How to Find Opportunities in a Volatile Supply Chain

Supply Chain Opportunities
WELCOME TO OUTDOOR UNIVERSITY®
How to Find Opportunities
in a Volatile Supply Chain
Supply Chain Opportunities
Presenter
Alex Boian
Director of Trade Policy
Supply Chain Opportunities
This Session Will Cover
• Near term trends in footwear
foot ear sourcing,
so rcing factors in
volatility of supply chains and forecast
• Near term trends in apparel sourcing, factors in
volatility of supply chains and forecast
• U.S. federal trade p
policy
y and how p
preference
programs, trade agreements and other tools can
help mitigate volatility and save you money
Supply Chain Opportunities
David Hampson
Global Manufacturing Director
Rofu ((H.K.)) Limited
•
•
•
•
•
•
Extensive experience in footwear manufacturing
World Bank – footwear expert for Eastern Europe and former Soviet
Republics
Manufacturing Director for Empresas ADOC in El Salvador
Manufacturing
g Director for Dr. Martens
Group Sourcing Director for The Browning Group
Global Manufacturing Director for Rofu Limited – Keen, Chrome –
overseeing China
China, Dominican Republic and Portland
Portland, OR
dhampson@rofucn.com or 852 -2892 2325 -16
Supply Chain Opportunities
T.S.
S C
Cheah
ea
Vice President, Asia Sourcing
Outdoor Coalition – TNF / Jansport / Lucy
•
•
Extensive experience in apparel manufacturing and industrial
engineering
VF Asia Sourcing for 21 years
–
–
–
–
–
QA for 3.5 years
VF Indonesia
Set up VF Bangladesh office
VF Hong Kong - QA & Technical Department & Regional Offices
VF Asia Sourcing – 2005 to present
t_s_cheah@vfc.com or 852 -2318 1268
Outdoor Americas Asia Sourcingg
Apparels & Equipment
TS Cheah
22 Mar 2011
Supply Chain Opportunities
The VF Vision Statement
S
VF will grow by building leading lifestyle brands that excite y
consumers around the world
8
Supply Chain Opportunities
Outdoor Apparel & Equipment
Topics:
11.
2.
3
3.
4.
9
Market Challenge
Market
Challenge
Raw Material Costs Update Sourcing Base
Sourcing Base
Sourcing Solutions
Supply Chain Opportunities
Market Challenge 2011
Outdoor Americas Asia Sourcing Team
Supply Chain Opportunities
Key Factors
Oil is around USD100/barrel in Mar 2011
Currency – USD still weak as compare to
Asian Currency
Wages increased
W
i
d in
i Asian
A i Countries;
C
ti
China
Chi
15-20%, Vietnam 20%, Bangladesh 15%,
Thailand 8%, Indonesia 15%
Raw Material 2011 compare with 2010 Cotton +80%, Polyester +27%, Nylon +27%,
Copper +29%, Down +30
11
Supply Chain Opportunities
Key
K y Factors
Competition from other brands for sewing capacity –
P t
Patagonia,
i Marmot,
M
t Nike,
Nik Adidas,
Adid
P
Puma
Lack of Inventory - Overbuy from different buyers
Impact of 2011 Japan Earthquake and Tsunami remains
unknown
Inflation 2010 – China 3.5%, Vietnam 8.4%, Bangladesh
8.5%, Indonesia 5%, Thailand 3%,
Inflation 2011 Jan/Feb – China 4.9%, Vietnam 12.1%,
Bangladesh 9
9.04%,
04% Indonesia 6
6.84%,
84% Thailand 2.9%
2 9%
Supply Chain Opportunities
2010 GDP
G byy Countryy
5,745.13
6000
Billion
n US$
5000
Bangladesh
China
Indonesia
Thailand
Vietnam
4000
3000
2000
1000
312.605
0
105.402
101.987
695.059
** International Monetary Fund, World Economic Outlook Database, October 2010
** Next update will be in April 2011.
Supply Chain Opportunities
Inflation Rate by Sourcing Country
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
Bangladesh
China
Indonesia
Thailand
Vietnam
2006 2007
2008 2009
2010
2006
2007
2008
2009
2010
Bangladesh
7.706
9.111
8.9
5.426
8.504
China
1 467
1.467
4 767
4.767
59
5.9
-0.693
0 693
3 524
3.524
Indonesia
13.104
6.034
9.777
4.814
5.066
Thailand
4.642
2.242
5.468
-0.846
3.047
Vietnam
7.5
8.349
23.115
6.717
8.4
Supply Chain Opportunities
Exchange
g rate [1]
Exchange Rates For Major Sourcing Countries
For The Year 2011
(Denominated in Local Currency : US$1)
Country
Bangladesh
Cambodia
China
India
Indonesia
Japan
Korea
Taiwan
Th il d
Thailand
Vietnam
Currency
BDT
KHR
CNY
INR
IDR
JPY
KRW
TWD
THB
VND
December
2010
71.91
4,111.42
6.68
46.12
9,140.77
83.93
1,162.25
30.49
30 26
30.26
19,675.00
January 2011
71.90
4,099.41
6.59
45.47
9,099.18
81.38
1,136.36
29.18
30 19
30.19
19,612.90
February 2011
72.14
4,083.15
6.61
46.48
9,149.13
82.09
1,121.58
29.05
31 14
31.14
19,623.00
March 2011
72.31
4,073.65
6.58
45.51
8,841.73
81.77
1,126.51
29.76
30 8
30.85
20,456.10
[Note 1] Positive percentage represents depreciation of local currency against US dollars.
N
Negative
ti percentage
t
represents
t appreciation
i ti off local
l
l currency against
i t US d
dollars.
ll
Change Since
December
2010
+ / (-) %
(Note 1)
0.56%
-0.92%
-1.50%
-1.32%
-3.27%
-2.57%
-3.08%
-2.39%
19 %
1.95%
3.97%
Supply Chain Opportunities
Exchange
x
g rate [2]
[ ]
Bangladesh BDT : USD
72.40
72 30
72.30
72.20
72.10
72.00
71.90
71 80
71.80
71.70
71.60
December 2010
January 2011
February 2011
March 2011
Cambodia KHR : USD
4,120.00
4,110.00
4,100.00
4 090 00
4,090.00
4,080.00
4,070.00
4,060.00
4,050.00
December 2010
January 2011
February 2011
March 2011
Supply Chain Opportunities
Exchange
g rate [3]
China CNY : USD
6.70
6.68
6.66
6.64
6.62
6.60
6.58
6.56
6.54
6.52
December 2010
January 2011
February 2011
March 2011
Indonesia IDR : USD
9,200.00
9,100.00
9,000.00
8 900 00
8,900.00
8,800.00
8,700.00
8,600.00
December 2010
January 2011
February 2011
March 2011
Supply Chain Opportunities
Exchange
Ex ha g rate
rat [4]
Thailand THB : USD
31.40
31.20
31.00
30.80
30.60
30.40
30.20
30.00
29.80
29.60
December 2010
January 2011
February 2011
March 2011
Vietnam VDN : USD
21,000.00
20,500.00
20,000.00
19,500.00
19,000.00
December 2010
January 2011
February 2011
March 2011
Supply Chain Opportunities
Oil Price Update
p
Monthly trend
Historical trend
Future prices
Supply Chain Opportunities
Raw Material Prices Watch – Copper
R
pp
Average monthly prices :
20
Supply Chain Opportunities
Raw Material Prices Watch – Cotton
21 February 2011
Cotton prices reached the historical level of 200 cents per pound in the last week in New York before
Friday retreating. Global cotton production is expected to rebound in the coming season, Cotton
Outlook said, but demand from China would remain extremely strong, due to the low level in Chinese
stocks. In the meantime, short supply fears could maintain cotton prices at extremely high levels.
Also can see Cotton monthly report at below web site:
http://www.cottoninc.com/MarketInformation/MonthlyEconomicLetter/
21
Supply Chain Opportunities
Raw Material Prices Watch – Polyester
22 February 2011
Polyester prices no more rose in the last seven days in China, reflecting a weaker demand
than expected. Staple fiber and filament processors have accumulated stocks before the
Spring Festival. Polyester price trends will now depend on the level in cotton prices.
22
Supply Chain Opportunities
Raw Materiall Prices Watch
W h – Nylon
l
16 F
February
b
2011
Nylon/Polyamide prices began surging in China after heavy anti-dumping duties were
imposed on caprolactam imports from the United States and Europe, therefore
boosting raw material costs of fiber producers. A stronger demand for nylon 6 in the
post-holiday
t h lid period
i d iin Chi
China could
ld result
lt iin a new rise
i iin prices.
i
23
Supply Chain Opportunities
Outdoor Americas Source Base
Situated by Key Country
Supply Chain Opportunities
China
 China labor cost increased 15‐20% in 2010 and will
further increase in coming years.
 Current
C
t salary
l
per month
th is
i USD300 ‐ 400/month.
400/
th
 Shortage of labors due to non‐migration of workers
from villages.
 Currency appreciation by 2‐3% as anticipated.
 Population is 1.3 billion.
 Current 2011 sourcing
g business volume is 27% of total
Supply Chain Opportunities
Indonesia
 Current salary is USD100‐130/month and expected 15%
increase in year 2011.
 Sufficient labor force with population of 230 million
people.
 Currency is kept at USD 1 to Rp 8800 to 9200.
9200
 Current 2011 sourcing business volume is 14% of total
Supply Chain Opportunities
Vietnam
 2010 average wage is USD170/month, which included a 20% increment in 2010. (USD140/month in 2009). Anticipate 20% /
increase in 2011.
 Inflation average is over 10%, which is the key driving force of labor cost increase
key driving force of labor cost increase.
 Inflation also causing labor unrest such as strike and high labor turnover.
g
 Labor shortage is common in Industrial zones in HCMC where competition for labor is severe.
 Total population in Vietnam is 85 million.
 Current sourcing business volume is 30% of C
t
i b i
l
i 30% f
total Supply Chain Opportunities
Bangladesh
 Bangladesh average salary is USD60/month in 2010.
 A 10% increment is mandatory as government regulation Anticipate 15% increase in 2011
regulation. Anticipate 15% increase in 2011.
 Labor is stable but competition started in CTG as major sportswear footwear factories are entering g
Bangladesh
 Currency in Bangladesh is stable.
 Population 159 million.
 Current sourcing business volume is 20% to total
g
Supply Chain Opportunities
Solutions To Deal With Market Challenge
 Product & Production Engineering with supply chain
partners(materials suppliers and garment vendors).
 Vertical Set‐Up from material to garment making.
 Trade Policy (FTA/GSP Form A, Chinese Domestic Sourcing).
 Migrate to Low Cost Country such as Indonesia,
Indonesia Vietnam,
Vietnam
Cambodia, Bangladesh, and duty free country.
 Moving production facility to inland China for low labor wage
and stable labor supply.
supply
 Partnering with sourcing to expand capacity outside China by
providing 5 years business plan.
 Material localization to improve costs and speed.
speed
Supply Chain Opportunities
Outdoor
d Americas
A i Asia
A i Sourcing
i Team
T
Thank you!
30
Supply Chain Opportunities
Behnaz Kibria
Trade Counsel
Committee on Ways and Means
Means,
U.S. House of Representatives
•
•
•
•
•
Born in Dhaka, Bangladesh, currently resides in Washington, D.C.
B.A. from Wesleyan University and a J.D. from the George
Washington University Law School
Associate counsel at Hogan & Hartson,
Hartson LLP in the District of
Colombia, focusing on antidumping and countervailing duties cases
Former Assistant General Counsel, U.S. Trade Representative
T d Counsel
Trade
C
l tto th
the C
Committee
itt on W
Ways and
dM
Means iin th
the U
United
it d
States House of Representatives
behnaz.kibria@mail.house.gov or 202.225.6649
Supply Chain Opportunities
Quest o s
Questions?
Alex
e Boian
oa
aboian@outdoorindustry.org
303.327.3509
Supply Chain Opportunities
Th k You
Thank
Y