Apparels Sourcing from Emerging Markets

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Delivering sustainable sourcing value from emerging markets

Apparels sourcing from emerging markets

Case Study

Agenda

1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

2

Client Introduction & Project Objectives,  Dragon Sourcing approach in 2 stages

 Client Introduction: Client is a hip French ready-towear label for women's, men's and children's fashions owns and operates apparel retail stores that sell apparel and clothing accessories.

Stage 1: Supplier Pre-Qualification 1. Demand Analysis 2. Supply Market Analysis 3. Develop RFI/RFQ 4. Administer RFI/RFQ 5. Analyse RFI/RFQ Responses

 Project Objectives: Primary objective is to identify and qualify potential suppliers by running Request for Information/Request for Quote (RFI-RFQ) process through procurement and sourcing direct from manufacturers in 11 emerging markets category wise for 6 categories:

 Deliverables: Stage 1 - Supplier database - RFI-RFQ template & analysis report - Supplier profiles including factory and product pictures, suppliers location, price analysis, supplier ranking & recommendation.

 Geographical scope: 11 countries in scope:  6 apparel categories in scope,

 Stage 2: Audits, Selection & Contracting to be finalised post stage 1 completion.

- Audit Report - Samples - Contract(s) 3

- Following 11 Countries and 6 apparel categories were shortlisted under the project scope, Categories Region East Asia

Countries

T-shirts

Denim

• China

X

• Bangladesh

X

X

• Pakistan

X

X

Sweaters

Jackets

Flou

X

X

X

X

X

Suits

# of categories / country 4

X

5

South Asia

2

• Vietnam South East Asia • Cambodia • Myanmar Indian Ocean

Balkan: Southeastern Europe

•

X X

X

X X X

• Macedoine

X

• Bulgaria • Serbia

Number of Countries per category

2 X

Madagascar

• Romania

1

2 X

2

X

X

3

X

X

X

4

X

X

X

X

4

X

X

X

X

4

6

5

9

2

7

4

Note: Bulgaria & Serbia has been added additionally by Dragon Sourcing for sweater category.

4

- Some of the Images of the 6 apparel categories shortlisted under the project scope No.

T-shirts

Denim

Sweaters

Jackets

1

2

3

4

5

Flou

Suits

Agenda

1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

6

Following steps were covered under stage 1: Supplier Pre-Qualification No.

Step

Deliverables

1.

Demand Analysis Work with client to define and understand the Products and requirements (specs, volumes, current unit prices, delivery destinations of delivery/consumption). Collect samples of the products in order to ensure potential suppliers fully understand them

• Kick-Off Report

2.

Supply Market Analysis Identify long list of potential manufacturers in countries in scope by leveraging B2B websites, DS database, fair catalogues, Chamber of Commerce, magazines, network, references.

• Supplier Long List

3.

Telephone Pre-screening Selection of manufacturers to be included in the RFI/RFP process by telephone pre-screening based on agreed simple criteria (e.g. capability to make the product, can export, quality certifications, interest in participating, etc.

• Shortlist for RFI-RFQ process

4.

Develop RFI/RFQ document Prepare an RFI/RFQ document, with an aligned balanced scorecard that has the objective to pre-qualify the competitiveness and capabilities of the manufacturers, including: background, financial, client and product experience, quality certification & processes, social responsibility, manufacturing/technology capability, R&D capability.

• RFI-RFQ Template • Balanced Scorecard

5.

Administer RFI/RFQ: The RFI/RFQ is translated to the local languages as relevant, and distributed to the relevant manufacturers, with telephone follow-up to push for maximum participation.

• Completed RFI-RFQ’s

6.

Analyze RFI/RFQ Responses: Analysis of RFI/RFQ responses, estimation of logistics costs, and preparation of a report, which profiles & objectively ranks the manufacturers by capability and competitiveness, including a recommendation for those to be audited.

• RFI-RFQ Report • Supplier Profiles • Proposed Shortlist for Audit.

7

Approximate yearly volumes and spend was collected at the project kick off stage,

Number of styles to be included for Estimated Yearly Volumes RFQ process In K - PCS

Estimated Yearly Spend in M (in Euro)

#

Category

1

T-shirts

• Adult : 3 • Kid : 3

units

Adult : 560 KID : 600

2

Denim

• Adult : 2 • Kid : 2

units

Adult : 275 KID : 380

3

Sweaters

• Adult : 2 • Kid : 2

units

Adult : 410 KID : 390

ADULT: XXX KID: XXX

• • • •

units

Adult : 170 KID : 350

ADULT: XXX KID: 4,7

units

Adult : 315 KID : 140

ADULT: XXX KID: XXX

Units

Adult : 170

ADULT: XXX

Total:

EUR XXX M

4

Jackets

Adult doudoune : 1 Adult coat : 2 Adult Parka : 1 Kid jacket : 4

5

Flou

• Adult dress : 2 • Adult shirt : 2 • Adult blouse : 2

6

Suits

• Adult women jacket : 2 • Adult men jacket : 2 Total 34 styles for costing 8

ADULT : xx KID : xx ADULT: XXX KID : XXX

- Stage 1: Supplier Pre-Qualification timeframe.

- Project was delivered within 12 weeks as per schedule.

Steps

Week Week Week Week Week Week 1 2 3 4 5 6 Jan 15

Jan 22

Jan 29

Feb 5

Feb 12

Feb 19

Week Week 7 8 Feb 26

Week Week 9 10

Week 11

Week 12

March March March March 5 12 19 26

April 2

1. Demand Analysis

2. Supply Market Analysis Extended Week

3. Telephone Pre-screening

4. Develop RFI/RFQ

RFI/RFQ approved

1

5. Administer RFI/RFQ

Extended week

6. Analyze RFI/RFQ Responses

Supplier profiles with recommendations.

Couple of steps were extended by a week to receive maximum response from the suppliers.

9

2

Not started

Done

In process

Delay

Documentation progress was fully tracked to ensure on-time progress,

#

Category

Kick off

Supplier database validation by client

Client data collection

PreData screening Client clarify questions questions draft

Client validation

RFI/RFQ template draft

Client validation

1

T-shirts

Sent on Jan 30th, Received for Sent with Validated on Feb adults Jan 26, kick off 5th, Kids: Feb 12

2

Denim

Sent on Jan 30th, Received for Sent with Validated on Feb adults Jan 26, kick off 5th Kids: Feb 12

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 9

Feb 16

Sweaters

Sent on Jan 30th, Received for Sent with Validated on Feb adults Jan 26, kick off th 5 Kids: Feb 12

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 9

Feb 16

Jackets

Sent on Jan 30th, Received for Validated on Feb adults Feb 8, 5th kids: Feb 12

Sent with kick off

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 9

Feb 16

Flou

Sent on Jan 30th, Received on Validated on Feb Feb 8 & 12.

5th

Sent with kick off

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 16

Feb 19

Suits

Sent on Jan 30th, Received on Validated on Feb Feb 12 th 5

Sent with kick off

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 16

Feb 19

3

4

5

6

Received Jan 26

Sent with kick off

Validated Jan 26

RFI-RFQ sent on Feb 9

Feb 16

10

Not-started

Score card draft

Started

Client validation

Finished

-

As a first step, Supplier database was identified category wise and added in each target Country. An extensive supplier data base was built leveraging multiple sources of information & from existing DS database.

11

- Pre-screening process was initiated after receiving client validation, - This process was to filter the long list of suppliers prior moving them to the RFI-RFQ step

12

- Supply Market Analysis: Process metrics follow up for all categories / countries.

- Weekly progress reports was sent to the client for review and validations. • •

1228

Pre-screening process completed RFI-RFQ doc sent to all the suppliers passed pre-screening.

124 254 690 223 538

59 130

177

65

99

124

149

351

74 79 38

98 61

158

193

Passed pre-screening

Failed pre-screening

Identified Suppliers

T-shirts

Denim

Sweaters 13

RFI-RFQ Received

Jackets

Flou

RFI-RFQ Rejected

Suits

Supplier Profile example

• •

Post pre-screening the suppliers, RFI process was administered to filter out most capable suppliers,

14

Supplier Profile example

RFI process was administered to filter out most capable suppliers

Supplier Profile example few slides

15

Supplier Profile example

-

Category specific technical questions were added in the RFI to understand supplier capability and capacity.

16

RFQ process, - Total 4 styles were selected for sweater RFQ, 2 adult and 2 kids styles.

Line

Age Group

Category

Pilot/Average Order Quantity in (Pcs)

XXX

Women

Adult

Sweater

XXX

2

XXX

Women

Adult

Sweater

XXX

3

XXX

Girls

Kids

Sweater

XXX

4

XXX

Girls

Kids

Sweater

XXX

No.

Style #

1

Product Pictures

17

Price Analysis Minimum Below Average

- Price analysis was done for the 30 suppliers responded to the RFQ. China 14, Bangladesh 12, Serbia 2, Bulgaria 1 & Madagascar 1.

Chinese suppliers were not invited to offer price for kids style.

Sr.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Supplier Name Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx Supplier xxx

Country xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

Category Line RFI score 76 75 75 71 71 70 68 68 67 66 66 66 66 65 65 64 62 62 61 60 60 60 59 59 55 54 53 49 39 35 Average Price

Sweater Women Style # xxx € 12.55 € 6.70 € 6.28 € 8.75 € 6.05 € 3.95 € 6.70 € 7.70 € 6.30 € 11.12 € 5.29 € 6.35 € 5.00 € 4.58 € 5.80 € 6.10 € 5.35 € 7.40 € 6.80 € 15.50 € 4.60 € 5.75 € 12.00 € 5.15 € 9.59 € 5.05 € 17.90 €

7.57

Sweater Women Style # xxx € 17.63 € 6.80 € 11.43 € 23.50 € 11.50 € 4.05 € 6.80 € 7.70 € 6.75 € 18.30 € 9.75 € 6.75 € 5.00 € 5.47 € 7.95 € 6.35 € 9.20 € 5.60 € 6.40 € 24.00 € 19.40 € 8.26 € 13.35 € 13.00 € 14.00 € 11.75 € 22.65 € 5.50 € 17.00 € 19.90 €

11.52

€ €

€ €

Above Average Maximum

Sweater Sweater Girls Girls Style # xxx Style # xxx Not in Scope Not in Scope Not in Scope Not in Scope 5.50 € 5.67 Not in Scope Not in Scope 5.40 € 5.65 Not in Scope 6.15 € 6.15 5.15 € 5.25 Not in Scope Not in Scope Not in Scope Not in Scope Not in Scope -

€

€

9 -

9 -

Not in Scope Not in Scope €

6.24

€

6.34

- Price analysis was done for each of the styles, - 27 suppliers offered price for style # XXX - FOB price in Euro per PC.

Women Sweater - Style # XXX FOB Price and spend in Euro

35800

Above average price € 7.57

31000

24000

25100

22240 19180 17500

7900

9160 9200

10000 10100 10300 10580 10700

11500 11600 12100 12200

12560 12600 12700

13400 13400 13600

14800 15400

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

China

XXX

XXX

XXX

XXX

Bangladesh

€ 3.95€ 4.58 € 4.60 € 5.00 € 5.05 € 5.15 € 5.29 € 5.35 € 5.75 € 5.80 € 6.05 € 6.10 € 6.28 € 6.30 € 6.35 € 6.70 € 6.70 € 6.80 € 7.40 € 7.70 € 8.75 € 9.59 € 11.12€ 12.00€ 12.55€ 15.50€ 17.90

Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir Suppleir 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

FOB Price in Euro 19

Spend in Euro

- Supply market analysis category wise was shared in the weekly progress and final RFI reports,

Process

Supplier Identification

Prescreening

RFI-RFQ Administration

Steps

China

Bangladesh

Cambodia

Madagascar

Macedonia

Bulgaria

Serbia

Total

• Suppliers identified

55

68

17

8

3

1

25

177

• Supplier passed prescreening

XXX

XXX

XXX

XXX

XXX

XXX

XXX

79

• Suppliers failed Prescreening

XXX

XXX

XXX

XXX

XXX

XXX

XXX

98

• Number of RFI-RFQ sent

XXX

XXX

XXX

XXX

XXX

XXX

XXX

79

• RFI-RFQ rejected

XXX

XXX

XXX

XXX

XXX

XXX

XXX

46

• Number of only RFI received

XXX

XXX

XXX

XXX

XXX

XXX

XXX

3

• Number of both RFI-RFQ received

XXX

XXX

XXX

XXX

XXX

XXX

XXX

30

20

Supply Market Analysis, Supplier rejection analysis were shared to client for each step, Pre-screening & RFI -RFQ administration.

Example for Pre-screening rejection analysis

7 3 10 14 35

12 17

11 2

Example for RFI-RFQ rejection analysis

1

3 4 25 9

Traders/distributors or Importers only, Not certified with any of the social compliance certification Not interested / produce CMT basis / only for in-house production Unable to contact them/ Company shutdown Discarded by client Do not produce sweater or stop producing Duplicate supplier from same group

Cannot meet the technical specification as doing very basic styles Consider themselves small for this project Capacity full Produce CMT basis / only for in-house production Traders/distributors or Importers only, Not certified with any of the social compliance certification Previously have worked with client and the order volumes are very small Cannot meet blended yarn requirement 21

Shortlisted Could be considered Not shortlisted

Suppliers location – CHINA. Manufacturer locations’ of all the suppliers as per category/Country wise were highlighted in the map, Sr.no

Supplier Name

City

Province

1

XXX

XXX

Guangdong

2

XXX

XXX

Guangdong

3

XXX

XXX

Guangdong

4

XXX

XXX

Guangdong

5

XXX

XXX

Guangdong

6

XXX

XXX

Zhejiang

7

XXX

XXX

Zhejiang

8

XXX

XXX

Zhejiang

9

XXX

XXX

Zhejiang

10

XXX

XXX

Zhejiang

11

XXX

XXX

Zhejiang

12

XXX

XXX

Hebei

13

XXX

XXX

Anhui

14

XXX

XXX

Shanghai

15

XXX

XXX

Shandong

Suppliers with only RFI received 22

Suppliers Assessment, - Suppliers were assessed and ranked based on the Company profile, - Scoring and ranking of the suppliers are done on the GSP,

23

RFI Score

76

RFI Ranking

1

- Suppliers company profiles as per ranking wise were shared in the final report.

24

-

Process metrics follow up for all categories / countries was sent to the client in progress and final reports.

1400

1228 1200

1000

124 These suppliers need original samples to submit RFQ and Balkan: South-eastern Europe suppliers have also requested client to visit them first.

254

690

800

223

59

538 600

177 400

200

130

65

99

124

149

351

74 79 38

98 61

117

28

193

158

393 54 101 57 46 18 117

0

Identified Suppliers

T-shirts

Passed prescreening

Denim

RFI-RFQ Received Ony RFI received

Sweaters 25

Jackets

Failed prescreening

Flou

RFI-RFQ Rejected

Suits

Agenda

1.

Sourcing Project Introduction

2.

Sourcing Approach

3.

Conclusions

26

- Global view on the number of suppliers shortlisted and could be considered per category and country wise.

- Total 88 suppliers were recommended for the next steps.

T-shirts

Region

East Asia

South Asia

Denim

Sweaters

Jackets

China

#

#

Bangladesh

#

#

#

0

Pakistan

#

0

#

5

#

#

#

#

#

#

#

0

0

South Cambodia East Asia

#

0

Myanmar

#

0

Balkan: Southeastern Europe

Suits

# of # of suppliers suppliers Countries Could be Could be Could be Could be Could be Could be per per Shortlisted Shortlisted Shortlisted Shortlisted Shortlisted Shortlisted considered considered considered considered considered considered country country

Vietnam

East Africa

Flou

0

0

# 3

0

#

0 0

Madagascar

#

0

#

#

#

#

#

#

#

0

#

#

0

#

0

0

#

0

#

#

#

#

#

#

#

Romania

#

0

Macedonia

#

0

0

0

0

#

#

0

#

#

Bulgaria

#

#

0

0

#

#

#

#

#

#

Serbia

0

#

0

#

0

0

0

0

0

#

30

10

18

12

8

15

8

3

88

52

Number of Suppliers per category

15

5

9 27

7

Countries not in scope

Result & Recommendation - Executive summary Please note, The sorting of suppliers was done based on following criteria’s, .

Shortlisted

Could be considered Not shortlisted

• • •

Green (Shortlisted): These suppliers are certified with Social Compliance certificate, and in addition, their scoring are high or above average and/or they are vertical integrated mills.

Price competitiveness was not a criteria used for the recommendation

•

Orange (Could be considered): Most of these suppliers hold social compliance certification in the past but not currently certified. These suppliers may be high score ranking but does not fulfil the must have criteria for holding social compliance certificate.

•

Red (not shortlisted): They are not certified with any social compliance certification as well no other quality certification and very low RFI scoring. Only handful of suppliers in each category are marked in red as they seem to be least potential for client.

28

Suppliers location – China for example, - 23 suppliers are shortlisted from 4 categories, - 11 suppliers are from Guangdong, 4 from Fujian, 4 from Zhejiang & 4 from others.

1

Sr. No.

Category name

No. of suppliers shortlisted

1 1

1

T-Shirts

2

2

Sweaters

8

3

Jackets

8

4

Flou

5

1

4

4

11

29

Conclusions  Whole project was carried out in 12 weeks with 1228 suppliers identified with 117 complete RFI-RFQ received and 28 suppliers responded with only RFI document.

 All the recommended suppliers are certified with social compliance and quality management certification.  Most of the recommended suppliers are vertical integrated mails having all the production process in house.

 Procurement Intelligence report was shared with the client giving insight on the logistic cost and import duties based on the HS codes.  DS recommended # of suppliers for sample development & supplier visit/auditing as a next step.  As a successful completion of stage 1 – supplier qualification, client awarded DS with stage 2 process, a. On-site audit to verify their production capability, quality and management b. Sample making to ensure supplier meet client requirements.  Overall based on the DS Report, It helped client to shortlist and possibly partner with most potential suppliers from the emerging markets.

15