GLOBAL SOURCING STRATEGY
Courtney Gill
Jordan Causey
Picha Choopojcharoen
Madison White Teng Ma
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ABSTRACT
At Ecru, we strive to provide the high quality, cutting edge
garments to our consumers. Our company is based solely on social responsibility and code of ethics. Our basics line will be available all year round and is perfect for the trendy customer looking to make a smart addition to their wardrobe, while still standing out of the crowd.
Through much research in sourcing and manufacturing we
have determined the values in what Ecru is specifically looking for. In order to meet our margins and keep our costs down we have spent much time researching facilities all across the world in order to determine which will best suit our needs. These countries include, India, China, Sri Lanka, El Salvador and the Philippines.
As an up and coming company it is very important to
minimize our risks and ultimately increase our overall opportunities for both our company and our supplier. We have developed a placement strategy that includes many factors such as country and supplier analysis and ranking, costing, negotiations, and the evaluation and analysis of the strategy development factors. This strategy will aid us in our ability to make the best decision when
“Simplicity is the ultimate sophistication�
it comes to the manufacturing of the Ecru Basics garments.
Leonardo da Vinci 2
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TABLE OF CONTENTS
INTRODUCTION
STRATEGY DEVELOPMENT PROCESS
COUNTRY ANALYSIS
SUPPLIER ANALYSIS
COSTING
Our Products 12 Target Market 14
CONCLUSION
APPENDIX
China 128
Why Develop a Strategy? 16 Values 18 Sourcing Guidlines 21
Countries’ Highlights & Textile Industies 27
Products, Volumes, & Seasons 22
Sri Lanka 28
Sales Plan 24
El Salvador 42 India 52 Philippines 60 China 72 SWOT Analysis 79 Country Ranking 84
Suppliers’ Highlights & Textile Industies 92 Sri Lanka 93 El Salvador 99 India 104 Philippines 108
Sri Lanka 132
China 141
El Salvador 135
Sri Lanka 144
The Future of ECRU 139
El Salvador 147 Placement Strategy 150
Preliminary Costing vs. Final Negotiatiated Prices 153
Conclusion 157 Preliminary Costing 122
Cost Sheets 161
Initial Costs vs Preliminary Costs 124
Tech Packs 167
China 111 Suppllier Ranking 116
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SOURCING STRATEGY
Sales Plan 126
Company Profile 8 Who We Are 10
STRATEGY DEVELOPMENT
COMPARISON OF FINAL COSTING
Sourcing Guidelines 213 Supplier Emails 220 Bibliography 234
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COMPANY PROFILE
ECRU is a high-end women sportswear retailer with its
flagship boutique in SoHo, New York. We provide women highquality sportswear with minimal, natural, and sophisticated
Vision
aesthetics and styles to our customers. ECRU also has an
Enhancing Life with Grace and Simplicity
extension line called “ECRU Basics� which provides basic yet high quality garments throughout the year.
Mission To be the ultimate house of simple sophistication and style through the creation of
ECRU incorporates its values throughout the company
and its products since the main proirity is to assure our
desire now and forever
customers receive the best quality and fashionable outfits that reflect their lifestyles and identities.
Values Aesthetic Fairness 8
Competence Integrity
Creativity
Diplomacy
Perseverance
Teamwork 9
WHAT WE STAND FOR
ECRU is a French word for “unbleached“ or “raw”. It
also means a shade of light greyish-pale yellow or beige-like tones. This type of color appears on raw and natural yarns and fabrics. The name reflects the company’s philosophy and core values in which we consider the pure quality and rawness throughout the products. That is why our designs and
aesthetics
are
rather
simple
yet
sophisticated
in
craftmanship. Ecru is the signature color palette through out our collections and packaging, which also makes us stand out and distinguishes our customers from other leading brands. ECRU also concerns about sustainability and corporate social resposibility. We take serious agreement on transparency and integrity with our partnerships from sourcing guideline to every process of the production.
SInce ECRU values the importance of environment
and sustainability, the products are made of 100% natural fiber yarns and fabrics such as cotton and linen. The company has been trying to reduce carbonfootprint by sourcing and utilsing fabrics within the same countries. Our company is also working toward more eco-friendly and organic fabrics in the future.
ECRU offers both fashion and basic collections. Our
products range from woven and knitted tops, bottoms, dresses, and accessories. Though ECRU basics collections have lower price range, we still maintain and assure our customers the same level of quality of our products. ECRU basics are offered throughout the whole year with new several pieces added to the collections each season to keep updated with current color trends for each season.
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OUR PRODUCTS
Style 1 - Latte
Style 2 - Barley
Retail Price - $120
Retail Price - $90
Style 5 - Desert Sand Retail Price - $180
Style 3 - Ivory
Style 4 - Bisque
Retail Price - $140
Retail Price - $120
ECRU Basics Woven Tops
Spring/Summer 2014 12
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CUSTOMER PROFILE
TARGET MARKET
Grace Smith Age: 27
Marketing Consultant
ECRU caters toward female New Yorkers within ages of 25-40. Our
From Upper East Side,
customers are considered as young digerati living in the urban and afflu-
NYC
ent lifestyles around Manhattan and Downtown Brooklyn. They are sophisticated, thoughtful, and stylish. With high level of education and career success, our women are independent and confident with their lifestyles and fashion choices. They are innovators and experiencers who always look forward and keep up with new trends and styles, but yet don’t want to overdress themselves. They want to dress well enough so that people
Family Income: $308,721 (Personal - $97,000)
can appreciate their looks as well as their status. Their preference in styles
Education: MBA in Marketing at NYU
is considered clean, minimal, yet unique in design and aesthetic. Our cus-
Competitive Stores/Brands: Stella McCartney, Chloe, and Bloomingdales
tomer also value high quality and craftmanship.
Fashion Cycle: Innovation Stage
VALS: Innovator/Experiencer
ECRU Basics line serves as fundamental pieces that our women must
have and wear them in their daily lives no matter what occasions or plac-
Buying Behavior:
es they go.
• Expect great customer service / Enjoy shopping experience • Best quality products • High brand loyalty
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Ecru, meaning pure, simple and clean, is a luxury women’s ready to wear brand with a mission to be the ultimate house of simple sophistication and style through the creation of desire now and forever. Ecru has a goal to create sophisticated and timeless pieces of women’s clothing while valuing aesthetic, diplomacy, fairness and integrity, as well as giving back philanthropically.
STRATEGY DEVELOPMENT PROCESS
These five country profiles from El Salvador, India, China, the Philippines and Sri Lanka is meant to overview the countries in all aspects from their culture, to their economy to their manufacturing, to ultimately determine which country is the best for Ecru to source their luxury garments from.
Why Develop a Strategy? Values
When determining which country to chose for the manufacturing of our luxury women’s woven tops Ecru’s looked firstly at the codes of
Sourcing Guidlines
conduct for each of the manufacturers as well as the way the country
Products, Volumes, & Seasons
strong value for Ecru, it is very important that the manufacturers share
Sales Plan
does business overall. Because ethics and overall conduct is such a
these similar goals. Our other considerations must obviously include the overall cost of creating the garments, the export industry as well as the over textile and apparel industry of each of the five chosen countries.
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VALUES
Diplomacy Working with foreign companies can bring its own set of challenges, but we are dedicated to resolving conflicts and finding common ground to benefit both ourselves and our manufactures as we wish to successfully grow our business as well as theirs.
Creativity At ECRU we know the best solution isn’t always the most obvious and believe in the power of creative thinking and play to be innovative.
ECRU is built upon several values we believe will allow our company
to grow and be successful. We aspire to be a brand that is looked up
Aesthetic
to and respected by our competitors and customers alike. These same
We strive to deliver garments that will be appreciated by our customer
values helped build ECRU’s sourcing guidelines as we are committed to
for both the care that was put into its design and creation and for its
producing quality garments that will be worn with pride.
overall look. We believe in simple luxury and want our customers to confident whether they are wearing our basic line or our fashion line.
Perseverance We believe in our company and its products and we will work hard to
Teamwork
overcome obstacles in whatever form they may take in order to deliver
ECRU is more than just a team; we are a family of people who all believe
apparel that lives up to our standards.
in our product and are committed to working efficiently not only within our company but also with our manufacturers in order to create the
Fairness
best products.
We believe in equal opportunity and rights free from any form of discrimination.
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Integrity
SOURCING GUIDELINES
We stand by our beliefs and values and strongly believe in transparency. We are dedicated to making sure that our employees are happy and being treated fairly, especially those who are manufacturing for us. We strive to give everyone a voice, free from worry, to ensure that our standards are being lived up to.
ECRU’s Code of Conduct is in line with values that are core
to its company. Fairness, teamwork, diplomacy and integrity are Competence At ECRU we strive to know our customer and her needs in order to meet them. We pride ourselves on every piece of merchandise that displays the ECRU name and go to great lengths to find manufacturers that are knowledgeable and reputable in the products they create for us.
some of the values that come across strongest in our code, as ECRU strongly believes in fair treatment of workers as they are more than just employees. They are people with their own families and needs, and we want to ensure their safety and well-being as we value them and the role they play in our brand. Our Code of Conduct is applicable to all suppliers, their subcontractors and other business partners that conduct business with Ecru. Our code can be found in the appendix and strongly details our requirements in regards to the health and safety of the work environment, worker’s rights with an emphasis on basic rights, wages and restrictions on working hours, and monitoring and enforcement which outlines transparency requirements, our right to make unannounced audits in addition to our scheduled bi-annual audits, our right to appoint an external auditor, should we see it fit and the consequences of not taking corrective action should a violation come to light.
*See full sourcing guidelines in Appendix
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Look 3: Ivory
Products, Volumes, & Seasons Total Annual Volume: 450,000 Units
105,000 Units Season: Year round
Loose fitting women’s 100% pima cotton, sleeveless, collared button-down.
Look 1: Latte 76,000 Units Season: Year round
Look 4: Bisque 85,000 Units
Loose fitting women’s 100% pima cotton
Season: Year round
blouse with narrow, cowl neck and extended sleeve openings.
Loose fitting, wide neck women’s 100% cotton poplin blouse with cutouts on sleeves.
Look 2: Barley
Look 5: Desert Sand
90,000 Units
94,000 Units
Season: Year round
Season: Year round
Loose fitting women’s 100% pima cotton
Women’s long-sleeved, 100% pima cotton,
blouse with ¾ length folded sleeves.
high-low, button-down shirt with princess seam, back detailing and right breast pocket.
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SALES PLAN
Because we are a high-end luxury company, our margins, princes
and sales are quite high. In the first year after the Ecru Basics collection launches we are projecting to do over $59 million in sales. This number is derived from selling 450 units divided between 5 garments and sku numbers.
Our retail prices are going to range from $90 up to $180, due to
the fact that we are a luxury brand and retailer. We are selling these garments online and in our own flagship store solely at this current moment, which means will not have wholesale prices. This will reflect highly on our margins, resulting in them being between 65% and 66% for each garment. Our average cost for production is about $5 per garment, making our total production cost for 450,000 units, 2,250,000.
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China
India El Salvador
COUNTRY ANALYSIS
Philippines Sri Lanka
Our five countries, China, India, the Philippines, El Salvador and
Sri Lanka were selected by our professor, but have been selected for a reason. During the duration of the strategy we have made it our goal to determine which countries are the best sources of
Countries’ Highlights & Textile Industies Country Selection Ratings Spreadsheet
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COUNTRIES Sri Lanka El Salvador India Philippines China
manufacturing for creating our luxury, woven women’s tops. There are many determining factors, but most importantly we have looking into the business and textile climate and industry, the costs, the logistics as well as the manufacturers reliability and code of conduct. Each of these five countries has something different and special to offer to the world of manufacturing and we have taken great time and detail in assessing which of the five will rise to the top.
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SRI LANKA
With all that this country has to offer, it has even more in manufacturing and business practices and has been awarded in many areas of “Green” business practices for their manufacturing facilities and factories. This country is beginning to thrive and make a name for itself
Country Introduction Endless beaches, breathtaking ruins, flavorful food and teas, legendary temples and oodles of elephants packed into over 3000 years of history and culture on the island of Sri Lanka. Sri Lanka offers incredible experiences stretching from the mountains to the sea. The country is packed with rich history, diverse wildlife, a variety of climates and eco-systems, cultural and religious heritage, wide-spanning beaches and offers hundreds of ancient ruins to explore and discover. It is Southeast Asia’s hidden gem that is waiting to be traveled and charted by tourists, nature lovers and history enthusiasts alike. (Data Monitor)
on the map with tourists as well as import and trade businesses and manufacturers. (Data Monitor)
Sri Lanka is an island country located of the southern most
tip of India. The country has a rich history documenting back over 3000 years ago. Sri Lanka has a very strong Buddhist heritage. The country was very important during the time of the ancient Silk Road and has continued to grow and expand their trade and exports, making them the top contributors to Sri Lanka’s economy. Even though the country is just starting to rebuild it self from a thirty-year civil war which ended recently in 2009, Sri Lanka is beginning to thrive once again in manufacturing and tourism, giving them a strong and growing economy. (Data Monitor)
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Sri Lanka, also known as, Ceylon, is an island in the Indian Ocean with
The president Mahinda Rajapaksa was elected in November of 2005
a population of about 20 million people. The highest concentration of
and is part of the Freedom Party. The Prime Minister, Disanayaka
the population is located in the larger cities, particularly in Columbo,
Mudiyanselage Jayaratne, who was elected in 2010, is also a member
the countries capital, main port, and industrial center and hub. Sri
of the Freedom Party. The President is elected for six-year terms and has
Lanka is ethnically, linguistically and religiously diverse, with over ten
the power to hire and fire the Prime Minister. The day-to-day running
different languages cultures and religious beliefs being practiced.
of the government lies to the prime minister and his cabinet, which is
(Data Monitor)
drawn from the legislature. (Datamonitor)
The flag of Sri Lanka is also known as the Lion Flag. It depicts a
In July of 1983 the Sri Lankan Civil War broke out and began an on
gold lion holding a sword in its front paw, a dark red background, four
going conflict all across the island. The government rose to fight against
golden leaves, one in each corner and two vertical stripes, one green
the rebellious Liberation Tigers of Tamil Eelam (LTTE), also known as the
and one orange. The lion represents the bravery of the Sri Lankan
Tamil Tigers. The Tamil Tigers are a military organization that formed in
Nation, while the other symbols represent the countries past history,
order to break away from Sri Lanka and form an independent Tamil
culture and religious beliefs. (Data Monitor)
state called Tamil Eelam in the north and eastern region of the island. The war led on for 26 years when the Tamil Tigers were finally defeated
Socio-Economic-political Analysis:
by the Sri Lankan military in 2009. (Datamonitor)
The Sri Lankan politics take place in a presidential representative
This war lasting almost three decades left Sri Lanka in a sheer state
democratic republic framework. This is where the president of Sri
of turmoil. Over 100,000 citizens were killed and even more were
Lanka is both the head of the state and the head of the government.
injured. The country was hurt culturally as well as economically. Much
The political make up also includes legislative power, which act under
damage was done to the country physically which has detracted
both the government and the parliament. For many decades, politics
tourists, investors and has damaged manufacturing facilities. With all
in Sri Lanka have been dominated by the Sri Lankan Freedom Party
that being said, in the 5 years that the war has been over, Sri Lanka
and the Conservative United Nation Party. (Datamonitor)
and its citizens have done all that they can to revitalize the country
and restore it to what it once was. (Datamonitor)
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The government figures in Sri Lanka have been stable for many years
The Sri Lankan governments very high debt payments have contributed
as well as their representative democratic republic political system. The
almost 100% to the country’s high budget and fiscal deficit. However,
country is swiftly able to make decisions that benefit the communities
the global 2009 recession and economic crisis actually caused a boom
and the people as a whole. However, the war has certainly affected
for Sri Lanka and nearly balanced their debt payment crisis. This has
the country significantly and even though Sri Lanka is making all efforts
given Sri Lanka the ability to now focus on their greatest assets, being
to restore and revitalize, it is still a potential drawback when looking at
their trade and exports, and agriculture. (CIA World Factbook)
prospective manufacturing locations.
The country is constantly looking for new ways to expand and improve their most lucrative markets, apparel manufacturing and agriculture,
Economic traits:
which combined employ over two thirds of the population and bring
Sri Lanka has a world ranking of 90 from the 2014 Index of Economic
in the majority of the revenues for the country. Because the main
Freedom and a ranking of 16 in the overall Southeastern Asian
revenues and income for the country do come from trade and exports,
hemisphere. (IEF) The country is continuing to see strong economic
particularly apparel but also tea, rubber and technology, there is a
growth following the conclusion of the 26-year Civil War. During the
large incentive for the country to constantly keep up to date and
war there was much turmoil economically and the country suffered
advanced to beat out the competition across the world. Sri Lanka
greatly. It is now that Sri Lanka is making all efforts to
is currently ranked at number four of the top apparel manufacturing
reconstruct and bring back one they once had. (CIA World Factbook)
countries in the world and
The Sri Lankan governments very high debt payments have contributed
has great potential to reach number one in the upcoming years.
almost 100% to the country’s high budget and fiscal deficit. However,
(World Factbook)
the global 2009 recession and economic crisis actually caused a boom
for Sri Lanka and nearly balanced their debt payment crisis. This has
the U.S Dollar is valued at .0077 of 1 Rupee. The current Sri Lankan
given Sri Lanka the ability to now focus on their greatest assets, being
unemployment rate is at 4%, ranking #49 in the world. Revenues in
their trade and exports, and agriculture. (CIA World Factbook)
2013 reached $8.43 Billion, while expenditures were at $12.57 Billion.
Sri Lanka’s currency is the Indian Rupee; and as of April 2014,
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The Sri Lankan inflation rate both increased and decreased significantly
The unemployment rate has seen a significant decrease in the past
over the past 10 years. In the past 3 years the rate of inflation has gone
ten years dropping from 8.4% in 2003 down to 4.0% in 2012. The rate
from 6.11% in 2012, to 9.9% in 2013 and all the way down to current
of unemployment for men is at about half the percentage of that for
4.2% that it is today. This is very unusually for the rate to fluctuate so
women. This is a significant decrease in a short period of time and is all
drastically, but the country has been in a serious state of turmoil after
due to the ending of the Civil War and Sri Lanka’s ability to quickly start
the war, which directly influenced their economic structure. Looking
rebuilding the country. (Labor Force Survey)
towards the future, Sri Lanka is making all the possible amends to
even out and steady the drastically changing inflation rate. (Trading
three categories make up a large percentage of revenues for the
Economics)
country. Sri Lankan apparel manufacturing supplies a wide variety of
Due to these high rates of fluctuation in both revenues and the
garments ranging from sportswear, lingerie, and lounge wear, to ready
inflation rate, Sri Lanka does show potential risks when looking into
to wear, bridal, swimwear and children’s wear. This gives Sri Lanka the
supply and manufacturing. The country is still in quite a high amount of
opportunity to supply to many different companies and with a wide
debt and is spending significantly more than they are bringing in. This,
variety of style, quality and price points. (Labor Force Survey)
and the drastically changing inflation rate may cause serious problems
and will be a great concern if Ecru business is done in Sri Lanka.
economy in Sri Lanka, many laws have been put in place to protect
Labor and Labor Laws:
the employees and their employers. Laws, codes of conduct and rules
The Labor force in Sri Lanka is very strong and makes up a significant
of ethics are made very clear to the employees and are 100% geared
amount of the population, of both males and females. About 48.2%
towards making their careers greater and more enjoyable. Companies
of the population works in labor, 67.2% being male and 31.3% being
in Sri Lanka have very in depth laws regarding workers rights, women’s
female. The labor tasks in Sri Lanka include agriculture, industry and
rights, employee legal work rights and employee termination rights
services. In 2012 30.7% of the population worked in agriculture, 26.6%
and once again these laws and how they work are made very clear
worked in industry and 42.6% worked in services. (Labor Force Survey)
to the apparel-manufacturing workers. Sri Lanka is currently close to
Sri Lanka’s main exports are apparel, rubber and tea. These
Since apparel manufacturing is such an important aspect to the
being the number one apparel manufacturing country in the world
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and they will be chosen so because of their incredible ethics and
the amount of integrity with which they treat their employees, their
but Sri Lanka has many attributes that make them stand out. Each
customers and of course, the environment. (Labor Legislations)
factory in Sri Lanka is 100% environmentally friendly and many have
won incredible awards including the world’s first LEED Platinum
Sri Lanka is constantly making sure that they are treating their
The apparel manufacturing industry is incredibly competitive,
employees and their customers with the utmost respect and integrity.
certification. They operate under strict ethical principles and
Because high integrity is one of Ecru’s top values, the way that Sri Lanka
guidelines that are made clear to the workers as well as the brands
manages their facilities is something that really resonates with us. The
and companies. The manufacturing facilities are also highly focused
ability to have respect in the workplace is something Ecru is certainly
on innovation, giving back to their country and maintaining a strong
looking for when reviewing countries and manufacturing facilities.
reputation all across the world. (EDB)
current Textile and Apparel Industry:
Sri Lanka’s apparel categories include sportswear, lingerie,
lounge wear, ready to wear, bridal, swimwear and children’s wear and the United States and the United Kingdom have been the
Sri Lanka’s textile and apparel export industry is the largest and
largest apparel buyers for many years. Longstanding relationships
most significant contributor to the country’s economy. The industry
with companies across the world, and a strong drive to make quality
has seen sizeable growth over the past four decades and today the
pieces, keeps buyers and brands coming back again and again to
apparel industry makes up 52% of the countries exports and economic
Sri Lanka. These relationships have made the apparel industry in Sri
stimulus. This fast growing industry also provides over 300,000 jobs to
Lanka even more reputable, stronger and more prosperous. (EDB)
Sri Lankan men and women across the country. The 350 garment
Sri Lanka is a producer of Garments Without Guilt and the “Made
factories and 16 textile and fabric manufacturers are privately owned
in Sri Lanka” label, both of which are synonymous with high quality,
entities but do manage well with the Sri Lankan government, seeing
reliability, social and environmental standards, code of ethics and
that they are bringing in the majority of the countries revenues. These
accountability. Each of these standards is made present in each of
technologically innovative factories play a key role in the advancement
the factories, the working environments, as well as how the garments
of the Sri Lankan apparel industry and are quickly paving the way to
are produced. Within the past three decades the country has
be the top supplier country in the world. (EDB)
evolved into creating high quality and sophisticated designs,
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allowing the country to appeal to even more companies and brands.
Logistics and importation
(EDB)
Exporting goods from Sri Lanka into the U.S. has become a very simple
Because the apparel industry makes up such a large percentage
and quick task. There are many shipping and freight companies that
of Sri Lanka’s economic stability and make up, all of the factories
service Sri Lanka and a large majority of the goods are going back to
and manufacturing facilities in the country take part in giving back
the Unites States. The routes are well established and there are multiple
to the community. This is a very important aspect of these facilities
to choose from depending if the goods are being delivered to west
and shows a philanthropic side that will resonate with many different
coast or the east coast. Because the majority of the manufacturing
fashion brands, again making Sri Lanka an ideal country to source
facilities are located in Colombo, the port city capital, or very close
from. Businesses and manufacturers are always looking to grow
by, getting the garments and apparel to the port is not an issue.
and expand and currently there are 10 new facilities being built. Sri
Hundreds of shipping companies travel from Sri Lanka to the United
Lanka has recently been named one of the top three countries out of
States including ZIM Shipping Line, Maersk Line and Hapag-Lloyd. The
the top 50 most important suppliers and has promise of becoming the
majority of exporting and shipping out of Sri Lanka is done through sea
top supplier in the world in a few short years. (EDB)
and there are limited airfreight companies coming to Sri Lanka. ZIM
Because the textile and apparel industry in Sri Lanka is one
Integrates Shipping Services ltd. was established in 1945 and has grown
of their top industries, they are constantly looking for new ways to
to be one of the largest container shipping companies in the industry.
improve and expand. With that being said, the manufacturers are still
The company is committed to providing their customers with reliable
incredibly focused on building strong relationships and reputations
shipping solutions around the world. An exporting container ship leaves
with customers. This in turn helps Sri Lanka keep their best customers
from Colombo, Sri Lanka every two days and takes approximately 3
coming back and gives them potential new customers for additional
weeks to arrive in New York, United States. The container ship takes two
revenues. Ecru would be happy to manufacturer in a country that is
routes: one from Sri Lanka through the Middles East and Mediterranean
focused on giving the customer exactly what they are looking for and
into southern Europe. From there it goes on to the port in New York.
making sure they have a great experience along the way.
(ZIM)
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Maersk Line is one of the top leading cargo-shipping companies in the world and has been rising to the top of the market since 1928. Their strong commitment to the environment as well as customer service keeps people coming back. The ship leaves the Colombo port every Friday at 12 pm and there is a one-day cut off period for canceling a shipment. The vessel takes about 3-4 weeks to arrive in New York. The line goes from Colombo to Rotterdam and then arrives in New York. (Maersk Line) Haypag-Lloyd is a container freight company operating in more than 300 locations across the world. The company has been in business for over 165 years and continues to keep their values of environmental protection, compliance and sustainability prevalent in their work. Exporting a container from Sri Lanka to New York will take about 22 to 28 days on a Haypag-Lloyd ship. The ship leaves twice a week and sails through the Middle East and Mediterranean, making one stop in Halifax before then landing in New York. (Haypag-Lloyd)
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EL SALVADOR
from one of the countries within the agreement. This is not the only tie El Salvador has to the US, as El Salvador adopted the US Dollar in
Country Overview
2001 as its currency which gives control over its monetary policy to the
El Salvador is a small Central American Country that has been gaining
United States (Coleman 63; “Country Intelligence” 7). This has helped
footing in the textile and apparel industries and is the closest country
to stabilize the country’s inflation rates which are now predicted to
to ECRU’s New York headquarters out of the five countries we have
increase steadily around a 2% change from the previous year in the
been researching. This means that manufacturing in El Salvador gives
near future (“Country Intelligence” 5-6). The dollarization also has
the advantage of a short lead-time. It is also the only country we
eliminated the need to keep an eye on exchange rates between
have researched which has established a free trade agreement with
the US and El Salvador. The United States is El Salvador’s main trading
the United States, through the Central American Trade Agreement-
partner, which receives half of El Salvador’s exports. The United States
Dominican Republic (CAFTA-DR). El Salvador was the first Latin
has invested over $2.5 billion into the country to help boost industries
American country to sign CAFTA-DR which was implemented in March
and infrastructure. In addition, approximately 1 in 5 Salvadorans lives
2006 and would allow ECRU to import any garments we manufacture
in the US, 1.2 million of which are immigrants (Meacham).
there tariff-free, as long as the labor and all the materials originate
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Political
estimated 80.2% of the population over 15 years of age being literate
El Salvador is a Democratic Republic that has been gaining stability
(Coleman 115). El Salvador will not lack for intelligent employees in the
since it’s 12-year civil war. It has a president who is elected for a single
years to come as literacy has been increasing and a strong amount
five year term. Current President, Mauricio Funes will be succeeded
of the population is young. El Salvador is often listed as one of the
by his Vice President, Salvador Sánchez Cerén in June; both of which
most dangerous countries, having a murder rate over 40 per 100,000
are left-wing members of the Farabundo Marti National Liberation
people in 2013, wide spread gang problems (particularly with the
Front party, or FMLN (Meacham). Sánchez Cerén has proposed
Mara Salvatrucha and the Barrio 18), drug trafficking and corruption;
“expanding rehabilitation programs, job training for convicts, and
however, it often ranks among the top ten happiest countries (Klahn;
increasing support for police” in addition to adding welfare programs
Meacham).
and development projects to help strengthen the economy and reduce poverty (Meacham).
Economy El Salvador has had a mixed economy since the 60’s and 70’s when
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Social and labor
expanded into manufacturing and it is currently one of the most
Nearly half of El Salvador’s labor force is employed in agricultural
industrialized countries in Central America. Agriculture employs half
and commercial activities while manufacturing accounts for 15.5%
of the country’s work force and includes the growing of sugarcane,
(“Country Intelligence” 15). Men make up the majority of the workforce;
coffee and cotton. Currently El Salvador has a “sluggish economic
however, women have been gaining footing in recent years. As of 2010,
performance” with imports exceeding exports although the growth
there were 4.13 million people who are of working age with a labor
rate has been taking a turn for the positive and is predicted to remain
force of 2.58 million (“Country Intelligence” 15). The population growth
so in the medium-term. The country has low investment rates resulting
has been slowing but remains positive at 0.7% per year; however, the
in slow capital accumulation that “reflect a low national savings rate,
labor-force is predicted surpass the population growth rate until 2040
a weak investment climate and poor human capital development”
due to El Salvador’s age structure, as there are more people entering
(Country Intelligence” 10). As El Salvador adopted the US Dollar as
the workforce then there are retiring (“Country Intelligence” 10). Both
its currency, it no longer has control over its monetary policy which
male and female children typically attend school for 12 years with an
is dictated by the United States (“Country Intelligence” 7). Inflation is
45
predominantly driven by food, fuel and energy related wares and El
clearance, port and terminal handling and inland transportation and
Salvador’s adoption of the US dollar has helped to stabilize inflation
handling (“Doing Business”). Acajutla is El Salvador’s major cargo
which is expected to increase by 1.9% in 2014, a much lower rate than
seaport, followed by Puerto de La Union Central. The Cutuco Port had
surrounding countries (“Country Intelligence” 5).
been inactive since 1996 and underwent renovations in January 2005, making it the most important port infrastructure project in over 30 years
as it would double the cargo holding abilities of Acajutla (“Puerto”). It was inaugurated Puerto de La Union Central on June 21, 2008. By ocean, ships can travel from one of El Salvador’s ports through the
Panama Canal and on to one of many U.S. ports where it can then travel by train or truck to its destination. Cargo can also travel across El Salvador to either Honduras or Guatemala as both countries have
sea ports along the Atlantic coast. Crowley is a shipping company headquartered in Jacksonville, Florida with capabilities to transport merchandise from El Salvador to ECRU’s New York City location. Crowley would transport ECRU’s cargo from El Salvador to a port in Guatemala where it would then sail to the Fort Lauderdale Port (Port Everglades) in Florida. Next the cargo would ship via motor rail to New
Exporting
York City. Ships travel from Guatemala to Fort Lauderdale 3 times a
Exporting from El Salvador requires 7 documents including a bill of
week with a transport time of 5 days. Trains set out daily and cargo
landing, a cargo release order, a commercial invoice, a customs export
will reach New York in 4 days. Crowley gave a quote of $5,755 for
declaration, a packing list, a technical standard/health certificate
the transportation of a filled 40ft shipping container of apparel from El
and terminal handling receipts (“Doing Business”). According to the
Salvador to New York City (Phone Interview).
World Bank Group, it takes 13 days and around $980 to prepare a container for export: this accounts for document preparation, customs
46
47
Textile Industry
a focus on how to utilize benefits of the CAFDA-DR trade agreement
El Salvador has built a vertically integrated supply chain and is the
(“Salvadoran Government”). Due to the textile and apparel industry
only Central American country that has developed a full synthetic
accounting for 16.3% of industrial GDP (2013) and 44% of exports,
cluster, producing nylon, polyester and microfiber fabrics which ECRU
it was identified as one of the sectors with strong growth prospects
may wish to utilize at a later date (“Specialized Textiles”). Apparel
in the short term (Salvadoran Government; Melara). As a result, the
production cost per minute in El Salvador is $0.10; which in line with
government will develop training programs to shift human resource’s
many of El Salvador’s neighbors including the Dominican Republic
focus to identifying new business opportunities in this sector.
and Guatemala. Mexico and Colombia on the other hand are more
48
pricy with costs around $0.12-$0.14 per minute. El Salvador’s textile
Climate
and apparel association, the Chamber of the Textile, Clothing and
A variety of natural disasters affect El Salvador typically causing the
Free Zones of El Salvador (CAMTEX), makes its mission “To promote,
evacuation of thousands, the destruction of infrastructure, homes,
represent and support the textile, clothing and free zones of El Salvador,
buildings and land. These natural disasters could result in the destruction
to strengthen their competitiveness,” and is a valuable resource when
of manufacturing buildings or the evacuation of employees that
sourcing and learning about the industry (CAMTEX).
would render them unable to work, affecting product production and
The apparel and textile industry in El Salvador has been growing;
the ability for goods to be transported. El Salvador experiences two
production saw an increase of 4.1% in 2013, while exports grew by 9%
seasons; the rainy season occurring between June and November,
to 2.394 billion (Melara). The industry accounts for 44% of the country’s
and the dry season, between December and May. During the rainy
exports; broken down further, fabrics accounted for 64%, followed
season, flooding and landslides have proven to be risky. Deforestation
by synthetic garments and fibers at 25% and woven apparel and
has been a problem in El Salvador which increases its susceptibility to
fibers at 11% (Melara). 73,795 direct jobs were created in the industry
these occurrences as roughly 85% of the country’s natural land-cover
during October 2013: a 3% increase from October of the previous
has been removed: making 65% of the country vulnerable to landslides
year (CAMTEX). El Salvador’s agency for Promotion of Exports and
(“Disasters Risk” 19). El Salvador has been called the Land of Volcanos
Investments (PROESA) held a seminar in November of 2013 with aims
and has over 20 volcanoes, 3 of which have been active in recent
to identify new opportunities in the textiles and apparel industry with
years and have resulted in the evacuation of thousands (“Disasters
49
Risk” 20). El Salvador is known for its vulnerability to hurricanes and
tropical storms as well as for earthquakes, as it is located on one of Earth’s most seismically active regions (“Disasters Risk” 18-19).
50
51
INDIA
India is still a male-dominated society where women have lower priorities and wages than their male counterparts. Poverty and healthcare are still major problems in India. Many water resources are contaminated
Social India has the second largest population in the world with around 1.2 billion people in 2012. The social environment is very stable and people live together harmoniously since many are religious and live their lives under the doctrine of karma (over 80.5% are identified as Hindus) Indian cultures have been perceived as diverse and exotic. There are 18 major languages in India. However, many Indians can speak English since it is the second official language. Hierarchy is influenced by the caste system and still important in Indian society. Younger people respect the elders, and lower rank employees also have to respect their bosses and higher executives.
52
in India, and air pollution is almost the worst in the world. Many people have diseases and are unable to obtain adequate healthcare (only 7-8% of the central budget is allocated for healthcare). Even though the caste system was eliminated, people from lower caste ancestry are still regarded as unclean and are given less priority and benefits than higher-status people. There are still issues related to the large wealth gap and disparities in the society that cannot be improved within the short period of time (Marketline).
Economic In 2011, India’s estimated GDP was $1.843 trillion with 7.8% growth rate. India economy has been improving and growing steadily in the past few
53
years. Middle class populations are increasing in numbers and earning
House of People (Lok Sabha)”. “The President of Indian is elected by an
higher disposable incomes. Foreign portfolio and direct investment
electoral collage of elected members from both houses of Parliament
inflows also have risen significantly in the recent years. Proposals for
and the legislatures of the states for a five-year term” (CIA). India has
direct foreign investment are supported by the government and are
28 states and 7 union territories. President Pranab Kumar Mukherjee is
also considered by the Foreign Investment Promotion Board.
the Chief of State, and Prime Minister Manmohan Singh is the Head
US-India bilateral merchandise trade in 2008 was almost nearly $50
of Government (Global Edge). The current diplomatic representative
billion. Major US imports from India include textiles, ready-made
from US is Ambassador Nancy J. Powell (CIA).
garments, internet-enabled and IT services, gems, leather products, and chemicals. The US is also India’s largest investment partnet with
Labor
a 13% share. India exports have also grown at a very fast pace
India has the second-largest labor force in the world, which accounts
accounting for 23.9% of the country GDP in 2012 (Marketline)
around 487 million workers. In 2013, India’s unemployment rate was 8.8%
However, India’s economic growth is constrained by inadequate
with 29.8% of population below poverty line (CIA). Textile and apparel
infrastructure (usually electricity), a cumbersome bureaucracy,
industry employs over 35 million workers and is also the second largest
corruption in service sectors and governments, regulatory and foreign
provider of employment after agriculture. Many unskilled workers
investment controls, and high fiscal deficits. The rising fiscal deficits,
are well-trained in their sectors. The current labor cost in apparel
inflation, and external debt have resulted in depreciation of rupee
manufacturing sector is $0.51 per hour; the overall wage is still higher
and negative credit rating (BBB-) India’s stage of economy has rather
than the same sectors in Bangladesh, Cambodia, Pakistan, Vietnam,
been a mixed between positive and negative aspects.
Sri Lanka, and Indonesia (Emerging Textiles). The growing number of young population in India implies the potential and active workforce
Political
in the world which looks positive for outsourcing for skilled and talented
According to Globaledge, the Indian government is considered as
labors; more than 70% of population will be working age in 2025.
federal republic, however “ the central government has greater power
54
in relation to its states and also has adopted a British-style parliament
Trade Agreement
system; the parliament consists of Council of States (Rajya Sabha) and
India has no Free Trade Agreement partnership with the US. However,
55
the country has several bilateral trade agreements with other countries
discovered at the partnered suppliers
and within WTO such as AIFTA (ASEAN-India Free Trade Area) which allows tariff liberalization over 90% of products including textiles. The
Textile and Apparel Industry
trade agreement is however beneficial to the US companies in the
The domestic apparel market in India was worth about $38 billion in
way that they can gain benefit from cost reduction if they decide to
2012. India is ranked as the sixth largest apparel exporter in 2013 with
use materials such as raw materials, fabrics, or components from one
the total estimated value of $14.4 billion. The apparel sector accounts
of the ASEAN countries, which will be delivered to India to be made
for almost 10% of the overall exports. India has been regarded as one
into final garments. India also has SAFTA (South Asian Free Trade Area)
of the best producers of cotton fabrics (especially hand-loomed) as
and with the new government recently has agree to start on bilateral
well as raw cotton exporters (ranking #2 in 2013) in womens wear,
trade ties with the EU and Canada in the future.
blouses and Indian ethnic wear comprise the largest segment with 75% share of the entire segment. The market is expected to grow at
Risks
9% for the next five years at the value of 22.3 $billion. The monthly
Though India has a potential growth in manufacturing and labor
wages of a worker in the Indian apparel industry was approximately
force. There are still some problem associated with poor infrastructure
$169.67 which was also the fourth lowest paying following Bangladesh,
and business protocol that might create risks to the production and
Cambodia, and Haiti.
company such as punctuality and discipline issue.
56
There are high risks associated with late inadequate shipment and time
The overall apparel industry is expected to grow at a compound
consuming process, which will tremendously cause the loss of profit in
average growth rate of 9% over the next decade. In 2012, there
the business. Inefficient implementation of regulations and Code of
was an introduction of 10% excise duty on branded apparel with
Conduct is also another risk. Child labor, unhealthy and unsafe working
an abatement rate of 55%. There are also differences in tax rates
environments, and unfair wages are still considered major issues. Many
depending on the states; “the government in Delhi, Uttar Pradesh,
companies have a hard time identifying the transparency level of the
Punjab, and Rajasthan charge a VAT of 5% on apparel�, while other
suppliers since the production is done oversea. It is a huge risk in losing
states charge 4%. The service tax was also increased by 2% in 2012
reputation of the company if any unlawful or inhumane practices are
(Gugnani) The rise in taxes resulted in increased average sales price of
57
apparel by 5-6% Most retailers had encountered a negative growth of
and environment also create problems with delivery as well. Second
4-5% in sales during the fiscal year of 2012 (Gugnani).
problem is poor atmospheric and working environment; India is
According to Indian Ministry of Textile, the textile and apparel industry
known for having very high level of air pollution and contaminated
in India have strong growth in demand and policy support, which
water resource, water is needed in production and it’s vital that it’s
has resulted in government investment schemes (TCIDS and APES)
clean before manufacturing into actual products. Dirty environment
and commitment of both domestic and foreign investments ($140
and poor air condition will also affect the workers’ health which
billion in value) (IBEF). The Technology Upgradation Fund Scheme
might result with problems in the future. The third issue is about
(TUFS) provides budget of $0.5 billion for modernization of the power
sourcing guideline in which many places in India still don’t comply to
loom sector and stress more on mechanization (IBEF). The FY14 union
the code of conduct honestly and child labors and unfair payments
budget also provides infrastructure support and tax sops and financial
to the workers still happen everywhere. India also has no free trade
packages that help reducing duty for imported textile and machinery
agreements with the US which means it is automatically subjected
and eliminate excise duty for the cotton and manmade garments as
to 15.4% tax over every product imported to the US. Though the
well (IBEF).
suppliers that ECRU contacted are very professional and have higher rank scores on ECRU supplier ranking, their price quotes are very high
Why we didn’t choose India:
compared to ECRU initial estimated costs.
Even though India is known for cheap labor costs (in general), ready-made apparel industry, woven and knitted cotton fabrics, there are some factors that made us had to eliminate India over other smaller countries like Sri Lanka and El Salvador. First problem is poor infrastructure, especially electricity and roads; losing power during the production process might create huge loss of time and profits, and might also delay the production. Poor road condition
58
59
PHILIPPINES SOCIAL The total population of the Philippines as of June 2012 was 103,775,002,
60
INTRODUCTION
evenly divided between males and females with an average age of
There is more involved in the design process of apparel than sketches
23.1 years. According to philstar.com, about 40 million of these make
and swatches. After all of the designs and measurements have been
up the labor force while the unemployment rate stands around 6.9%
made, it is required to source a manufacturer who will be capable
and the inflation rate as of May 9, 2013, was at 3.2%. Because of their
of fulfilling production needs at the right price, in the right time,
Spanish background, religion in the Philippines mostly consists of Roman
and incurring minimal risk. The purpose of this report is to analyze
Catholics (81%) and Protestants (12%), followed by Muslims (5%) and
manufacturing opportunities in the Philippines to determine where
others (2%), which should not pose any serious restraints on conducting
ERCU will entrust its designs. We want to keep rational feasibility in
business. It is also convenient that in addition to speaking their native
mind while also not compromising our core values and ethics in the
language, Filipino, the nation also lists English as their second official
creation, distribution, and lifecycle of our proposed products.
language.
61
POLITICAL
rapid economic growth and has suffered from recurring economic
In February 1987, the Philippines adopted a new constitution that
crises. This persistent underperformance has occurred in spite of the
instituted the presidential-style republican form of democracy, which
Philippines’ rich natural and human resources.
resembles the U.S. model much more than the European parliamentary
The reasons are rooted partly in history, partly in policy. As a
system. One key difference between the Philippines and U.S. systems is
legacy of the U.S. colonial period, oligopolies have dominated the
that the Philippines is a unitary republic, whereas the United States is a
economy, particularly in agriculture, where farmland continues to
federal republic, with significant powers reserved for the states. In the
be concentrated in large estates. In the post-World War II period, the
Philippines, by contrast; the national government is not challenged
Philippines pursued a strategy of import substitution industrialization,
by local authority. The ratification of the 1987 constitution—the fourth
whereby domestic goods are substituted for imports. This strategy
in the nation’s history—by national referendum signaled the country’s
required protectionist measures, which led to inefficiencies and
return to democracy following the autocratic rule of Fernando Marcos
the misallocation of resources. Although some trade protectionist
(1965–86). Politics in the Philippines is somewhat tumultuous. In February
measures were relaxed in the early twenty-first century, the Supreme
2006, the president declared a state of emergency after quashing
Court continues to support restrictions on foreign ownership of land and
the attempted coup staged by the political opposition. The current
other assets in effect since the constitution of 1935. These restrictions,
president of the Philippines is Benigno Aquino and Philip Goldberg is
plus widespread graft and corruption, have suppressed inbound
the current ambassador to the Philippines from the United States.
foreign direct investment. A historically low rate of taxation—only about 15 percent of gross domestic product (GDP), partly as a result of
62
ECONOMY
widespread tax evasion—has led to underinvestment in infrastructure
The economy of the Philippines is an anomaly in the Asia-Pacific
and uneven economic development.
region in that it has lagged behind other economies, such as those
Although trade barriers were scaled back, industrial cartels split up,
of Singapore, South Korea, and Taiwan. From a position as one of the
and limited reform measures taken in the late twentieth century,
wealthiest countries in Asia after World War II, the Philippines is now
political instability, continuing high levels of corruption, and resistance
one of the poorest. Since the 1970s, which were a relatively prosperous
to reforms by entrenched interests have prevented the Philippines
decade, the Philippines has failed to achieve a sustained period of
from pursuing a consistent and effective economic course. The
63
industrial sector continues to decline relative to services, an economic
TRADE
bright spot in which the Philippines apparently enjoys a comparative
The United States and the Philippines have had a very close trade
advantage, although some argue that services represent an employer
relationship for more than a hundred years. According to the Office of
of last resort. As of April 13, 2014, one Philippine Peso (PHP) was equal
the United States Trade Representative, the US meets regularly with the
to $0.023 (USD). In 2005 the services sector accounted for about 53.5
Philippines under the auspices of a Trade and Investment Framework
percent of GDP; industry, 31.7 percent; and agriculture, forestry, and
Agreement (TIFA) signed in November 1989. Several additional
fishing, 14.8 percent.
agreements have been signed under TIFA auspices, including a customs administration and trade facilitation protocol (2010), a memorandum
GEOGRAPHY
of understanding to cooperate on stopping illegal transshipments of
The Philippines are made of about 7,107 islands located off Southeast
textiles and apparel (2006), and a memorandum of understanding
Asia, between the South China Sea on the west and the Philippine
regarding the implementation of minimum access commitments by
Sea on the east. The major islands are Luzon in the north, the Visayan
the Philippines (1998).
Islands in the middle, and the Mindanao in the south. The total area
64
is about 186,411 square miles including about 185,168 square miles of
U.S.-Philippines Trade Facts
land and about 1,243 square miles of water. The Philippines consists of
The United States is among the Philippines’ top trading partners, and
volcanic islands, including active volcanoes, with mostly mountainous
it traditionally has been the Philippines’ largest foreign investor. Two-
interiors surrounded by flat lowlands and alluvial plains of varying
way goods and services trade between the United States and the
widths along the coasts. Research on the Philippines by the Library of
Philippines totaled to $22 billion in 2011. Exports totaled $9.9 billion;
Congress indicates that the islands are also prone to floods, landslides,
imports totaled $12.1 billion. The U.S. goods and services trade deficit
earthquakes, and tsunamis. This and the fact that the islands are
with the Philippines was $2.2 billion in 2011. The stock of U.S. foreign
located along the typhoon belt which experiences 15 to 20 typhoons
direct investment in the Philippines exceeded $5 billion.
a year, of which five or six may cause serious distraction and/or death,
Data from the United States Embassy in Manila indicates that the
makes the Philippines a very risky location to choose to manufacture
Philippines is currently the United States’ 36th largest goods trading
ECRU’s woven tops.
partner with $17.6 billion in total (two ways) goods trade during 2012.
65
Goods exports totaled $8.1 billion; goods imports totaled $9.6 billion.
million), Fats and Oils (mainly coconut oil) ($532 million), and Woven
The U.S. goods trade deficit with the Philippines was $1.5 billion in 2012.
Apparel ($531 million). U.S. imports of agricultural products from the
Trade in services with the Philippines (exports and imports) totaled $5.2
Philippines totaled $2.3 billion in 2012. Leading categories include:
billion in 2011. Services exports were $2.2 billion; services imports were
coconut oil ($531 million), raw beet and sugar cane ($107 million),
$3.0 billion. The U.S. services trade deficit with the Philippines was $827
processed fruit ($131 million), tree nuts ($97 million), and fruit and
million in 2011.
vegetable juices ($68 million). U.S. imports of private commercial services (i.e., excluding military and government) were $3.0 billion in
Exports and Imports
2011, up 12.2% ($324 million) from 2010, and up 94% from 2000 levels.
The Philippines was the United States’ 33rd largest goods export market
Other private services (business, professional and technical services)
in 2012. U.S. goods exports to the Philippines in 2012 were $8.1 billion, up
travel and passenger fares categories account for most of U.S. services
4.6% ($355 million) from 2011, but down 8.3% from 2000. The top export
imports from the Philippines.
categories (2-digit HS) in 2011 were: Electrical Machinery ($2.7 billion), Machinery ($867 million), Cereals (wheat) ($618 million), Flour and
Investment
soybean meal ($511 million), and Aircraft ($453 million). U.S. exports of
U.S. foreign direct investment (FDI) in the Philippines (stock) was $5.3
private commercial services (i.e., excluding military and government)
billion in 2011, a 1.1% decrease from 2010. Reported U.S. FDI in the
to the Philippines were $2.2 billion in 2011, 8.7% ($173 million) more
Philippines is mostly in the manufacturing sector.
than 2010 and 38% greater than 200 levels. The other private services
Philippines FDI in the United States (stock) was $114 million in 2011, up
(business, professional, and technical services) and travel categories
10.7% from 2010. The distribution of Philippines FDI in the United States
accounted for most of U.S. exports in 2011.
is not available. The Office of the United States Trade Representative
The Philippines was the United States’ 35th largest supplier of goods
also indicates that sales of services in the Philippines by majority U.S.-
imports in 2012. U.S. goods imports from the Philippines totaled $9.6
owned affiliates were $3.3 billion in 2010 (latest data available), while
billion in 2012, a 4.8% increase ($436 million) from 2011, but down 31.3%
sales of services in the United States by majority Philippines-owned
from 2000. The five largest import categories in 2012 were: Electrical
firms were $37 million.
Machinery ($4.0 billion), Machinery ($1.1 billion), Knit Apparel ($617
66
67
US & PHILIPPINES TRADE AGREEMENT
of focus of recent U.S.-Philippine cooperation. The two sides agreed
The United States and the Philippines have had a close trade relationship
to establish a new work program on labor affairs under the TIFA to
for more than a century. The two sides meet regularly under the
further our efforts. In addition, the United States and Philippines held
auspices of the TIFA, which is the coordinating mechanism for trade
detailed discussions of agricultural trade, including related to rice and
and investment policy discussions between our two governments.
meat, and these discussions will continue in the coming weeks.
Total goods trade between the United States and the Philippines is
In response to Philippine interest in the Trans-Pacific Partnership (TPP)
about $18 billion, up 41 percent since 2009. Services trade is growing
agreement, the United States briefed the Philippines on the goals and
rapidly and exceeded $6 billion in 2012, also up 41 percent from
objectives that the twelve TPP countries are seeking to achieve. The
2009. U.S. foreign direct investment in Philippines is roughly $5 billion,
two sides began a program of technical consultations to provide
concentrated in manufacturing.
the Philippine government the detailed information it will need to consider whether to seek to join the TPP agreement. The Office of the
The United States and the Philippines today concluded a two-day
United States Trade Representative also found that the United States
meeting under the Trade and Investment Framework Agreement
and Philippines also agreed to intensify cooperation on U.S.-ASEAN
(TIFA), agreeing to a program of expanded engagement in coming
issues and on the trade and investment agenda for APEC, which the
months on bilateral, regional, and multilateral issues.
Philippines will host in 2015.
The meetings
were chaired by Assistant U.S. Trade Representative Barbara Weisel and Philippine Undersecretary of Trade Adrian Cristobal. In addition, senior officials from other agencies on both sides participated in the meeting, including Philippine Agriculture Department under Secretary Segfredo Serrano and Edgardo Albon, Chairman of the Philippine Tariff Commission. On bilateral issues, the United States recognized the considerable efforts the Philippines has made to strengthen its intellectual property regime and overall framework for protecting worker rights, two areas
68
69
CONCLUSION
as long as we manage the amount of product being manufactured
There are many benefits to come of manufacturing in the Philippines,
at that time, however there are also active volcanos, earthquakes,
however there are great risks, specifically the unpredictable nature
and tsunamis that could make product investment more of a risk
of their numerous natural disasters. The quality of their manufacturers
than affordable for a small company like ECRU.
is still unclear as far as meeting the standards of ECRU, however, I
Finally, of the five countries researched, the Philippines had
am very interested in the technology of creating eco-friendly and
great potential in their manufacturing facilities, however there
sustainable fiber from pineapple and banana, which would certainly
was little information to be found and contact was very difficult
coincide with the ECRU values. In closing, the Philippines may not
to establish. The selection highlighted more disposable bag
be a viable first candidate in our search for a manufacturer, but it
manufacturers, weavers, and sports bag manufacturers. Of the
cannot be overlooked given it’s recent advances in technology and
seemingly suitable manufacturers, none replied to ECRU’s emails.
sustainability.
The emails were either invalid or kicked back due to a full inbox. When phoned, the manufacturers failed to answer. Of those who
Why we didn’t choose Philippines:
had voicemails, none of the calls were returned - even when we
The Philippines was eliminated for many reasons. First, the political
provided our country code in the telephone number and spelled out
environment is not very assuring. More specifically, the ease of
our email address. All of these reasons, when compared to the other
corruption makes for a disheartening business climate. If the
four countries, presented us with a situation where we saw it best to
Philippines government is unreliable to their own business climate,
move on without the Philippines.
they surely will not be flexible to foreign businesses. Also, the textile industry is not supported by the government and there are currently no trade agreements in place between the Philippines and the United States. In addition, the natural disasters in the Philippines are numerous and would not support ECRU’s need to have a steady flow of product for our Basic’s line. There is a monsoon season that could be tolerable
70
71
CHINA Unployment Rate • Current unemployment rate is 4.1% Economic Climate
• Stable near 4% since 2008
Economy Structure and History • Market socialism economic system • GDP-real growth ranked 14 and GDP-purchasing power ranked 3 • The economic development started since the economy reform in 1978
Currency • Use Yuan /RMB as currency unit
Labor Cost • Minimum monthly wage is $293, $0.085 per minute in Apparel Industry • Rising minimum wage for couple times in past years • Labor cost will continue in growth Reform and Promoting
• Current currency 1 USD= 6.25 Chinese Yuan
• Reform in 1978, joined WTO in 2001, Free Trade Zone in Shanghai
• Currency rate is controlled by the government
2013 • Chinese governor state China rules out strong economy stimulus
Inflation •Inflation rate has a increasing tend 72
73
Political Climate
Trade Agreeements
Voice and Accountability
• Government controls over the freedoom of expression
Name
• Government lack of accountability
China-ASEAN FTA
Political Stability
• Taiwan and Tibet Indpendence issue • Xinjiang Violence against government
China-New Zealand FTA
• Government effectiveness rated 60.7 (100 is highest) is at an
Effective Date
January 1st 2005
Apirl 13th 2008
China-Peru FTA
Mainland-Macau CEPA Arrangement
China-Costa Rica FTA
Counterfeiting
• Chinese government lack of protection of Intellectual property
China-Iceland FTA
• Counterfeiting is a big isssue in Chinese Apparel industry
China-Switzerland FTA
The Asia-Pacific Trade Agreement (APTA)
April 28th 2009
2003
2003
Mainland-Hong Kong Closer Economic and Partnership (CEPA)Arrangement
• Goverment is corrupted
avoiding punishment
October 1st 2008
China-Singapore FTA January 1st 2009
• Some companies violate the regulation and bribe the governors for
July1st 2007
acceptable level
China-Pakistan FTA
China-Chile FTA
Government Effectiveness and Corruption
• The Media is controled by the government as well
China's Free Trade Agreements
Nov-08
April 15th 2013
July 6th 2013
1975
Countries Indonesia, Brunei,Malaysia,Vietnam, Singapore, Burma, Thailand,Cambodia, Phillipines,Laos
Using "negatvie list" method for FTA for goods. Goods not on the negative list are regarded as regular goods. ( woven apparel falls into the regular goods category) Tariff to the old members of ASEAN was removed since 2010 Jan 1st ( for regular goods) and Tariff to the new members of ASEAN will be removed in 2015.
Pakistan
Chile
Most of the woven fabric falls in the list of "Zero Tariff to Pakistan" Detail on fta.mofcom.gov.cn -"zero tariff list to Pakistan"
No tariff for apparel and textile
New Zealand will remove all the tariff for leather garment, knitting apparel, shoes in 2016 Jan 1st (part of them was removed in 2014 Jan1st) Since 2009 China has signed the preferential agreement for all wool and wool products imported from New Zealand and no tariff
New Zealand
Singapore
Textile and Apparel Related Regulation
No tariff for goods export from China to Singapore since January 1st 2009 No Tariff for 97.1% goods import from singapore since January 1st 2012
Peru
Mainland-Hongkong
"One country, Two system" No tariff
Mainland- Macau
"One country, Two system" No tariff
Costa Rica
The goods were divided into 5 different categories and most of the apparel and textile products fall into the first two categories and the tariff would be removed within 5 years after the FTA signed.
No tariff for 90% of the goods (both export and import) since August 1st 2011, Textile and Apparel falls into the 90%
Iceland
Switzerland
China,Bangladesh, India, Republic of Korea, Lao People's Democratic Republic and Sri Lanka
No tariff for 99.7% of the goods export from china to Iceland, and no tariff for 81.56% of the goods import from Iceland to China. Textile and Apparel falls into these categories.
Reduced the tariff for textile and apparel that export from China to Switzerland
1767 Tariff lines originating from Bangladesh and the Lao People's Democratic Republic are given conventional tariff rates for exports to China. These countries are trading with a preferential tariff 0.5% to 5.0% lower than the applied MFN tariff for 50-63 HS
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Textile Industry
the release of open door policy. Since then, China gained a substantial
The Apparel/industry was one of the industries that Chinese government
market share in the international apparel and textile trade. In 1980,
choice to start for the open door policy (the reform in 1978) and it
China was accounting for 4.6% of the world’s total exports, and ranked
is one of the essence industry since then. The industry had a sign of
as number nine and then since 1995, it ranked number 1 in the world
continuing growth since 1979, the average annual growth rate of
and the growth steadily continued. (Qiu) From China National Textile
total value of textile and clothing output was 13.2%, the total industrial
and Apparel Council statistics, the value of China exported garment
value increase about 7% every year from 1997 to 2002 (except the year
and textile products worth $42.4 billion in first two months of 2013 and it
Asian financial crisis,1998). And after 2002, the year China joined the
was 34.1 percent higher than the same period in 2012 and 8.3 percent
WTO, most of the products in this industry grow even faster. (See detail
higher than the general export growth in the country. (Xinhua) All
in the image 4.7) Currently, China is the biggest player in producing
these data showed evidence of the importance of apparel/ textile
apparel and textile including cotton, yarn, wool fiber, cotton fabric, silk
industry in China and its steadily growing trend.
fabric, garments, chemical fibers and knitted goods. (Detail data in the size section) It has a trend of reduced employment in the apparel/
Government Support &WTO
textile industry, however, it is a sign of development in productivity and
There are three major supports to the apparel/textile industry from
efficiency. The industry will be continuing in growth, and with the rise
government, since the release of 11th
of labor cost and advancing technology it has a trend of entering the
Industry in 2006 by the State Development and Reform Commission.
high-end market section.
These policies are, develop the innovation and building Chinese brand
The Chinese textile market has a total value of 161.7 billion dollars (2012)
to the world market, and improve the technologies and equipment
and in the past five years the CAGR is 10.8 %. The Fabrics account
and restricting inefficient polluting. (Qiu) Another important action
76.5% of the total and yarns account for 23.5%. In Asia-Pacific industry,
made by the government was being member of WTO. Since WTO
it accounts 41.0% of the total. (Marketline)
allow Members to seek resource in WTO organization, it benefited
5-Year Plan for the Textile
Chinese Apparel/Textile industry because of the limitation reduction Position in the Country
on exporting.
Apparel and Textile industry is one of the pilar Industry in China since
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Reasons for Business China is known as the biggest manufacturer in the world especially in
COUNTRIES - SWOT ANALYSIS
apparel industry. There are several reasons made China to be the first choice of manufacturing for their garments. First, China has the biggest
SRI LANKA
textile industry, which is the nature advantage for manufacturing apparel. China produces bulk amount of silk, cotton, and wool. Besides, China has Free Trade agreement with Australia (known for best quality wool) and could import wool from Australia without tariff and FTA with Peru for high quality cotton, Thailand for high quality silk as well. Second, China has abundant experience of exporting. China is the biggest exporter and second largest importer. Since the revolution in 1979, Chinese government started to support international trading. Nowadays, they are really experienced in trading internationally and strong government support. Thirdly, Sophisticated logistic system and various choices of suppliers are other advantages of manufacturing our garments. China has more than 1500 apparel manufacturers and many of them also provide P.O service and clear customs for customers.
SWOT ANALYSIS
Strength - Green Conscious -Sufficient Labor Force - Strong Connections with Customers - High Standards For Quality and Craftsmanship
Weakness - 30-Year Civil War Ended in 2009
- Sri Lankan People Lost Trust in Government - Strict Business Etiquette to Follow When Conducting Business
This could bring convenience to us for avoiding extra process to bring the merchandise into U.S
Opportunity - Becoming Number One
Apparel Exporter in World - Political and Economic Stability - Leaders in Green and Sustainable Manufacturing
Threat
- High Amount of Debt
- Losing Revenues After War
- Much Competition Throughout the World
- Monsoon and Typhoon Season 9 Months/Year
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EL SALVADOR
SWOT ANALYSIS
Strength - Dollarized
- Close ties to the US - Stable labor force - $0.10 /min manufacturing cost - Government support for apparel and textile industry - Part of CAFTA-DR
Weakness -
Gang violence Corruption Costly transportation Weak accountability of government - Apparel focus is predominantly on knitwear and synthetics
INDIA INDIA SWOT ANALYSIS
Strength
- Skilled and specialized labors in apparel sector. - Second largest young workforce in the world - The largest cotton producer as well as cotton products. - Supportive foreign policy - Many English spoken professionals - Cost advantage
Weakness
- Poor infrastructure - Inadequate discipline and management - Corruption - Weak implementation on compliance in code of conducts - Unclean environment - Uncertain time management
Opportunity -
-
Elimination of tariffs with CAFTA-DR Government held conference to identify opportunities in Apparel sector Close proximity could result in receiving product quicker Recently rebuilt port may become a hub for transportation
Threat
- Prone to natural disasters - Political uncertainty with newly elected president
Opportunity - Ease of investment - New government supporting Free Trade Agreements and other policies - Improving economy - Readymade garments dominate exports - Rising incomes and growing middle-class - Increase in exports
Threat
- Low proportion of high technology exports - Increasing air pollution - Recent terrorisms discourage investors
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Philippines
SWOT ANALYSIS
Strength -High growth potential -Young & growing labor force -Developing textile technologies -Logistic convenience
Weakness -Corrupt government
-Long lead times
- Limited product placement
-No Trade Agreements with the U.S.
CHINA
Opportunity - Free Trade Zone, remove trading barriers - Continuing trend for industrialization -‐ Opportunity for investment
SWOT ANALYSIS
Strength -High growth potential -Sufficient Labor Force -Leading position in the industry -Government support for apparel and textile industry -Logistic convenience
Weakness -Unstable government
-Lack of Intellectual Property right protection
- Weak accountability of government
-High tariff
Threat
-Natural Disasters
-High inflation rate
-Currency manipulation allegation
-Government Restriction
Opportunity - Free Trade Zone,
Remove trading barriers
- Continuing trend for industrialization -‐ Huge market for investment
Threat
-Increasing labor cost
-High inflation rate
-Currency manipulation allegation
-Government Restriction
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COUNTRY RANKINGS
Â
We broke down 6 factors, including communication convenience, textile industry condition, labor cost, trade agreement, overall atmosphere in trading apparel and location, to evaluate the benefits for each country. Based on this evaluation chart, we rated China, India and El Salvador to be the higher ones. China has the most sophisticated textile industry and FTA with many other countries could with the textile-
The factors we took into consideration to compare the countries for placing our products are listed in the chart. Overall, El Salvador has the highest score, follow by China and India, Sri Lanka, and
Â
supplying sources. India has the cheapest labor cost compare to other countries, and communication convenience. El Salvador is the nearest country to the United States and has assigned CAFTA with the U.S. Philippines and Sri Lanka have fewer benefits.
Philippines was rated to be the lowest.
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Cost India has the lowest labor cost among these five selected countries, which is $0.080 per minute for apparel industry, and $200 dollars per month for general minimum wage. China is the second lowest, $0.085 per minute and $240/month minimum wage, however because of the continuing growth of labor cost recent years, China was rated the same as Philippines and Sri Lanka (around $0.10 per minute). El Salvador was rated slightly higher than China, Philippines and Sri Lanka because of the exemption of tariff that lower the total cost.
Government Generally, these five countries’ government overall are not in positive We evaluated countries’ business climate based on 5 aspects, the logistic performance, lead time to export, ease of doing business, government support, opennes to foreigners. China and Sri Lanka were rated to be highest countries, India and El Salvador were slightly lower, Philippines has the lowest score majorly because apparel industry is not supported by government and people are more likely to make money in other industries.
position, and each country has its own issues. The Chinese government has a lack of accountability, over control of media, lack of transparency and has some corruption issues as well. Sri Lanka just ended the Civil war in 2009, the government lack supports by citizens and has corruption issues as well. The Philippines’ government is heavily corrupted and has many embezzlement issues. El Salvador has a newly selected president with anti-US associates, and the government has foreseen instability concerns. So, these four countries were all rated as 5. Comparatively, India has a more stable government. India has a new government with promising bilateral trade ties but some corruption issues still exist.
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Location India, Sri Lanka, and the Philippines are all located in southwest Asia
Â
and have long lead-times for shipping merchandise to the U.S. China is closer to the U.S and has a more sophisticated logistic system which made China’s rating 1 point higher than the other three countries. El Salvador, located in Central America, has the advantage of having the shortest leading time.
The comparison factors of risks for selected five countries are listed in the chart above and evaluated threats from these aspects. Each country has its own issues and generally China, India and El Salvador have fewer risks for conducting business.
Social Stability Factors such as, the happiness of people in the country, uprisings, war, gang violence, population growth were taken into consideration to evaluate social stability of the selected countries. China’s biggest concern for social stability is the internal terrorist threats, and the Xinjiang violence. The Tibet independence issues are also influencing
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the Chinese society in a very negative way. India has internal and external terrorist as well. In Sri Lanka, citizens are not happy with the new government that just established after the civil war. The major concern for El Salvador’s social stability is the gang violence, and the crime and violence is threatening the social development. The Philippines has a more stable society with no big threats compared to other four countries.
Sourcing Guidelines Sri Lanka, the Philippines, and El Salvador companies all have acceptable sourcing guidelines that match with ECRU’s, especially Sri Lanka which known for green production. China’s sourcing guideline is not matching international standard and had several issues while trading, but the latest news indicate the government is enforcing the labor laws and trying to improve the current condition. India has child labor issues but the overall sourcing guidelines control is not as bad as China.
Textile Industry
industry is in a high growth condition. The supply for raw material in Sri Lanka is not as strong as China and India, but they have many factories and textile/ apparel industry is their biggest industry in the country. El Salvador is specialized for producing knits and synthetic textile but lack of raw materials and versatile for production. The Philippines was rated to be lowest because of the textile and apparel industry, which is not supported by the government and in a slow development pace especially in infrastructure.
Trade Agreements El Salvador is the only country that has a Free Trade Agreement with U.S. The CAFTA-DR gives free trade if all parts of product are sourced in a participating country. No quotas on imports to U.S. China has 12 FTA with other countries, like Australia, Peru, ASSEAN (south east Asian countries) that could bring benefits for sourcing materials from other countries with lower costs. India only has FTA with ASSEAN and negotiation FTA with Canada and EU countries. Sri Lanka has FTA with Pakistan and India. Philippines has no trade agreement could benefit apparel and Textile industry
Among these five countries, China has the biggest strength in textile industry with abundant raw materials like silk, cotton and wool. Besides, the Chinese government has also invested large amounts of money in purchasing high quality facilities with new technology. India is the second strongest, it has abundant raw materials as well and the overall 90
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SUPPLIER ANALYSIS Supplier Selection Suppliers’ Highlights & Textile Industies Country Selection Ratings Spreadsheet
Countries with Top 3 Suppliers India Sri Lanka • Brandix Lanka Limited Pvt. Ltd.
• Karle International Ltd.
• Eam Maliban Textiles Pvt. Ltd.
El Salvador
• Vexsal, S.A. De C.V.
exports as well as the countries over all economy. The manufacturing industry has grown significantly in the past three years and now employs 600,000 workers. Sri Lanka benefits highly from its positioning at the
• Eves Fashion
intersection of the major trade routes between Africa, South and East
Philippines • Reliance Apparel & Fashion Manufacturing, Inc. • Hamlin Industrial Corporation • Excellent Quality Apparel Inc.
• Industrias Merlet S.A. de C.V. • Picacho S.A. DE C.V.
Sri Lanka’s apparel industry is the highest contributor to the Sri Lankan
• Mira Exim, Ltd
• Hirdaramani International Export Pvt. Ltd.
SRI LANKA - SUPPLIERS
Asia, Europe and the Persian Gulf. The manufacturers and factories in Sri Lanka have won numerous awards for their “Green” practices and are setting the bar very high for other top manufacturers in countries around the world. Sri Lanka manufactures apparel for companies ranging from high end to low end, including Burberry, Fifth and Pacific
China
Companies, Ralph Lauren, Levi Strauss, Nike, Patagonia, Guess, Gap,
• SC International Garment & Accessories Ltd.
Banana Republic and many more. (Panjiva)
• Jiaxiang Jingle Fashion • Hangzhou Ourun Fashion Co. Ltd. 92
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above and beyond to make the customer, as well as their employees 1) Brandix
Lanka Limited Pvt. Ltd.
409 Galle Road, Colombo 3
happy is something that certainly resonates with Ecru. (Panjiva) (brandix.com)
Sri Lanka Phone: +94 11 4727222
2) Eam
Maliban Textiles Pvt. Ltd.
Fax: +94 11 2575485
261, Siri Dahmma, Mawaatha
Email: info@brandix.com
Colombo, Sri Lanka
www.brandix.com
Phone: +94 1268 6391
Specialization: Woven, Knitted Garments, Intimates and Activewear
Fax: +94 1269 9513 Email: nelum@triburgsl.com
Brandix is the largest apparel exporter in Sri Lanka. The company
www.maliban.com
opened its first plant in 1972 and they now operate 42 plants across
Specialization: Blouses, Shirts and Bottoms
the island and employ over 47,000 individuals. The company sends
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about 80 shipments a month and they also create their own buttons,
Eam Maliban Textiles opened 38 years ago in 1976. The factory
thread, fabric and hangers in house. Brandix’s customers include Gap,
delivers anywhere from 20 to 200 shipments each month and produced
Old Navy, Lands End, Banana Republic, Lucy Active Wear and Diesel
a total of 1200 shipments in 2012. Their customers include Gap, Lands
USA. (Panjiva)
End Joseph A. Banks, Banana Republic, Burberry, Brooks Brother and
The company has very strong ties to creating green, environmentally
Ralph Lauren. The company is part of the Garments Without Guilt
friendly factories and have created the worlds first even LEED
Organization and adheres to a strict code of ethical guidelines and
Platinum rated manufacturing facility. Brandix values integrity,
practices to develop their products economically. (Panjiva)
teamwork, customer service, learning and development, ownership
and commitment. The company’s values and commitment to the
and maintains sustainable levels of water, chemical and energy
environment match Ecru’s company make up seamlessly. The
usage, practices safe waste disposal and continuously acts to improve
fact that this company has worked with well known brands and goes
their carbon footprint. Eam Maliban contributes much of its efforts
This manufacturer takes part in corporate social responsibility
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to improving the country, community and lifestyles of its employees
but the facility mainly specializes in woven garments. Their customers
and offers them and their families many benefits outside of the work
include, Levi’s, Patagonia, The North Face, Guess, Fifth and Pacific
environment. (Panjiva)
Companies, Liz Claiborne, Ralph Lauren, Nike, Eddie Bauer and many
more. (Panjiva)
Eam Maliban is “committed to producing world class products”,
and again they would be a great manufacturer for us to work with.
The company’s main focus has always been on fit, style and quality
They have supplied to top retailers, on the same level, quality and
and they have been called “the pioneers in the apparel industry”.
price points of our garments. But, they also
Hirdaramani has a high focus on corporate social responsibility and
have a strong social, economically and philanthropic commitment to
has become the first carbon neutral factory in Asia. They are constantly
their country, their community and their workers, which is very important
looking for new ways to cut back to improve their carbon footprint
to Ecru. (Panjiva) (maliban.com)
and help the environment. Hirdaramani also adheres to a strict ethical code of conduct and standards. The company offers free
3) Hirdaramani
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International Export Pvt. Ltd.
healthcare to their employees and their families, they offer free training
Level 23, West Tower, World Trade Center
programs
Echelon Square, Colombo, Sri Lanka
and leadership opportunities for staff members and are constantly
Phone: +94 77 7744180
investing back into the community in local sports and schools to help
Fax: +94 11 2446135
further the country as a whole. (Panjiva)
Email: vinod@hirdaramani.com
This manufacturer would be perfect for Ecru. Their amazing
www.hirdaramani.com
sustainability act and their motivation to cut back on emissions and
Specialization: Woven Garments
help save the environment is something Ecru is very passionate about
Hirdaramani International Export has been in business for 120 years
as well. Creating a business that has strong integrity and gives back
and operates 28 factories in Sri Lanka, Bangladesh and Vietnam. The Sri
to the community is what Ecru has made it our mission to do. Creating
Lankan Factory opened in 1954 and has grown to reach a capacity of
garments with such a sustainable and philanthropic manufacturer
1 million garments per month. The facility delivers about 250 shipments
like Hirdaramani is exactly the right partner to have on our mission.
each month. Their customers again range from high-end to lower end
(Panjiva) (hirdaramani.com)
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Why we selected these manufacturers:
When looking at these manufacturers it is clear that they are all very concerned with the quality and craftsmanship of their garments as well as their ethical standings in the workplace and with the environment. Because both Sri Lanka and Ecru very invested in keeping the environment safe, this country and its apparel facilities is a very strong contenders for manufacturers Ecru’s women’s woven tops. Due to the fact that not all of these manufacturers specialize in woven wear, we have narrowed down the selection to the top three; Hirdaramani, Eam
EL SALVADOR - SUPPLIERS
Maliban and Trendy Wear. El Salvador has 62 suppliers that manufacture apparel, 15 of which manufacture women’s apparel. Many of the manufacturers lack a website and several show inactivity in recent years on Panjiva. Although El Salvador produces both woven and knit apparel, the woven apparel is predominantly for bottoms, children’s wear and men’s button down shirting while knit apparel has greater diversity and is produced in much larger quantities.
1) Industrias Merlet S.A. de C.V. Merlet was established in 1980 and specializes in knitwear, loungewear and active-wear but also produces women, misses and juniors blouses (Merlet). They are located at Industrias Merlet, S.A. de C.V. Calle
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Circunvalación, Polígono A #3, Urbanización Industrial La Laguna,
established in 1992 with a mission to become the regional leader in
Antiguo Cuscatlán, La Libertad, El Salvador, C.A. and can be found
quality dress shirt manufacturing. In 2006 Picacho merged with BVM
online at http://www.imerlet.com/. Merlet’s Vision is “To become
which has their corporate headquarters in New York. Picacho’s
a leading international apparel company, providing integrated
website can be found at www.picacho.com.sv/home.htm and more
production capabilities, design and commercialization services with
information can be found at www.B-W-A.com under manufacturing.
the highest quality standards; thus satisfying our customers’ demands in
Picacho’s customers include Ben Watcher Associates which has
a prompt, efficient and reliable manner, which permits us to enhance
ordered over 900 shipments primarily of men’s poplin shirts, Liz Claiborne,
and support the economic and social development of our associates
LL Bean, Dillard’s, DKNY and Izod. The majority of their orders have
and Country” (Merlet). They are well developed in knit apparel
been cotton shirting although products include woven sport shirts
and capabilities include design, development, manufacturing and
and blouses, high end security uniforms, sleepwear and loungewear.
distribution of fabrics and apparel. Customers include Levi Strauss,
Although their orders are predominantly men’s wear, they produce
Tailgate Clothing Co. and Carhartt. Merlet has experience with over
women’s and children’s wear as well as their “main goal is to be
1,754 shipments and is able to produce 400,000 units/week, while lead
flexible, to respond quickly and efficiently, making sure that your order
time varies between 2-12 weeks (“Technical Profile”).
is processed promptly and according to your exact specifications”
Merlet’s values appear to be in line with that of Ecru’s as they practice
(Products and Services). Their capacity is 350,000 units a month and
nondiscrimination and equal opportunities and value safety and
50,000 units per week specifically in woven shirts (“Manufacturing
hygiene through the conduction of internal and external audits.
Specs”). Lead times for garment production are 30 days from date of
They do not employ anyone under the age of 18 and abide by all
fabric received at the factory and garments are shipped FOB from El
government laws including hours of work, overtime compensation,
Salvador or LDP from BVM public warehouses in Miami Florida (http://
minimum wage and fringe benefits.
b-w-a.com/manufacturing-2/ ).
2) Picacho S.A. DE C.V.
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Production facilities include a sewing room, a cutting room, a
trims warehouse, a fabric warehouse, a product development office
Picacho is a woven apparel manufacturing company located at
and an administrative building. The company strongly believes in in the
Km. 26.5 Carretera a Santa Ana La Libertad, El Salvador which was
well-being of their employees and invests in them through the offering
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of a healthcare clinic where employees and their families receive free
While El Salvador has been making advancements in the
medical attention, a community school for the children of employees
apparel and textile industry, it is knitwear and synthetic textiles that
ages 5 through 17, a free daycare open to the community as well as
they predominantly produce. Some woven apparel is made but it is
employees staffed by trained nannies, a cafeteria and bakery and
almost always for bottoms. In speaking with some of the manufacturing
a discount store in addition at having recreation facilities such as a
companies, it became very apparent that El Salvador is not the place
soccer field and volleyball court (“Social Responsibility”).
for ECRU to manufacture it’s woven tops as they could only direct me to 2 companies that produce woven tops, and one of them only makes
3) Vexsal, S.A. De C.V.
woven shirts for men. If for some reason none of the other countries ECRU
Vexal is a manufacturing company which specializes in men’s woven
is sourcing are a better option, I would recommend manufacturing
shirts. Of the 242 shipments that appear on Panjiva, 170 utilized cotton
with Picacho as they already work with several American companies
fabric, while 53 included woven shirts. Clients include Wal-Mart, Nu
and their values seem align with those of ECRU. I would suggest visiting
Image Fabrics, Paris Accessories Inc and Ben Elias Industries Corp.
the factory and talking to the owners and employees prior to making
Vexal is located at Carretera Panamericana Ote Km 15 San Martin and
any decision if ECRU does decide to manufacture in El Salvador.
although they lack a website, they were recommended to me by the Vice President of Pro Dept, Ali Gitomer. In speaking to Roberto Bonilla, I learned that Vexal has been in business for 22 years and produces 60,000 units/week with a 2.5 week lead time. The company values their employees and only hires those ages 18 and above although most employees hired are age 20 and above. Employees work 44 hour weeks, earn minimum wage plus a bonus and are subsidized food. In the same phone interview I learned that Vexel strives to be ecofriendly and recycles bi-products and all cartons and gives left over fabric to recycling companies for reuse.
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to produce ECRU’s products. Not only these suppliers can make women’s woven tops but also their customers are notable and highend US retailers that provide similar products to ECRU. They provide other services and capability that will help ECRU grow as a company in the future.
Ecru looks for suppliers who have these following criteria:
INDIA - SUPPLIERS
1) Karle
International Ltd.
This supplier can produce any type of garments from basic to fashion. It can also manufacture casual wear, activewear (seam sealed jackets, rain gear, jogging suits, swim shorts), and refined
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India has almost 850 suppliers that manufacture and specialize in
collections. Products offered range from tops (shirts/blouses),
woven apparels. Women apparel industry in India is very competitive
bottoms (pants/skirts/crop), and outer wears (jackets/blazers/
and many companies’ contact and information are available online
overcoat) The supplier not only specializes in womenswear but also
through individual and trade websites. However, many companies
have abilities to make menswear and childrenswear as well. The
don’t provide valid information about their customers, product
most important thing is that Karle International is able to produce
quality, and sourcing guidelines; some produce only knitted clothing,
women woven tops from cotton fabrics for ECRU. The factory locates
some don’t have adequate services, and some don’t even do
in Bangalore where it’s known for IT hub and woven apparel area.
businesses with the US companies. ECRU was able to find several
There are over 6500 employees working in four manufacturing
suppliers that meet the criteria in terms of ability in making quality
units. The company has annual turnover around $55 US million and
women’s woven cotton tops, valid customers, services, production
manufacturing capacity of 450,000 units monthly. Its customers
capability, and management. Among the 5 suppliers we initially
consist of notable retailers such as Ann Taylor, J. Crew, Esprit, Express,
selected, we narrowed down to 3 potential suppliers that are able
Ralph Lauren, American Eagle Outfitters, Eddie Bauer, Nordstrom,
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Superdry, and Coldwarer Creek. The supplier provides multiple
environment, as well as opposing child labor, forced labor, or any
services from design development, raw material sourcing, sampling,
unethical practices. All these qualities are relevant to Ecru’s business
lab test, cutting, sewing, finishing, and washing. The company takes
practices and sourcing guidelines as well.
approximately 90 days for the lead time. The factories are audited and approved by nominated auditor for Compliance and Social
3) Eve
Fashion
accountability. The company has participated in conservation of
The supplier is specialized in women’s woven tops, readymade
Environment and prepare Environment policy, waste management
garments, and accessories. Its customers consist of notable retailers
& rain water harvesting. The supplier is highly committed to new
like Benetton, DW Shop and Primark. The company has annual
innovation and creativity. Its core values consist of excellent quality,
turnover around $3 US million and manufacturing capacity of 125,000
corporate social responsibility, transparency, and sustainability. The
units monthly with approximately 75-90 days lead time. The company
products are also very well constructed and professional made.
has adequate quality control such as fabric inspection, cutting control, fabric process control, and In-house inspection. The factory is
2) Mira
Exim, Ltd
fully equipped with updated technology and modern manufacturing
The supplier are specialized in women’s woven and knitted
facilities. The company also operates with integrity and has concern
clothing. Its customers consist of high-end retailers such as JP Boden,
over social environmental responsibility and sourcing guideline
Sugartown Worldwide Inc, Stella McCartney, Nicole Farhi, Bebe,
such as air cooled and well lit facilities, fire safety measures, water
Burberry, Diane Von Furstenberg. The supplier takes approximately 90
treatment plant, prohibition of child labor, first-aid facilities, recycling
to 120 days for the lead time. The supplier offers the highest standard
of resources, and energy efficient devices.
of quality and punctual delivery at competitive prices. Mira Exim Ltd is also an ISO 9001:2008 and SA 8000:2008 certified organization in which it follows international standards and regulations. The company emphasizes its sourcing guideline which include ethical business practices, sustainability concern, safe and healthy
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Producing 200,000 pieces per month, Reliance Apparel seems to be the most qualified and skilled manufacturer in the Philippines regarding woven apparel. Reliance has a commitment to pursue excellence and always invests in new machinery, upgrades their technology, and improves processes, systems, and procedures in order to be in the forefront of the industry. Out of the five manufacturers researched in the Philippines, Reliance would be the best facility to entrust with creating our products.
PHILIPPINES - SUPPLIERS 1)
2)
Hamlin Industrial Corporation
Reliance Apparel & Fashion Manufacturing, Inc.
Hamlin offers various capabilities in product assortment and quality for men’s and women’s contemporary sportswear. According to the information available, they are able to produce about 50,000 items per month. Hamlin has potential to be a good manufacturer for ECRU’s woven tops.
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3)
Excellent Quality Apparel Inc.
CHINA - SUPPLIERS Excellent Quality Apparel promises a lot in its name, however very little is delivered as far as available information. Although EQ conducts
1) Jiaxiang Jingle Fashion
business with reputable brands, the lack of information available is disheartening and may not be viable for ECRU to do business with.
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Evaluation
Evaluation
The biggest advantage of Jiaxing Jingle is their high quality of
SC is not as experienced as other companies since it has only been in
garments, as well as their specialization in tops. The company has had
business for 8 years. However, they do specialize in shirts and have a
much experience supplying to high-end brands such as Burberry, CK
great deal of experience in working with American customers such as
and Guess. The only issue may potentially be the longer lead time.
Tommy Hilfiger. SC may be a very good choice for our manufacturing
Since we do not have sufficient experience with scheduling, the long
because they do accept small quantity orders. Furthermore, they
lead-time might pose a problem for the release of new collection.
provide a very in depth code of conduct matching very closely to that of Ecru’s.
2) SC International Garment & Accessories Ltd.
3) Hangzhou Ourun Fsshion Co. Ltd.
Evaluation Ourun could be considered as a very internationalized company. According to their company introduction, they are able to produce
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garments with consistent quality and in short lead-time in bulk. The
and quality control is view their previous customers. Companies
company has a significant amount of experience, especially for
and brands that have good reputation and abundant experience
international customers and language barriers will not pose problems
sourcing manufacture internationally are more likely to build
when conducting business. However, most of the products they make
relationship and conduct cooperation with reliable suppliers. In the
are for mass-market or fast fashion, the quality control could be a
chosen 3 suppliers, especially Jiaxing Jingle, they all have a strong
major issue.
customer list consists reputable brands like Burberry, Guess and Adolfo Dominguez. Besides the quality and sourcing guidelines of the suppliers we
In the initial process of selecting suppliers in China the first
also evaluated their capacity, lead-time, customers, experience,
factor we took into consideration are the sourcing guidelines from
focus, whether they could produce satisfactory level woven
the suppliers and their quality because these are the core value
garments. Based on these evaluations we selected Hangzhou Ourun
of our company. China has a very negative reputation in the past
Fashion Co., Ltd, because of its shortest lead-time and high efficiency
years following the government policy and obeying the sourcing
customer service; SC International Garments and Accessories Co.
guidelines. The sourcing guidelines established by companies in
Ltd. since its code of conduct highly matches with ECRU’s, they are
China are lower than the international standard. Even Chinese
also very experienced in producing woven garments and they have
government is trying to reinforce related labor laws and policies,
work with Tommy Hilfiger for many years; Jiaxing Jingle is the best one
investigate suppliers’ sourcing guidelines is an important process for
among three suppliers not only because of their excellent customer
selection.
portfolio but also their well-organized company management system
Besides, as a high end store in NYC quality is our key competence
and great customer services.
especially for our basic items (woven tops), which need to be worn year round by customers. In order to avoid loosing customers, we need to select the suppliers that have strict quality control on their produced products. One of the strategies we used to evaluate their code of conduct
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SUPPLIER RANKINGS
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In order to make a better selection for our final placement strategy,
The abilities of manufacturing are mostly based on the range and
we broke down the suppliers rating into 12 aspects to evaluate the 15
variety of their products. For example, companies like Jiaxing jingle,
suppliers, 3 from each country selected earlier. And as the total and
SC, Karle Int. Eam Maliban could produce both men and women’s
average scores shows, Jiaxing Jingle from China, Karle Int. from India,
apparel, woven, knitting, tops, buttons and jeans..etc. In comparison
and Eam Maliban from Sri Lanka are the best suppliers among the 15
companies like Hirdaramani, Industrials Merlet, Vexsal have much
and where our final placement could be.
narrower focus, and some of them only provide knitting products,
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which made them rated to be much lower than other companies.
also willing to build relationship with different kinds of new companies.
We evaluated the capacity of suppliers by view how many pieces they
Companies that tend to produce for mass market or lower level brand
produce monthly. Industrias Merlet and Hirdaramani have the largest
were rated lower since ECRU is considered as a high-end brand in the
capacity among 15 suppliers, Industrias Merlet produces around
market position.
1600,000 pieces per month and Hirdaramani produces 100,000 pieces per month. Companies produce 100,000 pieces per month or lower
We evaluated the flexibility of a company by how fast the company
were rated to be comparatively lower.
could turn from one category of products to another. Other factors we took into consideration to evaluate the flexibility is how many
We received price quotation from Jiaxing Jingle and Karle Int. and
production lines suppliers have and the variety of categories they
Eam Maliban, the price offered by these three suppliers are all higher
produce. Based on the information provided by the suppliers, lead-time
than our estimated costs. Karle Int. is the company gave the highest
for manufacturing generally ranges from 2 weeks to 120 days. Ourun
price offer, which almost doubled our estimation. Jiaxing Jingle and
has the highest score because they could make sample within 24 hrs
Eam Maliban provided comparatively reasonable costs and Jiaxing
and has the shortest lead-time compare to other suppliers. Vexsal was
Jingle is lower than Eam Maliban. From the communication process
rated to be the lowest since they need 120 days for manufacturing.
with the suppliers we evaluated and scored their customer services based on their attitude of conducting business, whether they reply
The way we evaluate the level of management for suppliers based on
emails on time and the information provided by their customer service
how they organized the structures of their companies. Whether they
officers.
have sophisticated method to mange the producing chain and how they organize the production teams. For example, companies like
Companies such as Jiaxing Jingle, SC, Karle Mira Exim, Eam Maliban,
Jiaxing Jingle, Karle Int. provide image and word description of how
Reliance have a long list in their customer portfolio and they have been
the process of production was organized and function as a big team.
worked with many reputable brands like Stella McCartney, Burberry,
Besides, they are also vertical integrated could provide convenience
Guess, Ralph Lauren..etc Besides, they are very versatile as well, they
for sourcing fabrics.
have established long term cooperation with reputable brands and
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We evaluated the suppliers’ quality based on the quality level of their previous customers and how they organize the quality control team and process. The companies offer other services after production are evaluated to have higher score. And companies offer sewing and cutting service only were scored to be lower. Jiaxing Jingle, and Karle int. have their own mills and they have FOB destination, could cover the freight, insurance and clear the customs for products importing to U.S.
We compared companies’ sourcing guidelines to ECRU’s and evaluate
COSTING
whether they match with ours. The companies have more strict control of their sourcing guidelines and matches ECRU’s code of conduct best were rated to be highest. The companies do not provide code of conduct or with very limited info about it were rated to be lower. We evaluated the strategic outlook of companies based on the direction they are tending to lead their companies to, whether the companies
Preliminary Costing Initial Costs VS Preliminary Costs
are looking for growth in the future and how much their growth space is.
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PRELIMINARY COSTING
ECRU Initial ECRUCost Initial Comparison Cost Comparison by Countries by Countries Sri LankaSri Lanka Philippines Philippines El Salvador El Salvador Style Name Style Name Style # Style Retail # Price RetailChina PriceCost China Margin% Cost Margin% India Cost IndiaMargin% Cost Margin% Margin%Margin% Margin%Margin% Margin%Margin% Cost Cost Cost Cost Cost Cost
dsion)
Latte
Latte WS#3100 WS#3100 $ 120.00 $ $120.00 4.19 $ 96.51% 4.19
96.51% $ 4.16 $ 96.53% 4.16
96.53% $ $ 4 .33 96.39% 4.33
96.39% $ $ 4 .41 96.33% 4.41
96.33% $ $ 3 .78 396.85% .78
96.85%
urtney)
Barley
BarleyWS#3202 WS#3202 $ 90.00 $ $ 90.00 4.27 $ 95.26% 4.27
95.26% $ 4.23 $ 95.30% 4.23
95.30% $ $ 4 .43 95.08% 4.43
95.08% $ $ 4 .52 94.98% 4.52
94.98% $ $ 3 .86 395.71% .86
95.71%
ha)
Ivory
Ivory WS#3400 WS#3400 $ 140.00 $ $140.00 4.92 $ 96.49% 4.92
96.49% $ 4.86 $ 96.53% 4.86
96.53% $ $ 5 .20 96.29% 5.20
96.29% $ $ 5 .35 96.18% 5.35
96.18% $ $ 4 .59 496.72% .59
96.72%
dan)
Bisque
BisqueWS#3500 WS#3500 $ 120.00 $ $120.00 4.35 $ 96.38% 4.35
96.38% $ 4.30 $ 96.42% 4.30
96.42% $ $ 4 .52 96.23% 4.52
96.23% $ $ 4 .61 96.16% 4.61
96.16% $ $ 3 .94 396.72% .94
96.72%
Desert Sand Desert Sand WS#3600 WS#3600 $ 180.00 $ $180.00 7.25 $ 95.97% 7.25
95.97% $ 7.11 $ 96.05% 7.11
96.05% $ $ 7 .74 95.70% 7.74
95.70% $ $ 8 .04 95.53% 8.04
95.53% $ $ 7 .04 796.09% .04
96.09%
g)
Average Price Average Price
$
Average Cost Average Cost Average Margin Average Margin
$
130.00 $
130.00
5.04 $ $ $ 5 .24 5.24 $ $ 5 .39 5.39 $ $ 4 .64 4.64 $ 5.04 5.00 $ 5.00 $ 4.93 $ 4.93 96.12% 96.12% 96.16% 96.16% 96.21% 96.21% 95.97% 95.97% 95.86% 95.86% 96.43% 96.43%
In looking at initial costing figures for each country, El Salvador
countries. Overall, the cost ranged between $4.19 and $7.25 in China,
offered the cheapest average cost with an average margin of 96.43%.
$4.16 and 7.25 in India, $4.33 and $7.74 in Sri Lanka, $4.41 and 8.04
India and China were close behind with average costs of $4.93 and
in the Philippines and $3.78 and $7.04 in El Salvador. In all countries,
$5.00 respectively. With an average cost of $5.39 and an average
every look is expected to exceed an average margin of 94.98% when
margin of 95.86, the Philippines is by far the most costly country to
looking at initial cost comparisons.
manufacture in and has the lowest average margin between the
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INITIAL COSTS VS. PRELIMINARY COSTS
ECRUCost Initial V.SCost Prelim Cost ECRU Initial V.SCost Prelim Style Style # Name
Style Name
INITIAL INITIAL Style # Price Retail Price Retail China
WS-3100 $ $ 120.00 Barley $ Barley WS-3202 WS-3202 $ 90.00 Ivory $ Ivory WS-3400 WS-3400 $ 140.00 Bisque $ Bisque WS-3500 WS-3500 $ 120.00 Sand WS-3600 $ Desert Sand Desert WS-3600 $ 180.00 $ $ 130.00 Average Price Average Price $ $ Cost 4.96 Average Average Initial Cost Initial $ $ Cost 5.62 Average Average Prelim CostPrelim Latte WS-3100
Latte
Average Margin Average Margin
$ 120.00 4.19 $ $ 90.00 4.27 $ $ 140.00 4.92 $ $ 120.00 4.35 $ $ 180.00 7.25 $
130.00 $ 4.96 5.00 $ 5.62
95.88% 95.88%
PRELIM PRELIM
China Margin% Margin% China 4.19 96.51% $ 96.51% 4.81 4.27 95.26% $ 95.26% 4.69 4.92 96.49% $ 96.49% 5.75 4.35 96.38% $ 96.38% 5.00 7.25 95.97% $ 95.97% 8.56
96.16%
$ 5.76 $
96.16%
PRELIM PRELIM
INITIAL INITIAL
PRELIM PRELIM
El El El China Margin% Lanka Margin% Lanka Margin% Sri Lanka SriMargin% Sri Lanka Sri Margin% Margin% Margin% Margin% Salvador Salvador Salvador $ 4.81 4.33 5.20 3.78 95.99% $ 95.99% 4.33 $ 96.39% $ 96.39% 5.20 $ 95.67% $ 95.67% 3.78 $ 96.85% $ 96.85% 3.78 $ 4.69 4.43 5.53 3.86 94.79% $ 94.79% 4.43 $ 95.08% $ 95.08% 5.53 $ 93.86% $ 93.86% 3.86 $ 95.71% $ 95.71% 3.86 $ 5.75 5.20 6.24 4.59 95.89% $ 95.89% 5.20 $ 96.29% $ 96.29% 6.24 $ 95.54% $ 95.54% 4.59 $ 96.72% $ 96.72% 4.59 $ 5.00 4.52 5.65 3.94 95.83% $ 95.83% 4.52 $ 96.23% $ 96.23% 5.65 $ 95.29% $ 95.29% 3.94 $ 96.72% $ 96.72% 3.94 $ 8.56 7.74 9.68 7.04 95.24% $ 95.24% 7.74 $ 95.70% $ 95.70% 9.68 $ 94.62% $ 94.62% 7.04 $ 96.09% $ 96.09% 7.04
5.00 $
INITIAL INITIAL
5.24 $
5.24
5.76
95.57%
$ $
95.57%
95.97%
6.46 $
95.97%
4.64 $
4.64
6.46
95.03%
$
95.03%
El Margin% Margin% Salvador $ 3.78 96.85% 96.85% $ 3.86 95.71% 95.71% $ 4.59 96.72% 96.72% $ 3.94 96.72% 96.72% $ 7.04 96.09% 96.09%
96.43%
4.64 $
96.43%
4.64
96.43%
96.43%
After sending tech packs to potential suppliers, we were able to
cost which averages $4.64 per unit with an average margin of 96.43%.
compare ECRU’s initial cost sheets with the manufactures’ preliminary
The average margin when looking at the preliminary costs of ECRU’s
costs. China’s average cost grew by 15.2%, bringing its average
top countries is 95.88%. In looking at the preliminary costs, we believe
cost up to $5.76 and its average margin down to 95.57%. Sri Lanka’s
that ECRU has great opportunity for profiting due to the high margin
average cost increased by 23.28% decreasing its average margin
predictions. The high margins also allow ECRU to have some wiggle
down to 95.03% and raising the average unit cost to $6.46. El Salvador’s
room if it is necessary when conducting negotiations to settle on final
manufacturers did have yet to respond with their quote for ECRU’s five
costs.
looks, and so the preliminary cost is merely a reflection of the initial
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STRATEGY DEVELOPMENT
When looking at Ecru Basic’s sales plan one can see that it is
broken down by garment and then by month. Our top selling woven
tops are the Ivory and the Desert Sand. Ecru feels that these two
and the holidays, making selling quantities higher between the months
garments are going to be the most versatile as they do have a collar
of May, June and July and then again during December. However, this
they can be worn to work, they can also be dressed down, and even
is our basics line and we anticipate a steady sales flow all year round.
layered to be worn in the colder months. We see these pieces to be at
Ecru has very high hopes for this Basics line and we feel that is it just
or over 100,000 units over the course of the first year. Our other pieces,
what our loyal customers are asking for, which is why we are projecting
while they are not the top sellers are still going to make up a large
large volumes of sale.
Of course, our garments are going to fluctuate with the seasons
portion of sales for the first year and range from 76,000 to 90,000 total units for each look. 126
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suppliers offer customer service in up to 15 languages and could cover
CHINA
freight, insurance, and clear the customs for buyers. Since the reform in 1979, the Chinese government started to reinforce laws and policies to support international trading. The business etiquette is not hard to
In the country-ranking chart, China was ranked second among 5 countries and China is
known as world’s biggest manufacturer. For
a new company like Ecru choosing a sophisticated market to source manufacturing is definitely a wise choice. Overall, China has better socio-eco-political climate in general compare to other countries, as well as business climate. China has very flexible business etiquette and it is easy to conduct business. China is the second biggest country in economic standing, after U.S. In recent years it has tended to have a slower growing rate but it is still in a positive shape.
However, the wage of employer is growing up as well which means
the cost of manufacturing in China will be drive up as well. From the research, China has a tendency to switch from manufacturing bulk products in low quality and low cost to high quality and the government has invested large amounts of money to purchase upgraded technologies and new facilities. This could benefits companies like us aiming to source high quality products in the long run. China is ranked No.1 for exporting especially apparel and textile, which means China, is the one of the most experienced traders. Many
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follow as well, and since most Chinese people are atheist religion and suspicion issues would not need to be taken into consideration like many other countries. China’s apparel and textile market size is ranked as NO.1 as well. There are total of over 15,000 apparel manufacturers in China. Because of this fierce competition Chinese manufacturers are more likely to work hard on making deal and the high pressure from the market could avoid them to overprice the manufacturing. China also has the largest amount of workforce in the world. The majority of the population in China is still at the working age, there are some concerns for aging population in the future because of the one-child-policy, however it will not influence the industry within five years. China has and abundance of resources of raw materials. As we all know, China produces the largest amount of silk every year and they have wool, and cotton as well. The Chinese government has signed 12 Free Trade Agreements including with Australia (where has the best quality wools), Peru (well-known pima cotton productions), and Thailand (ASSEAN) (world’s best silk). These could benefits buyers to source high quality raw materials in a lower cost since the tariff is eliminated. However, the inflation rate has a trend to going up, which
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could lead the increase of cost for raw materials in the future.
reputable brands in their customers lists, such as Ralph Laruen, Burberry,
Another major concern for conducting business in China
Guess, Tommy Hilfiger etc. Jiaxing Jingle is much more flexible even they
is government’s weak control over the labor laws and policies
have less employer but their capacity is much bigger than SC which
reinforcement. Manufacturers are generally lacking awareness of
means their manufacturing process might be more well organized
the importance of sourcing guidelines. In recent years, the Chinese
and efficient. Jiaxing Jingle has more production lines as well so that
government started to focus on improving the market conditions,
they could switch from one to another easier. Both SC and Jiaxing
however, Rome was not build in one day, Sourcing guidelines need to be
Jingle are vertical integrated, they have own mills could provide dying
ensured to match with our company’s while selecting manufacturers.
services, and weave the fabrics the way customers wanted. This could
After we went through the elimination process we selected three most
highly reduce the lead-time and cost on sourcing fabrics and much
qualified suppliers for our companies. We analyzed the three suppliers
more convenient to the buyers.
in depth by focusing on their quality, previous customer lists, customer
In addition, Jiaxing Jingle is a full package manufacturer and could
service, sourcing guidelines and service offered. Since our company
provide FOB destination service, and will clear the customs for buyers.
believes in quality over quantity, the capacity of manufacturers is not
They also have excellent customer services. All emails were replied
our biggest concern and the selected manufacturers are all capable
in one day and their customer officer called us to ask for detail of
of manufacturing our products within an acceptable time period.
the order. They provide step-by-step guides for customers to know
Overall, the biggest strength for Ourun is their short lead-time. They
their manufacturers better large amount production pictures were
can manufacture the sample within 24 hours and finish the entire pack
shown on their factory introduction brochure. SC is not as good as
of merchandise with 20 days. However, compare to other two, it lack
Jiaxing Jingle in the aspects list above, however, SC has much shorter
of brands with high quality products in their customer list. Most of their
lead time than Jiaxing Jingle (Jiaxing Jingle need 70 days and SC only
previous customers were fast fashion brands such as forever 21, H&M
needs 30 days), and SC’s sourcing guidelines is more detailed, and
and ZARA, so that their standard of quality might not meet with ours.
they took environment protection and intellectual property protection
Further more, the information they provided on sourcing guideline is
into consideration for their company.
very vague and does not contain much information. SC and Jiaxing Jingle has very similar strengths, both of them have
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SRI LANKA
Sri Lanka’s textile and apparel industry generates the most
revenues for the country and for its government. The Sri Lankan manufacturers are well renowned all over the world for their top customer service, high quality garments and strong commitment to the green manufacturing processes. At the end of 2013 it was announced that Sri Lanka was on its way to becoming the top garment exporter in the world in the next five years.
The manufacturing facilities in Sri Lanka have been evaluated
and ranked based on twelve different categories; abilities, capacity, costs, customer service, customers, flexibility, lead time, management, quality, service offered, strategic outlook and sourcing guidelines. It was very important for Ecru to deeply look into each one of these categories for potential manufacturing opportunities in Sri Lanka. Each of these twelve categories had very strong ratings and Ecrus top concerning categories such as quality, customer service, costs, and current customers had very strong numbers and near perfect scores making Eam Maliban the winner out of the top five proposed Sri Lankan manufacturers.
Risks: -
Long distance from the U.S.
-
Potential high lead times and freight costs
-
Country is in a lot of debt
-
Lower capacities than other larger countries are capable of
-
Typhoons and Monsoons 9 months out of the year
Benefits: -
Over 100 years of apparel manufacturing experience as a country
-
Top green manufacturer ranking country in the world
-
Won LEED Platinum Rated Manufacturing award
-
Well known, high-end, reputable customer base
-
Apparel is the country’s main export and brings in the highest revenues
-
Updated technology
-
In depth code of ethics and conduct for factory workers
-
Takes pride in the quality and craftsmanship of their work
After much deliberation and ranking it has been determined
that Eam Maliban is the top apparel supplier in Sri Lanka with many benefits and attributes outweighing its competitors. These benefits include there high focus on quality craftsmanship, their corporate social responsibility and their code of ethics describing and showing the fair and upstanding treatment of their workers. Eam Maliban focuses much of its efforts on the well being of its staff as well as practicing
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green manufacturing techniques all throughout the facility. It is no
EL SALVADOR
wonder that this facility has been ranked to high and is sought after by many name brands clothiers.
Eam Maliban Textiles is known for their commitment to creating
world-class products. Customers include Gap, Lands End, Joseph A. Banks, Banana Republic, Burberry, Brooks Brothers and Ralph Lauren. Eam Maliban is also a major part of the Garments Without Guilt Organization, which contains a group of manufacturers all adhering to a strict code of ethics and conduct, who develop their products economically and environmentally friendly. The customer and company ethics align seamlessly with our luxury fashion brand, Ecru giving us piece of mind knowing that Eam Maliban will provide us with the quality and ethical standing that we are ultimately looking for. Sri Lanka is a wonderful country to do business with; the people are very friendly and welcoming and the manufacturing facilities are very up to date and are able to produce a large variety of garments and styles. There are many mills close by the Eam Maliban facility, so outsourcing fabric will not be an issue. Even though Sri Lanka is quite far from New York labor and freight prices are very competitive and reasonable and Ecru feels very comfortable working with Sri Lanka on their new Basics Collection
Manufacturers were selected based on many factors, including
their abilities, flexibility, lead-time, capacity, customer service, value added services, management, quality, customers, their values and how well they align to ECRU’s sourcing guidelines, and their outlook towards the future.
In evaluating manufacturers it was important to look at the range
of apparel that can be developed as well as the ability to product the products we intend to make at the quality we find acceptable. As a relationship develops, ECRU will benefit most from a manufacturer that is flexible in its abilities and diverse so that ECRU can grow into new product categories and lines. Capacities, lead-time and distance were weighted against each other. The weighing of risks and benefits was utilized to compare manufacturers. Looking at how long a company has been in business and the clients that they work with will help to gain insight into how experienced and knowledgeable a company is, how secure their business is financially, the level of quality a manufacture provides and the level of customer service offered. The location also needs to be considered as different times of year bring different weather patterns, some of which can cause devastating natural disasters that could interrupt production if a factory is destroyed or if evacuations are ordered.
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-Risks •
For El Salvador, Picacho ranked highest among the potential
El Salvador’s climate is a risk as it is prone to earthquakes, volcanic
manufacturers. Although Picacho has a lower capacity, producing
activity, hurricanes, flooding and mud slides.
50,000 woven apparel units per week, its close proximity to the US
•
Slow economic growth
and 30 day lead-time from when fabrics are received at the factory
•
Corruption and gang violence, although no more risky than other countries
make up for the lower production abilities: as product will be received
•
Low capacity- 50,000 woven apparel units/week
more regularly and quicker than more distant manufacturers. Picacho
•
Uncertain political environment with a new left? Wing president
ranked highly in the category of meeting our sourcing guidelines. The company puts such a great emphasis on the heath and safety
-Benefits
of its employees, providing them with a cafeteria that subsidizes its
•
Over 20 years’ experience
prices, recreational areas such as volleyball courts and soccer fields
•
Free trade with CAFTA-DR if materials are sourced for an included country.
to encourage teamwork and a healthy lifestyle. Picacho also offers
•
Short lead time- 30 days
employees and their family free, on-site medical care, free daycare
•
Close proximity to the US- quick transportation of goods
and free schooling for their children. In working with customers such
•
Same time zone, conversations can take place in real time
as Liz Claiborne, LL Bean, Dillard’s, DKNY and Izod, we can be assured
•
The US dollar is the official currency- no currency exchange fluctuations
that Picacho produces quality garments that also meet sourcing
• Democratic
guidelines.
•
No terrorist threats
•
Apparel is the county’s main export
to product an array of products, the machines utilized and the value
•
Well known customer base
they place on their employees were taken into consideration. Picacho
•
Takes pride in its employees
which was found in 1992 has been around for over two decades, which
•
Updated technology
has allowed them to develop specializations in the woven apparel
•
Versatile in product capabilities
industry. Picacho merged with the American company, BWA, in 2006
In evaluating future requirements, the company’s history, ability
which benefited the company’s growth by strengthening and creating connections with mills in other parts of the world and by creating a
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stronger link between El Salvador and the US. The company is also
THE FUTURE OF ECRU
experienced in utilizing CAFTA-DT to eliminate tariffs. Picacho has also expanded into the knitwear sector, allowing them to create a broader range of apparel styles and now manufactures clothing for men, women and children. Should ECRU decide to start a menswear line or an intimate line in the future, Picacho would be a great manufacturer to work with as it is well known in both areas and allows ECRU room to diversify its products all in one location. Picacho also puts great value on their employees and in doing so; they are investing in their trained workforce, which allows for fewer mistakes and greater productivity.
The future of Ecru is very bright, with many possibilities for growth
and expansion. The brand plans to extend into accessory design and production in the following year, as well as leather goods. Our goal is to create a lifestyle for the customer and a brand where she feels comfortable wearing a look from head to toe, as well as mixing and matching with other pieces from her wardrobe.
We are currently in the works with creating a specialty line for
Bergdorf Goodman, giving our company a chance to grown and expand even further. Ecru has had much press and industry exposure in magazine and articles that has contributed largely to the brands success and it is our goal to continue as much as possible down that path.
With 2014 projected sales at over $59 Million, we hope to see
over $85 Million in the year 2015. Our company has great potential for high amounts of growth. With 40% of sales online, we plan to keep all of our sales channels cohesive and user friendly to bring in as many customers and sales as possible. The most important thing for Ecru now and moving into the future is to be true to our brand, while making our customers happy and satisfying our company’s strong ethical standards.
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CHINA SOURCING STRATEGY
For our final sourcing strategy, we decided to choose China to
be our number one supplier. In our country-ranking chart, China was rated to be second and Jiaxing Jingle was rated to be the best among
SOURCING STRATEGY
15 suppliers.
Overall, China’s Scio-eco-political climates are in comparatively stable position and China also has a very positive business climate
#1
China #2
especially in Apparel and Textile industry. The suppliers are well trained for conducting international business. Manufacturing our products in China could provide our company, Ecru, several benefits.
First of all, since 1995 China was ranked Number one in exporting
Sri Lanka
and China also has world’s largest apparel and textile industry. Ecru
#3
in foreign countries, by placing products in China Ecru could reduce
El Salvador
the risk of countering some unexpected accidents. Besides, China’s
is a brand new company and lacks experience conducting business
business etiquette is very easy to follow which could avoid the failure caused by cultural gap.
Placement Strategy 140
141
Second, China has abundant resources of raw materials and many
increase the cost of raw materials and the increase the increasing
suppliers have their own mills could customize the fabric for buyers,
labor cost could drive up the overall cost to be high which could
like Jiaxing Jingle where we decided to place our Ivory and Desert
directly lead to lower our margin.
Sand. We want to provide comfort for our customers and most of our products are made in natural fibers, place the products in China could avoid extra concerns about sourcing fabrics.
Second, even Chinese government is supporting the apparel industry, however lack of transparency and intellectual protection could be influence the industry in a very negative way. We need to be more
Besides, the price quotation offered by Jiaxing Jingle is acceptable
cautious for conducting business with suppliers and make sure they
and we could maintain average margin around 95% and they have also
will not make counterfeits for our products, which could bring bad
been worked with companies like Burberry, Guess, and BCBG, which
reputation for our company and influence our sales performance.
means the quality of products could be guaranteed as well. We place our style WS#3400 (Ivory), and WS#3600 (Desert Sand) in China, Jiaxing Jingle fashion. Since they provided the lowest price quotation, and Ivory is planned to be our best seller with largest needed quantity our cost could maximize the margin. WS#3600 has very similar construction as WS#3400 could make the production easier if we place these two styles in same supplier and could shorten the lead-time as well since Jiaxing Jingle’s biggest weakness is their long lead-time.
One of the major risks for choosing China is the tendency of increasing inflation rate and Chinese government has the control over the currency. Even overall China’s Scio-eco-political climate is comparatively positive compare to other countries, there are still some future risks need to be aware. The increasing inflation rate could
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however they are still pause for some concern. Sri Lanka is a long
SRI LANKA SOURCING STRATEGY
distance for the United States and shipments take about 3 weeks to reach our destination port in New York from Colombo. These lengthy shipping times may result in high freight costs and loss of margin from
When looking further in depth at all that Sri Lanka has to offer it is
clear that they have the potential to be a top manufacturing country for Ecru basics. Apparel manufacturing and export brings in the top grossing revenues for Sri Lanka as a whole. It has also recently been announced that Sri Lanka is on its way to becoming the number one garment exporter and manufacturer in the world within the next five years. Ecru sees a big opportunity with doing business with Sri Lanka and is excited about the potential to work with top manufacturers in the country.
We have ranked Sri Lanka in second place, just behind China
and just in front of El Salvador. While the country has so many positives to offer our company they are still not as developed as China when it comes to garment manufacturing, which results in us placing Sri Lanka in second place. There are many positive attributes as well as some limited risks that still may pose a concern when doing business. However, the country has three very highly ranked manufacturing facilities that Ecru would be happy to negotiate and work with. The benefits of doing business in Sri Lanka certainly outweigh the risks,
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the lengthy lead-time. Sri Lanka’s facilities also have lower capacities than other much larger and more established countries like China. The benefits of the country and of its manufacturing processes and facilities are certainly very striking and cause the ranking for Sri Lanka to be quite high. Overall the country has had over 100 year of apparel manufacturing and export experience, which has paved the way for them to become such strong members of the current manufacturing market. The country creates garments for hundreds of well know, top brand name and high-end clothiers around the world, giving Sri Lanka a reputation for quality craftsmanship.
Sri Lanka as a whole takes great pride in the way that their
workers are treated and make their code of conducts very clear to their employees as well as any new clients. The treatment of employees is all very ethical and safe, wages are fair, facilities are clean and up to date and code, there are no children employed and the health, safety and education of Sri Lanka factory workers families is of the utmost concern as well. Sri Lanka is also the leader in green and environmental manufacturing practices in the world. They have paved the way for other facilities to follow in their footsteps and have
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won numerous awards for the never-ending efforts to help save the
EL SALVADOR SOURCING STRATEGY
planet and the earth.
Although ranked number two, Sri Lanka is certainly a country that
Ecru would be happy to do business with. Their values and beliefs on how business should be done are synonymous with that of Ecrus. Ecru values ethical manufacturing practices and treatment of employees, keeping the environment safe, and high quality garments above all else, and that is just what Sri Lanka spends their time and energy towards as well.
In evaluating El Salvador, it became apparent that El Salvador
has a lot to offer ECRU as a country to manufacture in. El Salvador has one of the most developed apparel industry in Latin America and is known for its synthetic branch and knitting capabilities, in addition, apparel is the country’s top export. El Salvador is also in close proximity to the US, shortening transportation time and also allowing for real time communication and updates. One of the greatest benefits from working with El Salvador is being able to enjoy duty free importing into the US as long as materials are sourced from the surrounding countries that are a part of CAFTA-DR. El Salvador has also adopted the US dollar as its own currency eliminating the need to worry about currency exchange.
We ranked El Salvador in third place, behind China and Sri Lanka.
Like Sri Lanka, El Salvador is a small country and not as developed as China when it comes to manufacturing; however, El Salvador does offer many benefits and high quality manufacturing facilities. Unfortunately many of the manufacturers specialize in knit wear rather than woven apparel, but a select few do exist and are highly reputable.
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Certain risks and downsides do come with manufacturing in El
Salvador. The climate is risky as the country has a long rainy season making it vulnerable to hurricanes, flash floods, and mudslides. Due to its location earthquakes and volcanic activity also occur. Natural disasters have proven devastating in the past and have caused large scale evacuations and damage. Although El Salvador’s economy remains in the positive, it has been growing at a decreased rate. There are issues with corruption, laws not being strictly enforced, gang violence and drug trafficking, but these things occur in the other countries we sourced as well, although some countries are not as open about it. There is also some politically uncertainty surrounding the new president that will take office next month as he is very left wing and has been affiliated with Cuban spies.
In choosing El Salvador’s manufacturer, Picacho has over 20
years’ experience with the woven apparel industry and a short lead time of only 30 days. In addition, El Salvador’s close proximity to the US allows for quick transportation of goods. Picacho has a strong customer base, versatile product capabilities and state of the art technology. The company also and puts great emphasis on quality as well as on its employees well-being. Picacho also has introduced knitting capabilities which allows for new product categories for ECRU to grow into in the future.
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PLACEMENT STRATEGY
ECRU FINAL PLACEMENT & MARGINS ECRU FINAL PLACEMENT & MARGINS China
China
Sri Lanka
Sri Lanka
El Salvador El Salvador
IvoryDesert #WS-3600 Desert SandLatte#WS-3100 Latte #WS-3500 Bisque Barley #WS-3202 Barley Ivory#WS-3400 Ivory #WS-3400 Ivory#WS-3400 #WS-3600 Sand #WS-3100 #WS-3500 Bisque #WS-3202 #WS-3400
450,000 Total Units Total Units Retail Price perRetail unit Price per unit Cost per Unit Cost per Unit Margin Margin % % $ 59,040,000 $ Total Purchase Total Purchase $ 2,073,360 $ total Margins total Margins $ 56,966,640 Total Retail
Total$Retail
% Avg Retail Avg Retail $ $ Avg Purchase Avg Purchase $ Avg Margins Avg Margins %
Avg Margins % Avg Margins %
$ Avg Cost/Unit Avg Cost/Unit
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96.49% $ 131.20 $ 4.61 $ 126.59
96.49%
4.53$
$ $ $ $ $
450,000 55,000 $ 140.00 $ 4.52 $ 135.48 96.77% 59,040,000 $ 7,700,000.00 2,073,360 $ 248,600.00
$ $ 56,966,640 7,451,400
96.49% 96.77% 131.20 4.61 126.59
55,000 94,000 94,000 76,000 140.00 $ 180.00 $ 180.00 120.00$ $ 4.52 $ 6.95 $ 6.953.96$ $ 135.48 $ 173.05 $ 173.05 $ 116.04$ 96.77% 96.14% 96.14% 96.70% 7,700,000.00 $ 16,920,000.00 $ 16,920,000.00 $ 9,120,000.00$ $ $ 248,600.00 653,300.00 $ 653,300.00 300,960.00$
76,000 85,000 90,000 85,000 120.00 $ $ 120.00 $90.00 $ 120.00 3.96 4.00 $ $ 4.00 $ 3.55 $ 116.04 $ $ 116.00 $86.45 $ 116.00 96.70% 96.67% 96.06% 96.67% 9,120,000.00 $ 10,200,000.00 $ $ 10,200,000.00 $ 8,100,000.00 $ $ 340,000.00 $ $ 300,960.00 340,000.00 319,500.00
90,000 50,000 50,000 90.00 $ 140.00 $ 140.00 3.55 4.22 $ 4.22 $ 86.45 $ 135.78 $ 135.78 96.06% 96.99% 96.99% 8,100,000.00 $ 7,000,000.00 $ 7,000,000.00 $ 211,000.00 $ 319,500.00 211,000.00
$
$
$
7,451,400 16,266,700 $
96.77%
96.14%
$ $ 16,266,700 8,819,040
96.14% 96.70%
8,819,040 $ 9,860,000
96.70% 96.67%
$
9,860,0007,780,500 $
96.67% 96.06%
7,780,500 $ 6,789,000
96.06% 96.99%
6,789,000
96.99%
96.49%
4.53
Ecru has decided to place their five woven women’s tops
Two looks will be placed in China at the start of the manufacturing
in manufacturing facilities in China, Sri Lanka and El Salvador. The
process. These looks are both collared button up shirts. Ecru feels that
garments are separated into each of these countries based on style,
china is the best country to manufacture these garments as the country
technicalities and quantities. We have also looked at the strengths
is well established in the industry and is highly capable to creating a
and weaknesses from each country to better create a final placement
well fitting, quality garment. We will be placing the full order of 94,000
plan for our products.
units of Desert Sand and half of the Ivory order at 55,000 units. We will
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be splitting up the Ivory piece because it is anticipated to be one of our top sellers and we do not want to risk any malfunctions by placing all of the order at one facility.
Two pieces will also be manufactured in Sri Lanka. Sri Lanka’s
manufacturing facilities have very high-end clientele and we feel that it is the perfect place for Ecru to make their more fashion forward and technologically made tops; Latte and Bisque. 76,000 units of the Latte will be manufactured and 85,000 units of Bisque will be manufactured. These pieces are going to be much more suited for a client who is looking for a piece that is a little more fashion forward and out of the
COMPARISON OF FINAL COSTING
box, which is why Ecru does not see the highest sales numbers for these looks.
Finally in El Salvador we will be placing the second half of the
order for Ivory as well as our take on the “basic tee”, the Barley. 90,000 units of Barley will be manufactured as well as 50,000 units for Ivory.
Preliminary Costing vs. Final Negotiatiated Prices
These two pieces are anticipated to be our top sellers due to their silhouette as well as their functionality in a client’s wardrobe. We will be placing these looks in El Salvador because of the ability for incredibly
Preliminary Margins vs. Archieved Margins
short lead-times of under two weeks. This may be very helpful for us as orders grow and Ecru needs new pieces within a short amount of time.
Our final average cost per unit comes out to be $4.53. The
average retail price between our five luxury women’s tops is $131.20. The average purchase price for each unit is $4.61. Ecru is very happy to have such high margins at over 96%, which equates to $126.59.
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INITIAL COST vs PRELIMINARY COST vs FINAL COST
ECRU Initial Cost ECRU vs Prelim InitialCost CostvsvsFinal Prelim Cost Cost vs Final Cost INITIAL
INITIAL PRELIM
PRELIM FINAL
FINAL INITIAL
INITIALPRELIM
PRELIMFINAL
FINAL INITIAL
INITIAL PRELIM
PRELIM FINAL
FINAL
Retail China Retail ChinaChina China China China Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri LankaEl Salvador El SalvadorEl Salvador El Salvador El Salvador Margin% El Salvador Margin% Margin% Margin% Margin% Margin% Margin%Margin% Margin%Margin% Margin% Margin% Margin% Margin% Margin% Margin% Margin% Style # Name Style # Style Name Style Price Cost Price Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost $4.81 3.83 95.99% 96.81% $ $ 3.83 $ 3.96 $ $3.78 3.78 96.85% $ 3.78 96.85% Latte WS-3100 Latte $ 120.00 WS-3100 $ 4.19 $ 120.00 96.51%$ 4.19 $ 4.81 96.51%95.99% $ 4.33 96.81% 96.39% $ 4.33 $ 96.39% 5.20 95.67% $ 5.20 95.67% 96.70% $3.96 3.78 96.70% $96.85% 96.85% $ 3.45 97.13% $ 3.45 $4.69 3.93 94.79% 95.63% $ $ 3.93 $ 4.08 $ $3.86 3.86 95.71% $ 3.86 95.71% Barley WS-3202 Barley $ 90.00 WS-3202 $ 4.27 $ 90.00 95.26%$ 4.27 $ 4.69 95.26%94.79% $ 4.43 95.63% 95.08% $ 4.43 $ 95.08% 5.53 93.86% $ 5.53 93.86% 95.47% $4.08 3.86 95.47% $95.71% 95.71% $ 3.55 96.06% $ 3.55 $5.75 4.52 95.89% 96.77% $ $ 4.52 $ 4.78 $ $4.59 4.59 96.72% $ 4.59 96.72% Ivory WS-3400 Ivory $ 140.00 WS-3400 $ 4.92 $ 140.00 96.49%$ 4.92 $ 5.75 96.49%95.89% $ 5.20 96.77% 96.29% $ 5.20 $ 96.29% 6.24 95.54% $ 6.24 95.54% 96.59% $4.78 4.59 96.59% $96.72% 96.72% $ 4.22 96.99% $ 4.22 $5.00 3.85 95.83% 96.79% $ $ 3.85 $ 4.00 $ $3.94 3.94 96.72% $ 3.94 96.72% Bisque WS-3500 Bisque $ 120.00 WS-3500 $ 4.35 $ 120.00 96.38%$ 4.35 $ 5.00 96.38%95.83% $ 4.52 96.79% 96.23% $ 4.52 $ 96.23% 5.65 95.29% $ 5.65 95.29% 96.67% $4.00 3.94 96.67% $96.72% 96.72% $ 3.49 97.09% $ 3.49 $8.56 6.95 95.24% 96.14% $ $ 6.95 $ 7.42 $ Desert Sand WS-3600 Desert Sand $ 180.00 WS-3600 $ 7.25 $ 180.00 95.97%$ 7.25 $ 8.56 95.97%95.24% $ 7.74 96.14% 95.70% $ 7.74 $ 95.70% 9.68 94.62% $ 9.68 94.62% 95.88% $7.42 7.04 95.88% $96.09% $7.04 96.09% 7.04 96.09% $ 7.04 $ 96.09% 6.75 96.25% $ 6.75 $ 130.00 $ 130.00 Average Price Average Price $ Initial 4.96 Cost $ 4.96 $ $ 5.00 5.00 $ 5.24 $ 5.24 $ 4.64 $ 4.64 Average Initial Cost Average $ Prelim 5.62 Cost $ 5.62 $ 5.76 $ 5.76 $ 6.46 $ 6.46 $ 4.64 $ 4.64 Average Prelim Cost Average $ 4.85 $ 4.85 $ 4.59Cost $ 4.59 $ 4.62 $ 4.62 $ 4.29 $ 4.29 Average Final Cost Average Final Average Margin Average Margin 96.18% 96.18% 96.16% 96.16% 95.57% 95.57% 96.45% 96.45% 95.97% 95.97% 95.03% 95.03%96.27% 96.27% 96.43% 96.43% 96.43% 96.43% 96.70%
Margin% 97.13% 96.06% 96.99% 97.09% 96.25%
96.70%
All the prices quoted from suppliers are all higher than our estimation
and most of them squeezed the margins to be approximately 1% lower
Barley WS-3202
than our planned cost. The final negotiated prices are actually lower
Barley is planned to be one of our best sellers, because of its simple
than we expected and drive up our margins about 0.5% higher for all
silhouette and could be easily accepted by majority. It has short sleeves
five styles.
and could be easily wear year round. Since Barley was planned to be sale in large amount we planned our margin per unit to be lower so
Latte WS-3100
that we could achieve the higher margin by selling larger amount.
Latte is one of our basic items with high neck and were planned to
Besides, in order to turn out the products faster we will manufacture
be comparatively sale in a lower volume since it might not be widely
the Barley in El Salvador for the shortest lead-time. The prelim price
accepted by majority. In both prelim cost and final cost, Latte has the
were planned to be $3.86 with 95.71% and the final negotiated price
highest margin among 5 styles. The Latte will be manufactured in Sri
is $3.55 with 96.06% margin.
Lanka and the quoted price is $5.20 per unit, with 95.67% margin, and
Ivory WS-3400
the final negotiated price is $3.96 with 96.70% margin. 154
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Ivory is considered as another item would sale year round, and it has the largest planned quantity, so we split the amount for manufacturing into two countries. The unit price for Ivory in China was quoted to be $5.75 with 95.89% margin, and negotiated down to $4.52 with 96.77% margin.
Bisque WS-3500 Bisque is similar to latte, and was planned to be a more fashion items with lower quantity and will be manufactured in Sri Lanka. The quoted price for Bisque is $5.65 with 95.29% margin, and the final negotiated price was lower to $4.00 with 96.67%
CONCLUSION
Desert Sand WS-3600 Desert Sand is a button up shirt and has similar construction techniques to Ivory and it does not need to be turn out as soon as the best sellers so that we decided to place Desert Sand in China for manufacturing. The quoted price from China for Desert Sand is $8.56with 95.24% and negotiated to$6.95 with 96.14%.
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During the final strategy process we eliminated India and the
away from their standard big name companies by adding luxury,
Philippines from our potential manufacturing locations. Each of these
fashionable garments from a small privately owned brand to their
countries presented risks that were very difficult for Ecru to overlook in
portfolio. Both Ecru and the manufacturers in China, Sri Lanka and
the process of manufacturing the Ecru Basics Collection. These factors
El Salvador have the ability to benefit from this new partnership and
overall for both countries include unstable government and economic
grow with Ecru as it expands into new products and lines in the future.
positioning, the restricted size of the textile and apparel industry, high manufacturing costs, low quality and craftsmanship and unethical work and labor environments.
Due to the fact that Ecru focuses highly on their ethics, code
of conduct, craftsmanship and quality as well as the safety of the environment, we have chosen to focus our manufacturing in three potential countries, China, Sri Lanka and El Salvador. Prices are very strong and competitive in these three countries and Ecru feels comfortable working with each of them to negotiate a fair deal that will benefit both Ecru and the manufacturer.
Our products will be placed in each of these three countries
to minimize our risks and to maximize our opportunity to protect our products if something were to happen to the facility. This not only benefits us but it also gives Ecru a chance to learn more about each of these factories and potentially increase our quantities and ultimately give the facilities more business in the years to come. These manufacturers are looking to expand their portfolios and branch
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APPENDIX
Cost Sheets Tech Packs Sourcing Guidelines Supplier Emails Bibliography
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COST SHEETS
Style 1 - Latte Style 2 - Barley Style 3 - Ivory Style 4 - Bisque Style 5 - Desert Sand
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STYLE 1 - CHINA
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STYLE 1 - EL SALVADOR
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STYLE 1 - INDIA
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STYLE 1 - PHILIPPINES
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STYLE 1 - SRI LANKA
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STYLE 2 - CHINA
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STYLE 2 - EL SALVADOR
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STYLE 2 - INDIA
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STYLE 2 - PHILIPPINES
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STYLE 2 - SRI LANKA
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STYLE 3 - CHINA
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STYLE 3 - EL SALVADOR
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STYLE 3 - INDIA
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STYLE 3 - PHILIPPINES
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STYLE 3 - SRI LANKA
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STYLE 4 - CHINA
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STYLE 4 - EL SALVADOR
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STYLE 4 - INDIA
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STYLE 4 - PHILIPPINES
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STYLE 4 - SRI LANKA
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STYLE 5- CHINA
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STYLE 5 - EL SALVADOR
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STYLE 5 - INDIA
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STYLE 5 - PHILIPPINES
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STYLE 5- SRI LANKA
TECH PACKS
Style 1 - Latte Style 2 - Barley Style 3 - Ivory Style 4 - Bisque Style 5 - Desert Sand
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STYLE
1
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STYLE
2
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STYLE
3
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STYLE
4
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STYLE
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CODE OF CONDUCT This Code of Conduct is applicable to all supplier, their subcontractors and other business partners that conduct business with Ecru.
We require that parties which wish to conduct business with Ecru sign a completed vendor compliance agreement to acknowledge and abide by our Code of Conduct.
It is the responsibility of Ecru’s suppliers and other business partners to inform any subcontractors about Ecru’s Code of Conduct to ensure that the requirements are abided by in every factory and workplace that contributes to Ecru’s merchandise.
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1. Legal Requirements
3.2 Fire Safety
1.1 All of Ecru’s suppliers and business partners must abide national
Ecru requires emergency exits be well lit and clearly marked on
laws in all activities in the country of operation.
every floor. All employees must receive training in regards to how to respond to fire or other cases of emergency. Fire extinguishers must
1.2 Ecru’s requirements may go beyond the national law’s
be available for emergency use and their location made known
requirements
during training exercises.
2. Child Labor
3.3 Accidents and First Aid
Ecru does not permit child labor and no person under the age of 16
First aid equipment must be available and its location know to all
shall be employed even if the legal age for employment is less than
employees.Textiles). The growing number of young population in
16 years of age.
India implies the potential and active workforce in the world which looks positive for outsourcing for skilled and talented labors; more
3. Health and Safety
than 70% of population will be working age in 2025.
3.1 Working Environment
4. Worker’s Rights
Suppliers must adhere to all laws regarding health and safety.
4.1 Basic Rights
Suppliers shall provide workers with a clean, safe and healthy work environment. No exposed wires will be permitted.
4.1.1 All workers are to be treated with respect and dignity, free from humiliation, corporal punishment or abuse of any kind.
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4.1.2 No discrimination of workers based on sexual orientation,
4.3.2 Each employee is allotted a 30 minute lunch break and 2 15
gender, religion, political opinion, race, ethnic origin, disability,
minute breaks each day.
pregnancy or age will be tolerated. Employees have the opportunity to anonymously report noncompliance with the Code of Conduct.
4.3.3 Ecru requires that all its business partners and Suppliers communicate the Code of Conduct with employees and supervisors
4.1.3 Forced labor is prohibited as is the use of illegal and prison labor.
in their native language.
4.1.4 All employees have the right to organize and join associations.
5. Housing Conditions
4.2 Wages
If employee housing facilities are provided by a company the health and safety requirements under clause 3 must be followed.
Wages are to reflect the experience, qualifications and performance of an employee and are to be paid regularly and on time. Each
6. Environment
employee will be paid at least legal minimum wages as determined by local government.
Suppliers must comply with all laws regarding the environment in their country of location, this includes having any relevant environmental
4.3 Working Hours
permits and licenses for its operations.
4.3.1 Ordinary working hours shall not exceed the legal limit and shall
6.1 Water Management
never exceed 48 hours per week. Overtime must be both voluntary
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and compensated and hours shall not exceed the legal limit and
Wastewater from wet processes must be treated before disposal and
shall never surpass 8 hours per week.
meet requirements of local legislation when it comes to quality.
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6.2 Waste Management
7.2.2 We reserve the right to appoint an independent third party to conduct audits in order to evaluate compliance with Ecru’s Code of
Waste and hazardous materials must be disposed of in accordance
Conduct.
with the law of the country in which the company operates. 7.2.3 Suppliers may not coach employees on how to answer or 7. Monitoring and Enforcement
respond to inquiries from Ecru representatives during audits.
7.1 Transparency
7.3 Corrective Action
Ecru expects the companies it works with to keep accurate records
Failure or unwillingness to correct violations of Ecru’s Code of
so that the company may be accurately assessed without the
Conduct and local law with in an allotted amount of time would
falsification of documents. We expect all business partners and
damage the supplier’s relationship with Ecru and could lead to
suppliers to be transparent and to not purposefully mislead auditors.
reduced business or termination of business between the two parties.
7.2 Monitoring
7.2.1 Ecru will schedule 2 audits per year and reserves the right to make unannounced visits for purposes of auditing to all parties producing goods or services for Ecru.
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SUPPLIER EMAILS & CALLS SRI LANKA
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EL SALVADOR
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INDIA
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PHILIPPINES
CHINA
*None of the suppliers replied the emails, but we managed to call them.
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BIBLIOGRAPHY - Sri Lanka "About Us." Srilanka Apparel Sourching Association About Us Comments. N.p., 2014. Web. 20 Apr. 2014. "Business Climate." Sri Lanka. National Branding & Investment, 2010. Web. 12 Apr. 2014. Cultural Bytes Sri Lanka. Edith Cowan University, 2014. Web. 23 Apr. 2014. "Countries and Their Cultures." Culture of Sri Lanka. N.p., 2014. Web. 11 Apr. 2014. Data Monitor. Sri Lanka Country Profile. Data Monitor Asia Pacific, Jan. 2013. Web. Apr. 2014. "Eating and Drinking | About Sri Lanka." Rough Guides Eating and Drinking Comments. Sri Lanka Cuisine, 2014. Web. 19 Apr. 2014.
"Fiscal Policy and Government Finance Chapter 6." Sri Lanka Fiscal Policy and Government Finance. Central Bank of Sri Lanka, 2012. Web. 12 Apr. 2014. "Geography of Sri Lanka." Princeton University. N.p., 2014. Web. 11 Apr. 2014. "Harmonized Tariff Schedule of the United States." Harmonized Tariff Schedule of the United States. N.p., 2014. Web. 17 Apr. 2014. "Hirdaramani International Export (Pvt) Ltd." , Level 23, West Tower, World Trade Center, Echelon Square, Colombo, Sri Lanka. Hiradaramani Internantional Export (Pvt) Ltd., 2014. Web. 11 Apr. 2014. "Haypag-Lloyd." Services between North America and Indian Ocean. Products and Services, 2014. Web. 25 Apr. 2014. "India-‐Sri Lanka FTA." Department of Commerce, Government of India. International Trade, 2006. Web. 21 Apr. 2014. "INTERCULTURAL CONSULTING." Information on Sri Lanka. N.p., n.d. Web. 23 Apr. 2014. "Labour Force." Labour Force. Labour Force Survey, 2012. Web. 13 Apr. 2014. "Labour Legislations." Sri Lanka Labour Legislations. Department of Labour, 2014. Web. 13 Apr. 2014. "National Chamber of Exporters of Sri Lanka | Voice of the Exporter." National Chamber of Exporters of Sri Lanka Voice of the Exporter. N.p., 2014. Web. 20 Apr. 2014. 234
"Pakistan-Sri Lanka FTA." Ministry Of Commerce. Government of Pakistan Ministry of Commerce, 2014. Web. 21 Apr. 2014. "Ramya Holdings." Ramya Holdings. Trendy Wear Ltd., 2014. Web. 11 Apr. 2014. "Routenet." Maersk Line. Shipping Services, 2014. Web. 25 Apr. 2014. "South Asia: Sri Lanka." Central Intelligence Agency. CIA: The World Factbook, 27 Mar. 2014. Web. 11 Apr. 2014. "Sri Lanka Age Structure." - Demographics. N.p., 2014. Web. 11 Apr. 2014. "Sri Lanka Apparel Exporters Association - Sri Lanka Apparel Exporters Association." Sri Lanka Apparel Exporters Association - Sri Lanka Apparel Exporters Association. N.p., 2014. Web. 20 Apr. 2014. "Sri Lanka Apparel - World's No1 Ethical Apparel Sourcing Destination." Sri Lanka Apparel - World's No1 Ethical Apparel Sourcing Destination. N.p., 2014. Web. 20 Apr. 2014.
"Sri Lanka - Boundless Open Textbook." Boundless. Art History, 2014. Web. 19 Apr. 2014. "Sri Lanka Business Portal -‐ Exporters." Sri Lanka Business Portal - Exporters. EDB, 2014. Web. 11 Apr. 2014. "Sri Lanka." Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. Index of Economic Freedom, n.d. Web. 12 Apr. 2014. "Sri Lanka Inflation Rate." TRADING ECONOMICS. N.p., 2014. Web. 12 Apr. 2014.
"Sri Lanka: Introduction." GlobalEDGE: Your Source for Global Business Knowledge. N.p., 2014. Web. 11 Apr. 2014. "Trendywear Pvt Ltd.", 459/1, Kandy Road, Ranmuthugala, Kadawatha, Sri Lanka. Ramaya Holdings, 2014. Web. 11 Apr. 2014. "US-Sri Lanka FTA." Office of the United States Trade Representative. N.p., 2014. Web. 21 Apr. 2014. ZIM. "Overview." ZIM. Cargo Services, 2014. Web. 25 Apr. 2014.
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Dutriz Hermanos SA de CV , 10 Apr. 2014. Web. 9 May 2014. <http://www.laprensagrafica.com/2014/04/10/textiles-registraron-el-44-de-lasexportaciones-salvadoreas-de-la-industria>. PROESA: Export and Investment Promotion Agency of El Salvador, Government of El Salvador. PROESA. Web. 10 Apr. 2014. www.proesa.gob.sv "Puerto de La Unión Centralamericana History." CEPA - Puerto La Unión, El Salvador, Centro America. Puerto La Union, n.d. Web. 10 May 2014. <http://www.puertolaunion.gob.sv/index.php?articulo=1023>. "Salvadoran Government Hosts Seminar For Textile & Apparel Sector." PROESA. PROESA, 12 Nov. 2013. Web. 6 May 2014. <http://www.proesa.gob.sv/latest-news/news/item/629salvadoran-government-hosts-seminar-for-textile-apparel-sector>. "Specialized Textiles and Apparel." PROESA. PROESA, 26 May 2013. Web. 14 May 2014.
“Employing workers in El Salvador.” Doing Business. The World Bank. June 2013. Web. 13
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CIA. "The World Factbook: India." Central Intelligence Agency. Open Government, n.d. Web. 13 Apr. 2014. <https://www.cia.gov/library/publications/the-world-factbook/geos/in.html>.
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Jian Yang (April 2006). “Learners and users of English in China”. English Today 22 (2): 3–10. doi:10.1017/S0266078406002021.. Quote: “What this suggests, it seems, is that Yan’s (2004) ten million may after all be a more informed estimate of the actual regular users of English in China.” (page 9)”
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