Supplychain strategy team#1

Chilouse

Children’s Denim Bottom Supply Chain Strategy LXFM 720 Supply Chain Management Strategies Ptofessor Grace Canepa Aitong Wang Mengdi Li Yao Lu Xuejiao Li Winter 2017

Executive Summary

TABLE OF CONTENTS

Ⅰ. Executive Summary Ⅱ. Introduction Ⅲ. Company Overview Ⅳ. Sourcing Guidelines Ⅴ. Country Analysis Ⅵ. Sourcing Strategy Ⅶ. Logistics, Warehousing & Distribution Ⅷ. Supply Chain Strategy Summary Ⅸ. Conclusion Ⅹ. Appendix Ⅺ. References

Chilouse offers best children’s denim bottoms with eco-friendly and organic materials. These products aim to outfit our children with latest fashionable styles and satisfy both parents and children. Chilouse uses eco-friendly materials and latest trend elements to provide our children a comfortable wearing experience and to express both parents’ and children’s fashion tastes.

We determined to use high quality materials and advanced technology to make sure every piece of cloth is safe for both children and global environment. Our designers seek to develop the most creative and fashionable products for our young kids in the world.

The aim of this research is to develop a global supply chain strategy for Chilouse’s production needs while keeping company’s core value of integrated business operation. The first step of our supply chain strategy was to establish a complete product line along with mission, vision, core value and sourcing guidelines. These elements provide a direction for our company’s future and customer’s interest area.

After creating our company’s value and culture, next step was to determine where the products would be manufactured and how to allocate these products.

Good choices can maximize our opportunities and minimize the risks. Chilouse analyzed four countries: Egypt, Bangladesh, Mexico and Pakistan. After considering their countries’ situation, manufacturing ability, and the capacity of their textile industry, we decided to use manufacturing form Egypt, Bangladesh and Mexico. We also make the selection of three manufactures in each country.

Chilouse weighted risks and benefits, and also ranked manufactures’ capacity and ability in order to select one of the top suppliers in each country that shared the same vision with our company to achieve sustainability.

The last step was to determine the amount of production and make sure the best margins and profits we earn. Chilouse also finds a good supply chain solution provider to help us with warehousing, distribution, and transportation.

Introduction

C O M PA N Y OV E RV I E W

Chilouse is a U.S. based company specializing in children’s denim bottom. The company aims to produce eco-friendly, organic and fashionable products that satisfies both our children and their parents . In order to ensure that these goals are met, while upholding the highest level of quality, the company has developed a comprehensive supply chain strategy.

Developing a supply chain strategy is essential to maximize opportunities and minimize risks for the company. Chilouse has evaluated their resources and determined the best ways to leverage them. The company assessed the market, product and consumer demands to determine its best placement within the industry. After creating our company’s value and culture, next step was to determine where the products would be manufactured and how to allocate these products.

Developing a supply chain strategy provides the company with a will-researched foundation to allow them to analyze all risks involved with the company’s ventures and to properly prepare contingency plans should these risks be actualized. Chilouse also finds a good supply chain solution provider to help us with warehousing, distribution, and transportation. A supply chain strategy will further enable Chilouse to correctly forecast in preparation for all future endeavors technically, logistically and financially.

Target Market Customer Profile Name: Ema Age: 30 Location: Atlanta Education: MBA in business school Occupation: Marketing manager Salary: $90,000 Interests: Visiting museums, attending concerts, socializing with friends Media Consumption: Vogue, Elle

The target market is age between 5-12 years old children who like fashion and denim, and the characteristics of personality is outgoing and activity. Their parents also like fashion, love programs for public and sustainable development. These parents can afford to buy this higher price denim bottom for their children. The price range is between $80 to $200.

Mission To provide eco-friendly, organic and fashionable products that satisfies both our children and their parents.

Vision Inspire a sustainable fashion for children’s wear Slogan “Just for children and future!”

Core Value Comfort, creative, fashion, sustainable, quality, recycle

SOURCING GUIDELINES

Code of Conduct sourcing guidelines

Employment Requirements and Responsibilities • Obey all labor laws. We do not hire child labor who is under 16 years old. No prison labours and indentured labours. There shall not be any use of forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise. All facilities are required to maintain official documentation in order to verify each worker’s date of birth, as well as appropriate records documenting that the employer adheres to all restrictions under local labor laws that apply to juvenile workers.

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Paid timely. Employers shall pay workers for all work completed and shall pay at least the minimum wage required by law or the prevailing industry wage, whichever

hilouse choose our supplier based on our company core value. Chilouse Clothing Company to do business only with those suppliers and factories that share Chilouse commitment to fair and safe labor, health & environmental practices.The Supplier Code of Conduct defines our minimum expectations. Since no Code can be all-inclusive, we expect our vendors to ensure that no abusive or exploitative conditions and practices or unsafe working conditions exist. Chilouse Clothing Company will not tolerate any vendor that directly or indirectly, through its subcontractors, violates the laws of the country where the merchandise is manufactured.

is higher, and shall provide legally mandated benefits. Employers should provide to workers, for each pay period, a clear and understandable wage statement that includes days worked, wage or piece rate earned per day, hours of overtime, bonuses, allowances and a description of any and all deductions.

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No discriminate. We respect every employee, no matter where you from and what’s your region. Workers should be employed and compensated based upon their ability to perform their job, rather than on the basis of gender, race, religious or cultural beliefs. Workers shall be treated with respect and dignity. Workers shall not be subject to any physical, verbal, sexual or psychological harassment or abuse in connection with their employment.

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Provide safe and clean working environment for our employees. We protect our employees from avoidable harms. Factories should have adequate circulation and ventilation. Work areas should be sufficiently lit so that manufacturing tasks may be safely performed. All equipment should be tested regularly and properly maintained.

Operational safety devices should be installed on equipment where appropriate. Each factory should have at least one well-stocked first aid kit. Each factory should have at least one well-stocked first aid kit.

Code of Conduct Environment Requirements and Responsibilities • Protect our environment with our suppliers together. We will give preference to the suppliers who use environmental-friendly technology and improve our technology. A member of the management team has been appointed and properly trained for the coordination of environmental management activities •

Reduce the emissions. We solve the harmful gas problems such as CO2 and SO2 while we producing our products and minimize the air and water pollution. Air emission sources are equipped with pollution control devices that remove or filter the contaminants prior to release when needed

• High-quality materials. Inventory records and production records demonstrating origin of incoming materials and traceability and place of product are maintained. We carefully select raw materials and train employees who work direct impact to environment.

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Recycle program. We recycle our products from our customers. After a series safe detections, and make sure the fabrics are all clean. We cut these clothes into pieces and blend with virgin cotton.

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Water consumption. Appropriate permits for water use/extraction required by local & national regulations have been obtained

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Noise management. Noise pollution limits as required by local and national regulations are strictly complied with. Immediate corrective actions are taken in the event noise pollution limits are exceeded

Code of Conduct Customer Services • High quality. We have quality guarantee of products to our customers.

• Professional customer service. Our salespeople are well trained to introduce our products to customers, and customer services are polite and patient to answer customer’s problem.

• Perfect post-purchasing experience. Customers get refund or exchange for any quality or size problems.

Monitor • All facilities must monitored regularly, at least once visit tour per month without notifications. All suppliers should be monitored and audit with different partners to ensure the integrity. Chilouse representatives shall conduct pre-production evaluation of supplier facilities as well as any subcontractor’s facilities.

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Chilouse representatives shall conduct unannounced (without notice) and unaccompanied inspections to supplier and subcontractor facilities for the purpose of auditing compliance to this Code of Conduct.

COUNTRY A N A LY S I S

MEXICO

In the recent times, Mexico has been in the news after President Donald Trump accused Mexicans of “stealing” American jobs. Many companies from developed countries have relocated their production to Mexico, owing to a lower cost of production and Mexico’s decision to remove trade barriers. Presently, Mexico rivals China regarding the number of overseas companies that have established production in the country (China). Another factor that has favored Mexico as a destination for these companies is its membership to the North American Free Trade Agreement (NAFTA) and GATT. For instance, goods produced in Mexico enter the US duty-free, unlike those manufactured in China. Additionally, the cost of shipping the goods from China (to the US) is considerably high when compared to shipping similar commodities from the neighboring Mexico. Despite the high instance of gang-related violence, Mexico is a politically stable nation. This situation has attracted foreign investors to the Latin nation. As well, the large Mexican population provides a stable supply of affordable workforce for companies. For instance, Mexico City is the largest metropolitan in the world with a population of over 20 million people.

Country Traits Mexico, officially known as the United Mexican States, is a federal nation occupying the southern half of the North American continent. It neighbors the United States on the Northern side, the Pacific Ocean to the south and west, Guatemala and Belize to the East, and the Gulf of Mexico to the Southeast. Being a federal republic, Mexico is led by a federal government featuring the national, state, and municipal level governments down the hierarchy, respectively. The current leader of Mexico is President Enrique Peña Nieto. The majority of the Mexicans (99.3 %) speak Spanish, owing to Spain’s occupation of the region for three centuries. Mexico is a large country spanning about 768, 000 square miles and supporting a population of nearly 123 million.

Education wise, Mexico ranks highly with a 97% literacy rate for children fewer than 14, and 91% for those over 15 years of age.

Country Stability Regarding Mexico’s social setup, the country is known for strong family ties, which according to Miller et al., “take precedence over work and all other aspects of life” (204). For example, while people in the United States define themselves based on their economic occupations, families in Mexico form the basis of personal identity. This attitude may affect the business environment because familial connections often find their way into the commercial setting. Incidentally, nepotism, which is frowned upon in the West, is often tolerated and actually encouraged in Mexico. This observation means that a Mexican employer will likely employ his or her relatives because he or she believes they will be more dedicated when compared to strangers. In the United States, the opposite is true where employers avoid hiring their family because they believe that they will demonstrate less dedication relative to strangers. In addition, due to strong family ties, Mexicans working in the US remit about $21 billion (0.2 % of Mexico’s GDP) to their families in Mexico.

Country Stability In describing Mexico’s social organization, it would be prudent to point out the aspect of social unrest. Mexico experiences numerous and frequent cases of violence-related murders, owing to the widespread gang activity in the country. According to Semple, the high incidence of violence in the country is caused by rivalry among criminal groups that seek control of the territories for selling their drugs (4). Mexico leads in America with the highest cases of drug trafficking. Consequently, the high incidence of violence has hurt the Mexican economy by scaring away potential investors. Ferreras estimates that the country lost about 2.12 trillion pesos to drug wars in 2015 alone (2). Figure 1 in the appendix section demonstrates how violence influenced Mexico’s economy between 2003 and 2015. Thus, it is safe to conclude that insecurity in the country has hurt its prospects of economic growth.

Country Stability Politically, Mexico is a relatively stable nation under the leadership of President Nieto. This situation has attracted both local and foreign investors to the Latin country.

Presently, many companies from developed economies have moved parts of (or the entire) chains of production to Mexico. The political climate in the country is shaped by actions, legislations, and policies enacted by both the federal and state governments. Federal decisions affect the business climate across the entire country. On the other hand, different states have varying local legislations, which have also resulted in varying economic climates. For instance, tax rates differ from state to state. As such, the rates may be favorable in one state but not in another. In addition, laws relating to the unionization of workers vary depending on the state.

Currently, Mexico is ranked as a middle-to-advanced economy. The country has the fifteenth largest nominal Gross Domestic Product (GDP). Between 1995 and 2004, Mexico experienced a robust economic growth, with its GDP expanding at a rate of 5.1% per annum. However, recent years have seen the economy’s growth slacken, particularly, the second quarter of 2016. According to The World Bank, the growth of the Mexican GDP stalled throughout 2016 due to reduced economic activity (par.2).

Factors such as pathetic savings and reduced export demand meant that the growth of the country depended on classified expenditure.

Presently, Mexico‘s service industry is the leading contributor to the nation’s GDP (64%) while the industry sector follows at 31%. Consequently, exports are pivotal in the growth of the Mexican economy, with electronics and automobiles being the leading exports. As such, increased external competition has led the Mexican peso to depreciate against the US Dollar in the years 2015 and 2016. Currently, the peso is trading at 0.048 US Dollars, down from 0.075 in 2013. If the peso continues to weaken against the US Dollar, doing business in the country may become increasingly difficult.

In addition, inflation in the country rose continuously for six months straight between June and December 2016. As a result, consumer prices rose by 3.36 %. According to Trading Economics, the Central Bank of Mexico expects the rate of inflation to reach 4 % in 2017 given the weakening of the peso. Inflation is likely to lead consumer prices to rise even higher to the extent of leading to decreased consumption and hence lower business prospects.

Fig. 1: Economic Impact of Violence in Mexico Sources: Institute of Economic’s and Peace

Lead-time of Production Lead-time of production refers to the period between when an order is placed and when the finished product is completed and ready to be shipped to the customer.

A short lead-time is preferred to a longer one since consumers do not wish to wait for long to have their orders delivered. Manufacturing in Mexico is highly favored due to the prevailing short lead-times. As a result, short lead-times result from a qualified workforce coupled with a low cost of production. However, due to the country’s over-emphasis on socialization, Mexicans observe far too many holidays. This situation may occasion delays in production, especially where industries have to remain closed during the said holidays. In addition, natural disasters such as the Hurricane Patricia are frequent in the country. Such catastrophes may destroy whole production plants or in the least slow production, thus leading to longer than the expected lead-production times.

Mexico Insights The cultural aspects of a business environment consist of norms, lifestyles, and values that shape the society immediate to a firm/company. These socio-cultural components influence the company’s ability to obtain resources, manufacture products, and/ or operate in the said society (Thornton et al. 106). The socio-cultural factors include any attribute of the society that can influence the organization’s external environment. Some prominent factors in Mexico include population, literacy levels, and views regarding social responsibility. As observed earlier, Mexico has high literacy levels, with over 91 percent of the child population completing primary education. High literacy levels imply that the country produces skilled labor that can be relied on to boost productivity in the motherland. At the same time, Mexicans have registered an acceptance of technology as it is portrayed by the high usage of personal computers.

This positive attitude has been reflected in the adoption of technology in production processes.

Mexicans value hard work. Such appreciation may be useful for business since it is likely to encourage high productivity. In addition, traditions in Mexico are respected and valued. As such, Mexican employees will be naturally inclined to observe the culture of an organization, which in turn facilitates organizational success. On the other hand, business leaders seeking to establish themselves in Mexico need to understand the importance of trust and relationships (Miller et al. 205). This awareness is particularly important for business leaders with a working experience from the US where personal qualifications precede social connections. Thus, employee dedication is more dependent on trust compared to individual qualifications. Additionally, being able to speak Spanish can assist a business leader in winning the trust of Mexican employees because speaking Spanish sends a signal that one cares or at least understands how the Mexican society works.

Timeliness is of utmost importance in the Mexican culture. Hence, being slightly late for a meeting can send an undesired message. Leadership in Mexico takes an authoritative stance. This claim means that the leader must demonstrate assertiveness to garner influence among his or her followers. Therefore, for business leaders, the habit of consultation with juniors may not be a desirable leadership approach in Mexico.

Instead, employees expect to be handed down instructions. This approach is different from the common practice in the West where leaders must foster teamwork by consulting with juniors, as well as peers.

State of Apparel Industry The textile and apparel industry has contributed immensely to the economy of Mexico and the US. Most of the players in the industry are mainly micro and small-scale companies that make up 85% of the sector. The overall success of the Mexican textile and apparel industry is attributed to the abolition of trade barriers, which led to the lifting of duties that were invoked by the North American Free Trade Agreement (NAFTA). Mexico’s access to GATT opened up a foreign trade, which was seen as a gateway to increased exports in the textile and apparel industry. Despite the growing success, the dawn of 2000 was marked by competition from China after it joined the World Trade Organization. However, analysts project that the industry still has some strengths due to its proximity to the US and the availability of suppliers from Latin America (“Mexican Textile Industry” 20).

In 2014, the Mexican government introduced six trade policies. Among them was the introduction of four duty implementation mechanisms meant to augment the inspection of apparel procurement from overseas. An additional strategy was the establishment of the lowest chargeable amount for fabric and apparel items. The policy was meant to regulate shipments that were below the stated minimum price. In addition, all importers of textile and apparel products would be listed on a registry for scrutiny (“International Trade Administration” 2). Despite the program collapsing during the peso crisis of 1995, many farmers benefited from it. In 1990, the total number of companies in the textile industry totaled to 2200. Each company accommodated an estimated 49 workers. Presently, the industry employs an estimated 170,000 workers.

Currently, a number of these companies are merging, a strategy that is leading to the reduction of companies in the industry. Because of the mergers, most employees are losing their jobs. The situation has resulted in a high unemployment rate in the country.

Suppliers within the Country Mexico is ranked as the 3rd largest trading partner for the US. About 4.7% of its GDP is from the textile and apparel industries distributed throughout the country. It is important to note that the Mexican manufacturing segment is concentrated in Guadalajara, Monterrey. According to GMDU.Net, Grupo Tevi is a fabric manufacturing company located in Guadalajara, Mexico. Due to its new products that the company keeps on unveiling, it has managed to maintain a wide customer and supplier base (Montano 2). Guazambaele is another family company that has established itself in the manufacture of women’s thong. The Guazambaele family established the company in 2003. Most of the customers are located in Riviera Maya and Cancun in Mexico. The company has estimated annual sales of below $1 million.Vivatex is also a textile manufacturing company located in Mexico. It was founded in 1980. Since then, it has established itself as a key textile manufacturing company. Its range of products includes yarn, artificial threads, and cords among others.

Trade Agreements The overall Mexican economy is affected by the economic conditions in the United States. In 1987, Mexico and the United States entered into a bilateral agreement named the Framework of Principles and Procedures for Consultation Regarding Trade and Investment Relations. The agreement was meant to push for the reduction of trade barriers in key sectors such as the textile industry. A second agreement named the Understanding Regarding Trade and Investment Facilitation was signed in 1989.

This move was seen to strengthen the agreement signed in 1987. Its essence was to further open up trade and investment opportunities between the two countries. With these two agreements, the textile and apparel industry in Mexico was able to increase the number of exports to the United States. After signing NAFTA in 1993, Mexico overtook China in exporting apparel to the US due to the duty-free imposition of all Mexican products entering the US. The condition for the duty-free export was that the components from the thread were to be made in Canada, Mexico, or the US. The move also enabled Mexican products to compete fairly in the northern American markets.

Product Classification

Transportation

The Harmonized Tariff Schedule (HTS) is used to determine customs duties for items that are imported into the US. A Mexican-imported silk garment (men or boys’ suits, jackets, blazers, etc.) has the following code: 6103.29.20.28. The code is in line with the HTS 2017 chapter (“Harmonized Tariff Schedule Search” par.1). More details are shown in Figure 2 in the appendix section.

International ports are busier compared to ports that serve domestic markets in the region. International ports handle high cargo tonnage and volume container shipment. The type of facilities found in the ports is determined by the specialization of load-handling facilities. Ports provide temporary shelter for docking ships, as well as the international distribution of goods. Many port facilities are located in developed countries such as Canada, Russia, China, and the USA (World Fact Book” par. 2).

Examples of ports that can service international freight companies are Port of New York, Port of Rotterdam, Port of Shanghai, Port of Singapore, and Port of Hong Kong.

Mediterranean shipping company takes 62 days to ship goods from Seattle to New York. Similarly, Matson Navigation Company takes 55 days to ship goods from Seattle to New York. On the other hand, Horizon Lines shipping company takes 72 days to ship goods from Seattle to New York.

Risks and Benefits The Mexican textile and apparel industry faces threats from the Chinese and Hong Kong textile industry because of the low labor costs in these countries. The effects of low labor costs are that the products will be cheaper compared to those offered by the Mexican industry. The Mexican textile and apparel industry has also received competition from emerging economies such as Pakistan, India, and African countries. Such rivalry has caused a reduction in prices due to the oversupply of textile products.

Asian countries are currently emerging as textile powerhouses in textile manufacturing. Studies indicate that the top three countries with high textile exports are of Asian origin. A majority of players in the Mexican textile market are small-scale producers.

This situation makes it even more difficult for Mexico to compete effectively on the global scale. On the other hand, the Mexican textile and apparel industry benefits from being centrally located in the North American, Central American, and Caribbean markets. Mexico has also benefited by being a member of NAFTA as reflected in infrastructure improvements, labor costs, and full-package productions.

Conclusion Numerous factors compound to make Mexico a haven for foreign investment. The factors are political, social, and economic in nature. As a result, Mexico is a leading exporter of electronics and automobiles. The country’s economy has also benefited from the high level of foreign investment. However, recent times have seen the Mexican peso depreciate against the US Dollar, as well as the rising inflation. If these trends continue, doing business in Mexico may become increasingly difficult. Notwithstanding, foreign companies continue to ship their production to the country, owing to the low cost of manufacturing.

Country Stability:

EGYPT Introduction

Egypt is perhaps one of the very few countries that has a big haul of history amidst historical controversies.

People like the Jewish hero Moses, Queen Cleopatra, Julius Caesar, Alexander the Great, King Tut and others have donned the land. Egypt showcases much of man's history, his achievements and the glorious monuments that stand to tell a tale for our future generations. Apparel manufacturing industry plays an important role in Egypt. Understanding the current country’s condition can help us to make the right placement decision.

What’s more, finding the reliable suppliers can maximize the profit and minimize the risks.

• Social Status Because of the extreme climate, most of the population lives the area near the Nile River and cities such as Cairo and Alexandria. One of the biggest problems is the high unemployment rate, which has been growing over the years. (Sobhi, 2010) According to the CIA report, the unemployment rate of 2015 is 12.8%.

However, it increases to 13.1% on 2016, which ranks as 145th in the world. (U.S ranks as 48th) The high rate of unemployment and a huge amount of population make people earn low wages, about 25.2% of the people below the poverty line. It seems that decreasing the unemployment rate is a big challenge in the near future.

Due to the high birth rate, economy is developing fast enough that creates new jobs, but number of children per women is high and population growing faster than new jobs. Additional factor of high unemployment is high urbanization relatively to similar countries. Many people live in several big cities that create high employment pressure. There are 31.96 million labor forces in Egypt, so creating jobs is an effective way for government to solve the current issue. The government encourages and welcomes foreign companies investment that will offer more job opportunities in Egypt.

Most Egypt people believe Islam; they even consider man is better than woman. So women have lower social level in Egypt; this poor image is reflected in the aspect of education. Male literacy rate is about 82.2% and women’s is 65.4%. Many women have no chance to go to school and learn knowledge. “The National Council for Women works for the welfare of women in Egypt, aims to completely eradicate illiteracy among females.” (Sobhi, 2010) Some women have sewing skills; they are the potential labor forces for textile and apparel industry.

Another social unrest is underdeveloped healthcare system. This challenge affects the rural poor and has the potential risk on country’s economic prosperity for a long time. According to USAID organization, “Poor women are 20 percent less likely to receive regular antenatal care than wealthy women, and under-five mortality for children born in the wealthiest quintile is 19 deaths per 1,000 live births versus 42 deaths for the poorest.” (USAID, 2016) Though government provides a lot of activities, such as Improving Maternal, Child Health, and Nutrition Services in Egypt, Family Planning through the Private Sector, Program to Improve Quality and Safety of Healthcare in Egypt, and so on, increasing the healthcare system is still essential and inevitable behavior for Egypt to stabilize the society. Since labor is the No. 1 resource for a manufacturing company, the increasing of health care system will keep these labors on their duty and apparels will be produced continuously.

Country Traits • Name: Arab Republic of Egypt • Location: North East Africa bordering Palestine (Gaza Strip) 11 km, Israel 266 km, Libya 1,115 km, Sudan 1,273 km • Capital: Cairo • Area: 995,450 sq km of land and 6,000 sq km of water • Climate: desert; hot, dry summers with moderate winters • Population: 94,666,993 (2016 est.)

• Ethnic Make-up: Eastern Hamitic stock (Egyptians, Bedouins, and Berbers) 99%, Greek, Nubian, Armenian, other European (primarily Italian and French) 1% • Religions: Muslim (mostly Sunni) 94%, Coptic Christian and other 6% • Government: republic • Language: official language is Arabic; English and French are widely understood • Sex ratio: 1.05 male/female (2016 est.)

Since the special geographical location, approximately 95% of the population lives within 20 km of the Nile River and its delta, where most economic activity takes place. From 2004 to 2008, the government aggressively pursed economic reforms to attract foreign companies’ investment. But poor living conditions and limited job opportunities lead public discontent that is why on January 2011, there was a revolution ousted MUBARAK. picture: http://identity-mag.com/category/battle-of-the-writers/

• Economic Status In the past years, the cabinet economic team wanted to make the national financial statement much more clear than before, so the team had simplified and reduced tariffs and taxes for imported foreign companies and exported domestic companies.

“Cabinet team …… revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth” (Sobhi, 2010), these activities improved Egypt’s competitiveness at that time.

The global economic downturn slowed Egypt’s GDP growth, especially for export-oriented sectors, including manufacturing and tourism. Since 2011, the uncertain political, security, and policy environment also caused economic growth to slow. In 2015, higher levels of foreign investment, especially from apparel industry, made a contribution to a rebound in GDP growth after a particularly depressed post-revolution period. (CIA, 2016) GDP from manufacturing in Egypt increased to 74760 EGP Million in the third quarter of 2016 from 72717.90 EGP Million in the second quarter of 2016. GDP From manufacturing in Egypt averaged 62652.52 EGP Million from 2007 until 2016, reaching an all time high of 77639.80 EGP Million in the second quarter of 2015 and a record low of 51326.60 EGP Million in the third quarter of 2007. (Trading Economics,2017). omfort the internal social unrest, reduce the regional conflicts and poverty still needs a lot of money. In this circumstance, officials have to exercise caution in pursuing reforms • Political Status Egypt government wants to open its market and build up a good relationship with other countries especially on foreign trade. From the 2015 report, the total export of 2016 is $14.73 billion, partners include: Saudi Arabia 9.1%, Italy 7.5%, Turkey 5.8%, UAE 5.1%, US 5.1%, UK 4.4%, India 4.1%.

Total import is $50.07 billion, partners include: China 13%, Germany 7.7%, US 5.9%, Turkey 4.5%, Russia 4.4%, Italy 4.4%, Saudi Arabia 4.1%. Egypt mainly exports mineral fuels and oil, cotton, iron and steel.

It imports mainly consumer electronic goods and capital goods, nuclear reactors and nuclear-powered boilers, cereals, food products and chemical products. (CIA, 2016) Egypt has bond cooperation with other countries; it is convenience for us to ship our products to other countries in the future. It can decrease the limitation to export all over the world.

Trade & Investment Framework Agreement (TIFA) is a trade pack, which establishes for expanding trade and resolving outstanding disputes between U.S and other countries. (ustr, 2017) Egypt joined in TIFA since 1999, and it was the United States' 68th largest supplier of goods imports in 2013. The total value is $1.6 billion in 2013, a 46.2% decrease ($1.4 billion) from 2012, but up 41% from 2003. (ustr, 2014) There are 5 large import categories: Woven Apparel ($479 million), Knit Apparel ($325 million), Mineral Fuel (oil) ($199 million), Fertilizers ($145 million), and Textile Coverings ($142 million). We can see that apparel industry takes an important role in Egypt’s export to U.S.

Lead-time of production:

• Natural disasters There are many natural disasters in Egypt, such as periodic droughts; frequent earthquakes; flash floods; landslides; extreme temperature, driving windstorms called khamsin occur in spring, dust storms, and sandstorms. When these hazards come, the transportation can be influenced, it can delay the delivery. Currently, the agricultural land is losing to urbanization and windblown sands. The desertification is seriously, oil pollution threatening ocean and Nile River, people now face the water source issue. (Prevention, 2014) • Cultural nuances The work hours are Sunday through Thursday 8:00 am – 4:30 pm. During the month of Ramadan, the local employees only work 7 hours instead of 8 hours (1 hour less either in the morning or in the afternoon). (Export. gov, 2016)

Cultural Insights

Egypt is a country with a lot of religions, and the main one is Muslim. Egyptians Muslims may practice their religion less strictly than others and the country also has a significant Christian population.

Nevertheless, this is still an Islamic country; we should show our respect when we have the business there. Egypt is considered as a collective society, which means loyalty plays an important role. Strong relationship and responsibility sharing for employees are two main factors in Egyptian’s business cultural.

What’s more, management of an organization in Egypt is perceived as similar to a family link. People work together and make final decisions, and these decisions will often focus on the maximizing benefit as a whole. (Kamel, 2015) Building lasting and trusting personal relationships is very important to Egyptians, which means you need to get close to them before the deals. Try to understand their life and treat them as real friends, although it takes a lot of time. “Saving face” is very essential, no matter Asian people or Egyptian people.

Causing embarrassment to another person may cause a loss of face and failure of your business, especially in the negotiation process. Calm down and try not to express your feelings when you are upset, happy, or angry. “It may be better to accept a compromise, even an unfavorable one, if the alternative means that your counterpart loss face.” (Katz, 2007) The official language is Arabic, but businesspeople can speak at least some English. It’s essential for you to hire a local agent to translate during the negotiation. When communicating in English, speak in short and simple sentences, avoid using difficult words or slang. Egyptians usually speak in quiet, gentle tones; so don’t speak loudly. This is an impolite behavior. People in the country usually converse in close proximity, standing only two feet or less apart. If you stand far away and want to keep your personal “bubble”, this is also considered as a rude behavior. If you want to say “no”, try another way, such as “we will think about it”, don’t forget to save their faces.

As mentioned before, Egyptians always focus on a long relationship, and benefit. Although the primary negotiation is seeking the benefit for a business, Egyptians look for a win-win situation. You should always respect them and show your positive attitude. You also need to find solutions through using logical arguments and show your willingness to compromise. Patience is a strong tool for you to communicate with them. Do not underestimate Egyptian’s negotiation skills. Sometimes they will show you the false information that is why they don't like information sharing. They believe the more information they have, the more advantage they have on bargaining. Price often moves more than 50% between initial offers and final agreement.

Established in 1990 and start production in July 1991

Leave an enough space for your business during the negotiation process. Do not use pressure strategy to force them sign the agreement, such as applying time pressure, making expiring offers and so on. They may think you are not willing to talk with them and it can harm the long-tern relationship.

Respect their culture also means the clothes you wear. As a businesswoman, do not wear short skirt.

Also never ask about their wife’s and daughter’s health. (Kanz, 2007)

State of the Apparel and Textile Industry

Egypt is recovering from the political and economic unrest from previous revolutions, although at the end of 2014 and 2015 Egypt enjoyed much more growth in apparel sales. In addition, the government announced to increase the price of imported products by 30%, which influenced value sales of apparel as most of the major brands in this market, are international brands and have no factories in Egypt.

According to the 2015 General Authority for Investment, Egypt is home to the fully vertically integrated textiles industry in the Middle East, with the entire production process. Egypt has competitively priced skilled labor. Wages in Egypt are most competitive and stable in the region.

What’s more, there are a lot of manufacturing training programs in apparel industry and government initiatives upgrade the skills of labors. Egypt has a good location to export to Asia, Europe. According to SEBA’s report, Egypt is also geographical closer to the US than its competitors such as India and Indonesia. It has 15 commercial ports to facilitate exports.

Kazareen Textile Company ( KTC ) , a member of Mimar Invest Group is a leading global textile , apparel & fashion services company that brings an integrated approach to design, production, marketing , retail and distribution of hight quality Textiles & brand name product for consumers worlwide. KTC was founded in 199 1inCairo (Egypt),the cotton capital of the world, well-known for its world-class long-staple cotton. Today, KTC has offices and facilities in several countries around the world to serve its growing clientele and meet their exacting demand for knitwear, woven garments and home textiles .

Abilities： Polo Shirt, Sweatshirt, Shorts, T-Shirts and denim shorts for man, woman, and children Capacity：20,000 Pcs Per Day Costs：3 hours to Alexandra port, save transportation fees. In QIZ, no duty Customer Service: They have business office in Orlando, easy to communicate with them Customers: They provide for North America and Europe market. Levis, Pvh, Ck, Target, Express, Club Monaco Flexibility：1500 labors, there are 7 companies all over the world.

Lead-time：30 days Management：Professional company with 7 sub-companies in the world.

Quality：Excellent in denim products with professional labors.

Services Offered: knitting, dyeing, compacting, cutting, sewing, finishing, quality control, packing Strategic Outlook: They have value-added services such as in-house handling of custom clearance, warehousing, Automatic Replenishment Services (ARS) including Delivered Duty Paid (DDP) services help their clients take the worry out of their global logistics problems.Advanced technology especially in organic denim production.

Sourcing Guidelines: 7 companies in the world, no bad news recently.

as a private sector company, with capital of us $ 3.000.000 & turnover export is us $ 20.000.000. Dolphin Garments main articles is manufacturing of ready made garments like Pants, Jeans, Shorts & Skirts all kinds of bottoms from any kind of fabric like denim up to 12.50 oZ, stretch twill & denim, corduroy, twill, canvas, bull denim, sateen, fleece.Dolphin Garments located in Port-Said public free Zone which has a strategic location in the center of the world, atentrance of Suez canal from the mediterranean sea, dolphin factory very close to the port (only 50 meters).

Abilities: Pants, Jeans, Shorts & Skirts all kinds of bottoms from any kind of fabric like denim up to 12.50 oZ, stretch twill & denim, corduroy, twill, canvas, bull denim, sateen, fleece.

Capacity: 175,000 piece per month Costs: 3 hours to Alexandra port, save transportation fees. In QIZ, no duty Customer Service: Easy to contact with them through official website, fax, phone and email.

Customers: US customers: Levy Group, Design & Source, Bill Blass, Jensmart, Resource Club Ltd, Wild Life, Gloria Vanderbilt, Jones Apparel, Kamon (Big Dogs) Flexibility: They have 1078 labors in a very big factory. They even have 7 warehouses for each process of the clothes.

Lead-time: 100 days Management: Highly standard of products, customers can talk with managers directly through phone or email.

Customers can also consult different questions about the business.

Quality: Excellent Services Offered: Cutting, Embroidery, Sewing, Garment Washing, Pressing Strategic Outlook: They have more than 731 advanced machines. They also have professional and trained labors for each process.

Sourcing Guidelines: Private company, no negative new

Egyptian Chinese Garments CO. WINITEX

Abilities: Polo Shirt, Pants, Shorts, T-Shirts, Dresses for Men, Women, and Children Capacity: 200,000 Pcs Per month Costs: Close to Alexandra port, save transportation cost. From QIZ, no duty export to U.S Customer Service: Easy to contact with them through official website, fax, phone and email.

Customers: For U.S market, their customers are Beveraly Hils, Polo club, Gymboree, Mecca, ROSS, TJ Max, Brilimgton, Dollar Gereral, and I ZOD Flexibility: They have two factories and 2000 labors, easy for them to switch from one product to another Lead-time: 60 days Management: Family business, keep the business integrity Quality: Excellent Services Offered: Cutting - Sewing - Embroidery Strategic Outlook: They have more than 500 Machines with the latest technology special for jeans and heavy material as well as normal material Sourcing Guidelines: Private company, no negative news

Trade agreement

In 1996, the U.S. Congress established the Qualifying Industrial Zone (QIZ) initiative to support the growth in the Middle East. The QIZ allows Egypt to export products to the United States duty-free, as long as these products contain inputs from Israel. “The QIZ legislation authorizes the President to proclaim elimination of duties on articles produced in the West Bank, Gaza Strip, and qualifying industrial zones in Jordan and Egypt.” (OTEXA, 2017) The Office of the United States Trade Representative (USTR), in consultation with other U.S. Government agencies, designates QIZs. In December 2004, three QIZs were designated in Egypt: the Greater Cairo zone, the Alexandria zone and the Suez Canal Zone zone. Later, the Central Delta Zone established in August 2005; and the Beni Suief and Al Minya zones in January 2009. Since our suppliers were form these QIZs, it can help us reduce the duty and save our cost.

Risks and Benefits

Egypt government wants to increase the economic growth and comfort the society unrest.

It’s necessary for them to attract foreign investment with benefits. U.S has already sign the dutyfree agreements with Egypt, and the suppliers we choose are from QIZs. It can save our cost and get skilled labors. Egypt has three main ocean channels, so the convenient transportation is also a benefit for us. The potential risk is the current society is not peace; high unemployment rate makes people frustrated and causes some conflicts with government. If we want to use suppliers from Egypt, we need to make a complete schedule for shipping and manufacturing process, in case some accidents happened. Make sure that we have other options if some natural disasters occur.

Product Classification

Benefits

Boy's Denim: 6201.92.1941 Girl's Denim: 6204.52.2040 Our products are form QIZ, which means duty-free for our clothes.

Transportation

There are three main sea freights and 16 ports in Egypt; they are Mediterranean Sea, Red Sea and Nile River.

We will choose Alexandra Port as our main port, since it is a prosperous port in Egypt.

• Turkon Turkon Container Shipping and Transportation Inc was established on March 3rd 1997 in order to transport on international maritime regularly. They have four domestic agencies in İstanbul, İzmir, Mersin, Bursa and four international Turkon agencies in United States of America, United Kingdom, Germany, Belgium and along with other agencies in all over the world, continue to expand their service network. It takes about 17 days shipping from Alexandra port to Savannah port.

• UASC United Arab Shipping Company (UASC) is a global shipping company based in the Middle East.

Founded in 1976, it has more than 185 offices around the world. The company is the largest container shipping line in the Middle East region and adjacent markets, covering over 240 ports and destinations worldwide.

UASC offers containerized cargo transportation; temperature controlled (reefer) and out of gauge cargo amongst other value added services to a diversified global client-base. It takes about 32 days shipping from Alexandra port to Savannah port.

The average cost of 40 FT containers including the insurance is from $2,911.53 to $ 3,112.74.

Map from UASC

-Government provides monetary assistance -Free duty, QIZ -Low barriers of market entry -Skilled workforce -Advanced technology -Shorter lead-time -Experienced management -Value-added services

Conclusion:

Risks

-Social infrastructure -Low education -High unemployment rate -Low national competitiveness -Apparel export to US is decreasing -Low market share

Egypt is a good choice for our company, since they have cheaper labor cost with skills, the government encourage foreign investment, they probably offers us some special benefits. Egypt has many relationships with other countries, it also export products to them. Most researchers believe there is a bright future in Egypt. Although, there are still some issues in Egypt, no matter the demographic problems or natural disasters. We should make a complete plan and do some deeper research about the political and economic aspects.

Pakistan Introduction

Pakistan, officially Islamic Republic of Pakistan, republic, 310,403 sq. South Asia. Pakistan has one of the world‘s most rapidly growing populations. Its people are a mixture of many ethnic groups, a result of the occupation of the region by groups passing through on their way to India. The Textile industry in Pakistan is the largest manufacturing industry in Pakistan. Pakistan is the 8th largest exporter of textile commodities in Asia. This sector contributes 8.5% to the GDP. Pakistan is the 4th largest producer of cotton with the third largest spinning capacity in Asia after China and India and contributes 5% to the global spinning capacity.

Country traits of Pakistan

Location: South Asia Geographic size: 307,374 mi² Capital: Islamabad Leader: Nawaz Sharif Composition: Pakistan has 5 provinces .

Population: 195,461,899 Population growth rate: 1.6% Official language: English and Urdu.

Literacy rate: 60% Education: The education system in Pakistan is generally divided into six levels: preschool, primary school, middle school, high school, intermediate and university.

Major religions: The state religion in Pakistan is Islam, Hinduism is the second largest religion in Pakistanafter Islam.

Major ethnic: The major ethnic groups of Pakistan include: Punjabis, Pakhtuns, Sindhis, Siddis, Saraikis, Muhajirs, Balochis, Hindkowans, Chitralis, Gujarati.

Currency: Rupee Exchange rate: 1 Pakistan rupee =0.009541 U.S. dollars

Political & Social

With large amount population, Pakistan has plenty labors, and it is one of the cheapest labor cost among the world. So Pakistan attract more investors manufacture products in the country. However, the child labor problem in Pakistan in serious. With more than 3.3 million children age between 5—14 years old engaged full time employment.

Political instability will remain a cause for concern, particularly in the run-up to parliamentary elections set to be held in 2018. The military will maintain its influence against a weakened civilian government, especially in foreign affairs and national security. Government expenditure and strong infrastructure investment will support economic growth in 2017-21.

Economics

Pakistan’s improvement matters because, with approximately 200 million people, it is the sixth most populous country in the world. It is also a nuclear power, and arguably a key to peace in the region. To be sure, the problems remain staggering. The education system is poor, exports are not making progress and rely too heavily on textiles, investment is insufficient.

Source: The Economist Intelligence Unit

Lead time of production

Lead time to export (days) in Pakistan was last measured at 20.70 in 2014, according to the World Bank.

Pakistan has very serious electricity crisis. However, the government didn’t provide very efficient solutions of this issue. Besides electricity, Pakistan has very poor natural condition. That’s why the environment that labors working need to be concerned. It is a country with frequent flood disaster. Earthquake is a serious problem in North Pakistan.

Pakistan has the second largest Islam population in the world. They celebrate their holidays according to Islam calendar. Friday is their Holy day and everywhere is shut down. People pray five times per day. When met their important Muslim holiday, people are allowed working 6 hours per day.

All those elements will influence the lead time and working efficient severely.

Cultural insights in fashion industry

Arts and Architecture The iconoclasm of Islam has given a characteristic form and pattern in the use of elegant designs, based on geometric figures and floral forms borrowed from nature. The Shah Jahan Mosque, Shalimar Garden, Badshahi Mosque, Shahi Qila and many such graceful buildings are a living proof of the splendid Mughal architecture.

Handicrafts Embroidery, leather works, glazed pottery, wood work, carpet making, metal crafts, and ivory are the essential parts of their culture. Pakistani craftsmen are considered the best in their craftsmanship. They are known for the high quality works which is very popular in foreign countries.

Cultural Insights •Islam is practised by the majority of Pakistanis and governs their personal, political, economic and legal lives.

•Among certain obligations for Muslims are to pray five times a day - at dawn, noon, afternoon, sunset, and evening.

•Friday is the Muslim holy day. Everything is closed.

•During the holy month of Ramadan all Muslims must fast from dawn to dusk and are only permitted to work six hours per day. Fasting includes no eating, drinking, cigarette smoking, or gum chewing.

•The extended family is the basis of the social structure and individual identity.

•It includes the nuclear family, immediate relatives, distant relatives, tribe members, friends, and neighbours.

•Loyalty to the family comes before other social relationships, even business.

•Nepotism is viewed positively, since it guarantees hiring people who can be trusted, which is crucial in a country where working with people one knows and trusts is of primary importance.

•The family is more private than in many other cultures.

•Female relatives are protected from outside influences. It is considered inappropriate to ask questions about a Pakistani's wife or other female relatives.

•Families are quite large by western standards, often having up to 6 children.

•Pakistan is a hierarchical society.

•People are respected because of their age and position.

•Older people are viewed as wise and are granted respect. In a social situation, they are served first and their drinks may be poured for them. Elders are introduced first, are provided with the choicest cuts of meat, and in general are treated much like royalty.

•Pakistanis expect the most senior person, by age or position, to make decisions that are in the best interest of the group.

•Titles are very important and denote respect. It is expected that you will use a person's title and their surname until invited to use their first name.

Apparel and Textile Industries Pakistan is the 4th largest producer of cotton in the World and 8th largest exporter of textile products in Asia.

Textile sector contributes 52% of total exports, 46% of total manufacturing, 8.5% of total GDP and 5% of the market capitalization. Country’s economy continues to improve this year, so they have ability to welcomes foreign companies especially manufacture industry cooperate with them.

It's not close from Pakistan to US. Karachi is commercial center and the largest port in Pakistan, it gonna take 45 days from Karachi port to Savannah port.

The textiles and apparel sector are already important drivers of the Pakistani economy but this continues to be an area for potential for growth. The sector: • • • •

Employs 40 percent of industrial workforce; Contributes 8 percent to the country's GDP; Sustains the livelihood of approximately 10 million farmers; Pakistan is the 8th largest producer of textiles in Asia, the 4th largest cotton producer in the world and is the world’s 3rd largest consumer of cotton.

Although current production is relatively low-value, textile products like raw cotton, cotton yarn, cotton fiber, and ready-madegarments (RMG) account for 10 percent of overall textile exports. Improving the quality and value of RMG products is a goal of the Pakistani industry.

Sources: International Trade Statistics 2014 (WTO), EURATEX, BGMEA, HKDTC, TDAP

3.Denim international

Transportation

Karachi Port Geographical Location

• Abilities: Supply any variant of denim; Basics 5 Pocket, skinny jeans, shorts, skitrs.

• Capacity: 2 million meters per month • Costs: Located in Pakistan’s only port city Karachi.

• Customer services: Contact them through email, phone, fax and online customer support.

• Customers: Their working range cover the whole world.

• Flexibility: Skilled workers are hired in each department and competent managers make sure to utilize their skills to its maximum.

• Lead-time: 60 days.

• Management: Having been in the Denim industry for over 15 years and started trading in different commodities across the globe.

• Quality: GOOD. • Services offered: Designing, Cutting, Dyeing, Weaving, Embroidery, laser printing.

• Strategic outlook: All process are done in house under supervision of highly trained staff who also ensure that all standards of ISO are implemented during each stage of production. Eco friendly and sustainability.

• Sourcing guidelines: No bad news recently.

Trade Agreements The United States is Pakistan’s largest export destination county, Pakistan exported $3.7 billion to the United States in 2015 and imported $1.837 billion. In order to take advantage of the growing integration and cooperation between nations, Pakistan has initiated many trade agreements with various nations, including USA. After successfully negotiating Trade and Investment Framework Agreement (TIFA) with USA—a precursor to Free Trade, Pakistan is now pursuing Free Trade Agreement (FTA). The agreement is believed to be of mutual benefit to either nations.

For water transportation, the country is beside Arabian sea, and port Karachi is the busiest and located in the commercial center of Pakistan. The Karachi Port is the principal Seaport of Pakistan which handles approximately 75% of the entire national trade.

Karachi Port due to its geographical and strategic location is known as the gateway to Asia. Karachi Port Trust (KPT) is situated in the city of Karachi and has divided in 2 different wharves.

Eastern Sea Transport (Pvt) Ltd., is the flagship company of Eastern Group. It was established in 1981, as a ship agency house in Karachi, Pakistan. Started by the enigmatic, knowledgable and hugely experienced Mr.Ikhtisar Ahmed (late), the reins were then taken over by his son and apprentice Mr. Aquil Ahmed, who rose above the challenge and ran the company with utmost dedication and vigour. Eastern Sea Transport in the last many years has been well-renowned and highly-reputed ship agents at Karachi for both tramp and liner vessels. We are extremely proud to have principals that bestow us with their trust and endeavour to always serve them beyond their expectations.

DSV is a global supplier of transport and logistics services. We have offices in more than 70 countries and an international network of partners and agents, making us a truly global player that offers services worldwide. The effective, professional solutions provided by the company‘s 23,000 employees enabled DSV to record worldwide revenue of 6.5 billion euro for 2014. In 1983, the organization in Pakistan as we know it today began. Today, DSV Pakistan is proud to serve you in six offices located throughout the country. Our experienced team acts as a specialized intermediary between the individual customer and a large network of carriers and airlines. We offer transparency and responsive logistics solutions. We are committed to creating added value for our customers through tailor-made supply chain services.

BuzyB Shipping agencies pvt limited, Pakistan, has become one of the best freight forwarding companies and agents in Karachi , Pakistan. We organize shipments internationally. We are not only well-known logistics companies in Pakistan, but also, mong international freight forwarder companies Islamabad, Lahore, Karachi, Faisalabad, Sialkot.

Risks & Benefits Pakistan’s textile industry ranks among the top in the world. Cotton based textiles contribute over 60% to the total exports, accounts for 46% of the total manufacturing and provide employment to 38% manufacturing labor force. The availability of cheap labor and basic raw cotton as raw material for textile industry has played the principle role in the growth of the cotton textile industry in Pakistan.

Although textile industry contribute a big achievement in economy, some problems caused as well.

Such as the technical skill is not very advanced in Pakistan, and the most of labors are not well trained, so the quality is poor and the working is inefficient. Moreover, they need innovation in textile industry development.

Risks

• • • • • • •

Technological obsolescence Environmental problems Innovation is required in textile design Labor lack of training Quality need to be improved Locational disadvantage Competitor pressure from developing countries.

Benefits

• Self reliance • Manufacturing flexibility • Abundance of raw material production • Availability of cheap labor • Growing economy and domestic market • Trade agreements provide convinience

Source: welcomingatlanta.

Maps of the United States and Pakistan (respectively) are not accurate in size

Conclusion Based on social, political, economics and environmental, Pakistan is a viable country for production of Chilhouse.

There are a number of factors that are either directly or indirectly associated with the business climate of a country. These factors are very important to analyze before investing in the country to maximize the opportunities and minimize the threats of loss of invested revenues.

Pakistan is rich in cultural diversity. The business is also influenced by the cultural beliefs and traditional norms. The economy is an essential factor which influences the business environment directly. Economic stability is the key towards prosperity and success. Pakistan has faced a number of political issues, but the economy of Pakistan remained stable. This is one of the encouraging points to invest in the business climate in Pakistan. The geographic location of Pakistan is very crucial.

Pakistan is located in South Asia and is the neighbor of all the OPEC countries. This has increased the importance of Pakistan. Most of the world oil pass through this region. Anyway, it is still little far away from United States.

Another important factor that influences the business climate is the technological development of the country. The countries possessing advanced technologies have a large business market. Pakistan is lacking behind other developing countries. The major issues Pakistan is facing is the extreme shortage of electricity. The infrastructure is poor in Pakistan that’s why working environment is crucial,

Introduction

Bangladesh

Bangladesh has dominion in the Bay of BengalďźŒand has two big harbor cities, which provide a good location for Bangladesh people to do export or import business. Because the traditional culture and social factor, Bangladesh form its own garment manufacture industry, and garment manufacture also affect Bangladesh economy a lot. Above 50% of Bangladesh people choose apparel industry to earn money. Because Bangladesh is a developing country, its economy mostly depends on apparel industry export.

Country Traits Location: Bangladesh Geographic Size: 147,610 sq.km Climate: Natural calamities, such as floods, tropical cyclones, tomadoes, and tidal bores occur almost every year, combined with the effects of deforestation.

Capital: Dhaka Government: Unitary parliamentary republic Leader: Abdul Hamid Population: 168,957,745 (2015 est.)

Population Growth Rate: 1.18% (2017) Official Languages: Bengali Literacy Rate: low literacy rate, males(66.5%), females (63.1%) Education:The education system is three-tiered and highly subsidized, government operats many schools in the primary, secondary, and higher secondary levels.

Major Religions: Islam (86.6%), Hinduism (12.1%), Buddhism (0.6%), Christianity (0.4%), Others (0.3%) Major Ethnic Groups: Bengalis (98%), Minorities (2%) Currency: Taka (BDT) Exchange Rate as of 03/07/17

Country Stability Political Situation: Bangladesh is one of the poorest countries in the world. Approximately 31.5 percent of the population lives below the poverty line. (Australian Government) The Bangladesh economy has achieved continuous growth for the past 38 years, and grew by 6.5% in 2015.

Bangladesh wants to be a middle-income country by 2021, and it will need to increase its growth 7-8% per year to achieve this goal. Sustaining economic growth increases the importance of manufacturing in GDP and reduces agriculture’s status. However, agriculture is still an important part of the economy, which contributes about 20% of GDP and employs 54 million people, or about 48.5% of the labor force.

The Bangladesh economy benefits from assistance from other countries. There is big challenge to diversify its sources of income. The clothing industry accounts for around 80% of total exports. (Australian Government) Economic Situation: BDT-Bangladesh Taka exchange rate: 1BDT= 0.001261USD, Bangladesh inflation rate:5.60%. Bangladesh is a middle power and a major developing nation. It is the one of the largest textile exporters in the world.

Bangladesh is the main connector and cooperator in Southeast Asia, which gives it a vital strategic status. ( Heritage Org) In Bangladesh, the main taxes are Customs Duties, Value-Added-Tax (VAT),Supplementary Duty and personal or corporate income taxes. Bangladesh has high tariff rates and supplementary duties, and also has a registration process and other regulatory systems, which often hider market access. Bangladesh is a member of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), which has the goal of becoming a tariff free zone by 2017. Bangladesh is also member of the South Asia Association for Regional Cooperation (SAARC), which has agreed to pursue tariff reductions under the SAFTA.(Export Gov) Social Situation: Bangladesh is home to one of the highest concentrations of NGO activity in the world and has a rich history of what can be described as civil society activity and organisation. Civil society has its origins in the country’s struggle for independence. Many NGOs were formed in the aftermath of the struggle against Pakistan. Over the last two decades, NGOs have increasingly shifted in favour of service delivery programmes, abandoning many earlier efforts at social mobilisation and community activism. This is seen by many to represent the depoliticisation of NGOs, resulting in an erosion of democracy.

Relations between the state and civil society have been strongly influenced by the country’s turbulent political history. Historically, government repression has played a major role in shaping the policy choices available to Bangladeshi NGOs. Today many contend that Bangladeshi civil society lacks the autonomous oppositional character needed to engage with state institutions and the political elite. The two major political parties unofficially control workers unions, business associations, student groups and many newspapers and consequently, civil society is unable to exert the oppositional strength necessary to influence public policy. Very few organizations beyond development NGOs are actively engaged in working with the poorest.

Lead-time of Production The main natural disasters such as earthquake, wind, storm surges, and tsunamis affect Bangladesh often, which will also affects the lead-time delivery.(Prevention Web) The hotspots map show that cyclones and floods pose the greatest risk to Bangladesh on a country level. The northern and eastern regions of the country are prone to earthquakes.

Bangladeshi people are fond of putting traditions into their daily lives and. In the list of National Public holidays of Bangladesh in 2017, there are about 20 holidays this year, which are concentrated in March, May, June, August, September, and December.( Officeholidays)

Cultural Insights

State of the Apparel and Textile Industry

Bangladesh has a rich cultural heritage such as literature, poetry and music. Folk art is also common, and weaving and complex needlework is a traditional part of Bengali culture. (Australian Government)

The Apparel and Textile Industry in Bangladesh has been developed since 1970s.

It survived multi-fiber arrangement phase out at the end of 2004, and remains internationally competitive to date. In Bangladesh, export-oriented industries such as RMG (both woven, and most notably knit), leather have performed well. Woven and knit RMGs account 3/5 of total exports from the country, and EU and USA account for more than 4/5 of the total export. ( Yunus, Yamagata 5)

For greeting in Bangladesh, handshakes are common in business and formal settings.

Good friends and family may engage in a light hug as well. Bengalis prefer to talk directly with their family or friends, and speak indirectly with distant acquaintance contacts. One Bengali proverb to be aware of is “face is the index of mind.” (Australian Government) Gender issues are still a problem in Bangladesh. However, women have more opportunities in urban areas, but they still are a big distance from men. Women often keep silent condition in order to avoid attracting attention. For Bangladeshi taboos, kissing or hugging in public is a major taboo. In the first meeting, it is not recommended that people wear jeans and casual clothes. (Culture Crossing Guide 4) For these meetings, people should attend the meeting on time even though you might keep waiting. Bangladesh is a very hierarchical society, and it always requires a most senior person in the room when it comes to beginning and guiding conversations. Because most Bengalis value an indirect communication style, they will avoid using no in answering questions. Saving face and maintaining the peace is more important. For giving, Bengalis don’t always exchange gifts at a first business meeting. When you are invited to a Bengali home, it’s better to bring chocolates, cakes and sweets and avoid bringing wine and any other liquor. When you receive a gift, open it in private. (Culture Crossing Guide 6)

Labor force is still an important input in garment industry of Bangladesh because which has become vital crucial factor in garment industry, which determine productivity and quality and to reduce costs. Labor unrest has been a common problem in garment industry. Based on the low wage and substandard living condition which cause the labor unrest among garment workers. The government introduce policies to maintain garment workers’ rights. Women are paid less than men for similar jobs. Although with the low wages, the production of the cost is still high. Bangladesh’s apparel sector because that is labor intensive and low productivity is somewhat offset by low wages. (Yunus, Yamagata 10) In Bangladesh, the garment sector employs more than 3 million workers, of which 85 percent are women.

ATC:Agreement on textiles and clothing BKMEA: Bangladesh Knitwear Manufacturers and Exporters Association BGMEA: Bangladesh Garment Manufacturers and Exporters Association RMG: Ready Made Garment (Yunus, Yamagata 12) Bangladesh get benefits from long-term services with OEMs in the evaluation criteria.

The benefits including: lower maintenance cost, performance guarantees, risk mitigation, and OEM’s global technology expertise. (United States Chamber of Commerce 6)

ADROIT LINKERS

Suppliers within the Country

Kenpark Abilities: denim jackets, women's active wear,men's knit wear, kid's wear.

Capacity: Kenpark boast a monthly turn-out of2.6 million garments ranging from woven bottoms to jackets and knits.

Costs: Close to Chittagong port, save transportation cost.

Customer Service: Offical websit, facebook online chat, Linkelin which are easy to contact with them.

Customers: Lee, Timberland, LEVI STRAUSS&CO.,Carrefour, Columbia, Target, ADIDAS, and RIVER ISLAND Flexibility: Over 16,000 labors Lead-time: 45 days Management: From a 7 production line manufacturer in a rented facility, to a benchmark apparel manufacturer Quality: Excellent Services Offered cutting,embroidery, washing and sourcing Strategic Outlook: Using brand new Rapier looms Picanol from Belgium, state of the art Flat Finishing machine, we can give the fabric a more smooth trendy look with clear optics.

Sourcing Guidelines: Private company, no negative news

Abilities: T-shirts,Cardigan, denim pants,kids' wear, polo shirts,tank tops, Capacity: 350.000pcs per month.

Costs: not close to Chittagong port, shipping to chittagong cost much.

Customer Service: In touch with overseas buyers 24/7 to keep them updated through E-mail,Skype, Web,Fax,Phone.

Customers: U.S. POLO ASSN, s.Oliver.FILA, TOM TAILOR, THE YARD, AUTHENTIC Flexibility: The transparent and professional management system Lead-time: 47days Management: equipped with capacious warehouses that facilitate storage of voluminous stock Quality: excellent Services Offered: cutting, sewing, trimming, ironing, packing, post-production inspection of assortment wise stacking, shipping mark or labeling, stuffing etc.

Strategic Outlook: They have done necessary inspection & quality control I.P.C. DUPRO & FRI on A.Q.L Standard Sourcing Guidelines: good quality review,affiliated many facotory brands

Mohammadi Group Abilities: Knit/Woven/Sweater Capacity: Knit/Woven/Sweater Costs: not close to Chittagong port, shipping to chittagong cost much.

Customer Service: Offical websit, Fax,phone Customers: H&M, COS, Sears, Springfield, and EI Corte Ingles Flexibility: 2370 (1249 women, 1121 men) Lead-time: 47 days Management: industrial plants: 3 business integrity Quality good Services Offered: cutting,embroidery, washing and sourcing Strategic Outlook: Group is to provide free of cost education to children of garment factory workers and help children to learn techniques and then they can complete any sweater or woven products.

Sourcing Guidelines: private company, no violence.

Trade Agreements The MFA also benefitted developing countries like Bangladesh, it can get local and international investors to seize the opportunity to develop. Bangladesh signed the Trade and Investment Cooperation Framework Agreement (TICFA) with the United States in November 2013. (United States Trade Representative) Bangladesh is also a member of the South Asia Preferential Trade Agreement (SAPTA) and the South Asia Free Trade Agreement (SAFTA). Bangladesh is a member of free-trade agreement (FTA)Such agreements involve cooperation between at least two countries to reduce trade barriers – import quotas and tariffs – and to increase trade of goods and services with each other. (United States Chamber of Commerce 7) The General Agreement on Tariffs and Trade (GATT) Uruguay Round, it was decided to bring the textile trade under the jurisdiction of the World Trade Organization. This policy support American companies in their search for growth, job creation, and exports, and ensure that America and Bangladesh, together, make their full potential contributions to the success and development of both countries, around the Bay of Bengal, and around the world. In particular, it will help ensure that Bangladesh’s signature industry—garment manufacturing for export—remains able to support national growth and employment.”(United States Chamber of Commerce 4)

Risks & Benefits Risks: Because of the location of Bangladesh, it has many natural disasters, such as earthquake, wind, storm surges, and tsunamis, which will affect the apparel manufacture and lead-time delivery. Bangladesh has many holidays around the year, which have separated in different months, so it’s bad element for our company to choose an apparel manufacture in Bangladesh. The garment workers are changing frequently is also a bad element because the low income in this area. The workers’ accommodation and safety are still potential problem.

Benefits：Bangladesh has signed many trade agreement with other countries including US, which reduce the trade barriers and tariff. It’s easy for our company to choose manufacturer to export. Based on the Bangladesh low labor cost, which means our company has more profit to earn. Many apparel companies have abundant experience, which have provided apparel to many famous company, so the quality will be fine.

Conclusion Finally, Bangladesh is an apparel industry exporter in the world, which a high technology and management system to operate manufacture process, based on its many experience. The government provide many policies to help Bangladesh’s apparel export, at the same time, Bangladesh have signed and join in many organization and trade agreement to support export. Those provide us a good opportunity to choose one apparel manufactory to build our product line.

Bangladesh has low labor cost and high quality products, so it is good choose for our group.

Country ranking After analyzing the four potential countries for manufacturing, the next step is to determine which country is the best decision to manufacture our products. We evaluated four countries according to business climate, costs, governments, location, risks, social stability, sourcing guidelines, textile industry, trade agreements, trained worker force and social-eco-political. As they are chosen, they are all crucial elements to decide whether incest in this country or not. Each of this metric is valued from1 to 10.

After evaluating the countries on these ranks, the final countries that were chosen for placement were, Egypt, Mexico and Bangladesh. Mexico is the highest, the average is 8.4 as it has relatively stabled political, closer location and good business climate. Bangladesh is the second highest rank country with 7.5 average. Bangladesh has abundant cheaper and skilled labors. The supplier Kenpark provides training courses for their employees to improve their techniques in garment production, so they can produce high quality products. Egypt is the third. Pakistan was not chosen due to the not very stable society, poor quality and very far location.

Egypt SWOT

SOURCING S T R AT E G Y

Bangladesh SWOT Supplier ranking After identifying the top countries, the next step was to identify the top suppliers in the country. Each of these countries has well developed textile industry, it is more obvious for us to see which country has better supplier so we make a supplier ranking based on abilities, capacity, costs, customer service, customers, flexibility, lead-time, management, quality, services offered, strategic outlook and sourcing guidelines. Similar to country metrics, the supplier metrics were chosen based on the metrics that are necessary when choose a supplier. The points difference between each supplier is tiny, so we compare some the most crucial elements of manufacturing apparels.

Mexico SWOT

Egypt and Kazareen Textile Company: We gave Kazareen 10 points of capacity and they have cooperated with famous brand in the world as well. The difference between it and Gropu denim is the location. Egypt is further from America than Mexico.

Bangladesh and Kenpark Company: Kenpark is good as well, but comparing with others, the points is lower.

Because the country is little backward and technology is not well developed, so the lead-time is bit longer.

The advantage is the cheap labor.

Mexico and Grupo Denim Company: It has the highest ranking due to the high capacity, large scale, better flexibility. Their customers are famous among the world, so they have a lot of working experiences. Except some basic elements of garment industry, a big advantage is the location is the closest from America, so we can reduce cost on transportation and maximum the margin. The cost of production done by Grupo Denim is the largest compared to its competitors in Egypt, Bangladesh, and Pakistan. The margin on most of the items that are planned for ordering is slightly less than that of competitors. Besides, the quality of items seems to be more or less equal in all cases. Lead times vary, with some companies offering more flexibility than others. Nevertheless, Grupo Denim has one major benefit as a Mexican company that makes it stand out of other production corporations. The risks of dealing with this company are much lower than conducting business in Egypt, Pakistan, or Bangladesh. All three countries have the high level of terrorist attack possibility.

Placement Strategy The next part of the process was to determine placement. Based on country rankings, the top three countries are Mexico, Egypt and Bangladesh. Our placement plan was developed based on the company’s thorough research.

Cost of production, country stability and lead-time were all considered when developing the placement strategy. This research determined a variety of different placement options. Each option present the best final placement strategy that would make best margins for the company and place stable levels.

All of the following placement strategies include the full 1 million units to be produced during the 12 months.

Company SWOT This scenario is the final placement. The girl’s denim jeans, we distribute 300,000 units to Bangladesh, because Pakistan has the highest margin 78.4% about these three countries, include the per unit cost is $7.56 and price is $35.The supplier has 1000 skilled labors with good control, easy to switch, which will make sure the lead-time shipping. They have working experience with some famous brands, and their customers have ZARA, H&M, and PAUL&Bear, so the quality of products will control.

We distribute denim shorts into 2 countries, 130,000 units to Bangladesh also, it costs per unit $7.56, and margin is middle of them; 100,000 units to Egypt include per unit cost $8.79. The reason why we separate into two countries, we want to reduce the not lead-time risk.

We distribute the denim skirts to Mexico, the margin is 72.93%, included the cost per unit $8.12. -The supplier Grupo denim of Mexico has strong capacity ability in producing denim products, and also Mexico is close to America, which will save transportation cost. Grupo provide their clothes to many famous brands aroung the world. Finally, we distribute boy’s denim jeans into Egypt, based on $9.43 per unit cost. The supplier of Egypt has office in us, which is convenient to communicate with their representatives.

This scenario is not the final placement. We distribute 300,00 girl’s denim jeans in Egypt, because Egypt has the highest margin 79.71% about these three countries, include per unit cost is $7.1 and price is $35.

We distribute 210000 denim skirts in Bangladesh, the margin is 73.07% include $8.08 per unit cost and $30 price. We manufacture 100000 denim shorts and 260000 boy’s denim jeans in Mexico, and the margin are68.21% and 72.39%. The margin is in the middle. The reason we distribute them separately is Egypt has the highest margin of manufacturing girl’s denim jeans. The supplier has strong capacity has office in US which is convenient to communicate.

Grupo denim in Mexico and Kenpark in Bangladesh they have strong flexibility and sufficient labors and shorter lead-time. The technology in Mexico is more advanced than others. What’s more, the distance from US to Mexico is much closer than others which will cost less on transportation. So, we manufacture the better part of garments in those two countries. On the other hand, manufacture denim jeans can help us get highest margin.

This scenario is not our final placement. As for the denim skirt, we distribute the total 210,000 pieces to Mexico with margin 72.93%. On the one hand, Mexico has many advantages in apparel manufacture. The supplier in Mexico, Grupo Denim, has very strong ability to produce this amount of skirts. On the other hand, Mexico is peaceful and closed to the US. The trade activities between Mexico and the US are also very frequent.

As for the girl’s denim jeans, we distribute 300,000 units to Egypt, because Egypt has the highest margin 79.71% compared with other three countries, since the per unit cost is $7.1 and price is $35. We distribute denim shorts into 2 countries. The production of denim shorts is allocated as 130,000 units to Bangladesh and 100,000 to Mexico. Since it costs $7.56 per unit, and margin is 73% in Bangladesh; it costs $8.9 per unit and margin is 68.21%. These two margins are not too high and too low, but the price of denim shorts is lowest, as a result, we considered other items first.

We distribute the boy’s denim jeans to Bangladesh; the margin is 71.11% and cost per unit is 10.98. Producing 260000 pieces in Bangladesh, because Pakistan has lower labor cost.

Country Decision

We choose Mexico, Bangladesh, and Egypt as our final placements and suppliers. According to OTEXA’s report about U.S. General Imports by Country, we found even though the cost of labor is a little bit lower, Pakistan is still facing internal and external threats. Such as low employment rate, poor quality of product, low education and healthcare. There are a lot of not well trained labor in Pakistan. Bad weather and climates may influence the transportation, especially for sea freight. The electricity crisis may influence lead time. Also, the distance between Pakistan and America is far which may cost more on transportation.

On the other hand, Mexico, Bangladesh, and Egypt have a stable relationship with U.S and they take important market place in US importer countries. What’s more, the three suppliers in these three countries have more flexibility and better performance than Pakistan. So, we drop Pakistan and choose the other three countries as final decision.

Chilouse is a children apparel company which focuses on e-commerce. E-commerce stands for 90 percent of the products and sales. There is also a brick-and-mortar store in Atlanta, which represents only 10 percent of the sales. The importing country of Chilouse is Mexico, Pakistan, and Bangladesh. And the ports are Savannah, Georgia and Tampa, Florida. The amount of import per year is 1,000,000 pieces if clothes.

Based on this information of Chilouse, DSV is selected to be the supply chain solution company. The average score of DSV is 8.7 which is the highest one.

There are three categories DSV gets 10 points. The first one is inventory management.

According to the type of Chilouse, which is apparel company, inventory will be a big issue to deal with. DSV inventory scan gives an increase in stock rotation by 30% on average, with a corresponding reduction in working capital. DSV’s approach to inventory management includes capturing the desired service levels into the re-order and stock levels per stock keeping unit (SKU). The inventory scan typically results in a 25% reduction of ‘Out of Stock’ incidents. The second one is multiple locations. They cover more than 40 cities in US and 80 countries all over the world, including Atlanta, which fulfills the need of Chilouse. The third one is locations. They have companies in Kansas City, Sparks, and Atlanta. These three cities are the main locations we choose to ship our product from.

LOGISTICS, WAREHOUSING & DISTRIBUTION

There is one category which is order turn around, is scored as 9 points. Domestic shipments usually cost 1-2 days.

Pick and pack, value added services and size are scored as 8 points. DSV provides the service of unloading, inspection, and registration to palletising and the placement of goods in assigned racks. In addition, trace and track are also available for DSV. Invoice is offered by DSV as well as the EDI. Kitting/assembly, Testing, Packaging/repackaging, Configuration/customization, Labelling, Repairs, Quality inspection, Customs clearance procedures and fiscal representation are also provided. The total size of 5,000,000 m2 is enough for Chiouse to place 1,000,000 pieces of clothes a year.

The lowest point which is 7 is the cost part. Quoted Base Rate = $1.15 sf/mo Estimated operating expenses = $.35 sf/mo Total asking rate = $1.50 sf/mo Although the cost is a little bit higher than other companies’, Chilouse will choose because of two reasons.

One is the higher price is accepted by Chilouse base on the margin and cost relationship. The other reason is high-quality service is required and has to make sure for Chilouse’s products.

Supply Chain Solutions Ranking

Warehouse, Logistics and Distribution Strategy

After having identified a sourcing and placement strategy, the next step was to determine how to distribute the product. Since Chilouse is a new business, the ownership team determined that they did not have the know-how and economic investment to manage an entire distribution strategy and platform. The team therefore looked at supply chain solution providers to help with distribution. When it came to identifying a supply chain solution providers like they ranked countries and suppliers. The metrics that were evaluated were inventory management, order turn around, pick and pack, value added services, cost, size, customers, and location. The goal was to pick a company that could handle the warehousing and distribution needs for Chilouse as well as offer other valued added services that could benefit the company. After looking at over 12 supply chain solution providers, the top three companies were DSV,PYDER and APL Logistics .

Based on DSV’s longstanding history as well as vast capabilities, it was determined to be the best solution for warehousing, distribution as well as transportation for Chilouse.

A successful supply chain strategy is an important and essential step for any company to achieve vision, mission, sourcing guidelines and product offering.

Chilouse aims to focus on children and their parents’ needs, use the high quality organic materials to make denim bottoms. We care about children’s feeling and comfort; we also make a contribution to the society and environment sustainability.

Chilouse requests strict standards for our manufacturers and vendors. Our manufactures must communicate with us twice a week to report their process and make sure there is no limitation of raw materials or labor force. To make an excellent inventory management and continuous growing of our company, the profit margin must be greater than 68%. Allocating the right quantity to right manufactures at the right time is the basic rule of company. Chilouse also compares Egypt, Bangladesh, Pakistan and Mexico apparel industry and choose the top manufacturer in each country. Since Chilouse puts high quality as the No. 1 rule and worries about children’s apparel safety, we will quality –check raw material’s safety. Egypt has the best cotton in the world, especially organic cotton. Both Mexico and Egypt have professional and skilled labors in apparel industry. Bangladesh has the cheaper labor cost and safe freight transportation. These three countries have a bond relationship with US and export most their apparels to US. That is why we finally choose these three countries to maximize our opportunity and take an advantage position in apparel industry. As for Pakistan, it still face unstable society environment, children labor is a big issue in Pakistan. We are not allowed this issue against our sourcing guidelines.

Chilouse has one physical store in Atlanta and one online store. How to guarantee ROI and minimize risk of late deliver is urgent for us to solve. Chilouse chooses the best logistic solution providers DSV for our company’s transportation, warehousing and value added service needs. DSV has excellent experiences on apparel distribution. They can help us with all the work, it can also make us growing faster. DSV can analyze the inventory information and give us good suggestions. All these works they do can increase the profit, effectiveness and our reputation.

Supply Chain Strategy Summary & Conclusion

• Techpack • Cost Sheet • Work Cited

Appendix

Techpack

Cost Sheets

Supplier Questionnaire

Line Plan

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