VCF Fall Conference
November 7-10, 2010
Trading Partner Collaboration on Steroids
How simple technologies are reducing com...
VCF Fall Conference
November 7-10, 2010
Today’s Takeaways
▶ Global Sourcing is complex
▶ It isn’t getting any easier
▶ Bus...
VCF Fall Conference
November 7-10, 2010
Global Sourcing / Private Label
Margin, Margin, Margin
Brand, Brand, Brand
VCF Fall Conference
November 7-10, 2010
Suppliers/sources Designers Raw Material Ocean Transport Air Transport
Global Sour...
VCF Fall Conference
November 7-10, 2010
20% - Minimum wage increase in China in 2010
82% - Cost of cotton price increase s...
VCF Fall Conference
November 7-10, 2010
Cost of Labor is Rising
China: 20%+ in 2010
• Bangladesh: $0.21
• Indonesia: $0.35...
VCF Fall Conference
November 7-10, 2010
Logistics Costs – That was then…
VCF Fall Conference
November 7-10, 2010
Logistics Costs are Rising
Pressures
▶ Container shortage
▶ Seasonal demand
▶ Fuel...
VCF Fall Conference
November 7-10, 2010
Raw Material Costs are Rising
0
20
40
60
80
100
120
Jan Feb Mar Apr May Jun Jul Au...
VCF Fall Conference
November 7-10, 2010
Compliance Costs Grow
▶ CPSIA, C-TPAT, 10 + 2
▶ Factory Compliance Programs
▶ Corp...
VCF Fall Conference
November 7-10, 2010
Against All Odds
▶ Increase visibility
▶ Focus on productivity
▶ Adopt Lean manufa...
VCF Fall Conference
November 7-10, 2010
▶ Email
▶ Real-time
▶ Social
▶ Aggregated
Evolution of Collaboration
Quickly appro...
VCF Fall Conference
November 7-10, 2010
Enterprise Collaboration Basics
▶ Enterprise 1.0 – focus on documents created and ...
VCF Fall Conference
November 7-10, 2010
Twitter and Friends…
Meet Global Sourcing
VCF Fall Conference
November 7-10, 2010
Maslow's Hierarchy of Enterprise 2.0
VCF Fall Conference
November 7-10, 2010
Keys to Successful Enterprise Collaboration
Multi-modal
Integrated
Archivable
Atta...
VCF Fall Conference
November 7-10, 2010
Real World Application
Leave Failures at the Factory
Quality Issue found in China ...
VCF Fall Conference
November 7-10, 2010
Today’s Takeaways
▶ Global Sourcing is complex
▶ It isn’t getting any easier
▶ Bus...
VCF Fall Conference
November 7-10, 2010
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Trading Partner Collaboration on Steroids

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One of the compelling reasons for a company to pursue building their private label business is for the margins. In today’s challenging economy, rising labor, raw material, logistics, and compliance costs all continue to gnaw at margin.

In the private label global supply chain arena one of the last bastions for margin protection and cost control is through business process and workflow. An effective and efficient way of managing this is through enhanced trading partner collaboration, leveraging new technologies.

The term “collaboration” is one of the most hackneyed terms in this industry, yet improving collaboration is always ‘top of list’ for retailers and brand owners managing global supply chains. In this session, join Donny Askin, CEO of Arigo, as he discusses how the new tools typically associated with social networking, tightly coupled with business process and workflow within the private label global supply chain, can help reduce costs, improve margins, and strengthen trading partner relationships.

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  • Thank you

    For those of you who have been following my blog – which is not many… you know I am new to this space

    Software guy and 2 year student of the Global Sourcing and Trade Management space – been getting fire-hosed on this entirely new ecosysetm

    Glad to have this coming out opportunity to share a little of what I have absorbed

    And perhaps introduce you to some fresh perspective and new, simple technologies to help reduce complexity out of the supply chain

    Tools and technologies you can add to your arsenal, defending your margin, responding to the everchanging landscape the global sourcing and trade management create

    Audience Participation: Please raise your hand and show me which finger you use to ring a doorbell. Now which finger do you think you children use: Hold onto that thought as its relevance will become evident later.

    There is much I could talk about: Visibility, Intelliegence, Compliance, Quality, Why Private Label / Global Sourcing is at its appegee or its perigee?

    But what I am going to talk about is….

  • (review slide)
  • (review slide)

    An old friend of mine, Paula Rosenblum of RSR Research in a recent survey noted :

    The % of retailers who indicated that at least half of their mechandise was private label grew from 42% in 2008 to 55% currently, an increase of 31%

    90% of the survey execs expected that % to increase in 2012

    Can capture 8-12% of margin taken from the middleman

    Private label branding provides differentiation against the homogenous, commoditizing tendencies of retailing
  • Sourcing itself is intrinsically complex

    Compound that with global sources all that is involved in designing, manufacturing, importing, the complexity grows exponentially

    As a retailer or brand owner you are connecting
    Supplier and manufactures
    To your design team
    Raw materials must be sourced and transported
    Finish product must be moved by water, air and land to your markets


    I suspect I am preaching to the choir here…you know all of this
  • If that were not enough… (review slide)

    Bruce Rockowitz – President and Exec Director of L&F has been very vocal about the days of labor deflation are behind us


    Regarding Cotton – Just last week NY Time article highlighted
    A number of domestic retailers including some of Arigo’s customers such as The Bon-Ton were raising prices due to the cost of cotton

    This was after they substituted cotton components with synthetic linings, smaller button, less Italian fabrics, more polyester and found cheaper labor markets
  • Cost of Labor Rising:

    Minimum wages in Southern China and Beijing grew 20+% this year alone

    The industry adage that “companies chase the lowest-cost needle” is changing, In its place, companies are developing more nuanced strategies that include both enhanced factory productivity and diversified sourcing bases to mitigate rising costs.

    According to Dept of Commerce, Office of Textiles and Apparel, shipments to the U.S. from Mexico for the year ended July 31 were up 19.4 percent to 1.5 billion square meter equivalents,

    Combined shipments from Indonesia rose 18.6 percent to 1 billion SME.

    Vietnam’s combined imports to the U.S. climbed 30.8 percent to 1.6 billion SME.

    China, still by far the largest, saw its combined shipments increase 29.2 percent to 14.1 billion SME
    With it rises costs globally

    None have the population depth to scale as China has

    Besides rising costs Chinese currency manipulation, as much as 40%, is currently being challenge

    All rising tide lifts all boats
  • Logistic Costs are Rising

    Just a year ago German publication, Spiegel headlined, “The Container Crisis - Shipping Industry Fights for Survival
    The global economic crisis was wreaking havoc on shipping: Demand and prices have collapsed and ports are filling up with fleets of empty freighters. The crisis has fueled cut-throat competition and not all companies will survive. Germany's Hapag-Lloyd alone needs 1.75 billion euros to stay afloat

    (review slide)

    Pictured: idle container ships off Singapore, nearly 10% of the global fleet idle
  • Logistics cost rising

    Fast forward 12-15 months:
    US and EU regulators are investigating container carriers for price fixing
    Ships remain mothballed throughout the world in harbors, canals and inland waterways
    Ships run slower – doubling transit time – to conserve energy and reduce energy cost, leaving containers and ships empty longer
    Retailers scramble to get fall goods in due to global shortage of containers – container cost skyrocket
    Late ships/high value items are getting air freighted at 10x the traditional shipping cost
    Arigo received numerous customer calls for help as they tried to sort thru getting their goods here
    Anecdote – refrigerated container


    Transportation and logistics costs have been rising as a percentage of the cost-of-goods-sold (COGS). This has occurred as a result of rising fuel prices, the intrinsic costs of long-distance flow of goods and transportation capacity imbalances—both for domestic transportation in regions like North America, and for international ocean and air freight from countries like China.

    (review slide)

  • Cotton Again – as well as other raw materials

    Slower demand of a few years ago reduced crop sizes

    As demand returned from a slowly improving economy and significant growth of demand from emerging consumer economies such as China, production increased

    Increased demand against short supply was compounded by flooding in Pakistan and India, bad weather throughout the growing regions including China, all created significant shortages

    (review slide) – Cost of Cotton has gone from $54/lb in Jan, 2009 to $104/lb this past fall – a 15 year high

    It is simple supply and demand – Sharon Johnston, senior cotton analyst for First Capital Group indicated that it will take 2 years for cotton production to catch up to consumption
  • Compliance Costs Grow
    • Increased regulatory requirements: environmental, product safety, etc.
    • Increased enforcement and penalties
    • Increased expectations: Traceability
    • State vs. Federal regulations
    • Resources: People, IT, etc.
    • Supplier Certifications and tools to properly manage the many different programs

    CPSIA - $100k first offense, $15m for multiple expenses, plus criminal prosecution

    Costs around Factory Compliance Programs
    Factory Evaluation
    Legal Compliance Survey
    Factory Security Survey
    Final Inspections

    Costs around Corporate Social Responsibility
    Ethical Sourcing
    Tier 2 Suppliers: Trim and packaging suppliers
    Environmental Initiatives
    Restricted Substances List
    Water Quality Program
    Sustainable Products
    Product Stewardship Committee
    Simply Green Strategy Committee

    But if that were not enough… on the horizon

    Transportation & Security Issues
    California Transportation Initiatives
    Transportation Infrastructure: Highways, National Freight Policy, Rail
    Drivers Hours of Service Regulations
    Cargo Security: 10 + 2, 100% Scanning
    Product Safety Legislation

    Trade Policy
    China/Viet Nam Trade Issues
    Free Trade Agreements-Asia/Pacific Region
    Free Trade Agreements-Latin America
    Generalized System of Preferences
    Trade Legislation
    Affordable Footwear Initiative
  • Now that we are collectively depressed – what can we do… What can we do

    (review slide)

    Remember our audience participation exercise at the beginning of the presentation???

    The answer lies in ways to leverage new technologies embodied in the new social networking tools (IM, audio, Video, Content and Community Building

    This is not crowd sourcing your design or demand chain --- but rather the new category of Enterprise Collaboration

    This is a key, new simple set of technologies to improve Trading Partner Collaboration that can improve design, improve quality, save time, increase accountability, bring your trading partners, internal and external closer, and allow you to “Leave Failures at the Factory!”
  • Collaboration, I have learned is a much hackneyed term in Global Sourcing and Supply Chain

    According CISCO - Collaboration 1.0 and 2.0

    In order to understand the importance of collaboration today, it is helpful to go back to the beginning. The first generation of
    business collaboration tools began with a focus on documents that were created and shared by individuals who used one
    device: the PC. Information resided safely within the walls of the enterprise, and personal productivity improved.

    Collaboration 2.0 shifts the focus from documents and PCs to people and social sessions, defined as the new fundamental unit
    of collaborative work, in which groups of individuals interact across company and geographic boundaries.

    The goal of a social session is to create the effect of presence within the reality of absence. Social sessions are the new fundamental unit of collaborative work. Again, the goal of a social session is to create the effect of presence within the reality of absence.

    This new collaboration experience helps us cope with information overload by delivering only what we need, just when we need it. We can find experts, trading partners, etc, in an instant and participate in blogs, videos, wikis, social networks, team spaces, online communities and conferences from a variety of devices. Thanks to advanced security and policy management, we can include partners, customers, and suppliers in our one-to-many communications

    (review slide)

    Enterprise collaboration – its use cases, interaction models, and business value – is at the tipping point of providing
    significant improvements to business productivity and overall business performance by ushering the convergence of
    communication, content management, business processes, and social computing.

  • * So, again, remember the doorbell finger question?

    Over the next 20 years some 72m Baby Boomers leaving the work force (per Chris Taylor, Corp Mktg Mgr as Aspen Logistics,)
    New Gen X & Y workforce entrants replacing them will have a new communication paradigm as evidenced in the surge of adoption and utilization of social networks.

    They ring doorbells with their “texting” thumb and don’t have watches because they get their time from their cell phones

    The preferred communication ‘devices’ will be cell, tablet … mobile devices. The tools of communication will be Twitter’esq, Webex’esq, Wiki’esq, IM’esq tools.

    All of this will flatten hierarchies, increase collaboration and virtualize presence

    Hang Out Analogy

    (review slide)


  • Leveraging Enterprise 2.0 what can that mean for Global Sourcing and Trade Management

    Cost Savings – cut down on mistakes, improve turnaround, get information instantly from any source
    Revenue Generation – Empower, enable trading partners internally and externally to foster new revenue sources
    Customer Satisfaction – Customer empowerment and communication, making part of the community
    Employee Satisfaction – Engaged and empowered staff, the ability to find the right person to foster ideas.
    Ideas are me
    Ideas are basis for finding like-minded colleagues
    Ideas as social objects
    Ideas become project
    Enterprise Collaboration is the plumbing that facilitates all of this
    Cross-Organization Collaboration
    Improves outcomes by allowing access to diversity of knowledge and perspective
    Building strong bonds
    Reduction of redundancy of effort
    Innovation Culture and Organizational Agility
    Seeing and reacting to market changes faster
    Shifting resources in response to new opportunities
    Empowerment of stakeholder to recognize opportunites and threats themselves and act accordingly

    All comes back around to improve efficiency, reduce cost, increase margin and more easily develop ways to differentiate your brand
  • Mulit- model – remember ecommerce emergence
  • DY Example

    AAFA example
  • So let me end where I began.
  • Who we are: Arigo is the industry leading provider of Visibility, Intelligence & Collaboration tools for Retailers and Brand Owners supporting Sourcing and Global Trade Management from pre-production through delivery. Arigo solutions help customers optimize complex supply chain processes and visually manage assets to improve sourcing and global trade transactions with full collaboration from retailer to supplier, from design to delivery. We pull it all together… And we do that for companies like JCPenney, The Home Depot, RadioShack, The Bon-Ton and Staples

    Thank you!

    Q&A
  • Trading Partner Collaboration on Steroids

    1. 1. VCF Fall Conference November 7-10, 2010 Trading Partner Collaboration on Steroids How simple technologies are reducing complexity Presented by: Donny Askin, CEO Arigo
    2. 2. VCF Fall Conference November 7-10, 2010 Today’s Takeaways ▶ Global Sourcing is complex ▶ It isn’t getting any easier ▶ Business process and workflow remain ripe for continued optimization ▶ Social Networking Tools leveraged within the context of Enterprise Collaboration = margin protection
    3. 3. VCF Fall Conference November 7-10, 2010 Global Sourcing / Private Label Margin, Margin, Margin Brand, Brand, Brand
    4. 4. VCF Fall Conference November 7-10, 2010 Suppliers/sources Designers Raw Material Ocean Transport Air Transport Global Sourcing Isn’t Easy
    5. 5. VCF Fall Conference November 7-10, 2010 20% - Minimum wage increase in China in 2010 82% - Cost of cotton price increase since 2009 … And consumer demand is flat 200% - Container cost increase since 2009 $15m and prosecution - Multiple CPSIA offenses It Isn’t Getting Any Easier
    6. 6. VCF Fall Conference November 7-10, 2010 Cost of Labor is Rising China: 20%+ in 2010 • Bangladesh: $0.21 • Indonesia: $0.35 - $0.71 • Sri Lanka: $0.46 • Mexico: $0.50 - $0.53 • Vietnam: $0.52 • India: $0.55 - $0.68 • Nicaragua: $0.65 • El Salvador: $0.92 • China: $0.93* • Philippines: $0.94 -$1.00 • Honduras: $1.02 • Guatemala: $1.21 • Costa Rica: $2.19 • U.K.: $7.58 - $9.11 • U.S.: $8.25 - $14.00 Source: INSTITUTE FOR GLOBAL LABOR & HUMAN RIGHTS.
    7. 7. VCF Fall Conference November 7-10, 2010 Logistics Costs – That was then…
    8. 8. VCF Fall Conference November 7-10, 2010 Logistics Costs are Rising Pressures ▶ Container shortage ▶ Seasonal demand ▶ Fuel prices rising ▶ Regulatory Compliance
    9. 9. VCF Fall Conference November 7-10, 2010 Raw Material Costs are Rising 0 20 40 60 80 100 120 Jan Feb Mar Apr May Jun Jul Aug Sep National Cotton Council of America Cotton Price by Month 2009 vs 2010
    10. 10. VCF Fall Conference November 7-10, 2010 Compliance Costs Grow ▶ CPSIA, C-TPAT, 10 + 2 ▶ Factory Compliance Programs ▶ Corporate Social Responsibility Programs(CSR)
    11. 11. VCF Fall Conference November 7-10, 2010 Against All Odds ▶ Increase visibility ▶ Focus on productivity ▶ Adopt Lean manufacturing ▶ Continue to seek cheaper labor markets ▶ Improve Trading Partner Collaboration
    12. 12. VCF Fall Conference November 7-10, 2010 ▶ Email ▶ Real-time ▶ Social ▶ Aggregated Evolution of Collaboration Quickly approaching; needs organizational adoption
    13. 13. VCF Fall Conference November 7-10, 2010 Enterprise Collaboration Basics ▶ Enterprise 1.0 – focus on documents created and shared primarily on a PC ▶ Enterprise 2.0 – focus on people and social sessions in which groups of individuals interact across companies and geographic boundaries. The goal of a social session is to create the effect of presence within the reality of absence.
    14. 14. VCF Fall Conference November 7-10, 2010 Twitter and Friends… Meet Global Sourcing
    15. 15. VCF Fall Conference November 7-10, 2010 Maslow's Hierarchy of Enterprise 2.0
    16. 16. VCF Fall Conference November 7-10, 2010 Keys to Successful Enterprise Collaboration Multi-modal Integrated Archivable Attachable
    17. 17. VCF Fall Conference November 7-10, 2010 Real World Application Leave Failures at the Factory Quality Issue found in China Quality Issue found in US Quality Issue found in US Cashmere Sweater Corrected in China Corrected in China Corrected in US Proposed Landed Cost 40.00$ Labor Cost/Unit in China 0.08$ 0.08$ Labor Cost/Unit in US 0.83$ Logistics cost back to China -$ 1.00$ -$ Logistics cost back to US 1.00$ Additional Cost/Unit -$ 0.08$ 2.08$ 0.83$ Adjusted Landed Cost 40.00$ 40.08$ 42.08$ 40.83$ 4 Retail Price 160.00$ Gross Margin 120.00$ 119.92$ 117.92$ 119.17$ 75.00% 74.95% 73.70% 74.48% Lost Margin / 5000 Units (387.50)$ (10,387.50)$ (4,166.67)$
    18. 18. VCF Fall Conference November 7-10, 2010 Today’s Takeaways ▶ Global Sourcing is complex ▶ It isn’t getting any easier ▶ Business process and workflow remain ripe for continued optimization ▶ Social Networking Tools leveraged within the context of Enterprise Collaboration is a new weapon in the arsenal to protect margin
    19. 19. VCF Fall Conference November 7-10, 2010

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