Manufacturing Supply Chain Collaboration with Retailers. Mr. Roger Lee TAL Group

Transcription

1 Manufacturing Supply Chain Collaboration with Retailers Mr. Roger Lee TAL Group 1

2 The geography of apparel production for US in 2005 when quota system was phased out The change in geography of apparel production for US in 2013 US consumers buying behaviors have been driving changes in apparel sourcing map Changes in US sourcing map in the next 5 years Inventory challenge to retailers Key to success to manufacturers 2

3 Quota elimination in 2005 triggered severe competitions among apparel exporters to US 2005 Top 5 apparel exporters (by countries) to US 22.04% $15.1Bn CHINA 2013 Next 5 years 8.85% $6.1Bn MEXICO 4.33% $3.0Bn INDIA 4.18% $2.9Bn INDONESIA 5.11% $3.5Bn HONG KONG Source: Trade.gov 3

4 Sourcing value had been shifting to far east over the last decade Next 5 years Source: Trade.gov Country Top 5 apparel exporters %Share in 2005 (by countries) %Share in to 2013 US %Change China 22.04% 37.32% 69.36% Vietnam 3.97% 10.18% % Indonesia 4.18% 6.23% 48.99% Bangladesh 3.45% 6.20% 79.62% Mexico 8.85% 4.61% % CHINA 4.6% $3.7Bn 6.2% $4.9Bn MEXICO Sri Lanka 2.40% 2.07% % BANGLADESH 37.3% $29.8Bn India 4.33% 4.02% -7.08% Cambodia 2.49% 3.20% 28.47% Honduras 3.82% 3.13% % El Salvador 2.36% 2.33% -1.12% Pakistan 1.83% 1.85% 0.97% Nicaragua 1.04% 1.79% 72.00% Guatemala 2.64% 1.65% % Italy 1.97% 1.54% % Philippines 2.66% 1.41% % 6.2% $5.0Bn INDONESIA 10.2% $8.1Bn VIETNAM 4

5 Consumers appetite for cheaper newer faster have been driving the dynamics of apparel industry Cheaper Newer Faster US consumers are spending less on garments Consumers are driving the dynamics of fashion industry Fashion trends are demanding for faster reaction time US Apparel and Footwear Volume vs Value Growth % year-on-year growth Retail Volume (units) Retail Value (US$) In-store Transportation 13 weeks 26 Design 56 Production -2-4 Packaging -6-8 Source: Euromonitor International Source: just-style.com

6 Supply chains are being redefined to service different market needs High Fashion Products Basic Products Next 5 years Source: Technopak.com 6

7 2005 Sourcing value is expected to shift away from China to lower cost countries in the next five years A survey conducted by McKinsey revealed that CPOs of leading apparel brands plan to shift sourcing value away from China to other countries over the next 5 years 2013 How do you expect your sourcing share (value) from China to develop during the next 5 years? PAKISTAN CHINA Percent of respondents, n=29 Strongly decrease INDIA MYANMAR Decrease Next 5 years Stay same Increase BANGLA -DESH CAMBODIA VIETNAM Source: McKinsey & Company Source: McKinsey s apparel CPO survey 2013

8 As an apparel manufacturer, what can be done to gain competitive edge while avoiding price war? 8

9 Inventory management remains a problematic area for many apparel companies Growth in inventories at a number of clothing chains has outstripped expected gains in sales (2013) Inventory value (end of 3Q) Change in inventories (end of 3Q) from a year earlier 30% USD 0.3 Billion USD 0.8 Billion USD 1.6 Billion USD 2.5 Billion 20% 10% 0% -10% Chico's Abercrombie & Fitch L Brands Gap -20% Source: Nomura Equity Research 9

10 The key to success is to increase collaborations with retailers Typical benefits from improved collaborations Effective end-to-end integration of value chain enables streamlining of collaborations Forecast error reduction 20-25% Inventory reduction Inventory turns increase Service level increase 5-10% 5-10% 5-10% Product Lifecycle Management (PLM) Read & React Vendor- Managed Inventory program Source: IBM 10

11 Read and React: Proactive management of seasonal items enables sales maximization On ranges of ~10-20% sales can be captured A client example Sales units Potential sales weeks 1 week 5 week 5 week + 2 weeks Read sales Order Production Transit & distribution Replenish stores & capture potential lost sales Actual sales ~19% Sales captured via Read and React

12 Read & React: 3 critical success factors to allow fast reaction to market changes Three critical success factors of Read & React Impact Season end inventory Strategic partnership with suppliers Before After -20% In-season forecast adjustment Supply chain collaboration Sales Before +43% After 12

13 VMI transforms supply chain management from push to pull Normal Vendor-managed replenishment: inventory: Sales and stock information Stock information Purchase order Delivery Delivery Delivery 13

14 VMI allows end-to-end optimization of inventory without sacrificing service level Service level vs Inventory turns Service Level 96% 91% 8x% 4.x Inventory Turns 14

15 THANK YOU