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The ‘Market Speed’ Option of the Americas Guatemala Apparel Sourcing Show May 22, 2013

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The market has changed with regards to peoples’ perception of value – “…. they want steak, cheap, not cheap steak” (Sir Philip Green, CEO of Topshop)


Better

Faster

Cheaper

The old sourcing norm; “two out of three ain’t bad” (borrowed from Meatloaf)

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Better

Faster

Cheaper

Now you need all three just to be in the game but this isn’t enough, you need more

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Apparel Sourcing Strategies

The solution for 30 years was; if the market wants cheap steak, chase low labor cost production • The big US players went to Asia, the large European firms went to North Africa, the Middle East and East Europe; smaller companies went off-shore “locally”

About 2010, the global economic recession started to create a new reality – ‘Balanced Sourcing’ • Spreading the risk, an appreciation for ‘total costs’

Increased interest in producing close to home

Quick Response, Flexibility

Today, the “hot topic” for US companies (and some European) is Sourcing in the Western Hemisphere 5


Production “Neighbors” • CAFTA/DR – Guatemala, Honduras, Nicaragua, El Salvador, the DR (including Haiti), Costa Rica, considered one region, each country with a special charm and capability • The forgotten partner, the US (especially Southern California) • Mexico – a huge opportunity with a growing economic base • Columbia/Peru

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Sourcing Strategies to Consider

• • • •

Balancing risk What region (not all products for a region) A regional office or through an agent Building your network o NOTE: If you are going to source in this hemisphere, be a member of the AAPN

How are you going to communicate/control key milestones (technologies – PLM, SCM)

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Our Panel ….. •

Wilson Avalos: Commercial Director, American Denimatrix wilson.avalos@denimatrix.com

Margaret L. Bishop: Fashion Institute of Technology m.l.bishop.2011@gmail.com

Patrick Clark: President, NEXTWAVE Sublimation Solutions PJCLARK@NEXTWAVEMS.COM

Gabrielle Sampietro: Senior Associate, WWA gsampietro@walterwilhelmassoc.com

Moderator: Walter T. Wilhelm, Chairman WWA wwilhelm@walterwilhelmassoc.com

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THE MARKET OPTION OF THE AMERICAS Wilson Avalos Commercial Director AMERICAN DENIMATRIX wilson.avalos@denimatrix.com


The Market: Overview  Economic condition, demographic trends and pricing are the factors driving the apparel sales.  Due to global economic downturn, the apparel industry has been severely affected, but the condition of denim market is better as compared to other apparel segments.  Promotional sales has become the norm amongst retailers.  Increasing GDP and population of the US are the biggest factors driving the growth of denim industry.  Market is contracting


Jeans Sales Trend in the U.S. (MM Units) 580

560

563.28 554.72

540

537.66

536.42 528.74 522.43

520 508.63

510.47

510.52

515.98

500.81

500

480

460 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016


The Market: Size and Segmentation MARKET SIZE BY SEGMENT (MM/YEAR)

15.31; 3% 5.52; 1% 113.37; 22% Economy <$39.00 Standard $39.00 - $91.00 Premium $91.00 - $195.00 High End >$195.00

376.28; 74%


Market Segmentation: Share by Gender Stretch Fabric becomes important 80.0% 68.1%

70.0% 60.0% 50.0%

56.6%

55.5%

49.8% 50.2% 43.4%

48.0%

44.5%

52.0%

Men's Women's

40.0% 31.9% 30.0% 20.0% 10.0% 0.0% Economy <$39.00

Premium $91.00 - $195.00

TOTAL


Decisive Sourcing Factors Cost

Speed

 First Cost

 Lead Time

 L0gistics

 Supply Chain Integration

 Duties  Finance  Inventory / Markdown  Cost of Replenishment

 Flexibility  Changes in Product  Changes in Volume

 Innovation Capabilities


Decisive Sourcing Factors Reliability  Financial Strength  Rule of Law  Operational Performance  Cost Control  Risk Management

CSR

 Labor Compliance  Environmental Compliance  Medical Care  Independent Monitoring


Labor Outlook for Asia  Continued double-digit increases in labor costs  Emerging growth economies “there’s always be a new China”  External pressures for “fair” wage  Unstable socio-economical conditions in emerging Asian economies.  High & increasing labor turnover  Other industrial competition for labor  Productivity declines


Average Apparel Manufacturing Hourly Labor Costs (Fully Loaded) â&#x20AC;&#x201C; US $ Cambodia 0.41 Bangladesh

0.51

Indonesia

0.62

Vietnam

0.65

India

0.72

China Inland

2.24

China Coast

3.35

Shanghai 0.00

3.97 0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50


Average Apparel Manufacturing Hourly Labor Costs (Fully Loaded) â&#x20AC;&#x201C; US $ Hourly Labor Cost with Benefits $ - Q4 2011 Mexico Honduras El Salvador

1.89

Guatemala

1.84

Nicaragua Haiti

1.15 0.89


Average Apparel Manufacturing Labor Productivity % 90 80

80

75

70

70 60

65

55

55

50

50

50

45

40 30 20 10 0 China Coast

Thailand

India

Bangladesh

Cambodia


Average Apparel Manufacturing Labor Productivity % 90

85

80

85

80

75

75

70

70

70

60

65 50

50 40 30 20 10 0

Mexico

Colombia

El Salvador

DR

Haiti


Speed (the market option of The Americas)  Advantages:  Leaner inventories required at retail.  More replenishment program shifts.  More frequent, faster fashion deliveries.  Cycle compression in pre-production facilitating and providing more cost reduction.

 Challenges:  Must improve sampling turnaround for basic fashion items.


Speed â&#x20AC;&#x201C; LT Order to US Distribution Center 140 120 100 80 Days

60 40 20 0 China Best

Vietnam

Guatemala

Honduras

Haiti


A Glance to Regional Sourcing  Increasing middle class in China increases demand in apparel for local consumption.  Asian factories are more comfortable servicing their local markets than export markets  Increasing compliance regulations  Increasing business complexity  Deflationary trend in pricing

 Increasing demand for US Iconic Brands in the Asian Markets  U.S. Market is likely to look at this hemisphere for sourcing opportunities


A Glance to Regional Sourcing  Supply Chain capabilities according to different product categories are still predominant depending on region.  Sustainability and Transparency are becoming widely used used terms for global companies.  Product Innovation and speed to market is important in a market that is starting to buy smartly.  Buy what I NEED, when I need it.


The Market: Conclusions  Due to existing cost platforms, market segments are most likely to be serviced as follows:  Economy

Emerging Asia

 Standard

China / Latin America

 Premium

Latin America / Domestic US

 High End

Domestic / Imported (Europe/Japan)


Regresar la fabricaci贸n de prendas de vestir de China a las americas: El Punto de cambio

Margaret L. Bishop

F a s h i o n I n s t i t u t e o f Te c h n o l o g y / N e w Yo r k C i t y / M a y o 2013 Con contribuciones de Li Jun Ma Y Nidhi Bhola


La decisión tiene en cuenta: china vs. Nor teamérica Factores

China

Las Americas

Costo del producto (FOB)

Aumenta

Mediano - Alto

Los riesgos financieros y políticos

Aumenta

Varia / Bajo

Costos del transporte

High / Aumenta

Bajo

Capacidad disponible

Disminuye

Varia / Bajo

Derechos de aduana

0% - 32%

Ninguno

3 – 7 Semanas

0 – 2 Semanas

Varía

Varía

Abundante

Limitado

Varía

Alto

Diferente

Mismo

No

Si

El tiempo de transporte Calidad Disponibilidad de materias primas Cumplimiento social Festividades / Cultura / Urgencia Protección de la propiedad intelectual

The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


costos y riesgos Adicionales

Producción Internacional

Producción Regional

Incremento de inventario • Costo • Riesgo

3-7 Semanas Tiempo: de producción al punto de venta Ventas al por menor The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


costos y riesgos Adicionales

Producción Internacional

Producción regional: • Eliminación de los derechos aduana (hasta 32.8%) • Reducción tiempo de entrega por 3 7 semanas Incremento de inventario • Eliminación del transporte de mar • Costo disminuye: • Riesgo • Inventario/costos financieros/inventario agotado/cargas por errores • Costos de viaje para super visar la producción • Errores por las diferencias en el 3-7 Semanas Tiempo: de producción allenguaje/cultura punto de venta Ventas al por menor The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


L a f ab ri c a d e l f ut uro: e fi c ie nte y te c no lo g í a-ric a

Planificación Pre-producción Producción Distribución Pago

Una empresa eficiente y tecnologíarica • • • • • • • • • •

Reduce Tiempo de entrega Errores Costos financieros El tiempo de procesamiento Costos laborales Defectos Consumo de energía Elimina las perdidas de telas Aumenta las ventas

The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


N uevo p a ra d ig ma: Lo s d e saf Ă­o s d e l os l Ă­d e re s

Desear cambio Llegar a ser excelente en la eficiencia Utilizar un poder lleno de procesos eficientes y la tecnologĂ­a Incorporar accionistas para identificar oportunidades/ Desarrollar soluciones juntos Permitir a empleados para hacer mejoras de incremento

The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


Re cu p e rar l a p ro d uc c ió n tex t i l y d e p re nd as d e ves t ir a la s A mér ic as: Pod rí a suc ed e r e st a s uc ed i en d o

GRACIAS

The Tipping Point: Reshoring Garment Production, China to the Americas, Bishop,


NEXTWAVE your digital fabric media solution partner. Your full line supplier of digital textile products for the industrial graphics industries.


What is Integration? Next Wave Definition: To take all parts of the dye sublimation solution, RIP, printer, ink, paper, fabric, fixation equipment, workflow, etcâ&#x20AC;Ś and have them consistently work together in unison to create the highest quality textile product efficiently with the least amount of waste and scrap.


What is Integration? Next Wave Definition: To take all parts of the dye sublimation solution, RIP, printer, ink, paper, fabric, fixation equipment, workflow, etcâ&#x20AC;Ś and have them consistently work together in unison to create the highest quality textile product efficiently with the least amount of waste and scrap.


What is Integration? Next Wave Definition: To take all parts of the dye sublimation solution, RIP, printer, ink, paper, fabric, fixation equipment, workflow, etc… and have them consistently work together in unison to create the highest quality textile product efficiently with the least amount of waste and scrap. “What is your Cost Per Sq. Ft”


Full Line Integrator Printers Software Paper Ink Service/Support


Market Trend 2012 Decorative Textile Market World Wide $150b Digital Textile Segment Represents less than 1%

Info Trend Analysis is calling for Digital to represent up to 40% in 5 years


NEXT WAVE COMPETITIVE ANALYSIS COST PER SQ. FT.

2005

2006

2009

2013

2013

MIMAKI

MIMAKI

MIMAKI

MIMAKI

REGIANNI

140G paper/G1Ink

140G paper/G2Ink

95G paper/G3Ink

66G paper/G4Ink

60G paper/G5Ink

PAPER

0.12

0.12

INK

0.12

0.09

0.24

0.21

0.09

0.05

0.036

Conventional 0.07 Transfer Printing 0.05 Cost per sq. ft.0.02 $.06 0.16

0.10

0.056


How do we accomplish this? 1. Quality Solution Partners 2. Comprehensive Education & Training 3. Certified Technical Service/Support Team 4. Constant Interaction with our Partners


Who are our Solution Partnersâ&#x20AC;Ś


Thank you From the team at Nextwave:


“20 YEARS AGO THE MAGIC WORD WAS QUANTITY, THEN 10 YEARS AGO IT WAS QUALITY, NOW THE MAGIC WORD IS Flexibility…” Severino Mata, President of Vestex

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


Flexibility doesn’t work if it’s just one…

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


…or two

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


…or three

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


Flexibility has to function throughout the supply chain: from fiber to fabric, to dyeing and printing, to cutting and sewing, to notions, to trims, to finishing, even shipping… …and particularly with your customer

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


Overview • Misperception – Guatemala, in particular, only doing high volume commodity tee-shirts… • Factories have switched 180 degrees and transitioned to STM high margin products for: UnderArmour, Adidas, Nike, Reebok, Puma, L.L. Bean, Polo, Patagonia, Ark’Teryx, Champion, Castelli, Sugoi, Dick’s, Academy, Sanmar, Duofold, DKNY, Victoria’s Secret, Kenneth Cole… • Fashion, Activewear, Sportswear, Childrenswear, Maternity, Workwear/Uniforms (FR), Lingerie, Shapewear, Swimwear, Yogawear, even Military • There are multi-tasking operators sewing knits and wovens side-to-side providing maximum flexibility and allowing a much wider product range to be made within one facility • World class product development facilities • “Added value” such as logistics and replenishment services


Overview (cont.) • Synthetic “cluster” concept (proximity from fiber to mill to factory) is hugely successful in El Salvador • From polyester fiber extrusion, texturizing to knitting (circular and warp), state of the art sublimation printing, with garment construction reaching new technical highs • Factories are now set up to be ”demand driven” and not “supply driven”, with customization becoming more and more important, with very low MOQ’s • New competitive technologies: 3-D CAD technology, sublimation printing on roll, per piece, welded seams…. • One week lead times possible, also making “onesies” for team sportswear (a growing trend) • Many factories have had a very profitable year with good activewear growth in performance fabrics with complicated construction


The Strong Circular Knit Textile Sector â&#x20AC;&#x201C; Trims


Textile capabilities in wovens and warp knits (GUA and SAL)

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


Some surprises….

• Click to edit Master text styles – Second level – Third level • Fourth level – Fifth level


Technical differences â&#x20AC;&#x201C; both work for their own reasons

Hand Cutting

NC Cutter

(Numerically Controlled)


Fabric R&D, Garment Design & Development


The market speed option of the americas guatemala apparel sourcing show 2013