourced through fair trade.

• EnvironMentality’s business partners will submit to compulsory quarterly audits, surprise visits, and monthly progress reports.

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OURCING STRATEGY

Sourcing strategy development is an approach to supply chain management that formalizes the way information is gathered and used so that EnvironMentality can leverage its consolidated purchasing power to find the best possible values in the marketplace. The sourcing plan includes country selection, supplier selection, placement/ ranking of countries and suppliers, final strategy formation and logistics/warehousing and distribution. Into this planning, all these sourcing events are organized and detailed with all tactical and operational information.

Steps in the strategic sourcing process are illustrated below.

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OUNTRY RES

As part of our ongoing supply chain strategy develop been conducted on six countries in order to determine for EnvironMentality to procure and source materials services. This analysis will focus on the viability of manu India, Honduras, Sri Lanka, Vietnam, and Bangladesh country overview, country stability, the state of the a industry, free trade agreements, cultural differences, l and benefits of working in each country, a SWOT anal an overview of three viable suppliers in each countr the finalized supplier. Through the analysis of the cur countries, we will be able to finalize EnvironMenta placement strategy moving forward.

SEARCH

pment, research has e the best locations and manufacturing ufacturing in China, h by examining the apparel and textile lead times, the risk ysis of the country, ry, and a SWOT of rrent state of these ality’s supply chain

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EOPLE’S REPUBLIC OF CHINA

POLITICAL

China is a 57.8 on the index of Economic freedom on a scale on 100 as the country is governed by a single political party, controlled by a few individuals, which leads to only a minimum amount of economic autonomy from government intervention.

This may lead to Political and economic uncertainties and an occasionally difficult business environment that can affect corporate payment behavior, thus, an acceptable risk comes with doing business in China.

The Chinese government owns major conglomerates in China, thus, any policy that is made is in favor of businesses and making money, as China is more of a capitalist country than communism.

The Chinese media is very secretive and is controlled by the government hence, any news received by its citizens or by foreign countries might lack the complete truth. This may lead to foreign investors and businesses dealing with China to make inaccurate decisions due to lack of information. It is also difficult to do business if you don’t have someone on the inside as the country is corrupt, but the new Anti-corruption initiative by the government has majorly eased the situation and strengthened the country a little more. New environmental friendly laws were passed and inspections were conducted across all industries.

ECONOMICAL

China’s GDP was $11.6 trillion in the year 2016 and apparel export contributes $160.8 Billion. The economy grew 6.9 percent in 2017, well above the official target of near 6.5 percent and a 26-year low of 6.7 percent in 2016. The growth

rate had slowed in the last 2 years due to the anti-corruption law passed by the government, which left a lot of businesses adjusting to the new rule, but, now the country is back on track.

China is also the largest business partner of the USA, where the later has a trade deficit with China of $345 billion in 2016. China’s exchange rate is $1 = 0.16 yuan. Also, the dollars that come into China through trade are sent to China’s central bank and stockpiled it is foreign exchange reserves making it unavailable for circulation thus, putting upward pressure on the dollar value, lowering Yuan’s value. Then China’s central bank invests this amount in the US treasury increasing USA’s debt to China.

This is how China controls its currency inflation rate by 2%.

SOCIAL

The richest 2.1 million families control between $2 trillion to $4 trillion in stocks, bonds, and real estate. While the middleincome group of China is growing rapidly the lower-class individuals are growing but at a very small rate. 11.0% of the Chinese population lives on less that $3.10/day, while the 1% of the population owns more than the sky. This inequality has led to slow tensions and has steered to a volatile society. The workforce of China as of 2017 is 803.6 million ranking it first place globally, thus, it still has the world’s largest capacity to produce laborintensive goods, such as textile. China has abundant skilled labor thus, it can provide value-added services along with quality product production. The culture of China is so different that competition and status are embedded in the minds of its citizens, and it is difficult for external individuals to understand its citizens.

LEAD TIME OF PRODUCTION

China has 2 main national holidays; the Chinese New Year in February and the National Day in October, each of these last 7 days and therefore is called “Golden Week”. There was a third, one week holiday which was put to a stop in 2007 to reduce economic disruption. There are 15 days more of holiday spread across the whole year. Holidays are marked on the calendar ahead of time which allows the suppliers to plan around it to meet the required lead times.

China is also prone to natural disasters in terms of Earth quake, drought, floods and typhoons. The above-mentioned reasons do affect the lead time of production depending on the situation and the intensity of the disaster. In certain regions on the west coast the famine has consistently led to loss of crops like cotton. Thus, China is trying to be more environmental friendly to reduce pollution and other catastrophic environmental disasters. The country is also promoting sustainable practices to rectify future flood and famine issues. This, will in the future ensure less interrupted lead time promised to each buyer.

CULTURAL INSIGHTS

China has a hard-working culture and long working hours. They are efficient even when they are chit-chatting through work and they would also agree to stay extra hours if the work could be completed and they could make a little more money.

The people: Deeply rooted in Chinese society is the need to belong and conform to a unit, whether the family, a political party or an organization. Age and rank are highly respected and sometimes tend to offend the elder in the process of doing business. Hence, keeping in mind to allow the supplier to speak first out of

respect for age is important. Also greeting senior most person begins greeting. Thus, greet the oldest, most senior person before other and we must ensure to line up our team in the order of seniority so they can know who to greet first.

Greetings: Chinese may nod or bow instead of shaking hands, although shaking hands has become increasingly common. When introduced to a Chinese group, they may greet with an applause, therefore it is good to Applaud back.

Body Language: The Chinese dislike being touched by strangers like hugging, locking arms, back-slapping. Clicking fingers or whistling is considered very rude. Chinese point with an open hand and never with only an index finger.

Corporate Culture: They are suspicious and fearful of being cheated or pushed around by foreigners, who are perceived as culturally and economically corrupt.

It is very difficult to break through the “them vs. us” philosophy (foreign partner vs. Chinese). In personal relationships, the Chinese will offer friendship and warm hospitality without conflict, but in business, they are astute negotiators.

Punctuality is important, business cards are exchanged upon meeting. Business cards should be printed in English on one side and Chinese on the other.

English may not be spoken in business meetings, although some Chinese may understand English without making it known, therefore hiring an interpreter or asking for one is important. Seating is very important at a meeting. If they don’t wish to pursue the deal any longer, they may not inform the second party. To save their own face, they may become increasingly inflexible and hard-nosed, forcing the buyer to break off negotiations.

TRADE AGREEMENTS

China has bilateral trade agreement with over 100 countries. China’s bilateral investment agreements cover expropriation, arbitration, most-favorednation treatment, and repatriation of investment proceeds. They are generally regarded as weaker than the investment treaties the United States seeks to negotiate in its agreements.

China does Have Free Trade Agreement with 14 countries and 8 more are under negotiation. The 14 countries include ASEAN, Singapore, Pakistan, New Zealand, Chile, Peru, Costa Rica, Iceland, Hong Kong, Switzerland, Macao, Taiwan, Korea and Australia. The Hong Kong/ Macao agreements - One is bilateral agreement to exempt each other from their own antidumping duty arrangements.

China is the world’s leading exporter and world’s second largest importer. Though US Imports majority of its goods from China, the countries don’t have a Free Trade Agreement. This is to ensure that china doesn’t dump its products in the US market for cheap rates leading to other suppliers and home companies’ losses. According to Office of US Trade Representative, China exported appx. $478.8 Billion in 2016 to the USA. US trade deficit with china is approximately $345 Billion as of 2017, which is lower than 2016’s $347 Billion.

China is Also part of the (The AsiaPacific Economic Cooperation) APEC which includes USA and China in the total of 21 countries. It is the premier forum for facilitating economic growth, cooperation, trade, and investment in the Asia-Pacific region. China also chooses its FTA/RTA partners strategically to ensure that China’s investment in those international countries can bring them a return through those countries’ FTA agreements with USA. This benefits China’s overall income as the investment profits go back to china.

Finally, trade organizations such as USFIA (United States Fashion Industry Association’s) & AAFA (American Apparel and Footwear Association) have joined these organizations for a global collaboration. China is also part of numerous environmental protection agreements.

These agreements that China has with USA and other countries, will allow our business, EnvironMentality, to source from Chinese supplier Smart shirt garments (present in numerous countries) and leverage on the free trade agreement and quotas for raw materials.

CHINA’S APPAREL INDUSTRY

China’s apparel and textile export industry is the largest in the world and as of 2016, it is valued at $160.8 Billion, which is almost 35% of the global market share according to Global Edge. China is also the largest supplier of garment and textiles to the USA. However, China’s increasing labor costs has reduced its growth rate and put the country at risk as many suppliers are choosing cheaper labor countries like Vietnam and Bangladesh.

But China’s “Made in China – 2025” initiative (which focuses on producing

70% all components for all industries in China by upgrading, investing and leveraging technology and expertise) will continue to place China as number 1 in the apparel industry. Major retail buyers still prefer Chinese suppliers due to the value-added services (an innovation of fabric and supply chain management) that other competing countries don’t provide, at least to the extent that Chinese suppliers do. The costs of labor will also be addressed as many companies are shifting to semi-and automated machines to reduce costs in the long run. The Chinese government is known for being supportive to any cause or initiative if it benefits the country (which is capitalism driven) and apparel industry and its innovation initiatives still remain on the government’s radar as it is one of the largest segment that

generates GDP for the country of the largest segment that generates GDP for the country.

BENEFITS

Our business EnvironMentality can benefit from the sourcing of garment from China due to its geographical location which will ensure the quick availability of raw materials at short lead times. The Free Trade Agreements with countries that can provide Lyocell will help gain a cheaper rate due to the nil duty. The start to final product can be made in close proximity allowing to rectify mistakes in short term if any. Apart from these China also has cheap labor and skilled labor.

The investment in technology and valueadded services benefit our business along with China’s ambition to produce 70% of all the components by 2025. The

rate of labor is less compared to the competing countries and they meet the labor and environment standards that EnvironMentality is looking for. The government has also taken the initiative of enforcing strict environmental guidelines to rectify china’s situation. The chosen suppliers already have a strong customer base in US which provides them with the product knowledge that EnvironMentality can leverage on. As China’s economy is strong and the risk of doing business is minimal we can create long-term contracts without worry.

RISKS

The Government controls everything which makes it difficult for a foreign company to judge the country without inside help. So, any policy implemented could break or make a business. Due to lack of free trade the duties will be high (12.2% to 25%). Doing business for the first time in a country with a totally opposite culture might put EnvironMentality in difficult position if anything were to go wrong. The logistics are expensive compared to Honduras, which has a FTA with USA along with its close proximity to the USA which reduces the lead time.

CHINA’S SITUATIONAL ANALYSIS and semi-skilled labor force S • Skilled leads to high productivity.

• Leader in Apparel production.

• Centrally located hence, easy for sourcing and outsourcing.

• Strong economy hence, less risk of doing business.

• A maturing market provides healthy competition.

• Largest population in the world makes it suitable for a business-like apparel that is labor intensive.

• Has 14 FTA and 8 under negotiations.

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• Single ruling party means it is difficult to keep the existing party in check.

• Media system is controlled.

• Labor cost in slowly increasing.

• Cultural differences may lead to misunderstandings.

• It is very difficult to break through the “them vs. us” philosophy.

• Doesn’t have FTA with the USA. • Numerous holidays.

• New laws on environmental friendly practices allows for new technology investments.

• Increased competitiveness of competing countries like India and Vietnam.

• The 2025 plan to produce 70% of all components in China.

• Natural disasters threatens availability of raw materials and lead time of production.

• Curb on corruption thus, easy to business in the future through white channels.

• War / cold war with neighboring countries like India.

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NDIA

Religion: Hinduism

84%, Islam 9.8%

Population: 1.3 billion Capital: New Delhi

Education level: 4.5% graduate or above, 32.6% below primary school

India President: Shri Ram Nath Kovind Prime Minister: Shri Narendra Modi

Sovereign Socialist Secular Democratic Republic with parliamenary system of governmet

Language: Hindi & English

POLITICAL

India is a democratic union of states with parliamentary power. Prime Minister Narendra Modi’s party, the Bharatiya Janata Party (BJP) has held a majority in parliament since the 2014 election. Modi

is a “hard line” Hindu nationalist, who won with overwhelming support in 2014, due to anger at nationwide corruption and weak economic growth (India Country Profile). In order to combat some of the corruption, the Modi government abruptly

enacted a demonetization policy in 2016 that banned larger bank notes in an attempt to get rid of “black money” or untaxed cash (Krishnan). The policy was unpopular and caused major disruptions as 86% of the circulating cash was made up of those bills (Krishnan). The policy was credited with an economic slowdown from 2016-to mid-2017, but new forecasts indicate that the cash-to GDP has stabilized and India’s GDP is projected to grow by 7-7.5 percent in the coming year (Business Today India).

The recent upturn in India’s economy is due, in part, to the implementation of the 2017 Goods and Service tax (GST).

This policy replaced state and local taxes with a universal value added tax that aims to create one market (India: Country Profile, Passport). While there was initial confusion for many Indian companies and retailers used to dealing in cash, the GST is expected to increase consumption as business transactions become easier. In addition to the GST, Modi’s government also launched a “made in India” program in 2014. Made in India aims to make India a “global design and manufacturing hub” and was created in response to the collapse of the emerging market bubble India experienced up until 2013 (India: Country Profile, Passport). As part of its nation building initiatives, one of Made in India’s goal is to raise manufacturing’s share of the GDP from 16% to 25% by 2022 (India: Country Profile, Passport). According to the Make in India Initiative webpage, “The policy is the first of its kind for the manufacturing sector as it addresses areas of regulation, infrastructure, skill development, technology, availability of

finance, exit mechanism and other factors related to the growth of the sector.”

All of these initiatives serve to make India’s stance on globalization a positive one. In fact, PM Modi recently spoke at the World Economic Forum where he defended globalization and encouraged cooperation on climate change and economic policies.

ECONOMIC

Despite the 2016 demonetization policy, which caused cash shortages and low confidence in the market, India’s economy has been growing over the past few years. However, as we get deeper into 2018, it seems that India is in for another economic slowdown, at least until 2019. While initial GDP projections were closer to 7%, “2018 may be the slowest in four years at 6.75%, before it rebounds to between 7% and 7.5% in the next fiscal year” (Lyer). This slowdown is likely a temporary effect of the recently implemented GST. The coming year will see a focus on the rural and agricultural economy because the general election is in 2019, and the BJP needs to address the low agricultural prices Indian farmers are suffering from.

As of February 5th, 2018, the Indian Rupee was 1 Rupee to .016 U.S. Dollar. The Indian inflation rate has been on the decline, as per the inflation targeting framework imposed on the central bank (Economy, Finance and Trade: India). Currently the inflation rate is at 5.21% and is expected to lower to 5.1% in the coming fiscal quarter. While the inflation rate is a little high, as least compared to the U.S.’s 2%, against the Rupee, the American dollar is quite strong so would be a good value for the price.

SOCIAL

India’s power is in its people. India’s middle class is expected to rise by 5.6% to more than 80 million by 2020, the overall population will overtake China by 2030, and India will have the world’s largest working age population, crossing 1 billion people by 2050 (India: Country Profile, Passport). India is investing in physical and social infrastructure in order to increase living standards. The government plans to invest 1 trillion in infrastructure including ports, roads and power plants (India: Country Profile, Passport). With such a large population, and increasing birth rate, job creation is a major concern. In 2017, unemployment was 4.8% and will increase to 4.9% in 2018 (India: Country Profile, Passport).

Younger workers may not be as willing to work low paying jobs, and therefore labor costs may increase (India: Country Profile, Passport).

In addition to population and employment concerns, India has a tense relationship with Pakistan including a terrorist attack in 2008 (India: Country Profile, Passport).

In Eastern India there is an ongoing conflict, including an attack in 2013, between the Maoist insurgency who wish to free Kashmir from India (India: Country Profile, Passport).

LEAD TIME OF PRODUCTION

India is a large and diverse country with many geographies, weather, religions, customs, and holidays. For this reason, it’s important to be aware of potential hindrances to production lead times due lead time due to natural and cultural events. Most of India, with the exclusion of the milder north, can be classified as a tropical climate causes flooding and damage, especially along the big rivers, Bramhaputra and Ganges in the northwestern part of India (India Climate).

As such, India experiences monsoons from July to September. The heavy rainfall often associated with heavy rainfall, especially in the lower Himalaya region. India also experiences occasional cyclones in the east between April and December, earthquakes, droughts, and extreme heat (see figure 3).

As for cultural events, India is so diverse, that many holidays are celebrated only regionally, and in some cases, are religion based, with Hindu, Islam, and Christianity being the three major religions. The public holidays include, Republic day on January 26th, Independence Day on August 15th, and Mahatma Gandhi's Birthday on October 2nd. There are also several major festivals including: Diwali a festival over 5 consecutive days any time between October and December, Holi in March, Ramadan/ Eid from May to June, and Durga Puja over four consecutive days between September and October. Not all holidays or festivals are observed in every region, and there are many more not covered in this report.

When finalizing Environmentality’s supply chain strategy, the region our manufacturer is located in will play a major role as to the types of natural and cultural based delays we may experience.

CULTURAL INSIGHTS

When preparing to do business in a foreign country, it’s important to understand the cultural customs. While many Indians speak English, there is a fundamental difference to how Indians approach business, one of the biggest being time. As a society, India is considered polychronic, in which time is flexible. Both social and business meetings often start late, about an hour after the original time (India Business Customs). Additionally, India does not observe daylight saving time, so the time difference between India and the U.S. will vary throughout the year. The work day India is similar to the U.S. Monday through

Friday, 9:30-5:30 PM, however, Indians also typically work a half day on Saturdays (India Business Customs). In some larger cities, such as Mumbai working hours may be earlier in order to avoid bad traffic.

Finally, lunch is typically taken between 1 and 2 PM and lasts an hour.

Other considerations when doing business in India are the various cultures and religions.

For example, dietary preferences can be complicated and it is polite to inquire about it as “Hindus abstain from beef, Muslims abstain from pork, and Indians of many religions are vegetarians” (India Business Customs). It is also important to keep in mind that India is more conservative, so business attire is also conservative for both men and women (India, Culture Crossing Guide).

Similar to many Asian countries, business cards should be accepted with two hands.

Business meetings and negations in India may be slow as India is polychronic. Many

meetings begin with small talk about family, education, hometowns, and sports (India, Culture Crossing Guide).

Because of this, it is possible that business won’t be discussed in initial meetings. Even so, proposed agendas and supplemental materials for the meeting are appreciated when sent ahead of time. Because India is so hierarchical, when conducting meetings and negations it’s important to defer to the most senior person in the meeting.

Harmony is key, and contradicting the most senior member is to be avoided (India, Culture Crossing Guide).

Communication style tends to be nonconfrontational and indirect. For this reason, direct “no’s” won’t happen often and pressure tactics are the wrong approach to take (India, Culture Crossing Guide). However, bargaining and discounts are expected, so this is an important feature to conducting negotiations in India.

TRADE AGREEMENTS

India has no free trade agreement with the US in terms of apparel. As the U.S. is in a trade deficit with India by $20 billion as of 2016-17 and India exported over $42 billion to the US during that same time, it’s unlikely that the U.S. is interesting in perusing a free trade agreement with India at this time (Mishra, 2017). While India and the U.S. have no trade agreements for apparel, there are a few other agreements that cover services including: India-U.S. Trade Forum (TPF), India U.S. Strategic Dialogue (S&CD), and India-U.S. CEO Forum. India is also a part of trade agreements between other countries, most notably, the ASEANIndian Free Trade Area (AIFTA), which reduces duties on 76% of goods between member counties. This may be beneficial for Environmentality when sourcing raw materials we don’t want to procure in India.

INDIA’S APPAREL INDUSTRY

For India, textiles are one of their oldest industries. Currently, the textile sector is one of India’s largest exports accounting for 13% of total exports (Textile Industry & Market Growth in India).

Since 2016, the government aimed to add 30 million more jobs to the textile and apparel sector (Economy, Finance and Trade: India, Passport).

The sector currently employs 45 million people directly and 20 million people indirectly (Textile Industry & Market Growth in India). India’s textile industry is made of two parts, the first covers “handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods” (Textile Industry & Market Growth in India). The second covers spinning, apparel, and garments and use modern methods. As for textile production, India is the 2nd largest producer of silk and cotton, 3rd

largest in cellulosic fiber and 2nd largest producer of Manmade Fiber & Filament (Textiles and Apparel).

As mentioned previously, the “Made in India” initiative aims to boost manufacturing including of textiles and apparel. In 2016, the government not only invested further into the apparel and textile industry, but also cut the customs duty on raw materials from 5% to 2.5% (Economy, Finance and Trade: India, Passport). With the government investing in this sector, it’s expected to grow from its current US$ 120 billion to US$ 23 billion by 2020 (Textile Industry & Market Growth in India). Additionally, cotton production is estimated to increase by 9.3% and the total area under cultivation of cotton in India is expected to increase by 7%. Indian exports of retail and lifestyle products is also increasing and grew at a “compound annual growth rate (CAGR) of 10 per cent from 2013 to 2016, mainly led by bedding bath and home decor products and textiles” (Textile Industry & Market Growth in India). As the government heavily supports growth in this sector, there are many governmental organization, trade organizations, as well as research organizations, including: The Textile Association (India) (TAI), Northern India Textile Mills’ Association (NITMA), and The Ministry of Textiles of India.

Despite the growth of the apparel and textile industry, labor costs are still low in India when compared to other countries (see figure 4). While Asia saw a 5% increase in minimum wage in the apparel sector in 2016, India adjusts minimum wage based on economic factors such as inflation rate and GDP growth (Lu). In 2014, the average labor cost in India was around .92 cents per hour (Zhu). With the decrease of the inflation rates in India and

projected GDP growth, it seems likely that labor wages will remain constant in the coming years.

RISKS AND BENEFITS

Tofullyevaluatetheviabilityofmanufacturing in India for Environmentality’s supply chain strategy, we must assess both the risks and benefits of sourcing materials there. One major risk is that the general elections are coming up in 2019. Potentially, much of the emphasis and growth in the textile and apparel sector, tax reforms on raw materials coming in, and other economic plans like the Made in India initiative, could be reversed if a new party were to take control of parliament or Prime Minister Modi wasn’t reelected. Even though the economy is projected to grow by 7% in 2019, the slow down happening currently may turn voters off of Modi and the BJP (Bharatiya Janata party). Another risk is the regionality of India. Because India is so diverse, it’s difficult to summarize general practices for the entire country. While it’s

impossible to account for every eventuality, it’smorelikelythannotthatifEnvironmentality goes forward with manufacturing in India, there may be some delays or confusions on business practices, or cultural affairs due to the variability of regional practices that can’t be accounted for in their entirety in this report. Additionally, while not a risk, per say, the lack of free trade agreement between India and the U.S. is certainly a challenge, as is relationships between the two countries change, heavier duties could be imposed on our product. Finally, while there is a lot of emphasis on the growth of the manufacturing marketing in India, it’s still too early to know if these projections will come to fruition. If projections fall short, the entire market could collapse on itself as jobs disappear and investments stop.

As for the benefits of working in India, it’s undeniable that the promise of growth in the manufacturing sector is exciting.

To get in while the market is fresh and growing could be beneficial in the long

run as Environmentality makes strong and long-term relationships with suppliers. Additionally, the support from the government on this effort offers a form of security, as they create the infrastructure to manage and maintain this growth. For this reason, there are many organizations and agencies that are set up to help companies do business in India. The process is becoming more streamlined as we saw with Modi’s universal tax law, and things are becoming more automated as well.

Another benefit is India’s vast textile and apparel industry. Because it’s such an old industry, there are technical skills and knowhow that would be hard to find other places. India is also a major producer of raw materials and textiles, so, there isn’t much of a limit in terms of fabric availability and techniques available. In this way Environmentality wouldn’t be limited by raw materials and need to import these materials. Finally, India’s labor wages are lower than many countries, so there would be costs savings in this area.

INDIA’S SITUATIONAL ANALYSIS S • Strong textile industry supported by government.

• Access to raw materials.

• Infrastructure for doing business in India is increasing.

• Low labor cost .

• Lack of free trade agreement with the U.S.

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• Slow economic growth currently, despite projections.

• Population growing and country wide infrastructure is struggling to keep up.

• Former and on ongoing money corruption.

• Growth in manufacturing sectors.

• Apparel and textile industry expected to add jobs.

• Direct foreign investment in India is increasing.

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• Increasing sustainable practices and meeting industry goals through the “Made in India initiative” .

• 2019 election in India could change the political party in power changing policies that have been put in place.

• Trade deficit between US and India could increase tariffs on imported apparel.

• Projected growth in the manufacturing sector might not pan out, collapsing the market.

• Competing on labor costs.

T

H

ONDURAS

Religion: Roman Catholicism

Population: 9 million Capital: Tegucigalpa

Literacy: 81%

Honduras President: Juan Orlando HernĂĄndez Alvarado

Presidential Republic

Language: Spainish

POLITICAL

Honduras is still impacted by corruption, violence, and poverty. In 2016, the World Banks’ Political Stability Index

recorded Honduras as -0.36. The democratic government is led by the current president, Juan Orlando Hernandez. Hernandez is serving his

second term and his recent victory in the presidential election has ignited violent political protests. On top of this, poverty still affects 60% of the population. Honduras is very present in the international community and is a member of the United Nations, World Trade Organization, and the Central American Integration System. Honduras does not have any regional trade blocs and participates in various environmental agreements. The country’s political atmosphere does require improvement; however, the government is making an active attempt by developing plans and policies.

ECONOMICAL

Honduras is experiencing moderate economic growth. The country’s GDP is projected to reach 23.56 Billion in 2018, which will account for 3.6% growth.

Honduras’ top trade partners include the United States, China, and Guatemala.

The economy is greatly influenced by U.S. exports. In 2016, Honduras received $10.56 billion in imports and sent $7.84 billion in exports. One USD is worth 23.60 Honduran Lempiras. Inflation is currently at 4.33% and it is expected to increase to 4.73%. The top exported goods include coffee, electrical machinery and sea food. The top industries include sugar, coffee, woven and knit apparel goods, and wood products. The textile and apparel industry accounts for 150,000 jobs now. Nevertheless, the Honduras 2020 strategy is expected to increase the number of jobs by 200,000. Since 2007 the unemployment rate has risen by 5.7%. This unemployment rate is directly correlated with recent minimum wage

adjustments. Honduras is a low/middle class income country. Poverty still effects 60% of the population, regardless of the gradual economic growth.

SOCIAL

In 2018, Honduras’ estimated population accounts for about 9.41 million people, which is a 1.64% growth from last year. The current median age is 23.4. Most people in Honduras speak Spanish and Amerindian dialects. There are four ethnic groups in Honduras. Majority of the population, 90%, includes the Mestizo group. The remaining 10% consists of the African, European, and Indigenous ethnic groups.

Majority of the population is considered part of the Roman Catholic Church.

However, some Hondurans belong to the Protestant Church. The education system in Honduras is comparable to the United States. In 2016, 96.18% of the Hondurans youths were enrolled in primary school and 64.59% of Hondurans were enrolled in secondary school. These elements impact the Honduran society.

LEAD TIME OF PRODUCTION

Certain country-specific conditions, like natural disasters and holidays, are known to affect the lead-time of textile and apparel production. Honduras is subject to a variety of natural disasters including hurricanes, flooding, earthquakes, droughts, and forest fires. Unfortunately, natural disasters are not the only aspects which affect business schedules. Holidays also referred to as cultural nuances, interfere with production too. Hondurans celebrate New Year’s Day, Maundy Thursday

Good Friday, Pan-American Day, Holy Saturday, Easter, Labor Day, Independence Day, Morazan Week, and Christmas Day. Environmentality should take into account the conditions that may affect the lead-time of production because both, natural disasters and holidays disrupt business deadlines.

CULTURAL INSIGHTS

Cultural insights are important factors to successfully conduct business in unfamiliar regions. Therefore, it is critical to acknowledge the similarities and differences of each culture and respond accordingly.

Hondurans approach communication, negotiation, and business with their cultural values in mind.

Hondurans are known to communicate indirectly and lower their heads to display respect. Whereas, citizens from the United States communicate directly and use eye contact to show respect and attentiveness.

Generally, in both countries, politics and religion are not appealing subjects. Therefore, the topics should not be discussed in casual settings. Also, it is best to contact Honduran companies by email or through the means of social media. Hondurans do not answer unidentified phone numbers because they fear extortion. These suggestions will assist Environmentality and allow the company to effectively communicate with Honduran suppliers.

The significance of both, hierarchy and balance within Honduran structures are essential elements to having a successful international collaboration.

In the Honduran business hierarchy, decisions are formulated at the top, by the boss, and are communicated to the employees. In fact, most workers refrain from disagreeing because conflicts are not acceptable or tolerated. Therefore, negotiation practices must fall in line with these strong beliefs.

Prospective business partners should avoid notions of confrontation, hard selling, pressure tactics, or any other aggressive means to get what is desired. Business partners should strategically conduct negotiations to avoid offending Honduran customs. This can be accomplished through the creation of reciprocal relationships which allows Honduran business partners to want to help Business conduct is another extremely critical detail and it deserves attention. Punctuality and professionalism may be extremely important in America, nonetheless, the rules slightly shift in Honduras. Punctuality is essential in daily job positions. However, business meetings do not start on time and generally begin with light conversations about family or sports. On top of this, the acknowledgment of degree titles is extremely important in Honduras. For example, if your business partner has a doctorate degree, you must always refer to your partner as “doctor.� These are recommendations to properly conduct business with Hondurans.

Cultural insights help foreign professionals comply with appropriate business practices in unfamiliar regions. These insights act as guidelines for successful means of communication, negotiation, and business conduct. There are various differences and similarities within the international community. There is not a superior business practice, therefore, cultural differences should be respected and acknowledged.

TRADE AGREEMENTS

Honduras is part of the Central America Free Trade Agreement (CAFTA-DR), along with the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, and Nicaragua. Under the Central America Free Trade Agreement, qualified textile and apparel products enter the United States,

and the other countries within the agreement, duty-free. Therefore, as long as suppliers follow the Rule of Origin and Yarn-Forward Rule of Origin guidelines the process is simple. The Rule of Origin states that products must come from member states and have documentation to solidify where they were obtained. The Yarn Forward Rule of Origin states that textile and apparel products should be constructed of yarn and fabric within the member states. These rules are significant factors that are reviewed by customs and affect the product’s ability to enter the country.

Environmentality’s shirt, composed of 90% lyocell and 10% cotton, qualifies for the duty exemption. Which ultimately reduces the company’s costs in the long run. Therefore, the Central America Free Trade Agreement is beneficial to Environmentality.

HONDURAS’ APPAREL INDUSTRY

The apparel and textile industry in Honduras is present and on the rise. In 2017, Honduras sent approximately $4.5 Billion worth of its textile and apparel exports to the United States. In fact, projections show that 83% of the country’s textile and apparel products will end up in the U.S. market. Specifically, the industry’s expertise is in woven and knit manufacturing. Nevertheless, there is an open labor poor, a range of sourcing and manufacturing opportunities, and a promising future.

The future of the industry will be influenced by the government, labor costs, and trade organizations. The government launched Honduras 2020, an economic plan of transformation, to encourage investments in the textile and apparel industry. So far,

the country has received a $78 milliondollar investment for a synthetic yarn plant.

These new technological advancements will impact labor costs and improve the overall productivity performances. For example, Honduras has installed solar roofs to implement the use of clean energy. This has reduced electricity costs and addressed the need for social responsibility. In response to the lower costs and sustainable practices, more foreign companies desire to conduct business within Honduras.

Furthermore, Honduras is a member of the Central American Integration System, which was created to implement a free trade zone, political union, and common market between Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Belize, and the Dominican Republic. With assistance from the government, trade organizations, and labor costs, Honduras is aiming to be the leading exporter, within Central America, to the United States and Europe.

RISKS & BENEFITS

There are risks and benefits associated with conducting business in Honduras.

The advantages begin with the Central America Free Trade Agreement (CAFTADR) and the favorable currency rate. The company does not have to pay the 12.2% duty rate, which eliminates cost. On top

of this, the exchange rate has decreased gradually within the last ten years.

Currently, one U.S. dollar is worth 23.60 Honduran Lempiras and Environmentality can use this to its advantage. The GDP growth rate is projected to increase by 3.6% in 2018(see fig. 1). Also, Honduras is within close proximity to the United States.

Which means that the time associated with transportation would be significantly shorter than if the company’s products were sourced in an Asian country.

Furthermore, the Port of Puerto Cortes was recently updated to fit modern standards.

Nevertheless, there are a number of risks associated with conducting business in Honduras. Honduras has an economic and political environment influenced by corruption and a low level of citizen security. The current political tension, which includes violent riots and demonstrations, is the result of the 2017 presidential election. Other concerns include armed robberies, pickpocketing, and theft. On top of this, the country participates in a significant number of holidays, which limits the number of possible work days.

Additionally, the country is experiencing high inflation and inventory levels are decreasing.

Nevertheless, these risks do not eliminate the country from consideration. Other countries experience risks like these too.

HONDURAS’ SITUATIONAL ANALYSIS S

• Proximity to the U.S. • CAFTA trade agreement • GDP Growth rate is increasing • Agriculture resources • Technology advancements in the textile and apparel industry (Honduras 2020) • Growth expected in the textile and apparel industry • Global markets

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• Relationship with the United States.

• Middle class is growing

• Crime • Poverty • Relies on the US economy • Political atmosphere

• Increasing interest rates • Increasing inflation rate • Unemployment rate rising • Natural resources

T

S

RI LANKA

With a literacy of 92.5%, Sri Lanka has the most literate population

Agriculture: 32.7%; industry: 26.3%; services: 41%

Population: 21 million Capital: Colombo

Sri Lanka The government is republic. President is Maithriplala Sirisena

POLITICAL

Religion Buddhism 70.2%, Hinduism 12.6%, Islam 9.7%

Language: Sinhalese, Tamil Currency: Rupee

Sri Lanka has gone through a changing political scenario over the years and specially after the end of the civil war in 2009 and have gained a considerable political stability as the present government has a majority in the parliament. There has been a lot of debate recently about Sri Lanka’s inability

to attract Foreign Direct Investment (FDI) despite its huge potential economically.

Sri Lanka is in dire need of FDI to succeed.

Sri Lanka’s political system stands at a critical juncture. Over the coming months the coalition will work on finalizing the draft for a new constitution, which is expecting to be adopted in a national referendum in 2018. The new charter

will strengthen democratic institutions and the outlook for political stability.

Successive governments will attempt to balance Sri Lanka’s foreign relations with India and China, seeking to establish the country as a trade and maritime hub.

ECONOMICAL

Sri Lanka’s economic freedom score is 57.8, making its economy the 111th freest in the 2018 Index. Its overall score has increased by 0.4 point, with improvements in investment freedom, business freedom, and judicial effectiveness outweighing a lower score for fiscal health. Sri Lanka is ranked 25th among 43 countries in the Asia– Pacific region. Sri Lanka’s main economic aspects consist of tourism, tea export, rubber exports, agriculture and apparel mainly.

U.S.-led Trans-Pacific Partnership (TPP) trade pact — of which Sri Lanka is not a signatory — on the horizon, competition from TPP signatories such as Vietnam could deal a blow to the South Asian nation’s apparel export industry, which currently employs half a million Sri Lankans and provides 44 percent of all manufactured goods exported by the country. It wouldn’t be the first time Sri Lanka is up against trade practices that are not in its favor. Competition with Vietnam, Sri Lanka’s closest garmentmaking competition, will be particularly stiff, but Sri Lanka may be able to buy some time while hiccups in the TPP’s implementation are ironed out.

Sri Lankan economy is bound to undergo a rapid change in focuses with upcoming western megapolis and financial city projects with a focus towards foreign investment driven programmes.

SOCIAL

The country‘s achievements in social development are constantly well ahead of its economic achievements. The Sri Lanka Strategy for Sustainable Development (SLSSD) seeks to achieve this vision through eradication of poverty, ensuring competitiveness of the economy, improving social development, ensuring good governance, and a clean and healthy environment. These five goals prioritize the challenges that must be addressed in the path to achieving sustainable development. Seventeen objectives and 65 strategies with targets and indicators have been identified under the SLSSD goals.

LEAD TIME OF PRODUCTION

Lead time is a main challenge that the apparel industry of Sri Lanka has to face due to rising markets, frequently changing fashion patterns and high competition in the industry both locally and internationally. Therefore, meeting customer demands at a minimum time is crucial. Buddhist festivals revolve around the days of the full moon – or poya days – which are official public holidays as well as having special religious significance.

People often travel on poya days, so transport and accommodation tend to be busy. This can affect the lead time of the production due to absentees. Recently Struggling to pay its debt to Chinese firms, the nation of Sri Lanka formally handed over the strategic port of Hambantota to China on a 99-year lease last week, in a deal that government critics have said threatens the country’s sovereignty. Sri Lanka have found themselves owing debts they cannot pay. Sri Lanka owes more than $8 billion to state-controlled Chinese firms. Due to this deal, Sri Lanka lost

control of their own port which has affected the lead times.

CULTURAL INSIGHTS

Sri Lanka is a relatively hierarchical society. This means that people accept a hierarchical order in which everybody has a place, and which needs no further justification. The ethnic composition consists of the main races Sinhalese, Tamil & Muslims, and greetings tend to differ between the three. The most commonly used is ‘Ayubowan’ and is widely accepted as the Sri Lankan greeting. An arm’s length of personal space is usually the norm for any formal/business communication.

Business cards are usually exchanged after an initial handshake and greeting.

Having one side of your business card translated into Sinhala or Tamil is a nice touch but not crucial. Personal relationships are extremely important for business so allocating some time for small talk vs. business talk at the beginning of meeting is a good idea. Sri Lankans often prefer face to face meetings and for some discussions to be conducted over a meal.

A Sri Lankan may feel unable to agree on much without his superiors present to confirm his decision. Therefore, they are likely to be more flexible and willing to compromise between meetings when they can check back with the head office. A Sri Lankan will seldom give a flat negative response to proposals made, even when they don’t agree with them. Therefore, focus on hints of hesitation. Sri Lankans do not always base their decisions solely on facts and figures. Feelings of intuition, instinct and faith can often influence their decisions.

TRADE AGREEMENTS

Sri Lanka has no free trade agreement for apparel with the United States of America, however, Sri Lanka has several other trade

agreements with U.S. Sri Lanka has GSP (Generalized System of Preference) with the U.S. where some Sri Lankan exports to the United States and Vietnam qualify for duty free-privileges but, apparel products are excluded. The TIFA (Trade and Investment Framework Agreement) provides the helps Sri Lanka and the U.S. governments to discuss and resolve trade and investment issues at an early stage.

Sri Lanka also has free trade agreement with other countries like South Asian, Asia-Pacific, India, Pakistan and China.

SRI LANKA’S APPAREL INDUSTRY

The Sri Lankan garment industry has strong commitment to the welfare of its workers. Guided by the visionary slogan: “Garments without Guilt”, ethical practices are at the root of the industry’s success.

Garments are made with conscience and care by protecting worker’s rights, creating opportunities for education and personal growth, and helping to alleviate poverty in communities with the aim to create a more equitable society. The apparel industry in Sri Lanka has also won many awards for green manufacturing. Sri Lanka is the world’s number one ethical apparel sourcing destination.

The “Made in Sri Lanka” label is now synonymous with quality, reliability, social & environmental accountability. Sri Lanka is the first amongst seven apparel manufacturing facilities in the world to be awarded the LEED platinum rating, setting a global benchmark for Green Apparel factories. Strengths in the Sri Lanka apparel industry are Sustainability, ethical Sourcing destination, a flagship green destination, leading design innovation, hub for south Asia and regional collaboration. The following associations are involved which support the apparel sector by addressing the sector related

issues through coordination with the government institutions.

• Joint Apparel Association Forum (JAAF) • Sri Lanka Apparel Exporters Association • Sri Lanka chamber of Garment Exporters USA and UK are the top markets for Sri Lankan apparel throughout the decades.

Sri Lanka has GSP+ facility for its exports in to the EU which cover 28 markets.

There are around 300-350 Manufacturers of apparel. The total value of exports in the apparel sector was US $ 4675Mn in the year 2016. The industry possesses an impressive partnership portfolio which includes world renowned labels such as Victoria’s Secret, Gap, Liz Claiborne, Next, Jones New York, Nike, Tommy Hilfiger, Pink, Triumph, Ann Taylor, Speedo, Abercrombie & Fitch, Land’s End, Marks & Spencer and Intimissimi.

RISKS AND BENEFITS

Sri Lanka is a great country to work with as it has the most desirable working conditions. Strengths in the Sri Lanka apparel industry are Sustainability, ethical Sourcing destination, a flagship green destination, leading design innovation, hub for south Asia and regional collaboration which completely match the standards of EnvironMentality.

But when it comes to manufacturing of shirts, Sri Lanka is not the best fit, as Sri

Lanka is known for manufacturing knit apparels, fashion clothing for women and most importantly Lingerie. This limits our options of manufacturers of shirts in Sri Lanka. Apart from that, labor is expensive in Sri Lanka compared to India, China, Vietnam and Bangladesh. Lead time is a main challenge that the apparel industry of Sri Lanka has to face due to rising markets, frequently changing fashion patterns and high competition in the industry both locally and internationally.

SRI LANKA’S SITUATIONAL ANALYSIS S

• Situated on the main sea routes is an attraction for manufacturers.

• Availability of skilled labour, educated and trainable workforce • The lingerie, swimwear and sportswear segments, stand as Sri Lanka’s main apparel strengths.

• Ability to handle high volume orders • A reputation for quality short lead times and on time delivery; • A reputation for conforming to the highest standards of working practices, working conditions and labour laws

• Reinstatement Of GSP+ now looks to be a strong probability.

• The major players like Brandix for example look set to expand textile production in Sri lanka, thus reducing reliance on imported textiles.

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• Lack of marketing skills and a low level of marketing information, and knowledge about export marketing.

• The need to import all raw textiles • High absenteeism and labour turnover.

• Low labour productivity and Increasing labour cost • The absence of a growing “local” market in neighboring countries which would provide an alternative or addition to the USA and Europe • Sri Lanka’s labour costs are increasing at a faster pace than productivity

• Increasing competition especially (lower labour cost) • Competition for labour with other emerging industries especially in Western Province • The necessity to reduce lead time from the manufactures to the shop, • distant supplier’s inability to deliver the value added garments on time

T

V

IETNAM

Weather:The climate is tropical and extremely humid

Population: 96 million Capital: Hanoi

Agriculture output accounts for 20% of the gross domestic product

Vietnam Religion Folk Religion 73%,Buddism 12.2%, Catholicism 6.8%

Communist Party of Vietnam Lanuage: Vietnamese Currency: Vietnamese DONG

POLITICAL

In December 1980, Vietnamese Socialist Republic was the proletarian dictatorship and the Vietnamese Party was the only one that led the nation. In 1973, Vietnam and the United States signed in Paris an agreement on ending the war and

restoring peace to Vietnam. In 1992, the National Congress of Vietnam passed the current constitution and stipulated the current political system in Vietnam. The National Assembly is the highest state authority in Vietnam and the only legislative facility in the country. Congress representatives are

elected directly by the Vietnamese citizens. The main powers of the council are formulating the constitution and deciding economic plans. The central government is the executive authority and the supreme administrative authority of Vietnam.

ECONOMICAL

Vietnam’s economy is ranked sixth among the 10 ASEAN countries, behind the Philippines and ahead of Myanmar. Vietnam’s service industry, manufacturing industry and agriculture accounts for 44%, 39% and 17% of its GDP. Vietnam’s major industries and services include manufacturing, mining, construction, real estate and finance.

In the first half of 2017, Vietnam’s economy grew 5.7% GDP due to industrial growth (manufacturing and processing industries grew by 10.2%.)

In August 2017, the average consumer price increased by 3.8%. From 2010 to 2015, Vietnam’s government increased the minimum wages every year, with an average growth rate of 18%. Therefore, the minimum wage in Hanoi and Ho Chi Minh is $166 a month.

SOCIAL

Vietnamese society is a traditional agricultural country, and the agricultural population accounts for over 70% of the total population.

Agriculture output accounts for 20% of the gross domestic product.

Farmers have important social status in Vietnamese society. The characteristic of Vietnamese society is based on the agricultural social culture. The population of Vietnam is 90 million now and it is ranked No.14 in the world,

8th in Asia and third in Southeast Asia.

Since 2007, Vietnam has entered the golden age of population structure. In other words, Vietnam’s labor force is a large proportion of its total population.

As a result, this advantage has provided adequate human resources for the development of Vietnam economy. Vietnam is widely affected by the ideology of the Confucianism.

Since entering the socialist era, Vietnamese has been widely affected by government-controlled media and communist culture. Since the 1990s, Vietnam’s government started to operate the policy of reformation and opening and Vietnam started to accept Western or other Asian culture.

LEAD TIME OF PRODUCTION

According to The World Bank, the lead time to export (days) in Vietnam is 21 days. The time is calculated from the product’s initial stage until it is finished. Working days in Vietnam are from Monday to Saturday morning and national holidays are not too much. The longest holiday is the Lunar New Year which is a five-day holiday. Vietnam is a country that places balance between enjoying life and work. As a result, the overworked cases are not happening regularly.

Compared with other countries, these festivals do not affect the production very much. According to World Bank, Vietnam will face losses of more than 6.7 billion dollars over the next 50 years due to natural disasters such as typhoons, floods and earthquakes. The 71% of Vietnam’s population and 60% of the land area are risk of hurricanes and floods. The average loss caused by hurricanes and floods is estimated at 0.8% of Vietnam’s GDP.

CULTURAL INSIGHTS

The Vietnamese pay lots of attention to etiquette. When you meet someone, you must say hello or shake your hands and bow your head slightly to show respect.

In Vietnam, personal relationships are the foundation of business and also the factor that can decide if your business is successful or not. If you know how to develop and maintain your relationships, you could have opportunities as big entrepreneurs.

The Vietnamese are happy to meet new people, but they never do business with strangers. Therefore, you absolutely make friends with them before talking about business. If you make the right friend, you will get more advantages than you think.

Furthermore,Vietnam’s government has the power to decide most of the commercial changes in the country and Vietnam’s law and policies change a lot. As a result, it is very favorable that you have a friend in the government.

Vietnam follows the traditional Asian decision-making model.

Vietnam businessmen emphasize the harmony of groups. Foreigners usually know nothing about the disputes between various partners. Compared with other Asians, the Vietnamese are more likely to use a frank manner of speaking and they don’t like disputes when they talk about business.

When discussing business with Vietnam clients, it is forbidden to talk about the political issues in Vietnam. When dealing with Vietnamese, it is impolite to touch the shoulder and avoid touching the heads of the children.

TRADE AGREEMENTS

The U.S.-Vietnam Bilateral Trade Agreement was signed in 2001. After this trade agreement, the trade between the two countries had dramatically increased in the next decade. In 2007, Vietnam became

a member of WTO. As for the textile and apparel industry, Vietnam is the third largest supply country of textile, accounting for 7% of the total imports. Furthermore, the Vietnam has already been the second supply country of apparel to the United States, accounting for 12.5% of the total imports.

Vietnam is a member of ASEAN and the goal of ASEAN is to accelerate economic growth, social progress and cultural development. In 2018, tariffs have been reduced 96% of the total tariffs and investment restrictions have also been gradually opened. Furthermore, ASEAN has also signed the FTA with China, Japan, South Korea, New Zealand and Australia. ASEAN has successfully built the fully integrated region in the global economy.

In order to increase Vietnam’s economic competitiveness, Vietnam’s government has signed 12 FTA, including VietnamKorea FTA, Vietnam-Eurasian Economic Union and EU-Vietnam FTA. These FTA could dive foreign enterprises to increase investment and introduce new technologies to Vietnam’s industry.

VIETNAM’S APPAREL INDUSTRY

In South East Asia, Vietnam’s textile and apparel is growing faster than other regional competitors. The textile and apparel company are more than 3,800 and also the main power of the export sector.

United States, Japan and Europe are the main exported countries of the Vietnam’s textile and apparel industry. According to Vinatex general manager “Le Tien Truong”, the Vietnam textile and garment export amount has achieved 300 billion dollars in 2017, which grew 6.5-7% compared with 2016. The basic wage of labor is $175 per month and it can rapidly grow in the next few years. In addition to cheap labor, Vietnamese manufacturers also focus on increasing production.

City of Hanoi, Veitnam capacity and following the delivery time. Furthermore, the Vietnamese government also asks related authorities to reduce administrative procedures in order to save time and money. Moreover, Vietnam’s textile and apparel industry plays a very important role in economic’s growth. Vietnam’s textile and apparel industry represent over 15% of the country’s GDP and 18% of its total exports in 2017. Textile and apparel companies provide over two million jobs and one million related job opportunities. The trade agreements give the advantages to enter different markets. Vietnam-EU FTA will be officially effective in 2018 and Vietnam’s textiles and products can compete with other GSP countries such

as Cambodia in Europe’s market.

RISK AND BENEFITS

Vietnam has a lot of potential to develop textile and apparel industry in the world.

The abundant and cheap labor are two main drivers of the industry along with its near proximity to countries like China for raw material sourcing. The benefits are rapid economic growth and supports from Vietnamese government. Moreover, Vietnamese government made quite strict environmental regulations, which matches our sourcing guideline. However, there are still some unavoidable risks.

For instance, Vietnam is vulnerable to hurricanes and the infrastructure is very fragile, which can increase the lead time.

VIETNAM’S SITUATIONAL ANALYSIS S

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• Vietnamese strongly support textile and apparel industry

• Floods, earthquakes and typhoons will cause loss of economic

• The economic growth of Vietnam is very strong and fast

• The infrastructure from port to road is fragile

• There are many well-planned industrial area in Vietnam

• The government is lack of transparency

• The regional organization and FTA provide lots of trade advantages

• The apparel industry is lack of technology and integration

• The labor force is quite abundant

• Lack of raw material • Strike such as Anti-China protest

• The highway in Vietnam can reach southwestern China, which can connect to China’s market • The foreign investment are rapidly increasing • Vietnam domestic market is gradually growing

O

• The infrastructure in northern Vietnam is insufficient. There are some serious blockage of containers and delays by sea and air • The cost of raw material and energy is increasing • The chemical industry is underdeveloped. The man-made fibers are almost imported

T

B 1 BDT( TAKA)= $83.3

ANGLADESH

Population: 162 million Capital: Dhaka

Literacy 61%

Bangladesh President: Abdui Hamid, Prime Minister: Sheikh Hasina Wazed

Unitary STATE Parliamentary Democracy Language: Bangali 98%, English & other 1,2%

POLITICAL

Politics in Bangladesh takes place in a framework of a parliamentary representative democratic republic, whereby the Prime Minister of Bangladesh is the head of government, and of a multi-party system. President is the Head of the State and is elected for a period of

5 years. The political party currently in power is the Awami League headed

by Sheikh Hasina Wazed since 2009.

For the better part of the last two decades, Hasina’s chief rival has been Bangladeshi Nationalist Party leader Khaleda Zia, and their rivalry is popularly known as the “Battle of Begums”. The two women have alternated as non-

interim Prime Ministers since 1991. The government exercises executive power.

Legislative power is vested in both the government and parliament. The Constitution of Bangladesh was written in 1972 and has undergone sixteen amendments.

Bangladesh faced an extreme political crisis in 2015, because of political turmoil and disparities between the Awami League (in power) and the Bangladeshi Nationalist Party (in opposition). It led to countrywide blockade as road; rail and river transport was halted along with more than frequent fires, bombings and arson. Looking back, Bangladesh has been in a state of acute political crisis and civil unrest since 2006, which resulted in constant declarations of emergency and curfew. Bangladesh has also witnessed a spate of violent attacks against secular bloggers, academics, gay rights activists, foreigners, and members of religious minorities since 2016. In April 2017, Hasina made a landmark visit to neighboring country, India and signed 22 new deals and MoUs with India taking the Indo-BD bilateral relationships to a new height, which included a defense cooperation as well.

ECONOMICAL

The market-based economy of Bangladesh is the 44th largest in the world in nominal terms, and 32nd largest by purchasing power parity; it is classified among the Next Eleven emerging market economies and a Frontier market. According to the International Monetary Fund, Bangladesh’s economy is the second fastest growing major economy of 2016, with a rate of 7.1%. According to the Asian Development Bank, Bangladesh’s economy grew by 7.28% in 2017, the

fastest expansion in 30 years. It was also the sixth year in a row that GDP growth was greater than 6%. However, 40 per cent of the population of Bangladesh continues to live below the national poverty line, while child malnutrition rate is at 41% of children under the age of five.

In 2015, Bangladesh exported over $26 billion in clothing, second only to China.

Clothing exports make up almost 14% of the GDP and 80% of all exports. Trade is moderately important to Bangladesh’s economy; the combined value of exports and imports equals 38 percent of GDP. The average applied tariff rate is 11.9 percent.

Nontariff barriers have been known to impede trade. Government openness to foreign investment is less than average.

SOCIAL

Bangladesh is a close-knit ethnolinguistic community, with over 95% of the population conversing in Bengali, and the majority of them belonging to Bengali Muslim groups. The religious preferential treatment led to the development of Islamic culture. Nearly 80% of country’s population are devout Muslims.

Bangladesh, before independence, had to fight for individual identity, postindependence in 1971, as the result of which, faced social unrest along with other natural calamities like floods. Bangladesh is one of the lesser developed countries on the global map with deep-ridden and inherited extreme poverty and hunger, and growing social and economic disparities.

Human rights groups in Bangladesh face constant obstacles, including escalating harassment and surveillance by police.

Although, the social climate in Bangladesh is not the most favorable one, the recent Rana Plaza tragedy in 2013 has shown some positive effect on the urban as well

as rural sectors of the society. The government is now stressing on social issues like poverty, unemployment and overall human safety standards.

Bangladesh is an E9 country, as a part of UNESCO’s Education For All (EFA) initiative. The “E” stands for education and the “9” represents the following nine countries: Bangladesh, Brazil, China, Egypt, India, Indonesia, Mexico, Nigeria and Pakistan, representing over half of the world’s population and 70% of the world’s illiterate adults.

LEAD TIME OF PRODUCTION

Bangladesh has a subtropical monsoon climate because of its location at the northern junction of Bay of Bengal in the Indian subcontinent, characterized by wide seasonal variations in rainfall, high temperatures and humidity. Lead times may be affected due to incessant monsoon, especially during the months of May to September, as the roads are prone to waterlogging. Lead times are also affected, as shipping carriers have to cross the Indian peninsula, adding a minimum of two extra days. The people of the Bangladesh and the industry are still recuperating from the Rana Plaza collapse of 2013. The incident was responsible for numerous deaths, resulting in consolidation of business to a small number of suppliers.

This may indirectly affect lead times, in terms of getting the best price for apparel manufacturing as well as raw materials.

The eighth most populated country in the world, Bangladeshi community observes most Hindu and Muslim festivals along with some Buddhist (Buddha Purnima) and Christian (Easter) events.

Hindu festivals like Bengali-tradition Durga Puja; Janmashtami – the birth of Lord Krishna; Dolyatra or Holi, the festival of colors; and

Muslim observances like Eid ul-Fitr and Eid ul-Adha, along with Ramadan may delay production lead times as these are observed throughout the country and the factories do not operate on these days.

CULTURAL INSIGHTS

The Bangladeshi culture has evolved over the years, even before the partition of Pakistan in 1971. The culture still finds its roots in the Bengali Renaissance period of the 19th century and can be found in the people’s taste of music and films, along with the prevalence of noted Bengali writers, authors, music composers, filmmakers, scientists, etc. as they have contributed to the development of the culture seen today.

The composite culture has influences of Islam, Hinduism and Buddhism, and has manifested in various forms such as art and craft, folklore, language and literature, festivals, etc. among many others. Cultural nuances can also be seen in cuisines and culinary traditions.

Bangladeshis follow the hierarchical system in their business as well as personal dealings, as most business consists of generations of the same family. When reaching out to a company, always begin with an assistant, and then proceed to a managerial and executive level discussion.

It is expected in Bangladesh to include the highest qualification and/or university degree on one’s business card, which should be given after a light handshake.

Concept of personal space is profound. It is clearly offensive to extend any form of physical contact to the opposite gender.

During a business discussion, it is best to let a male from the client side to speak as women in business are still looked down upon. It is considered customary to show up at an event or a meeting after it has begun. It is a way to test patience. Casual wear is to be avoided for business meetings

especially the first. It is best to keep it conservative.

TRADE AGREEMENTS

Bangladesh does not have any Free Trade Agreement with the United States of America. The country had duty-free access for assembled apparel into the US from 2009 to 2019, until the Obama Government suspended the Tariff Relief Assistance for Developing Economies Act following the Rana Plaza collapse in 2013. Bangladesh has since then been under scrutiny for labor’s working conditions and lack of freedom to form labor unions. Bangladesh was omitted out of the US Generalized System of Preferences in June 2013, citing serious shortcomings in labor rights and workplace safety. The country failed to meet statutory eligibility requirements related to worker rights.

Bangladesh is a member of 64 Trade

Rana Plaza Disaster

Organizations including World Trade Organization, International Monetary Fund, World Bank, etc. It also has six Free Trade Agreements in the Asia-pacific region, which allow procurement of raw materials from neighboring countries.

These include: • Asia-Pacific Trade Agreement (signed, in effect) • Preferential Tariff ArrangementGroup of Eight Developing Countries (signed, in effect) • South Asian Free Trade Area (SAFTA) (signed, in effect) • Trade Preferential System of the Organization of the Islamic Conference (signed, not yet in effect) • Bay of Bengal Initiative for MultiSectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area (negotiations launched) • Pakistan-Bangladesh Free Trade Agreement (negotiations launched)

BANGLADESH’S APPAREL INDUSTRY

Bangladesh is the 44th largest economy in the world with a $28 billion garment industry, which ranks second after China.

It is a member of South Asian Association for Regional Cooperation (SAARC) – an intergovernmental union of South Asian nations. SAARC was founded in Dhaka in 1985 and is now headquartered in Kathmandu, Nepal. SAARC has relations with the United Nations and the European Union. According to Monitoring of Employment Survey of Bangladesh, the female labor force increased by nearly 12 per cent between 2006 and 2009, while the male labor force increased by nearly 8 per cent. This indicates increased presence of women in the job market, bolstered by the ready made garments sector and opportunities created by microcredit operations in both rural and urban areas for various income-generating activities.

Even though the apparel and textile industry is booming with ever-growing exports to the United States, the country at large is yet to come to terms with overall progression of the industry. As perceived from the Rana Plaza collapse, the buildings that house the factories are centuries old and in dilapidated conditions. Not once but twice, the textile industry has suffered grave material and human losses due to infrastructural negligence. The workers even today continue to work in bare minimum conditions to churn out the bulk

of exports for the country. However, some manufacturers have upped their game due to pressure from the buyers in terms of working conditions and other labor related requirements. However, the saddening fact is that the military banned Trade Unions in 1976, it is in effect till today. There is no freedom for the labor to associate themselves with groups such as labor associations. Many unofficial associations were formed during the aftermath of the Rana Plaza collapse.

From a buyer’s perspective, production in Bangladesh is as cheap as it gets. With low labor costs, automated production, and faster lead times, the apparel industry caters to the biggest buyers across the globe. However, what really is at stake is the conditions in which the industry operates.

• The Trade Associations supporting the Bangladesh apparel and textile industry include: • Dhaka Chamber of Commerce & Industry (DCCI) • Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) which is the representative organization safeguarding the interest of the private sector in the country’s trade and industry • Bangladesh Garment Manufacturers & Exporters Association (BGMEA) is officially recognized as the apex apparel export trade body of about 5,000 domestic apparel-manufacturing units.

Chittagong Port

RISKS AND BENEFITS Bangladesh is an opportune market to conduct apparel business, majorly because of its well-established image in the apparel and textile industry. There are some risks involved while conducting business in Bangladesh. It is almost 14 hours ahead of Seattle time. Time zone difference can lead to delays in terms of real-time information sharing. The laborers are prohibited the freedom of labor unions and associations which disregards the United Nations Code of Conduct and EnvironMentality’s non-negotiable sourcing guidelines. The economy is still recovering from the Rana Plaza Collapse of 2013; with the fear of it repeating since most factories have old and shoddy construction and houses heavy machinery that overload the building’s foundation,

causing it to collapse. Bangladesh is synonymous with incessant monsoon, the rainy season coupled with frequent flood alerts can be a deterrent in conducting overseas business.

However, there are some benefits as well.

Many large-scale manufacturers have incorporated automated machines in their factories, facilitating faster lead times of production. Labor is available easily and as cheap as $0.12 per piece at good quality (Macleans). Furthermore, most suppliers have been working with well-established brands like PVH, Polo Ralph Lauren, Zara, J. Crew, JC Penney, etc. for over two decades, which provides some credibility to the textile industry. Bangladesh, as part of SAARC, can easily procure raw materials and other supplies from other neighboring countries like India, Sri Lanka, etc.

BANGLADESH’S SITUATIONAL ANALYSIS S

• Abundant availability of cheap raw materials and labor • Well established ports for efficient transit • Easy road, rail, sea and air transportation • Rapid development by NGOs and private organizations • Strong agricultural and textile export industry in terms of GDP • Competitive advantage in woven, knits and denim – strong Ready Made Garment sector • High volume orders are handled efficiently • Export Promotion Zones facilitate better management of the textile and apparel industry

• Lack of skilled and educated labor

W

• Geographical location – northern tip of Bay of Bengal, carriers have to cross the Indian peninsula, adding a minimum of two extra days to lead times • Limited governmental support for the textile industry, prone to politically motivated violence • Corruption, terrorism and civil unrest, frequent political turmoil between opposing parties • Poorly constructed and managed infrastructure, ex. Rana Plaza collapse in 2013 • High risk aversion rates • Weak HDI – Human Development Index

• Enhancing industry infrastructure for higher standards • Raw material availability to be leveraged upon • Young labor force; untapped human capital - employment and equality status to women as sex ratio is 102:100 • Change in Government’s attitude towards RMG sector, in lieu of providing employment • Better disaster mitigation measures to reduce vulnerability • Sharing growth of neighboring countries • Partnership with European Union

O

• Uncertainties due to monsoon and other natural phenomenon • International regulations for violating standardized codes of conduct like prohibiting labor unions • China offers relatively high labor productivity and applies more capital-intensive modern technology, and lesser lead-time - biggest threat to Bangladesh’s apparel industry

T

C

B OUNTRY RANKING

1st - China 2nd - India 3rd - Vietnam

It is the largest garment supplier to the USA and has a Low risk for negative change in business. Growing economy. The “Made in China 2025” initiative includes technology investment. The labor costs are low and prices are also negotiable. The government has a strong foothold and supports textile and export. China is also reducing corruption through its anti-corruption policy. It is centrally located in Asia and has land, air and water transports. It is closely located to the USA and takes only 13 days to reach Seattle port. It has low risk, nevertheless has different natural disasters. Fairly stable environment however, there is a wide social status gap which has caused some unrest.

Labor party belong to the government so it is a dummy. It is working very hard to be environmental friendly, with constant government inspection. China is open to negotiations, making it easy to impose some of our guidelines as well. Apparel and textile exports brings in $160.8 billion to the country. There is continuous FDI in textile infrastructure and raw material. China has no free trade agreements with USA. However, USFIA and AAFA have created strong partnerships with Chinese companies. Strategized FTA with countries that have FTA with USA, which helps their GDP. China has a good number of skilled and unskilled labor, constant training happens. Policies remain consistent as a small set of individuals create them. The central government doesn't change often as other countries. China is the second largest economy is the world and it also is the largest capitalist country. (Ranked 1st among 6 countries with 85.5 points).

P

EOPLE’S REPUBLIC OF CHINA

I

NDIA

India’s economic growth slowed in 2018, though it is projected to grow 7% in 2019. The Made in India initiative is a factor as it aims to increase manufacturing in India by 9% of total GDP. India’s population is growing and younger workers may not be willing to work lower paying jobs, but currently costs are low compared to Asia, and should remain constant. The government is stable and pro manufacturing growth, however, there is an election coming up in 2019 which could potentially change these leanings. India is further away from the U.S. and it would take at least a month to ship products by boat. Weatherrelated delays may occur due to monsoons and flooding. While emphasis on growing the manufacturing sector is strong, it’s too early to know if the projected growth of the industry will be a reality. The social climate is stable, but rising populations make infrastructure and poverty a continuous concern. The Made in India initiative covers many aspects and regulations regarding textile and apparel manufacturing, including the Integrated Processing Development Scheme (IPDS), which aims to make textile manufacturing sustainable. India’s textile industry is strong at 13% of total exports. The industry is growing with the government aiming to add 30 million jobs and employing 45 million.

India currently has no free trade agreement with the US for apparel. There have been some ups and downs with major political reforms in regard to the manufacturing sector, including GTS, demonetization, and Made in India.

India’s total was 81.

H

ONDURAS

Honduras’ garment industry specializes in both, woven and knit apparel garments. Records show that 83% of the country’s textile and apparel exports end up in the United States. Honduras is in close proximity with the United States, which significantly reduces transit time. The country is part of the Central America Free Trade Agreement and EnvironMentality’s product qualifies for the duty exemption. On top of all of this, the country is experiencing an economic plan of transformation, Honduras 2020, which is encouraging investments in the textile and apparel industry and helping to implement sustainable practices. The manufacturing cost in Honduras is higher than India, China, Bangladesh, and Vietnam; therefore, the country experiences great competition. The country is considered stable, however, recently Honduras has been susceptible to political demonstrations in response to the last presidential election. (Ranked 4th among 6 countries with 74 points).

Apparel industry is Sri Lanka’s Largest export industry.

Government is critical as new constitution is being drafted.

From economic perspective, Sri Lanka ranks as 111th freest country in 2018 index. On other hand country’s achievements in social developments are constantly well ahead of its economic achievements. It is does not have risky business environment. Sri Lanka do not have any trade agreements. Sri Lanka is progressing when it comes to social developments.

Apparel industry is Sri Lanka’s Largest export industry. The industry possesses a partnership portfolio which includes world renowned labels such as Victoria’s secret, Gap, Tommy Hilfiger, Marks & Spencer, A&F, etc. Cost of manufacturing in Sri Lanka is higher than India, China, Bangladesh. Sri Lanka has strict sourcing guidelines. Only 4% of the workforce currently engaged in the operational grades has acquired vocational training. It takes 66.6 days in the sea if we consider the Colombo port as the origin and Seattle Port as destination. Compared to other countries Sri Lanka is the farthest. (Ranked 6th among 6 countries with 59 points).

S

RI LANKA

V

IETNAM

Vietnam’s apparel industry plays a very significant role in their economic growth. The industry represents over 15% of the country’s GDP and 18% if its total exports in 2017. Furthermore, Vietnamese government strongly supports the textile and apparel industry, which encourage more foreign enterprises invest in Vietnam and bring new technology in the manufacturing industry. On the other hand, Vietnam’s manufacturing industry still lags behind in production technology and equipment. To sum up, Vietnam textile and apparel industry is still very potential in the next 50 years. (Ranked 3rd among 6 countries with 76 points).

Bangladesh’s $28 billion garment industry is monopolized by a large cluster of multifaceted suppliers. Current GDP is at 7.28% (2017). Bordered by India and Myanmar, it is easily accessible by seaports, however, carriers take additional time to cross the Indian peninsula. Close proximity to SAARC and SAFTA members facilitates regional trade, however no free trade agreement with USA. Hindrance may be caused by flash floods and heavy monsoons. Semi-skilled labor is abundant and cheaply available. Bangladesh has a parliamentary democracy, however, it is weak and prone to corruption, politically motivated violence and terrorism. Growing social and economic disparities with bouts of civil unrest. 31% population lives below poverty line and literacy rate is 61%.

Workers are prohibited the freedom of labor unions. Poor working conditions in old, dilapidated buildings. (Ranked 5th among 6 countries with 60 points).

B

ANGLADESH

S

C UPPLIER RANKING

P

EOPLE’S REPUBLIC OF CHINA

Smart shirt is a Chinese supplier who is present in 5 countries with 20 manufacturing sites. The company performs services such as forecasting consumer trends, fabric research, development and production of fabrics, garment designing, developing trial weaves and handloom to meet customer specifications, designing labels, hangtags and packaging, inventory management and garment manufacturing; men and women’s shirts, men’s t-shirts and pants & shorts.

The company has a capacity of app. 5.5 million pcs/month. They engage with customers to generate optimum outputs at required time to ensure efficient inventory management. The supplier also has offices in USA that constantly monitors inventory and work on requirement bases. They supply to top clients such as Emporio Armani, Patagonia, Macy’s, Tommy Hilfiger, Nordstrom, Dillards, Ralph Lauren, Burberry, Levi’s, Calvin Klein and many more.

They have consistently been supplying to top clients for over 60 years and its current consumers show that the supplier has high quality. They hold an ISO 9001 Quality Certification and Quality Management Systems Certificate (CQC). They have Lab certification from 14 countries and have 15 certifications that Global Organic Textile Standards (GOTS), Gold Certificate of Social Compliance (WRAP), Workplace Condition Assessment (WCA). Thus, has strong and ethical sourcing guideline in place. It also meets the environmental standards we are looking for. Smart Shirts provides D2S in an efficient and profitable way and is a successful one stop manufacturer. (Ranked 1st among 6 supplier with 76 points).

Eastman Exports does yarn spinning, making fabrics of different quality in cotton, Synthetic, blends, knitting, dyeing facilities, men’s (shirts, fashion shirts, lounge, underwear), women’s (shirts, fashion shirts, lounge), girls (shirts), boys (shirts), and sports clothing. They produce approx. 2 million pcs/per month. Eastman has many programs in place to reduce lead times including design teams, Automatic Re-ordering System, and Vendor Management Inventory. They are dedicated to quality and have certifications including “free trade” and “organic”, as well as sustainability initiatives. Their customers which include Old Navy, Ben Sherman, Gap, and French Connection, which fit in well with the product categories and clients we aim to serve. Eastman has numerous (9 total) accreditations including “Ethical Trading Initiative” and “WRAP” which fit with our own sourcing guidelines. They have several value-added services including graphic design forecasting, virtual fit simulation, product design, research and development (fabrics/sustainability research), and inventory management.

They have ongoing research for improvement of services, fabric, and sustainability practices within their facility. Overall, Eastman had a total of 65 and is ranked 3rd out of the 6 suppliers.

I

NDIA

Productos Textiles S.A. is a manufacturing company which specializes in producing woven dress shirts. Productos Textiles S.A. offers full package services and can operate 480,000 pieces per month capacity. As a company under the Kattan Group, the facility is held to a high standard.

Therefore, social and environmentally friendly practices are implemented.

The company’s customer list includes Phillips-Van Heusen, Williamson Dickie Mfg., VF Imagewear Inc., Carhartt, and Guess. Productos Textiles S.A. focuses on providing exquisite quality for their customers. Productos Textiles S.A. is the best facility in Honduras to produce the product because of its services, dedication to quality, estimated lead time, emphasis on social responsibility and environmentally friendly practices, and recognizable customers.(Ranked 4th among 6 supplier with 6 points).

H

ONDURAS

Eam Maliban manufactures ladies’ blouses, Men’s Shirt and men’s and women’s bottoms. Their production capacity is of 1.7 million pcs/month.

They have offices in Hong Kong and in Jordan, facilitated with advanced wet processing capabilities extend global reach. Their client diary includes Gap, Brooks and Brothers, Burbery, Eddie Bauer, Dillard’s, Marks and Spencer, Kohl’s and Express. Vendor Compliance Policies include: Water, chemical and Environment management, reduced carbon footprint, energy and waste management. Their mission on Garment Without Guilt is to imbibe ethical practices One of their core strengths is quality. The EAM Maliban has been awarded ISO 9002 and ISO - 14001 Certification Quality manufacturing, Quality wet processing services, cost effective services and shipping, internationally recognized skills. One of the largest units to be set up in the Middle East, the two plants in Jordan has a production capacity of 3.1 million pieces a year. (Ranked 6th among 6 supplier with 60 points).

S

RI LANKA

Makalot, Smart shirt and Esquel group are top three candidates according to our criteria. According to my supplier ranking, Makalot is the best option of my three suppliers. Makalot is a leading apparel manufacturing company in the Asia-Pacific region. Its main businesses are the design, manufacture and sale of ready-to-wear garments. The products include underwear, skirts, dresses, vests, knitwear, etc. The product capacity is 411 million per year. On the other hand, Makalot is not vertical integrated, which could be the disadvantage of our supply chain. The main sales region of readyto-wear products is the U.S. and Europe market. (Ranked 5th among 6 supplier with 61 points).

V

IETNAM

Refat Garments chosen number 1 from Bangladesh. Provides complete production package (designing, manufacturing and packaging). No vertical integration, however, partnership with fabric mills. Internal embroidery, printing, washing, dyeing plants, and polybag, label, carton making units.

High production capacity of 7 million units monthly. Lead time is min. 14 days and max. 20 days. Clients include Polo Ralph Lauren, PVH, Tommy Hilfiger, JCPenney, VF Brands, Zara, American Eagle Outfitters. Customs and freight offices at seaports to facilitate forwarding. Six factories with 300 flexible production lines, ISO 9001 certified. Consistent compliance and audits.

Internal ETP plants, CNG transportation, certifications from American Social Accountability International (ASAI), OEKO-TEXÂŽ (International Association for Research & Testing in Textile & Leather Ecology), GSP(EU), LEED (Leadership in Energy and Environmental Design). Supports internal labor union. Transparent, frequent communication with clients. Developing sustainable strategies for manufacturing. (Ranked 2nd among 6 supplier with 70 points).

B

ANGLADESH

C

D OST SHEET

BY COUNTRY

C

HINA COSTING

I

NDIA COSTING

H

ONDURAS COSTING

S

RI LANKA COSTING

V

IETNAM COSTING

B

ANGLADESH COSTING

L

E INE PLAN

BY PRODUCT

P LACEMENT

STRATEGY

The final placement plan aims to minimize risks and maximize opportunities by acknowledging both, the company's needs and the extensive research conducted.

The country and supplier ranking exercises have influenced the placement decisions.

However, EnvironMentality’s final plan is also justified by product requirements, costs, lead-times, line plan, and margins earned through different placements.

7

P RODUCTION

STRATEGY

The following three margins illustrate EnvironMentality’s placement strategy to maximize our margins while minimizing risk. We have chosen to place in China and India, as they have performed well consistently across our country and supplier analysis and also have low labour costs. When trying to determine placement for the final country, the following margins helped us to finalize our placement in Honduras over Vietnam and Bangladesh.

China India Honduras

This placement strategy yields our third largest margin results. Though Vietnam has the highest margin value we chose Honduras because of the overall benefits to EnvironMentality. Because of Honduras’s close proximity to the U.S. and our distribution warehouse in Dallas, TX, shipping times are drastically shorter ranging between 48-72 hours. This proximity will also account for cheaper logistics cost overall. This factor led us to make Honduras our quick replenishment center. This will reduce the risk of empty shelves, lead to less inventory in stores, as well as the risk of markdowns due to excessive inventory. The free trade agreement between Honduras and the U.S ensures we won’t have tariffs imposed which is another overall benefit to placing in Honduras. The caliber of client for the supplier, Productos Textiles, which includes, Guess, Phillips-Van Heusen, and VF Imagewear, meets our quality standards and was a consideration as well. Additionally, Honduras’s growing textile industry including their 2020 plan which aims to increase investment in textile and apparel industry is a good opportunity for EnvironMentality to build a strong relationship with Productos Textiles and potentially become one of their major buyers over the coming years.

A caveat of placing in Honduras is that they have a lower production capacity compared to the other countries we are placing in, and the labor costs are more expensive. As we plan to use Honduras as a replenishment location, we have put only 280,000 units there to keep our margins optimal and maintain the placement as replenishment only. See the following two margin calculations which demonstrate this point.

A

F

INAL PRODUCTION STRATEGY CHINA, INDIA, HONDURAS

E

LEMINATED STRATEGY

CHINA, INDIA, HONDURAS

E

LEMINATED STRATEGY

CHINA, INDIA, VIETNAM

This placement strategy yields the highest margin results, however, other risks including 30-day shipping time as opposed to Honduras’s 4872 hour shipping as well as Makalot’s lower quality focused clients (Walmart, JCP, Khols) compared to Productos Textiles’s clients (PhillipsVan Heusen, VF Imagewear, Guess), and lack of supplier vertical integration were all risks that influenced our decision to not place product in Vietnam.

E

LEMINATED STRATEGY

CHINA, INDIA, BANGLADESH

This placement strategy yielded our 2nd highest margin compared to other countries.

Compared to Vietnam, EnvironMentality would Lose $144,470 in revenue though would earn $250,530 more than in Honduras. Despite the better margin value, the country instability in Bangladesh is too high of a risk. A strong supplier kept Bangladesh in contention, but country wise, Vietnam ranked higher. The labor saftey and port infrastructure was also factors of risk.

E

LEMINATED STRATEGY

CHINA, BANGLADESH, SRI LANKA

This placement strategy yielded our lowest margins at 80.6% compared the 8082% range achieved in other placements. Due to high labor costs, and lack of natural resources in Sri Lanka, this wasn’t an ideal placement strategy for EnvironMentality.

BS

UPPLY CHAIN SOLUTIONS

L

OGISTICS RANKING

Logistics is the integration and management of the product value chain including aspects of design, suppliers, financing, information, energy, transportation, distribution, and sales. Logistics management is the part of supply chain management between the point of origin and the point of consumption that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information. With the increase in global sources of suppliers as well as global consumer markets, the use of logistics to coordinate production and distribution is growing in importance.

Warehousing is an administrative and physical function that include receipt, identification, inspection, verification, putting away, retrieval for issue, etc. providing inspection, verification, delivery to the consumer, while ensuring quality.

Our channels of distribution are a brick and mortar store in Seattle, Washington and e-commerce. The frequency of distribution will be determined by annual seasons and initial launch.

EnvironMentality plans to launch its new line of men’s shirts in August, therefore the highest frequency of distribution would be in the months of July and August. Other seasonal distribution would be during the holiday season in the months of November and December, then during February and finally Father’s day in June. For e-commerce, we will require a third party logistics provider to handle orders, returns and customer services.

With the above understanding, EnvironMentality has logistics requirements that will be the basis of analysis amongst the logistics providers in the United States. The biggest requirement is inventory management, from not only our manufacturing suppliers overseas, but also conducting inventory counts in their warehouses and recording perpetual inventory. Lead times in an equally important consideration as our customers look forward to twoday delivery to their doors as well as the product available on retail store racks. The logistics providers should also be able to efficiently pick and pack consignments, provide tickets and barcoding, electronic data interchange, invoicing and quality audits. Having a mobile application or an online portal to track shipments is a nice to have feature.

The size of the warehousing facilities is an important aspect for us to look at. The space should not a hindrance in terms of moving products around. In terms of judging credibility, they should be working or have worked in recent pasts with recognizable apparel, fashion and/ or retail brands. It is also necessary for the provider to have multiple locations across the states, so that transportation is not compromised and access to ports on the West as well as the East coast is an essential aspect. Since our own distribution center is in Dallas, it will be a highlighting factor for the provider to have presence in the state of Texas so that it will be easy to service most locations within 24 to 48 hours. The logistics providers should also be able to assist on return management and fulfill the above requirements in a sustainable, eco-friendly and ethical manner.

X

PO LOGISTICS INC.

XPO Logistics, Inc. is one of the world's ten largest providers of transportation and logistics services, headquartered in Greenwich, Connecticut. Publically traded on New York Stock Exchange, it has a highly integrated network of people, technology and physical assets in 1,455 locations globally. 7 facilities in Seattle and 23 in Dallas. Offer complete inventory management, cross-docking, order management, D2C e-fulfilment, omni-channel optimization, reverse logistics, pick and pack, gift wrapping, ticketing, labelling, etc. Clients have 24 hour visibility of product movement online. Has wide range of services to fit specific requirements such as storage, handling, flows, regulatory compliances, brokerage, safety and security. Clients include ASOS and OVS Fashion. They ship over 7 billion units every day.

D

AMCO

Damco has a presence in over 100 countries, and employ more than 11,000 people worldwide. They have key locations in Dallas and Seattle. They have a 48,000 ft² warehouse in Dallas, TX and 350,000 ft² Sumner, WA, close to Seattle, WA, our headquarters.

Some of their fashion retail clients include Macy’s and Walmart.

They provide both inventory count and perpetual inventory. They can deliver within 24 hours for both Seattle and Dallas locations.

Damco offers pick and pack options for orders. Damco has a few value-added services including, visibility solution that allow for current information on supply chain performance, EDI or ad-hoc search and reporting capabilities through MyDamco, direct to store capabilities, and they also work with companies to meet sustainability needs. Overall Damco had a total value of 71 and average of 7.89.

T

RANSPLACE. INC

Transplace has expertise in the fashion and apparel industry. The company’s headquarters is located in Dallas, Texas. The company’s other U.S. locations are IL, NC, SC, NJ, CA, AR, PA, and MO. Transplace is also located in Mexico and Canada. The company offers Global transportation management, freight forwarding, customs brokerage and compliance, ocean and air freight, technology integration, procurement, and benchmarking. The warehouse in Laredo TX is 190,000 square feet. Transplace completes inventory counts and has real-time shipment visibility. It also provides EDI, invoice options, and offers capacity optimization services. The company has an order turnaround time of 48 hours.

D

HL LOGISTICS

DHL is headquartered in Bonn, Germany. They work with companies like Ben Sherman and have partnerships with fashion houses participating in fashion week London, Paris, Milan, Tokyo and New York. They have logistics presence in over 60 countries across all regions of the world. DHL have dedicated and shared warehousing and distribution operations. DHL offers a comprehensive packaging service, including the re-packing of finished products. Packing involves the integration of outsourced packing operations into distribution centers, to increase flexibility and streamline fulfillment.

DHL offers VMI services which includes inbound freight management Vendor hub operation, incoming quality inspection, de-trashing and kitting, just in-time delivery, parts replenishment and supplier management. They offer pre-retail services like label tagging, garment processing, retail ready POS display, product launches, stitching inspections, washing, ironing.

R

YDER SC SOLUTIONS

Ryder is top supply chain provider in North America. Today, Ryder’s supply chain solution focus on creating a network of cross-docking products to ensure same or next day deliveries. Ryder has been recognized for its excellent third-party logistics, environmentalfriendly fleet and supply chain solutions. Ryder ‘s warehouse capacity is 40 million sq. feet in the U.S. Ryder’s lean approach help customer manage warehouse to eliminate waste and shorten lead times.

S

ADDLE CREEK

Saddle Creek Logistics Services is a third-party logistics provider based in Lakeland, Florida. They offer inventory management, POS tracking, omni-channel distribution, warehousing, cross-docking, LTL shipments, EDI, ticketing, RF barcoding, invoicing, packaging, freight forwarding and brokerage. Order turnaround time is 24 hours. Pick and pack 7 pallet an hour. 43 locations in USA including Seattle (1.06 million sq. ft.) and Dallas (1.50 million sq. ft.), 290 worldwide. Orders can reach customers within 48 hours. Monthly all service package costs $5,850. Clients include Bealls, Rack room Shoes, Xterra, Ann Inc. They specialize in outlet malls.

8

F

INAL

STRATEGY SUMMARY

Through extensive research and analysis, EnvironMentality has devised a supply chain strategy that represents not only our mission and values but also meets the unique needs of our customers. EnvironMentality’s strategy starts at the product development level. Our shirts are designed to be environmentally friendly, multi-functional, wrinkle resistant, and easy to travel with so as to meet the busy lifestyle needs of our customers. EnvironMentality’s mission to provide environmentally friendly clothing for ease of travel doesn’t stop at product design; our strategy aims to be transparent through sourcing guidelines and internal review committee which will ensure that both EnvironMentality and its partners remain committed to the stated ethical and environmental goals.

EnvironMentality’s strategy is committed to ethical and sustainable sourcing, so after extensive country and supplier research and analysis, we have identified and chosen to work in countries that support the textile industry and ethical labor, as well as with suppliers that have sustainable practices, continual research on furthering sustainable practices, and support the ethical labor practices as outlined in our sourcing guidelines. Our suppliers are also compliant with the United Nations Code of Conduct for imports and exports, and perform regular internal audits.

Finally, EnvironMentality’s strategy encompasses strong logistics and distribution capabilities that help to further our sustainable goals and satisfy the needs of our brick and mortar stores as well as our e-commerce site. Our decision to partner with a supply chain solutions provider was determined through logistics, warehousing and other services such as inventory management, timely delivery to our customers, ability to efficiently pick and pack consignments, take care of ticketing, invoices, EDI, return management, and audits. The size of warehousing facilities, reputable clients and strategic locations across the United States were equally important points of consideration. EnvironMentality’s own warehouse in Dallas, Texas is strategically located to provide the products to the retail stores and the online customers in the shortest amount of time. In short, EnvironMentality’s supply chain strategy focuses on providing ethically sourced products for our environmentally conscious customer.

C 9

ONCLUSION

EnvironMentality has conducted in-depth research and analysis to develop a supply chain strategy with decisions regarding design, sourcing, manufacturing, transportation, logistics and distribution. It is imperative to understand the value addition at each step of the supply chain, beginning from the raw material, to the manufacturer, followed by distribution and then, finally to our customers via physical stores as well as e-commerce. Our research incorporated complete understanding of the fabric, i.e. Lyocell as well as other components of men’s shirt.

Lyocell is a sustainably developed fabric, made from wood pulp fibers.

Our shirts are made with 90% Lyocell with 10% organic cotton blend.

Wrinkle resistance is one of the most fascinating properties of this blended fabric.

Our team looked at six countries, viz. China, India, Honduras, Sri Lanka, Vietnam and Bangladesh. After careful analysis of aspects such as business climate, cost of manufacturing and labor, ability to procure raw materials, government and social stability, location of the country, risks and benefits of conducting business, compliance with our sourcing guidelines, state of the apparel and textile industry, trade agreements, social, economic, political scenario as well as the culture. The final countries selected for manufacturing were China, India and Honduras.

The top three suppliers from each country were analyzed based on their abilities, production capacity, shorter lead-times, quality and

certifications, recognizable customers, compliance with our sourcing guidelines, maximization of profit margins, additional services offered and a strategic outlook in terms of growth and sustainability. The final three suppliers selected were Smart Shirt Ltd. from China, Eastman Exports from India and Productos Textiles from Honduras. While China and India will handle the bulk of the production, Honduras will be responsible for quick replenishment. The suppliers also follow sustainable methods of manufacturing and ethical business practices.

The shirts, once manufactured will be packaged efficiently in boxes and loaded onto 40 Feet High Cube containers that are equal to 2 TEUs. Our distribution center in Dallas will receive shipments from the three countries, considering its vicinity to the port of Houston, along with assistance from our logistics and supply chain solutions provider, XPO. The provider has its warehouses all across USA, which eases movement of product from Texas to all parts of the country, including our retail store in Seattle, as XPO also has warehouses in Washington.

E-commerce orders will be shipped from our Dallas distribution center and can reach customers within 48 hours.

EnvironMentality wants to achieve its goals of ethical clothing manufactured in clean and hygienic factories by well-trained and wellpaid labor. Our core value of environmental responsibility allows our company to evolve and embrace complete sustainability.

A

PPENDIX

10

FULL SLEEVE NO POCKET

T

ECH PACK

FULL SLEEVE SINGLE POCKET

FULL SLEEVE SINGLE CONCEALED POCKET

SHORT SLEEVE NO POCKET

SHORT SLEEVE DOUBLE POCKET

SHORT SLEEVE SINGLE POCKET

P

RODUCT HTS

C

OUNTRY WISE SUPPLIER RANMKING

C

HINA

I

NDIA

H

ONDURAS

S

RI LANKA

V

IETNAM

B

ANGLADESH

CHINA, BANGLADESH, INDIA

CHINA, INDIA, VIETNAM

CHINA, INDIA, VIETNAM

CHINA, INDIA, HONDURAS

CHINA, INDIA, BANGLADESH

CHINA, VIETNAM, SRI LANKA

L

OGISTICS QUESTIONNAIRE

L

OGISTICS QUESTIONNAIRE

S

UPPLY CHAIN PROVIDERS

S

UPPLY CHAIN PROVIDERS

S

UPPLY CHAIN PROVIDERS

S

UPPLY CHAIN PROVIDERS

S

UPPLY CHAIN PROVIDERS

S

UPPLY CHAIN PROVIDERS

B 11

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