Global Sourcing Highlights and Trends for 2015 Onwards

Transcription

1 Global Sourcing Highlights and Trends for 2015 Onwards World Sports Forum Dr. Sven Kromer Munich

2 Kurt Salmon Over 75 Years of Consulting for the Apparel and Footwear Industry North America Atlanta Minneapolis New York San Francisco Europe/Africa Brussels Casablanca Düsseldorf Geneva Luxembourg London Lyon Manchester Nantes Paris Asia-Pacific Hong Kong Shanghai Tokyo END-TO-END APPAREL VALUE CHAIN WHOLESALE MARKETING MERCHAN- DISING PRODUCT RETAIL SUPPLY CHAIN SOURCING LOGISTICS ONLINE 4 th February 2015 Kurt Salmon 2

3 Where are we today?

4 Demand and Supply Side Challenges DEMAND SIDE SUPPLY SIDE Increasing Complexity of Consumer & Product Needs Competitive Price Pressure Speed of Innovation & Information Market Volatility & Uncertainty Fashion Supply Chain and Sourcing Raw Material Availability & Volatility Rising Labor & Production Cost Shift of Global Sourcing Regions Amplified Supply Market Risks 4 th February 2015 Kurt Salmon 4

5 Demand Side Complexity Women s Running Jan th February 2015 Kurt Salmon 5

6 Volatility in Critical Factors for Sourcing CRUDE OIL PRICE RAW MATERIAL (COTTON) fold increase since end of financial crisis -44% decline in second half of % lower than peak 2011, but still 18% higher than Jan Price per lb ($US cents EUR EXCHANGE RATES -40% TRY TRY CNY INR th February 2015 Kurt Salmon 6

7 Development of Production Cost Index Development Production Cost Indices (PCI) % STRONGEST INCREASES +13% +5% % % % % % % % % Pakistan Vietnam Ba desh Cambodia Indones. China Low China High India Tunisia Romania Turkey PCI: Production Cost Index = Indicator for relative cost advantages of a country per Standard Allowed Minute (PCI UK = 100) 4 th February 2015 Kurt Salmon 7

8 Top Sourcing Markets for Europe 2014 Jan-Oct 2014 mn EUR % of Total Growth Rate 2013/2014* Czech Republic China % Bangladesh Turkey India Poland Morocco Romania Vietnam Cambodia Tunisia Pakistan Sri Lanka Indonesia Bulgaria 929 Thailand % of all imports 14% 11% 6% 3% -2,4% 5,1% 11,3% 4,5% 11,0% 10,6% 9,6% 2,7% 1,6% 13,9% 3,2% 3,4% 9,4% 23,0% 24,6% 28,2% * Jan-Oct 2014 Source: Eurostat 4 th February 2015 Kurt Salmon 8

9 Deep Dive Selected Sports Categories Track Suits (import value* in %) +7% +4% -9% +7% +10% -4% +7% +7% -1% -4% China USA Russia Poland Czech Republic Japan Turkey Hungary India Algeria Pullovers (import value* in %) +4% +10% +6% +15% +19% +7% -1% +60% +13% +22% China Bangaldesch Turkey Cambodia India Poland Romania Pakistan Marocco Vietnam = Delta Jan-Oct 2013 vs. Jan-Oct 2014 * Jan-Oct 2014 Source: Eurostat 4 th February 2015 Kurt Salmon 9

10 GSR Survey: Biggest Challenges of Future Sourcing Increasing labour cost & wages Increasing transportation costs Shortage of raw materials and therefore increasing prices Delayed deliveries Production capacity bottlenecks at tier 2 suppliers Lack of transparency of social compliance at tier 2 suppliers Increasing cost through changes in legislation Low quality of products, lack of production know-how Unfavourable development of currency exchange rates Increasing domestic demand in manufacturing countries Violation of suppliers against social & environmental standards Violation of suppliers against social & economical standards Too high dependency on China due to lack of alternatives Production capacity bottlenecks at tier 1 suppliers 4 th February 2015 Kurt Salmon 10

11 Summary of the Status Quo TODAY FUTURE Increasing sourcing complexity Price pressure from demand markets Cost pressure from supply markets Decreasing predictability? Need for differentiated capabilities from speed to innovation 4 th February 2015 Kurt Salmon 11

12 Drivers of Fashion Supply Chain Change Market/ Consumer Environmental Influence Technology Future Fashion Supply Chain Environmental Influence Supply Market 4 th February 2015 Kurt Salmon 12

13 The Future: Changing Demand Markets Customized Products End-to-End Transparency Speed of Innovation Globalized Demand 4 th February 2015 Kurt Salmon 13

14 Geographical Expansion & Differentiation APPAREL GROWTH OUTLOOK OPTIMIZED COMMONALITY? Country B? Country A? Country C 10%?? Country D 5% 6% CAGR % -1.7% 1.0% 0.7% 0.5% Brazil India China Style Commonality Example France UK US Germany 4 th February 2015 Kurt Salmon 14

15 Range Architecture and Differentiated Calendars Fashion Highlights/ Innovation DIFFERENTIATED CALENDAR MANAGEMENT DIFFERENTIATED CALENDAR MANAGEMENT Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Core Seasonal Classics Planning and Concept Design PD Pre-Sales Sales Fabric ProdProduction Inbound Outbound 4 th February 2015 Kurt Salmon 15

16 Time From Market as Competitive Advantage Vertical Product Engine CUSTOMER TIME-TO-MARKET INFORMATION PROCESSING TIME-FROM-MARKET Multi-Channel Customer Insights 4 th February 2015 Kurt Salmon 16

17 The Future: Changing Sourcing Markets Evolving new Sourcing Markets Collaboration/ Info Sharing Shift of Processes to Sourcing Markets Near Sourcing 4 th February 2015 Kurt Salmon 17

18 Near Sourcing as Part of Balanced Portfolio BALANCED SOURCING PORTFOLIO Responsiveness Near Sourcing Potential in Total Cost Perspective: Eastern Europe Faster PD interaction closer to market Reduced markdowns Middle and South America Turkey Lower inventories Better availability and less lost sales SE Asia, Bangladesh China US HK Taiwan Japan Increased reliability and control Production Cost Innovation 4 th February 2015 Kurt Salmon 18

19 Deep Dive Sourcing Market Polarization Denim (import value* in %) +15% +10% -8% +25% +10% +3% -2% -5% +11% +10% Bangladesh Turkey China Pakistan Tunisia Poland Morocco Czech Rep. Cambodia Egypt = Delta Jan-Oct 2013 vs. Jan-Oct 2014 Polarization Shift to Low Cost Low Flexibility Shift to More Flexibility Higher Cost Bangladesh Pakistan Cambodia Turkey Tunisia Poland * Jan-Oct 2014 Source: Eurostat 4 th February 2015 Kurt Salmon 19

20 Survey: Planned Tier 2 Supplier Management To what extent do you plan to manage tier 2 suppliers in future? 77% 81% 54% 41% 31% Blocking of fabrics/ materials Buying of fabrics/ materials Nomination of suppliers for fabrics/ materials Certifying and auditing of tier 2 suppliers Social and environmental standards or tier 2 suppliers 4 th February 2015 Kurt Salmon 20

21 Shared PD and Sourcing Collaboration Shared PD Workflow Tools Key PD & Costing Steps Brand Sourcing Design pack Define Review Design & Development Spec Package Review Define BOM Review Define Measure & Graded Spec Review Define Packaging & Labeling Spec Review Define Construction Details Review Define Lab Dip & Artwork Mgt./ Approvals Review Approve Sample Tracking & Approvals Review Approve Costing Target Costing Define Review Material Costing Review Define Development Costing Review Define Sourcing/ Vendor Costing Review Define 4 th February 2015 Kurt Salmon 21

22 The Future: Changing Technology Apparel with technique 3D Design & Printing Planning Integration PLM Integration Budget & Strategy RETAIL Retail Plan PRO- Brand DUCT Plan WHOLE- Wholesale SALE Plan Starting with retail planning Retail MFP, LP Planning Global CAP and LP Channel & Account Planning Retail Buying Door Planning Conceptual Assortment Plan driven by global Retail and Wholesale planning Retail driven wholesale plans Full integration of sourcing strategy,capacity, material down to demand plans SOUR- CING Sourcing Strategy Capacity & Material Planning Demand Planning & Forecasting Supply Planning & PO Mgt. Stock Allocation 4 th February 2015 Kurt Salmon 22

23 Integrated Planning Retail, Wholesale, Product, Sourcing Budget & Strategy Full integration of sourcing strategy,capacity and material plans down to demand andsupply plans RETAIL Retail Plan Retail MFP, LP Planning Retail Buying PRO- DUCT Product/ Brand Plan Global CAP and LP WHOLE- SALE Wholesale Plan Channel & Account Planning Door Planning SOUR- CING Sourcing Strategy Capacity & Material Planning Demand Planning & Forecasting Supply Planning & PO Mgt. Stock Allocation 4 th February 2015 Kurt Salmon 23

24 Increasing Importance of PLM Integration Integration of Buying office/ agents wth PLM 58% Planning Customer/ Competitive Analysis Merchandise Strategy Class & Open To Buy Management Financial Planning Assortment/ Line Planning Comp Season Analysis Design Trend/ Colour Fabric & Raw Materials Sketch/ Silhouette Themes & Concepts Core PLM Development Colour Standards Sampling Costing & Negotiations Calendar Management Extended PLM Other Systems Technical Design Collaboration Colour Approval Spec Package Technical Fit Packaging & Labels Material Testing and Approval Production & Sourcing Product Creation Vendor Standards & Vendor Mgmt. Capacity & Production Planning Vendor Compliance & QA Commitment Management RFQ, Quotes Comparison PO Contract Management Logistics Consolidation Transport (Ocean/ Air) Customs & Deconsolidation Delivery to DC Allocation Replenishment Finance Billings & Claims Invoicing Accounts Payable Typical Results: Reductions: 20-30% Cycle Time 1% -3% in COGS 3% -5% in material costs via Raw material aggregation 5-15% G&A 25% In Place Planned 17% Not Planned Expedited shipments reduced to 10% -20% of shipments 5-10% Margin Improvement 4 th February 2015 Kurt Salmon 24

25 What does it mean for us today?

26 To be Prepared our Product Development and Sourcing will need to become More Differentiated FUTURE SOURCING MODELS More Integrated More Transparent More Analytically Optimized Organization Processes IT- Systems More Technology Driven 4 th February 2015 Kurt Salmon 26

27 The Global Sourcing Reference 2015 About the Study 12th edition, published every two years Leading study for retailers, brands and consumer good manufacturers, >240 pages Price: 990,- excl. VAT Content: Insights into key developments in sourcing countries, organization, supplier and supply chain management Survey of leading sourcing and supply chain executives on sourcing trends and developments Interviews with international sourcing experts Cost indices of all relevant sourcing countries for Europe and the U.S. To be Published Mid 2015, globally available 4 th February 2015 Kurt Salmon 27