Supply Chain Project by Rutuja Mahajan

SUPPLY CHAIN STRATEGY

SUPPLY CHAIN MANAGEMENT IN THE GLOBAL MARKETPLACE LXFM 720 PROFESSOR GRACE CANEPA

NAMITHA ACHANDIRA, RONGDAN HU, RUTUJA MAHAJAN

CONTENTS

I. Executive Summary.................................................................................................................................04

II. Introduction..............................................................................................................................................05 III. Company Overview..............................................................................................................................06

IV. Sourcing Guidelines..............................................................................................................................10 V. Country Analysis

India.............................................................................................................................................................15 Indonesia...................................................................................................................................................32 Malaysia.....................................................................................................................................................44

VI. Sourcing Strategy..................................................................................................................................60

VII. Logistics, Warehousing and Distribution..................................................................................82 VIII. Supply Chain Strategy Summary.................................................................................................90

IX. Conclusion................................................................................................................................................93 X. Appendix....................................................................................................................................................94

XI. References.............................................................................................................................................119

EXECUTIVE SUMMARY

R N Clothing is a private start-up company by three young women. It is based in Los Angeles, California and operates in North 2

America. It primarily sells women’s blouses that are made from 100% cotton. These blouses are available in 3 styles; a sleeveless

basic, 3/4th sleeve tunic and a stylized top. The garments are easy to wear, provides comfort to the wearer and can be a staple piece of clothing all round the year.

R N Clothing is a company that makes sure it does not harm the environment and therefore; focuses on sustainability. It is very par2

ticular about its sourcing guidelines and the suppliers are chosen on these grounds. This is because the company wishes to leave a minimal footprint on earth.

Our employment standards are non discriminatory and makes sure that female employees are given all the rights. Utmost safety is

ensured for women at all times and various training programs are conducted for the betterment of the employees and the company. R²N Clothing looks beyond its business strategies. They believe in building relationships with their customers for a lifetime.

INTRODUCTION

R²N Clothing is an apparel company based in Los Angeles, California in the Unites States of America. The company specialises in women’s wear woven blouses, primarily producing cotton blouses all round the year. The company aims to provide comfortable and affordable clothing for young working women.

R²N Clothing focuses on an effective supply chain strategy that helps in reducing risks, that are associated with acquiring raw materials and delivering products.The company chooses its suppliers based on efficiency, reliability and sustainability.

The production is set up strategically, with the products being placed within different countries, based on the environment of the country and the capabilities of the supplier.

Furthermore, our supply chain solution providers help us with the logistics; transporting our products

to the warehouses and distribution centers without causing any delay. This in turn, makes it a successful supply chain management system within our company.

COMPANY VALUES

COMPANY OVERVIEW

The company focuses on womenswear category, emphasising on woven blouses. The garments are designed to be essential pieces that can be worn all throughout the year. The focus is to create aesthetically appealing garments with minimal styling, besides being easy to wear and sporting a clean and neat finish.

The brand focuses in building customer relationships and maintaining transparency within employees, suppliers and its customers.

The company believes in choosing suppliers that have specific sourcing guidelines that is on par with that of R²N Clothing.

R²N Clothing reaches out to its target customers through department stores like Macy’s, JC Penney, Kohl’s and Belk.

VISION Our vision is to build relationships with our customers on a spiritual level. We aim to emerge as a transparent and ethical brand in terms of supply chain.

MISSION Our mission is to create wearable and cost efficient clothing for simplistic women. 7

TARGET MARKET

CORE VALUES

Our products mainly cater to women between 25 to 35 years of age, who are independent and working professionals. They like to keep

R2N Clothing

it simple and choose to wear our staple pieces, every once a while. Our quintessential target customer would possess a bachelor's

degree or a master's degree in any field, earning a monthly salary to sustain herself in the city. Name: Laura Parker

Creativity

Honesty

Environment

Team work

Respectful

Age: 28 years Location: New York Education: Masters in Interior designing

Communication

Perseverance

Personal growth

Spiritual growth

Occupation: Interior designer Salary: $80,000 Marital status: Single Interests: Reading, Music, Socializing, Gardening

SOURCING GUIDELINES

LABOR STANDARDS

CLEANLINESS

• No child labor

• Training to help manage hygienic practices

• Maintain appropriate working hours

• Increase the no. of bathrooms

• Minimum wages to be met

• Incentives for completion of projects

• Bathroom hygiene and regular cleaning

• Play area for laborer’s children

SAFETY

• Good lighting in working areas

• Fire safety

• Dress code(aprons/T-shirts) to unify everyone

• Transportation for laborers’ safety

• No discrimination

• Gloves for people working with dyes and harsh chemicals

ENVIRONMENTAL POLICY • Waste management : Segregating dry and wet wastes • Water management : Rain water harvesting • Minimizing usage of plastic

Incorporate earthen pots for tea/coffee

HEALTH • Free health check-ups AUDITS

• Recycling fabric wastes

SUSTAINABLE STRATEGIES

• To maintain company standards, rules and regulations

• Making use of biogas

• Money management and financial planning

• Solar and wind energy

• Financial training

PRODUCT LINE

STYLE #1 Women’s cotton blouse with 3/4th sleeves Colors: 4 Retail price: $29.99 Wholesale price: $15.99

STYLE #2 Women’s cotton off-shoulder blouse Colors: 4 Retail price: $39.99 Wholesale price: $18.99

STYLE #3 Women’s cotton sleeveless blouse Colors: 4 Retail price: $34.99 Wholesale price: $17.99

COUNTRY ANALYSIS

INDIA

INTRODUCTION

An in-depth analysis of India’s social, political and economic state becomes important before selecting it as a potential manufactur-

INDIA - INDONESIA - MALAYSIA

ing hub for our brand; R²N Clothing. Besides that, it is also crucial to see if the country matches our brand’s sourcing guidelines and is stable in the textile and apparel industry. We focus on maximizing our company’s profits, minimizing risks and achieving a stable and comfortable supply chain model.

COUNTRY TRAITS

POLITICAL

India - with a population of a billion and a quarter and an electorate of 814 million (2014) - is the world's largest democracy.

The Indian political system is a recent construct as compared to the American or British political system; dating back from India's independence from Britain in 1947.

The current constitution came into force on 26 January 1950 and advocates the trinity of justice, liberty and equality for all citizens.

The Constitution of India is the longest written constitution of any sovereign country in the world, containing 444 articles, 12 schedules and 98 amendments, with almost 120,000 words in its English language version.

The constitution of India has been one of the most amended national documents in the world with almost 100 changes. Many of

these amendments have resulted from a long-running dispute involving the Parliament and the Supreme Court over the rights of parliamentary sovereignty as they clash with those of judicial review of laws and constitutional amendments.

India's lower house, the Lok Sabha, is modelled on the British House of Commons, but its federal system of government borrows

from the experience of the United States, Canada and Australia. While the framers of the Indian constitution certainly had in mind this Anglo-Saxon idea of federalism, historically the central government has dominated over the regional states. The Constitution

actually refers to India as a "Union of states" and perhaps a better term - which is also used in the mainstream media - is quasi-federal system.

Central or federal -India has three branches of governance: the legislature, the executive, and the judiciary. The legislature of India

is the bicameral parliament, which consists of the upper house, known as the Rajya Sabha (Council of States), and the lower house,

known as the Lok Sabha (House of the People). The executive branch consists of the president, the vice president and the council of ministers (the cabinet being its executive committee), headed by the prime minister. India has a three-tier judiciary, consisting of the Supreme Court (headed by the chief justice of India), 21 high courts and many trial courts.

The Rajya Sabha meets in continuous session and, unlike the Lok Sabha, is not subject to dissolution. The two houses share legislative powers, except in the passing regulatory bills, where the Lok Sabha has overriding powers.

ECONOMIC SITUATION

GDP and growth rate - Overview

Financial sector reforms initiated in the early 1990s have had a positive impact on the functions of the Indian financial system. The

2005–07. Momentum slowed due to the global fiscal crisis, and the real Gross Domestic Product (GDP) slipped to 3.89% in 2008;

Overview

gross national savings rate was around 30% in 2013. However, most savings are still in low earning deposits, which is a cause for

concern. India’s banking sector is still dominated by public sector banks, although their share has been declining steadily with the emergence of private sector banks such as ICICI Bank and HDFC Bank. Lately, the economic scene has become very promising and the government is progressing towards more stability; with all the initiatives taken by the Prime Minister of India. Inflation

India’s inflation rate has among been the highest in emerging markets, which is also affecting the country’s economic recovery and constraining its sovereign rating. Consistently high inflation provides little room for the central bank to cut interest rate, which

keeps key interest rate on the higher side, thus acting as an impediment to growth. In 2015, the inflation was high at 5.8%. Inflation

averaged 8.8% during 2010–15, which is suggestive of the structural problems, apart from cyclical factors such as commodity prices, which keeps inflation rate on the higher side. In 2016, the CPI index is expected to grow by 5.69%.

The Indian growth story has seen various ups and downs. The economy witnessed robust average annual growth of 9.4% during

India was one of the few countries to sustain a healthy growth rate during the period, mainly due to strong domestic consumption and investment. Showing signs of a strong revival in 2009 and 2010, the Indian economy grew at 8.47% and 10.25%, respective-

ly. However, domestic policy paralysis on the part of the government and global economic uncertainty surrounding the euro crisis

caused the growth to slow down to 6.63% in 2011 and again to 5.61% in 2012. Poor economic growth continued in 2013, when the economy registered a GDP growth of 6.63%.

India’s growth rate came at 7.24% in 2014 and increased by 7.57% in 2015. However, with the new government investing on vari-

ous infrastructure projects and encouraging entrepreneurs to set up businesses, India’s growth rate seems to be promising. Marketline forecast suggest that the growth rate will remain above 7% at least till 2020.

GDP growth of India at constant (2011-12) prices in the year 2016-17 is estimated at 7.11 percent as compared to the growth rate of 7.93 percent in 2015-16. Quarterly GDP growth rates are: Q1 (7.2%), Q2 (7.4%), Q3 (7.0%). At current prices, GDP growth rates for year 2016-17 is 11.52%.

SOCIAL LANDSCAPE Overview

Almost 70% of the people of India live in rural areas; rapid urbanization is expected to cause socioeconomic problems in the coun-

try. Males have always dominated the sex ratio in India. The country has regularly introduced policies to control its growing population. India has a multicultural ethnic fabric, and its citizens have the freedom of religion.

More than half of the married women in both urban and rural areas are anemic, around one-third of the women are underweight, and around 40% of children under five are severely and chronically malnourished. The United Nations Development Program's

Human Development Report 2014 placed India 130th out of 188 countries in terms of human development, which is lower than the other BRIC economies and many poor African nations.

Social instability

In the nearly 70 years since independence, religious violence has claimed thousands more lives, including that of modern India’s

founder, Mahatma Gandhi, as well as Prime Minister Indira Gandhi. A recent Pew Research Center report on religious restrictions found India to have one of the highest levels of social hostilities involving religion in the world.

Even India’s current prime minister, Narendra Modi, has been dogged by allegations of religious intolerance, stemming from an-

ti-Muslim violence in the state of Gujarat in 2002, which according to some estimates killed as many as 2,000 people. Modi, who

was chief minister of Gujarat at the time, has been accused of not doing enough to stop the killing because he is leader of the Hindu nationalist Bhartiya Janata Party and the violence was perpetrated by Hindus against Muslims.

In 1951, India became the first country in the world to launch a family planning program to control population growth. Since then,

the program has undergone a variety of reforms. The major focus of the family welfare program shifted away from population con-

trol toward health care under the 10th five-year plan. It aimed to ensure that families had improved access to medical facilities and higher quality healthcare to enable them to achieve their reproductive goals.

Under the 11th five-year plan (2007–12), the Working Group on Population Stabilization was formed by the planning commission

with the primary objective of reviewing the current demographic projections for the 11th plan and beyond, by which time the country’s population is likely to stabilize, and to review the goals outlined in the National Population Policy of 2000.

The Indian pension reform saga began in 1998. The policy thinking on perhaps the most important second generation economic

reform for India originated with the Ministry of Welfare; later renamed the Ministry of Social Justice and Empowerment; which is responsible for the care and welfare of the elderly and vulnerable.

LEAD-TIME OF PRODUCTION

CULTURAL INSIGHTS

Lead time to export (days) in India was reported at 17.7 days in 2017, according to the World Bank collection of development indi-

When first meeting someone, it is common to be introduced to them by a third party. Indian culture places a great deal of impor-

from the moment it is initiated and runs until it is completed. If a procedure can be accelerated for an additional cost, the fastest le-

duced by a mutual acquaintance will stand you in good stead.

cators, compiled from officially recognized sources. Time is recorded in calendar days. The time calculation for a procedure starts

gal procedure is chosen. It is assumed that neither the exporter nor the importer wastes time and that each commits to completing

tance on personal relationships, and many business relationships will be built upon a personal foundation. Therefore, being intro-

each remaining procedure without delay. Procedures that can be completed in parallel are measured as simultaneous. The waiting

Due to the British colonial influence, handshakes are the standard greeting in a business environment. Be aware, however, that in

The conditions that may affect lead-time of production can be unforeseen public holidays, natural disasters like heavy rains during

open to try and see what is expected by the people you are meeting with.

time between procedures for example, during unloading of the cargo; is included in the measure.

the monsoon season that may lead to flooding, cultural nuances like that of Indian festivals like Diwali, Navratri etc.

a lot of situations it is not normal for men and women to shake hands with each other due to religious influence, so keep your eyes

If meeting with a group of people, be sure to greet each person individually rather than addressing them as a group. Due to the

influence of hierarchical Indian social structure, the oldest or most senior person present should be greeted first, followed by the

next most senior, and so on. When talking to Indian people, make sure to be aware of your body language, as much significance will be attached to it. Avoid "aggressive" postures, such as folded arms or hands on hips, and avoid putting your feet up on furniture or pointing them at another person, as, like the left hand, the feet are considered unclean. Be aware that sustained eye contact is not necessarily usual, especially when speaking to someone of a lower or higher status.

When negotiating agreements, expect there to be many rounds of back and forth. In India business decisions are rarely made quickly or lightly, so it is important not to get frustrated by any delays you experience. Titles are important in India, and as such people

should be addressed formally, i.e. title (Mr,Prof, Dr, etc.) and surname. Only use someoneâ&#x20AC;&#x2122;s given name if they have expressly given you permission to do so.

STATE OF THE APPAREL AND TEXTILE INDUSTRY

Indian spinning sector is highly advanced and competent globally in terms of price, quality and standards.

Textile and apparel sector contributes 14% to industrial production, 4% to India's Gross Domestic Product (GDP) and constitutes

The Indian pension reform saga began in 1998. The policy thinking on perhaps the most important second generation economic

Textile and apparel sector is the second largest employment provider in the country employing nearly 51 million people directly

responsible for the care and welfare of the elderly and vulnerable.

15% of the country's export earnings.

and 68 million people indirectly in 2015-16.

reform for India originated with the Ministry of Welfare; later renamed the Ministry of Social Justice and Empowerment; which is

Textile exports of India stood at USD 40 billion in 2015-16.

India's fiber production in 2015-16 is 9 million Tons in 2015-16 and is expected to reach 10 million Tons in 2017-18.

The total fabric production in India is expected to grow to 69 billion square meters(sq. mts.) by 2017-18 from 66 billion sq.mts. in 2015-16.

Apparel has contributed highest i.e. 42% to the textile and apparel export basket of India during 2015-16. Also, it is one of the focus areas of the Government of India as the sector has huge employment generation potential.

Currently, India's fiber consumption is cotton dominated contrary to the global trends. India offers huge scope for manmade fiber

and filament manufacturing. With the consumers becoming more aware about health and hygiene along with their changing preferences, consumption of manmade fibers is poised to grow in future.

SUPPLIERS ARVIND MILLS

Founded in 1931 by three brothers, Arvind Mills has long been a staple of the clothing industry in India, as a

manufacturer for high-end superfine fabrics in India. Arvind has dominated the market with brand names like

Arrow, Flying Machine, USPA, New Port, Mega Mart, and The Arvind Store. Over the recent years, Arvind has also diversified into other major segments such as fabrics, garments, advanced materials, chemicals and dyes, retail, engineering, telecom etc. ALOK INDUSTRIES LTD

Alok Industries Ltd is a vertically integrated textile company that provides end-to-end solutions through five

TRADE AGREEMENTS India does not have any free trade agreement with the United States. It falls under the U.S. trade preference programs such as the Generalized System of Preferences(GSP), which provides opportunities for many of the world’s poorest countries to use trade to

grow their economies and climb out of poverty. GSP promotes economic development by eliminating duties on thousands of products when imported from one of 120 designated beneficiary countries and territories.

core sectors – cotton yarn, apparel fabric, home textiles, garments, and polyester yarn. Alok has a large custom-

A ministerial-level meeting of India and United States Trade Policy Forum (TPF) helped both the countries to exchange views on a

major international brands. They have some of the world’s biggest retailers and India’s largest manufacturers of

facturing (iv) Intellectual Property.

er base including domestic and international retailers, as well as garment exporters in India and some of the apparel and home textiles. MADURA GARMENTS

Madura Garments Lifestyle Retail Company Limited; was founded in 1988 and is based in Bangalore, India. The

range of trade and investment issues: (i) Agriculture (ii) Trade in Services and Trade in Goods, (iii) Promoting Investment in ManuBoth the countries recognized that legal, financial, information technology, and accountancy services can be assets to Indian and U.S. companies and can facilitate growth in trade and investment. They also found the need to establish science and promote liberalization in these sectors.

company designs, manufactures, distributes, and retails apparel and accessories for men, women and children. It is known to produce shirts, trousers, jeans, blouses, tunics and winter wear. The company markets and sells its products through exclusive and franchise stores, multi-brand trade outlets, hypermarkets, and department

stores. They also make use of e-commerce for selling their merchandise. Madura Garments Lifestyle Retail Company Limited operates as a subsidiary of Aditya Birla Fashion and Retail Limited since 2016.

RISKS AND BENEFITS The benefits would be cheap labor, skilled labor, easy and cost-efficient procurement of raw materials.

With the prime minister of India, Narendra Modi supporting "Make in India" concept, this would boost any business.

The risks would be the changes in the value of the currency/ exchange rate. Competition from other manufacturers and those countries that have a free trade agreement with US.

CONCLUSION It is important to consider the political, social and economic status on India, understand the strength of its apparel manufacturing and textile industry before choosing to manufacture our products.

INDONESIA Indonesia, one of the most beautiful country is located in the Asian continent. It is a Southeast asian country. They have the largest economy amongst the other Southeast Asian countries. They are known for their tourism and one of the most exotic place to vis-

it for a calm and a peaceful holiday. Indonesia comprises of luxurious forests and resorts attracting more and more tourists every

year. They also have a very fertile land apt for rice cultivation, which is also the staple food of Indonesia. In spite of being an Islamic

country, they are known for their beautiful Hindu temples. Tourists specially fly to Indonesia to experience the life at these temples, where meditation is still being practised by the yogis. This country is blessed with a coastline of 54,720km, which makes it easier for trading, attract tourists and farming of fish and prawns.

This culturally diverse country is best known for its tourism, spas and relaxation for a holiday. They are also home to many manufacturing units mainly because of their lower currency exchange rate and labor costs. Apart from being blessed with nature, Indonesia has maintained good relations with the strong and influencing countries in the world like United States, Australia, United Kingdom etc helping them in terms of business and growing its economy and also providing security for their nation.

This report mainly focuses on analyzing the textile and apparel industry in the country and whether the conditions suppo

Indonesia is blooming in the textile and apparel industry which makes it one of the countries to be considered for Global sourcing

strategy. The country has its own ups and down and mainly due to the socio-eco-political reasons and they are further explained in

detail in the report. For R2N clothing, Indonesia is definitely a consideration mainly due to low cost of labor and their advancement in the export market for apparel and textile industry over the years.

COUNTRY TRAITS

COUNTRY STABILITY POLITICAL

Indonesia is a democratic nation with Joko Widodo as the president elected in 2014. Till 2004, people did not elect the president

but since then the president is elected for a five-year term. Indonesia faced a lot of corruption and was not politically stable during

the time of Mr. Suharto, who was in power for almost 30 years. It was in 2014, when a very competitive election took place and Mr. Joko won the elections, leading the nation to a model for a fair transfer of power . Till very recently Indonesia was struggling with

direct and indirect elections, mainly due to certain influencing people in the country, which was affecting the business due to their corrupted scandals. The country faces a major problem with the corruption among the politicians, policemen and bureaucrats.

Their relations with the ASEAN countries is weakening because of their increasing future aspects with the EU market. They are also politically strengthening their ties with India, Singapore and Australia for expansion of their business. The political situation is getting better with the new government which should bring in more opportunities for Indonesia specially in the apparel sector. ECONOMIC

Due to increasing export, manufacturing units has provided employment to citizens of Indonesia. The unemployment rate has drastically reduced over the years which recorded reduction of unemployment by 5.9% in 2015. There is a growth of GDP seen through the years. According to the world bank, there is an increase of 1% in GDP every year. In the export sector, the country is doing very well under Apparel and Textile industry, but has drastically affected their agricultural export business. Indonesia has to work on

certain aspects like increasing the size of the ports, power infrastructure, logistics as that is a hindrance for keeping up with the customer demand. Tax effort of the country is very low compared to its peer countries. Indonesia fears from losing the manufacturing

base for foreign countries, due to RCEP (Regional Comprehensive Economic Partnership). Indonesia emerges as the fastest growing economy globally and ranks 16 in the GDP among 203 countries around the world.

The tax burden in the country is very high and rising, which creates a barrier for the economic growth of the country. The individual

income tax rate is 30% and corporate tax rate is 25%. The overall tax burden is around 10.9% of the entire domestic income. The

country is working hard and successfully achieved a very low unemployment rate. They majorly focus on their export market from where the major economy has increased in the recent years. Indonesia recorded a growth of 1.2% q-o-q in Q2, 2017.

SOCIAL

Indonesia is a developing country but still faces a problem with the poverty. Government is working for reduction of poverty by

various development programme. Indonesia is ranked 110 in terms of human development. One of the major problems faced is the

religious sensitivity. Majority of the population is Islam and fear from the terrorist risk. There are a lot of differences due to various

religions and thus to overcome this issue, citizens of Indonesia are promoting ‘United Indonesia’ by a peaceful rally. The country has majorly middle class population but still has a vast population of lower income group. 30-34 age group is the highest earning population of the country, contributing to the highest gross income levels.

The youth of the country is changing and adapting more to social media and technology. As aresult, they working towards the deCURRENCY EXCHANGE

1 U.S. dollar = 13,516.500 Indonesian rupiah (as of 10-10-17)

velopment of their country. ‘Batik’ is a traditional dyeing technique from Indonesia and the youth is taking efforts to sustain the

traditional technique. Fashion designers are using this technique as an inspiration for their designs. The development of the youth

has impacted the growth of the country vastly as they focuses more on education, which results in more work force and resulting in higher economy for the country. They are constantly fighting to help their country grow socially and economically.

LEAD TIME PRODUCTION Majority of population in Indonesia is Muslim, thus Idul Fitri (Lebaran) marks the most important festival of the country. In 2017,

the festival of Ramadan occurred in May-June. But the dates vary every year according to their auspicious time. Business is mainly

affected during Ramadan as followers are expected to follow certain rituals like no smoking, drinking, fasting during certain hours,

no chewing gum. The productivity during these days decreases drastically. Because of the uneven eating habits observed during the festival, the laborers do not have a lot of energy to work in comparison to rest of the year. This festival goes on till one month affecting the business by 30-35% every year. Around 15 holidays during the entire year are assigned. Labor’s day holiday is an essential holiday for every industry. These holidays do not affect the production as much as the festival of Ramadan affects the business.

CULTURAL INSIGHTS Javanese are the major population of Indonesia. Indonesia is a very culturally rooted country and believe in preserving them. They

love to express themselves and wear the traditional Indonesian outfit. The people of Indonesia believe in harmony and respect rela-

tions over profits. Respect is an important virtue and followed by all, specially when it comes to superiority in terms of age. Men and women have to follow certain etiquettes in terms of work. Since it is a muslim dominated country, women are seen wearing veils. Women are not allowed to wear sleeveless or any garment which shows their skin. Even the workers in the factory, specially the

women have to wear veils, which they call the ‘hijab’. Indonesians follow a certain etiquettes and expect the other other countries

to follow them, when they are doing business with them. English is the language used majorly for business internationally, however it is recommended to learn Bahasa if you want to know the local business and their lifestyle. They are very calm, peaceful in nature

and avoid arguments, however women and men are not allowed to come very close and touch in public. They greet with a ‘selamat’ and hand shake with only their right hands. Till a woman approaches for a handshake, a man should not greet with a handshake.

Eye contact for a longer time should be avoided and never chew a gum. Indonesians are not quick decision makers and take time in terms of business. They believe in building relations first and then going ahead with the deal.

Establishing a business in Indonesia is relatively easy, provided their code of conduct is taken seriously. While conducting a business Natural disaster is another factor that Indonesians have to face. Volcanic eruptions, Tsunami, earthquakes and floods are very com-

mon to the country. Due to natural calamities, sometimes the lead production is affected due to delay in shipments or the goods are unable to be released from the ports. Majorly the goods are shipped by seaways, since Indonesia has a huge coastline the shipment is highly affected by natural disasters like Tsunami.

in a country like Indonesia, it is important to know their traditions. A female representative can be send from the buyers end along

with male representative so that it is much more comfortable for them to work with their suppliers. A hierarchy is for sure observed within the country. It is not only the government but the influencers of the country have a lot of contribution. Hence the buyers

while conducting a meeting make sure they are addressing the correct people and know major salutations mainly followed by Muslims, as the majority of population is Islamic.

STATE OF APPAREL AND TEXTILE INDUSTRY

SUPPLIERS

The textile industry is an important sector when it comes to export. Indonesia comprises of many manufacturing units with United States and Europe being their major market. US and Europe buyers are dealing with suppliers in Indonesia which has resulted in increase of export business.

The Y-O-Y of apparel and textile in 2016 was 4.5% and it is forecasted to increase to 12% in 2021.

PT Makalot Industrial Address: Kawasan Berikat Nusantara, Blok C Unit 24, Cilincing, RT.2/RW.1, Sukapura, Jakarta Utara, Kota Jkt Utara, Daerah Khusus Ibukota Jakarta 14110, Indonesia Website: http://www.makalot.com.tw/eng/about_3.aspx Customers: J. C.Penny, Macy's, Under Armour, vf, Hanes

Busana Apparel Group Address: AXA Tower 41st Floor, Kuningan City, Jalan Prof. Dr. Satrio Kav. 18 Kuningan,Setiabudi Jakarta 12940, Indonesia Website: https://www.busanagroup.com/ Customers: Ann Taylor, Anthropologie, J. Jill, Calvin Klein Indonesian market has grown in the recent years due to increasing number of manufacturing

Units. Firstly, the currency exchange is very low, which helps for cost reduction of the garments. Their wages are very low and are

the fifth lowest in Asia. In the recent years there has been a rise in their wages but not sufficient for their living. The wages for a low skilled worker is around $6-7 per day. The workers are paid weekly bases. Indonesia does not have a lot of transparency in their supply chain and that proves as one of their weaknesses. The workers are not provided with health and safety to the level they should be provided. The sourcing guidelines by the buyers has helped the country function better in certain aspects.

PT Pan Brothers Tbk Address: Jl. Perjuangan Raya No.88, RT.11/RW.10, Kb. Jeruk, Kota Jakarta Barat, Daerah Khusus Ibukota Jakarta 11530, Indonesia Website: http://www.panbrotherstbk.com/ Customers: lacoste, tommy hilfiger, prada, ralph lauren 39

TRADE AGREEMENTS

TRANSPORTATION

Indonesia is the 35th country of export for the USA. Goods imported includes plywood, textiles, oil, gas, rubber. Out of the entire

textile manufacturing, 60% is exported to the United states. USA is the 5th largest import market for Indonesia. Customers include

Old navy, GAP, Kohlâ&#x20AC;&#x2122;s. There is no free trade agreement between the US and Indonesia. Both the countries share good relations with each other and are recently working on 11 more treaties for a better trade. The vice president of Indonesia (Jusuf Kalla) and Vice

president of USA (Mike Pence) recently met to come up with new trade agreements with each other. Both countries have a very good bound and it is beneficial for both the countries to trade with each other. The labor cost of Indonesia is very low and it works very

well for the buyers in the United States. Terrorism is one of the weakness of the country and USA was hesitant in signing any bonds. Another issue observed was corruption and intransparency in the supply chain. Indonesia is also a part of the ASEAN countries to carry out trade but they are facing few issues currently. Indonesia is also eligible beneficiary country for GSP (Generalised System

of Preferences) but does not trade with US for textile and apparel sector. Indonesia is a part of TPP (Trans-Pacific Partnership), but recently they have declared to not be a member because of the elected US president Mr. Trump. Indonesia is developing trade relations with India, Singapore and Australia to venture more in the textile industry.

RISKS AND BENEFITS Indonesia one of fastest growing economy amongst the Southeast Asian countries. But trading with this country comes with some risks and benefits. The Government of Indonesia is not very stable and a lot of ups and down are seen. Since Mr. Joko Wildodo is

elected as the president, country has seen immense growth. Buyers are skeptical in investing because There is also fear of terror

attacks, which the country has faced before and also destructions caused by natural calamities. There are many other benefits to

carry on business with this country. The culture of Indonesia is very rich and they believe in following etiquettes. It is not very diffi-

CONCLUSION

cult to do business with people of Indonesia. Also the labor cost is very low. It is very beneficial if your company believes in cost

reduction as they have a very low currency exchange rate. Indonesiaâ&#x20AC;&#x2122;s risk rating is A4, which falls under Acceptable risk. Also, in

Indonesia, a very beautiful country and not very large in area, has shown some commendable growth in these recent years. They are

terms of Business climate rating it is ranked B, which falls under Acceptable risk.

involved in many export activities. Their GDP is forecasted to increase in the coming years. Apart from Apparel and textiles, they are very rich in natural resources. Indonesians were affected by an unstable government few years back, but the scenario is changing. The youth is emerging in various activities and striving for development of their country. They have a very good literacy rate and

believe in education of both men and women. They do have cultural influences on their business behaviour. Establishing business in Indonesia is relatively easy but there are a lot of risks involved to. They are very calm to work with and believe in building relationships with their business partners. There is a lot of potential in this country in terms of location, hard working labor, ports, climate

and availability of resources. They are also trying to build relations with other nations for a duty free trade and specially striving for a free trade agreement between Indonesia and United States.

MALAYSIA

COUNTRY TRAITS

The Malaysian government believes that the textile and apparel industry is one of the most promising industries. Malaysia is located in the core region of Southeast Asia, guarding the vast economic and military value of the Malacca Strait. Unique port locations such as the port of Penang, Port of Kando, Johor's port of JoĂŁo del Rey in Johor, contribute to the further development of export-orient-

ed countries. The United States, Japan, and Turkey are the three major export destinations in Malaysia. The United States remains the main export market for Malaysian textile products, accounting for 16% of total industrial exports. Maintain and actively seek

business cooperation with foreign enterprises to carry out new R & D activities to further enhance its competitiveness in the global market. This survey combines the status quo of the industry, suppliers, trade agreements, risk judgments and other analyze the Malaysian textile industry.

COUNTRY STABILITY

ECONOMIC

Malaysian country universal currency is ringgit, in the international abbreviation for the RM. In 2017, the growth rate of GDP in Malaysia is expected to rise to 5.8%, and the first quarter climbed 5.6%. The global economy continues to strengthen, and the growth of countries becomes more synchronized. Global trade has rebounded sharply. In developed economies, consumption and investment continued to improve. Ringgit has been strengthened to reflect the high degree of flexibility in financial markets better.

The potential risks to Malaysia's economic growth are mainly external risks, which is due to the threat of US fiscal stimulus and

trade protectionist and the potential volatility of global commodity prices. In the textile industry, Malaysia has seven bilateral free trade agreements (FTAs) with TPP countries: Japan, New Zealand, Australia, and Chile. TPP will increase the two countries - the

United States and Canada which is associated with the textile industry. The Malaysian textile industry has been around for many

years. Local suppliers are contract manufacturers of many high-end global brands such as Nike, H & M and Under Armor. TPP pro-

vides Malaysian exporters with a more considerable advantage than non-TPP countries by eliminating most of the tariff and non-tariff barriers. For example, the cost and price of the export commodity. As foreign investors are competing to invest in new plants, POLITICS

especially in capital-intensive activities, Malaysia is expected to invest heavily.

Malaysia is composed of 13 states of constitutional monarchy. Since the election, due to different opinions and the emergence of

In order to keep up with the pace of fast-growing

larger than ever, coupled with strong and nationalist rights, the interests and expectations of developing countries, and advocacy

has taken the attitude of foreign direct investment.

political parties for the development of multi-party system. In recent years, Malaysia's foreign policy position has begun to be much for active cooperation. With the Media coverage of national politics has increased significantly, making politics more transparent to

citizens. Allegations of corruption by the Prime Minister of Najib Razak from state investment funds are still under investigation. Religion, political manipulation and preferential policies are widening the cultural divide between Malaysiaâ&#x20AC;&#x2122;s ethnic groups and could

be hindering the nationâ&#x20AC;&#x2122;s chances of unity as the next general election looms. The negative results of these investigations may leave Malaysia in a state of political turmoil. Regional cooperation is the cornerstone of Malaysian foreign policy.

neighboring countries, the Malaysian government

These include tax incentives and non-tax incentives such as grants and "soft loans". Through active

intervention and consultation in employment, to

help avoid unequal treatment of employees in their work.

SOCIAL

LEAD-TIME OF PRODUCTION

Malaysia is a multicultural society and the population is expected to increase from 28.6 million in 2010 to 41.5 million (2040).

But the population growth is slow, and the annual population growth rate had declined from 1.8% in 2010 to 0.8% in 2040. The

race retains their religion, customs, and lifestyles like Racially charged rhetoric has characterized politics in this multi-ethnic and

multi-religious country ever since its independence from Britain more than 50 years ago. It is essential for manufacturers to have a comprehensive understanding of multi-ethnic and multi-religious. Social factors also have a profound impact on industry and profitability. For example, the improvement in the level of education has a direct effect on the efficiency of the employee. This shows

by The government provides six years of free primary education, five years of free education in secondary schools. In Malaysia, in

addition to the protection of the employment law, the employment relationship also accepts the contractual agreement between the employer and the employee.

The factors that may influence the lead-time of production are the natural disasters and cultural nuances. About Natural conditions

Malaysia still needs to continue to develop technology to help them get more opportunity into the international market. And the

is high and mostly in the summer. So the Floods is the main cause of damage to the manufacturing sector in Malaysia, accounting for

Technology:

technical support that makes Malaysia become an attractive place for the foreign investor to do business. The technology factors

affecting the apparel industry include resource availability and production technology. Such as company provides information tech-

nology and automation solutions for apparel manufacturers or company use the 3D digitalization technology which has become the

company's strong selling point. Technology transfer will affect cost, quality, and lead to innovation. For example, some raw materials (such as leather or organic fabrics) may force manufacturers to spend more time and human resources in the procurement process. This may increase the cost and price of clothing. Also, Garment companies may add more advanced equipment to the plant, which grows product costs or force companies to fire some workers.

affecting pre-production include Floods, Tsunami, Landslides and so on. As Malaysia is in tropical climates, the frequency of floods

most of the western part of the country. The direct effects of floods include casualties and destruction of buildings. Damage to infrastructure can often cause damage to power transmission and power generation systems. Floods have an enormous impact on the

production and inventory and equipment. Malaysia is located outside the Pacific Seismic Zone, a safe location to avoid the destruc-

tion of volcanoes and earthquakes. However, the activities of the volcanoes and earthquakes in the nearby state will have an indirect impact, such as the 2004 tsunami in South Asia. Floods, landslides, and tsunamis have a direct impact on the production of the company's transport, including shipping through airport and port. Malaysia has a total of 11 days of public holidays. The government obliges five days that everyone needs to take which is Independence Day, Supreme Head of State, ruler or state head of the birth,

Labor Day and Malaysia Day. Another six days will agree by the employ and employee. This also means that the statutory festivals, the enterprise's productivity will be reduced or stopped.

CULTURAL INSIGHTS

• The Malaysians shake hands with each other, and then touched the chest with both hands to show their sincerity. Malay men do not take the initiative to shake hands with the women unless the women shake hands forwardly.

• When you greet or deliver something, remember not to use your left hand, because it is an insulting meaning; the Malays think The left hand is considered to be dirty. Therefore, the right hand is applied to deliver something.

• Malaysians do not ask the guests to give gifts. If the owner provides the gift like some daily food such as coconut, betel nut, bananas, cakes, biscuits, candy, it will be ok. Cause it said close friendship, the host will be happy to accept.

STATE OF THE APPAREL AND TEXTILE INDUSTRY Malaysia is export-oriented country, which also help the textile and apparel industry growth. This prompted the industry to meet the needs of the global market to expand and innovate. So far, the main export destinations of the industry are the United States,

Japan, Turkey, Indonesia, and China. the export of the textile and apparel industry is located within peninsula Malaysia, the cut and sew knit industry is in the South, and the woven apparel industry in the north.

• Malaysia has many festivals because of the diversity of religions, cultures and customs of multi-ethnic countries. National holidays are settled. The government announces the specific dates of unsettled festivals in the previous year.

• Malaysians tend to rely on nonverbal communication (facial expressions, intonation, body language, etc.) to express themselves. Silence is an essential element of communication in Malaysia. They usually ask for a brief pause before answering the question, which shows that they are thinking and considering how to respond.

• When scheduling business meetings in Malaysia one must take into consideration the importance of prayer times in this pre-

dominantly Muslim country. Fridays are a particularly religious day of the week and if possible meetings should not be scheduled for this time.

• In keeping with Malaysian culture, titles and job descriptions play a significant part in many Malaysian companies. They are important for employees in order to emphasize the line of authority within the business.

• Business cards are customarily exchanged after an initial introduction in Malaysia. Since a large proportion of Malaysian business people are Chinese, it will be useful if your card is printed in both English and Chinese and that details of your education, professional qualifications, and business title are included. Cards should be presented and received with both hands.

"Made in Malaysia" products access to excellence in quality, reliability and timely delivery of recognition in the global market. The

Malaysian textile and apparel industry has proven its ability to be an industry with great potential. The textile and apparel industry

is one of the fastest- growing industries in Malaysia. The Extensive activities including spinning, texturizing, weaving, knitting, printing, dyeing, finishing and garment-making as well as manufacturing various industrial textile products, garment accessories, fishing nets, gloves, bags, hats, carpets and textile machinery and equipment.

FUTURE OUTLOOK Until the year 2020, the Malaysian textile and apparel industry is expected to grow rate 6.3% per year, reaching the US $ 7.5 billion one year by government support and technology development. The textile and apparel industry will become a vital development industry in Malaysia, and textile and apparel will continue to be a significant export product. The Malaysian government plans to

step up efforts to promote the textile and apparel industry through some initiatives. First of all, the government helps the textile and apparel industry to increase investment in high value-added products. The industry has also implemented latest automation and

technology in its manufacturing and distribution, while actively seeking business collaboration with foreign companies and under-

The labor issue force prompted Malaysia to introduce a minimum wage system. The textile industry has become one of the most af-

fected industries. As the large-scale and manufacturing-intensive industries, the Malaysian textile industry's current minimum wage is 3107 dollars which has been higher than another country like Vietnam and China. Wage system is a guarantee for the employee.

But for the textile and apparel manufacturers, the minimum wage system raises labor costs for the product. The Malaysian government has put forward a series of textile and apparel industry plans, from the design strength to the improvement of printing and

dyeing technology to find new opportunities. Malaysia textile and apparel industry will provide high-quality products and services. By using their advantages, focusing on the production of high value-added products to meet consumer demand, to maintain strong growth in exports.

taking new R&D activities to further strengthen its competitiveness in the global market. Continue to attract investment projects, to maintain market share, to promote exports.

Second, the government encourages the textile and apparel industry by IMP3 to expand its existing markets and open up new markets actively such as Japan, the United States, Canada, the European Union, West Asia, Africa and Latin America. For example, more and more Malaysia manufactures establish some overseas distribution centers to strengthen market share. It enhances the ability

of manufacturers to meet the right buyers; international trade fairs, inviting foreign fabric and clothing procurement group to visit;

collaborate with the International Fashion Center to promote the brand; Free trade agreement to enjoy market incentives; to attract procurement agents to set up offices. The third move to strengthen regional integration. The government encourages the Malaysian textile and apparel industry to accelerate the combination of the region's textile association. Cooperation with regional association helps reduce non-tariff barriers and harmonize tariff procedures and improve export efficiency.

TRADE AGREEMENTS

SUPPLIERS WITHIN THE COUNTRY RAMATEX BERHAD The company manufactures yarn and garments, as well as knits, dyes, and prints fabrics. They provide a vertical intergraded system and produce yarn and various types of garments, as well as engages in knitting, dyeing, and printing of fabrics. Ramatex has taken care to ensure its manufacturing processes embrace environmental protection, create a more sustainable approach to our high-quality production by minimizing energy usage, adopting waste & water recycling and using organic materials & approved chemical dyes only.

PERUSAHAAN CHAN CHOO SING SDN. BHD. The group product the man and women Apparel and Accessories. It has become a favorite apparel supplier in the United States, Europe, Canada, Japan and South Asia, which puma, guess, sears, Adidas, and gap are the Customer of their US business. their total production capacity is 150,000 dozen garments per year with a totally integrated supply process for their customers. In the future strategy, the Group always believe in technology advancement. Therefore, our factories are well equipped with the necessary tools in every stage of job processing. Malaysia Not have the free trade agreements with USA and EU. However, Malaysia signed and implemented 7 bilateral FTAs with

HONSIN APPAREL SDN. BHD.

Japan, Pakistan, India, New Zealand, Chile, Australia and Turkey. And Malaysia is a Member of the ASEAN, TPPA and TIFA. This rela-

This company specializes in manufacturing and exporting international branded sportswear. They are cer-

is expected to be the biggest gainer from those trade agreements. Elimination and reduction of duties by TPPA partners for textile

things that they provide Apparels Retailing Business & Advertising Business for their consumers.

tionship benefits Malaysia will have access into new markets like the US, Canada, Mexico and Peru. the textile and apparel industry and apparel products will provide better market access to new markets.

tified as an ISO 9001:2008 organization to work with nike, under armour, asics and others. The important

TRANSPORTATION RISKS AND BENEFITS There are seven significant seaports in Malaysia which is Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port, Penang Port,

RISKS

and Sarawak respectively. In recent years, the port of Malaysia has improved transport infrastructure, operational facilities, and con-

• Floods, earthquakes, landslides and other natural disasters have a direct impact on production and transportation.

Bintulu Port and Kemaman Port. Meanwhile, the ports in Sabah and Sarawak are under the jurisdiction of the Government of Sabah tainer planning strategies. It helps efficiently improve the container port system to enhance competitiveness.

• Multiculturalism creates cultural shakes between local and foreign.

• It has not completed free trade agreement with the United States and still has some trade barriers.

• There are unstable factors between Government and society, and corruption scandals may affect business activities. • The labor shortage in the manufacturing sector has led to rising costs

• The demand for physical and mental health of the labor force is improved BENEFITS

• Malaysia is a multicultural country that offers more creativity and design in manufacturing. • Textile and apparel industry is one of the oldest and largest industries in Malaysia. • Unique island terrain to improve the convenience of transportation.

• One of the members of ASEAN, enjoying a beneficial trade agreement with neighboring countries.

• One of the members of the TPP for the elimination and reduction of textiles and apparel products into new market barriers. • Industry competitive advantage is shown in high-quality products.

• The Malaysian government plans to take decisive measures to promote the development of the textile and apparel industry. • The textile industry implements structured human capital management with the help of the government.

CONCLUSION Malaysia textile and apparel industry have a good prospect in the future. The growth of Malaysia's textile and apparel exports has been boosted by the growing global demand for quality textiles and clothing in Malaysia and the increasing purchasing power of

major importing countries, the United States, EU countries and Canada. The balance of trade agreements in Malaysia will improve

the textile and apparel industry and help garment manufacturers to create more profits and jobs. And The government supports the

development of the textile industry and offers a variety of preferential policies for the investment of human-made fibers, cotton, and other functional textiles. It Strengthening the investment of high-tech and high value-added products to create the conditions for foreign-funded enterprises to invest. Which also made the rapid development of the Malaysian textile industry.

SOURCING STRATEGY

OVERVIEW

R2N Clothing, which are producers of cotton blouses for women, did a thorough analysis of the countries and suppliers that match the companyâ&#x20AC;&#x2122;s product offerings and sourcing guidelines. With a holistic consideration of the business environment of a country,

R2N Clothing has resorted to manufacture its products with the most suitable supplier, that can help minimize risks and maximize

profits. The socio-economic and political stability of a country along with the capabilities of a supplier were one of the many factors that were considered by the company. The aim was to choose a supplier who could help minimise lead time, be cost effective and maintain high quality.

INDIA SWOT ANALYSIS

The SWOT analysis shows that Indiaâ&#x20AC;&#x2122;s major strength lies in the availability of raw materials, low labor costs and vertically integrated suppliers. The weaknesses include lack of infrastructure and technology. Although India has the potential to develop innovative

and performance oriented textiles and expand its global presence, it faces a great deal of competition as companies have a tendency to shift their manufacturing orders to low cost producing countries/ geographically closer countries.

INDONESIA SWOT ANALYSIS

Indonesiaâ&#x20AC;&#x2122;s strengths lie in low labor and production costs. It is a technologically advanced country with a high literacy rate. The

country has an unstable government and holds no trade agreements with the United States. Indonesian suppliers are not vertically integrated and thus, is dependant on other countries for raw materials. Besides that, its geographical location being far makes it

have longer lead times for any production. However, the business environment is good and easy to conduct any business, especially in the textile industry as it seems to be very promising. Natural calamities and corruption are some of the threats for the country.

MALAYSIA SWOT ANALYSIS

Based on the SWOT analysis, Malaysia has the ability to produce a variety of high quality apparel; suitable for all markets. Although it is technologically advanced, there is a lack of raw material and skilled labor. The Malaysian Government supports the textile

industry and has a growing economy, however the political instability, rising labor costs and the high rate of natural calamities are a major concern to establish a business.

COUNTRY RANKING India, Malaysia and Indonesia being Asian countries have distinct work ethics and a stable business environment. Based on as-

pects like business climate, government risks, socio-economic and political situation, cost, location, textile industry and sourcing

guidelines; the countries were compared and ranked. These rankings helped R2N clothing to understand the country in depth and

choose a suitable country for the production of the products. Overall, Asia in general promises to be a good place to establish a business model.

Based on the research conducted, the three different countries were compared and ranked, considering different parameters. It was noted that none of the three countries had signed any trade agreements with the United States.

The textile industry in India seems stronger than that of Indonesia and Malaysia, although it has a more promising business cli-

mate. With the Indian government becoming more stable by the day, the textile industry seems to be flourishing like never before.

On the other hand, Indonesia and Malaysia have a fairly unstable government, however, the former has a more stable textile industry. The labor costs are the least in Indonesia with easy availability of skilled labor.

Based on the rankings, R2N clothing has decided to manufacture majorly in Indonesia due to its shorter lead times and skilled low

cost labor. A fairly small amount of production has been assigned to the supplier in Malaysia; keeping in mind their capabilities and performance.

SUPPLIER SELECTION - INDIA

SUPPLIER SELECTION - INDONESIA

SUPPLIER SELECTION - MALAYSIA

ARVIND MILLS, INDIA

The SWOT analysis clearly reveals that Arvind fabrics are in demand due to its high quality and are exported to the US, Europe,

West Asia, the Far East and Asia Pacific markets. Arvind focuses on research and development besides abiding by its strict sourcing guidelines. The company takes up a lot of strategic initiatives to create a sustainable future for the next generation. Over the years,

Arvind has been majorly focusing on cotton and denims, and the company has a great potential to venture into unconventional and new fabrics, thereby expanding their customer base. Arvind faces a major threat from other vertically integrated suppliers within the country.

PT MAKALOT, INDONESIA

RAMATEX BERHAD, MALAYSIA

PT Makalot Industrial is one of the leading suppliers in Indonesia. They have achieved shorter lead times and have been recognised

Ramatex Berhad is the largest integrated textile and garment organization in Malaysia. The company produces yarns, knits, gar-

sourcing guidelines. They offer multiple services like embroidery, 3D pattern making etc however, their major weakness lies in

not upgraded.The company has a great potential to develop new dyes and explore their textile offerings. As the Malaysian govern-

for the same, by their buyers. They focus mainly on quality and building customer relationships which forms the basis of their

having to import raw materials from countries like China and Vietnam. They see opportunities in exploring into more apparel cat-

egories and providing advanced services. Suppliers within the country that manufacture similar apparel products are their biggest threat.

ments, and also offers printing techniques and dyed fabrics. The main weakness lies within the companyâ&#x20AC;&#x2122;s infrastructure which is

ment controls power supply, the company does not get power supply on certain days. Besides the competitive market, this acts as a major threat as the company can never assign overtime during times of high production.

SUPPLIER OVERVIEW AND SELECTION: A couple of well known suppliers were chosen based on their overall performance.The chosen suppliers in these countries have

a wide customer base in the domestic and the international market. Suppliers were ranked based on their capabilities, reliability, sourcing guidelines, services offered, customer base, quality, lead time production and logistics.

Arvind Mills Ltd. is a leading manufacturer and one of the largest cotton and denim producers in India. They are known for its high

quality fabrics, shorter lead times, and services offered. It is vertically integrated and offers a lot of value added services. Arvind also focuses on strategic initiatives that aim to create a sustainable future.

On the other hand, PT Makalot Industrial is a leading supplier in Indonesia; which specialises in casual tops, sleepwear and activewear. The company focuses on achieving shorter lead times and produces high quality products.

It is cost effective as Indonesia has skilled low cost labor. Besides that, the company has set up healthy sourcing guidelines and pay

Ramatex Berhad is one of the leading garment organizations in Malaysia that demonstrates an integrated supply chain system.The

They take great pride with the numerous certifications that they have earned from their buyers for being a reliable and a trusted

tions itself as a socially responsible company, involving in initiatives like waste water management and recycling of garments. They

heed to building good customer relationships. supplier.

company is known to produce yarns, knits, garments, and also offers various printing techniques and dyed fabrics. Ramatex posi-

focus on delivering high quality products and give a lot of importance to the development of their laborers. They organize regular

healthy checkups, ensure their safety, and even offer learning opportunities to their employees as they believe in the overall growth and development of their organisation.

PLACEMENT OVERVIEW PLACEMENT 1 After conducting a thorough research on the countries, namely; India,

Indonesia and Malaysia; and their suppliers, R²N clothing has decided

to base their manufacturing in a particular country considering parameters like; cost, quality and lead time. All the top three suppliers from

these countries were assessed and a single supplier was selected from each country. The suppliers were later ranked according to R²N clothing’s production distribution.

In our first placement, the styles were distributed among the three countries with respect to the cost of each garment. Style 1, was

entirely placed in Indonesia, as the cost of each unit was the least for this particular style, compared to the other two styles. On the other hand, 56% of the total production of Style 2 was placed in India and 44% in Malaysia. Although the costing for style 2 was

higher in both these countries, it still had a benefit of being vertically integrated. More percentage was dedicated to India because

they have shorter lead times as the distance is closer to the US. 44.5% of style 3 was placed in India while 55.5% was placed in Indonesia. The low cost per unit and the high wholesale margins, were the main reasons for assigning a higher percentage to Indonesia, however there are a lot of other risks involved which can affect the production.

A production capacity of 1 million products were distributed amongst different countries , over a time period of 12 months.

Out of the total production, 45% of the production was assigned to

Indonesia, 35% to India and 20% to Malaysia. Several different trials were conducted before finalising a suitable placement strategy. The

production distribution was based on the capabilities of the suppliers

and the product requirements and sourcing guidelines of R²N clothing. 77

PLACEMENT 2 In our second placement, 40% of style 1 was placed in Indonesia and 60% in Malaysia, because of the low cost of production in

these countries. For style 2, the production is carried out in all the countries, with the highest being in Indonesia; which is 56% of

the total production for style 2. For style 3, the production is distributed amongst the three countries with the highest being in India, followed by Malaysia and Indonesia. Although Indonesia has low labor costs, the fabrics are imported from other countries, which

results in the increase of the fabric costs besides increasing the production time. On the whole, 35% of the production was allocated to Malaysia, 34% to Indonesia and 31% to India. Indonesia and Malaysia have quite a lot of similarities in terms of risks, distance

and business climate, but malaysia is well equipped and have their own raw materials, unlike Indonesia. India; comparatively, has

been assigned less production due to its high labour costs; despite having a better textile industry and a more vertically integrated system.

PLACEMENT 3 After a couple of trials, the products were placed in these countries based on the cost, lead time and quality. All the suppliers had to meet the sourcing guidelines set by RÂ˛N clothing. 26.7% of Style 1 is placed in India, 33.3% in Indonesia and 40% in Malaysia. Style 1 is comparatively a simple blouse and can be manufactured in Malaysia, where there are not many skilled labor. Low costs led to the placement of products in

Indonesia; whereas a more vertically integrated system and lower risks were reasons to place products in India. For Style 2, 28% of the products were placed in India, 40% in Indonesia, 32% in Malaysia. Style 2 is a trendy blouse and therefore, was placed majorly in Indonesia due

to low labor costs. Moreover, the Indonesian supplier has been excellent with its lead times. The only drawback was that the fabric had to be imported from other countries and thus production was placed in Malaysia as they have their own raw material. To lower the risks, the rest

of the 28% of the products are placed in India. 44.5% of style 3 was produced in India and 55.5% in Indonesia. This style needed more skilled workers compared to the other two styles. Thus, this style was produced in India and Indonesia as they have more skilled labor and therefore, proved to be better options.

PLACEMENT STRATEGY

R²N clothing conducted a thorough research on the selected countries and the suppliers were identified based on the sourcing

guidelines, their existing customers, infrastructure, quality and lead time. Costs were taken into consideration as it is an important

factor. Based on the suppliers’ capabilities in the different countries, R²N clothing, decided to place its products in differing quantities. Indonesia being the most cost efficient, had 45% of the total production placed there. The suppliers have earned innumerable

certifications from their buyers; for maintaining short lead times, and thus was considered trustworthy, for handling a major quantity of the production.

All the three countries do not have any trade agreements with the United States and are therefore not exempted from paying taxes. According to the HTS code, 6.7% of taxes have to be paid for the products to enter the US market.

All the countries have a trade agreement AIFTA (ASEAN-India Free Trade Area) amongst each other. This benefits Indonesia the

most, as they import a majority of their fabrics from India. All these countries work towards achieving a free trade agreement with the US and once that is achieved, our strategy can be shaped up based on that. The products are going to be shipped from ports lo-

cated near their manufacturing units in their respective countries. The arrival port of entry is Los Angeles and it typically takes 4-5

weeks for the products from Indonesia and Malaysia while it takes 3-4 weeks for the products from India to reach the west coast by waterways.

After Indonesia, about 35% of the production was placed in India. With its rapid growth in the textile and apparel industry, India is believed to be a very reliable country. They have skilled labor, assured quality and also maintain shorter lead times. The only

drawback would be; the labor costs being high. But R²N clothing’s requirements were fulfilled by the country and the supplier. With low risks, a stable government and better working conditions, our chosen Indian supplier surely ensures ‘on-time’ delivery of our

products. Malaysia; which is also seen as a powerful country for textiles and apparel are accustomed to certain risks and their cost

of production is not as low as Indonesia. To have a continuous production all throughout the year and to keep our supplier satisfied; we have dedicated 20% of the production to Malaysia. The country does not have skilled labor as compared to the other countries,

and therefore style 3 is not allotted to them. However, the supplier selected from Malaysia, seems to be very promising in their quality and sourcing guidelines.

LOGISTICS, WAREHOUSING AND DISTRIBUTION

One of the most important steps to ensure the delivery of products on time is; the logistics and warehousing. Choosing the right

logistics company is very important for the final part of R²N Clothing’s strategy. With a quantity of 1 million units of apparel, warehousing becomes important and the location that is closest to the final customer is preferred. R²N clothing is located in Los Ange-

les and that is the port of entry for the apparel units; which are manufactured in India, Indonesia and Malaysia. R²N Clothing looks forward to find a logistics company that is based in the west coast, thus making the next process easier. Three logistics companies

were shortlisted amongst several and were ranked on certain important attributes that the company seeks from their supply chain providers.

RYDER LOGISTICS

Ryder is one of the leading supply chain solution providers in the United States. They have been successful in the past many years.

Their portfolio consists of many industries with retail being one of the most important sectors. They have a good customer base and they believe in maintaining relationships with their customers by proving to be efficient. The company has a warehouse capacity of

40 million sq. feet and have their presence in many locations in the United States. They are present in the locations where RÂ˛N clothing plans its distribution, thereby reducing the time for an order turn around. They assure 99% delivery rate on time. They offer

value added services, like real-time inventory control systems, customized reporting, label applications, variety packs, RF warehouse management system, design and printing of packaging materials etc. RÂ˛N clothing finds Ryder to be a promising supply chain solution provider.

CEVA LOGISTICS

CEVA Logistics is one of the worldâ&#x20AC;&#x2122;s leading supply chain management companies that specializes in design and implements in-

dustry-leading solutions in both; freight management and contract logistics. They focus on reducing wastes and stay committed

to sustainability. They aim to be innovate and creative in everything they do, from warehousing operations to transportation, from solution design to procurement policy. The company has a global network; covering over 160 countries with over 1,000 sites.

The culture of operational excellence is embedded in every process involved during operations. Moreover, the company has devel-

oped robust programs for Freight and Contract Logistics operations around the globe. CEVA has a renowned operational expertise to provide the best services across its integrated worldwide network and have been recognized and certified for their impeccable services, over the years.

They focus on general business and the specialist needs of the automotive, consumer & retail, energy, healthcare, industrial & aerospace and technology sectors.

KENCO LOGISTICS

Kenco Logistic Services is one of the nation’s leading third-party logistics providers, managing over 100 facilities and 25 million

square feet of warehouse space in 30 states in America and Canada. Kenco specializes in facilities and services for the pharmaceutical, apparel, automotive, food, textile, and appliance industries. Currently they provide logistics services for many retail stores such

as Best Buy, Sears, Target, Toys R Us, Walgreens and Wal-Mart. Kenco has comprehensive services like warehousing and distribution, project logistics, global logistics management, 3PL customized provider services, Sequencing, Cross-Docking, Reverse Logistics,

Postponement and Kitting, Label/Barcode creation, Special packaging, Return and refill management, Global shipment visibility and reporting, and EDI integration. To meet the changing preferences of consumers, they develop agile supply chains that consistently deliver on aggressive performance indicators. They also provide invaluable solutions to the apparel industry, including real time inventory visibility, allowing clients to get the most out of their assets by improving inventory turns.

Based on the research carried out on several companies, three logistics companies were shortlisted based on R²N Clothing’s re-

quirements. One of the most important criteria was the warehouse being closer to the customers; followed by the capacity of the

warehouse. Most of the logistics company are moving towards technology and the use of digitalization; that gives them a competi-

tive advantage. R²N clothing found Ryder logistics very promising, keeping in mind their existing customers, location and their value added services. They provide end to end solution for the company and maintain transparency in their model, which makes it very easy for business.

RYDER LOGISTICS

Furthermore, they also include, repackaging, ticketing, packaging, re-boxing, labelling, product customization and testing, reverse

logistics and return management and the like. Ryder comes up with cross-docking, which helps for a quick start-up, within 30 days R²N Clothing decided to go ahead with Ryder logistics for their final step of global sourcing strategy. The company has a huge pres-

ence in the United States, along with other countries like Mexico, Singapore, Canada and Europe. They have around 800 locations in North America itself. With a huge global presence, they have achieved success in the industry since 1934. Over the years, the company has kept themselves updated with the fast changes happening in the world, in terms of using technology and making a shift towards digitalization.

They have a total capacity of 44 million sq.feet and are very promising with their value added services as well. They have been

of time, 85% of the pincodes can be served in a day. This is a better solution especially when it comes to an e-commerce market.

Their value added services includes, design and printing of the packaging materials, automatic cartoning, shop floor management

system etc. They are very accurate and plan their shipment in advance, thus not wasting storage space and helps reducing inventory management. They believe in being transparent and have developed a tracking app where the customers can track the shipments,

carriers and their location of departure to arrival. The app also makes sure that all alerts are reported. Looking at the expertise and experience of the company, R²N Clothing decided to partner with Ryder logistics for their warehouse space and delivery of their products; to the desired customers like J. C. Penney, Macy’s and Kohl’s situated in different states of North America.

awarded for their excellence in services by various industries and also by their existing customers. They believe in delivering the

best, being on time and maintaining their customers, which is similar to the values of R²N clothing. They have a large portfolio of serving various industries from automobile, food, retail, oil and gas etc.

The company is also working towards providing solutions like supply chain optimization with better dock fulfillment, shipment

tracking, more network visibility and waste reduction at the same time. They have their service of rental trucks with very flexible options - without hindering any on-going deliveries. To improve their supply chain, eliminate wastage and reduce costs, they are

working towards a LEAN supply chain model. They have claimed to have achieved 99% accuracy in their deliveries. They have their control tower which monitors every step, in order to achieve an end to end supply chain model.

SUPPLY CHAIN SUMMARIZED

R²N clothing specializes in women’s cotton blouses and implements the global sourcing strategy to maximize their profits. The company goes through different stages of developing strategy to reach out to its customers in the United States.

The company has a portfolio which includes woven cotton blouses for S/S 18 season. The company aims to begin with the manufacturing of 1 million units of apparel. After researching, forecasting and understanding the needs of the target customers, a line

plan has been developed over a period of twelve months; keeping in mind the peak seasons; specially during Christmas holidays,

beginning of spring and ‘back to school’ period. Every blouse is designed to be produced in four colorways. The company’s efficient design team produced the tech pack and it was then forwarded to the manufacturers.

In order to be cost effective and at the same time have shorter lead times, R²N clothing, conducted a research on countries like India, Indonesia and Malaysia for manufacturers. These countries being efficient and growing in the apparel sectors, manufacturing was

assigned to them. None of these countries share trade agreements with the US, however, considering their efficiency and low costs, the suppliers in each country are assigned to manufacture these blouses.

The suppliers that were selected were the best from each of the countries. R²N clothing being very particular with their

sourcing guidelines, chose their suppliers on the basis of this; besides the cost parameter. The sourcing guidelines of every supplier was studied and the final three suppliers that were

selected, did match the company’s requirements. The suppliers

were further analysed based on their abilities like capacity, lead time, technological advancement, cost effectiveness, whether

vertically integrated or not. etc. After a ranking these suppliers, PT Makalot, an Indonesian supplier seemed to be more cost

efficient than the other two, whereas the supplier in India was more vertically integrated and has lower risks due to a stable

apparel industry and government. Majority of the production was assigned to PT Makalot followed by Arvind mills, India.

CONCLUSION

Malaysian supplier; Ramatex Berhad is also cost efficient but not as much as India. They do have a vertically integrated system, however, it is a stronger system in India. Hence, they are given the lease production amongst the three.

R²N clothing has its headquarters in the West coast. The garments are manufactured at their respective suppliers factories and are

As a start-up company, R²N Clothing wanted to have its strategies on point and develop a supply chain solution strategy that complements the company’s values, vision and mission.

The objectives that we want to achieve through global sourcing strategy are :

shipped to the west coast via waterways. The suppliers are responsible for packaging of the garments according to the requirements

(a) Maintain high quality, achieve high margins and keep the costs low

west coast, precautions are taken by providing good packaging. Once the garments are shipped, the supply chain solution providers;

of the company; which is 9” X 12” plastic packaging. Since it is a long journey and takes around 3-4 weeks to be delivered to the

Ryder, chosen by R2N Clothing due to the expertise; take over the logistics and the warehousing. The garments are then segregated

(b) Choose supply chain partners based on the sourcing guidelines; in order to complement R²N Clothing’s core values.

based on their final locations; which are Houston, San Francisco and Denver. They are stacked up at the Ryder warehouse and is

R²N Clothing believes that these objectives will be fulfilled with the help of their three suppliers from India, Indonesia and Malay-

cations in the US, the time taken to deliver the products to the final customers; which are Kohl’s, Macy’s and J C Penney; is reduced.

the extensive research conducted on various suppliers and supply chain solution providers.

later repackaged and labelled. Ticketing and packaging are a part of the responsibilities of the logistics company. With multiple loWith 99% accuracy in delivery; claimed by Ryder, we have the assurance of being successful in our business. With one of best sup-

pliers from the three countries and with an efficient supply chain solution provider, R2N clothing has a powerful team to keep their customers happy and satisfied.

sia , and also, with the best supply chain solution provider, Ryder. The company is confident about the decisions made based on

We believe that we’ve chosen the best supply chain for our company and hope to be successful. We wish to be recognized for our

quality, time management and impeccable services. Our goal is to keep our customers happy and build relationships for a lifetime and look beyond business.

APPENDIX

PRODUCT CLASSIFICATION (INDIA, INDONESIA AND MALAYSIA)

INDONESIA

MALAYSIA

INDIA

STYLE #1

101

STYLE #2

103

105

STYLE #3

107

109

111

COUNTRY RANKINGS TRIAL 1

COUNTRY RANKINGS TRIAL 2

113

PLACEMENT TRIAL 3

LOGISTICS 1

LOGISTICS 2

115

LOGISTICS 3

QUESTIONNAIRE

117

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