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New focus garment supply chain strategic planning

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  • 1. An Reengineer’ed Garment Supply Chain Business Model (For Discussion Purpose Only) August 4, 2011 Confidential
  • 2. Who Are We
    • We are a Service provider (not manufacturer) in the garment supply chain.
    • Our objective is to reduce the transaction costs in the supply chain.
    • Our revenue and profit come from sharing the costs savings with our partners (customers, manufacturing and logistics partners) from our innovative value proposals.
    • Our investment philosophy is high return and low investment and visible (that is not measured by time).
    August 4, 2011 Confidential
  • 3. Who Are Our Customers
    • Customers That Require Design Service
    • Customers That Source From Overseas
      • Have Stores That Sell To Consumers
        • Department Stores (Sell More Than Garment)
        • Specialty Stores (Sell Only Garment)
      • Have No Stores That Sell Direct To Consumers
        • Catalogue
        • E Stores
      • Have No Stores That Sell To Customers That Have Stores
        • Distributors
        • Designers
    August 4, 2011 Confidential
  • 4. August 4, 2011 Confidential Coase, Ronald, “ The Nature of the Firm ”, “ The Problem of Social Cost ”
  • 5. August 4, 2011 Confidential
  • 6. August 4, 2011 Confidential
    • Costs required to carry out a market transaction (Outsourcing)
      • Cost of aligning the interests of buyers and sellers
      • Cost of enforcing their contractual agreement
      • Cost of obtaining information
      • Cost of coordinating input and output of the transformation of goods, quality control, logistics
      • Cost Of Uncertainty : inventory risks
      • Etc .
  • 7. Manufacturers PUSH - Pre ordering based on estimate - Receiving - Storage Retailer Or Importer Customer Or Stores PULL Physical Inventory By Each Manufacturer Pick and Pack August 4, 2011 Confidential PUSH
  • 8. August 4, 2011 Confidential Merchandiser Retailers’ Buyers Manufacturers Buyers Distribution Centre Retailers’ Stores Design Promote & Sell Review Place P/O to Manufacturers Make Sample Line Planning & Sales Forecast Receive Orders Place Material Orders Receive Material Manufacture Deliver Receive Into Warehouse Pick/Pack Deliver Receive Into Stores Place Orders Supply Chain Process
  • 9. August 4, 2011 Confidential Sales 100 Cost Of Sales 40 Gross Profit 60 Selling Expenses 25 Product Develop’t 10 Distribution 6 Overhead 10 Tax ? Net Profit B4 Tax ?
  • 10. August 4, 2011 Confidential - From “Time is money”
  • 11. A New Business Model
    • Quick Response To Fashion Trend
    • Concept of Negative Working Capital
      • Collect Cash Before Paying The Suppliers
    • Reduced Distribution Cost
      • No Warehousing Cost And Reduced Order Processing Cost
      • No Inventory Cost
    • Increase Sales By Reacting To The Consumer Demand
      • Reduce Lost Sales
      • Better Sell Through
    August 4, 2011 Confidential
  • 12. New Focus Garment Supply Chain
    • Four Components
      • Quick Response Product Development
      • Cluster Manufacturing & Virtual Warehouse
      • Demand Driven Ordering
      • Activity Based Management System
    August 4, 2011 Confidential
  • 13. Cluster Manufacturing Virtual DC Demand Driven Ordering Retailer or Importer Customer or Stores PULL Supplier Z Physical Inventory X Supplier A1 Supplier A2 Supplier A I Cluster A Supplier B1 Supplier B2 Supplier B i Cluster B Supplier Z1 Supplier Z2 Supplier Zi Cluster Z QR Product Development August 4, 2011 Confidential PULL ------------------------Activity Based Management System-----------------------------------
  • 14. Quick Response Product Development
    • Fabric Development
      • Colour and Pattern Forecast
      • Sample Colour Yarn Inventory
      • Fabric Data Base
      • Pantone Numbering System (Standard Colour Communication)
      • Fabric Design Software (Standard And Quick Communication)
      • Collaborative and Quick Response Fabric Design Process
    • Sample Garment (Prototype) Service
      • From Fabric Mill Direct To Sample Making
      • One Sample For Several Manufacturers
    August 4, 2011 Confidential
  • 15. August 4, 2011 Confidential
  • 16. Cluster Manufacturing
    • A Cluster Consists of Several Medium Size And Low Cost Factories, Each Specialized In One Product, Geographically Closed To Each Other
    • Ideal Area for A Cluster
      • Guangdong Area
      • Shanghai Area
      • Sri-lanka
      • Vietnam
    August 4, 2011 Confidential
  • 17. Virtual Warehouse
    • Orders Are Segregated Into Cluster/Supplier Orders From Central Location
    • Depending On The Requirements And/Or Product Type, Orders Are Fulfilled Either By Pulling From Inventory At Supplier Site Or From Quick Manufacturing
    • Each Cluster Has One Consolidated Shipment For Each Customer/Store
    • For Each Order, It Can Have As Many Shipments As The Number of Clusters (Not Suppliers) Required To Fulfill The Order
    August 4, 2011 Confidential
  • 18. Manufacturer Order (1)
    • Importer/Retailer
      • Customer/Store
        • (For Importer) Store
          • Product-Quantity
    August 4, 2011 Confidential
  • 19. Manufacturer Order (2) (Example for Cluster A, Manufacturer 1 – Specialized in Dress Shirt) (One manufacturer Order, Two Shipping Packages)
    • Example: Importer
      • PVH (Importer)
        • Nordstrom (Customer)
          • Seatle Metro Store (Store)
            • Calvin Klein Dress Shirt Style 001 Size 15/32 100 pieces (Product-Quantity)
    • Example : Retailer
      • JC Penney (Retailer)
        • Dallas Downtown (Store)
          • Stafford Dress Shirt Style 002 Size 15/32 10 piece (Product-quantity)
    August 4, 2011 Confidential
  • 20. Shipment
    • Products From Each Manufacturer Are Consolidated Into One Package At Each Cluster (Virtual Warehouse)
    • A Package Could Consist Of More Than One Products
    • One Package (Could Be Several Physical Packs) Per Sales Point (Customer’s Store For Importer, Store For Retailer, Where Orders Are Originated)
    • All Packages Are Consolidated At Each Cluster For Shipping
    • One Shipment (For All Packages) Per Cluster
    • Packages Are Cross Dock’ed And Shipped Direct To Sales Point
    August 4, 2011 Confidential
  • 21. Customer/Store A Order Customer/Store B Order Customer/Store C Order Customer/Store i Order New Focus Garment Supply Chain Service Manufacturer A1 Manufacturer A2 Manufacturer Ai Cluster A Cluster B Manufacturer B1 Manufacturer B2 Manufacturer Bi Process 1 – Order Segregation August 4, 2011 Confidential Stores A, B, C Stores A, C Stores C Stores A, B Stores A, C Stores A
  • 22. Customer/Store A Customer/Store B Customer/Store C Customer/Store i Manufacturer A1 Manufacturer A2 Manufacturer Ai Cluster A Cluster B Manufacturer B1 Manufacturer B2 Manufacturer Bi Process 2 – Order Products Consolidation & Shipment Customer/Store A Order Shipping Package From Cluster A Customer/Store B Order Shipping Package From Cluster A Customer/Store C Order Shipping Package From Cluster B August 4, 2011 Confidential Customer/Store A Order Shipping Package From Cluster B Customer/Store B Order Shipping Package From Cluster B Customer/Store C Order Shipping Package From Cluster A
  • 23. Demand Driven Ordering
    • Cut To Orders Ship To Users (COSU)
      • Non Replenish’able Products
      • Fashion Items, For Single Season Only
    • Direct Replenishment
      • Replenish’able Products
      • Non Seasonal Items Like Basic Dress Shirt, Khaki Pants, Polo Shirts
    • Catalogue Orders
    August 4, 2011 Confidential
  • 24. Demand Driver Ordering
    • Orders Are Issued By Customers (For Importers) Or Stores (For Retailers)
    • Order Quantity Is Determined By Customers, Model Inventory, And/Or Replenishment
    • Each Order Contains Different Products From Different Manufacturers From Different Clusters
    • Orders Are Communicated Through EDI
    • Information Of Inventory, Production Lead Time (Available For Sales), Order And Shipment Is Visible To All Supply Chain Partners As Needed
    August 4, 2011 Confidential
  • 25. August 4, 2011 Confidential       Cut To Orders Ship To Users Customer Orders Product Development Sales Manufacturer DC Retail Pick/pack
  • 26. August 4, 2011 Confidential
  • 27. August 4, 2011 Confidential
  • 28. Direct Replenishment
    • Designed For Commodity Products
    • Auto Replenish to Warehouse/Stores From Clusters Of Manufacturers
    • Customer shares forecast, on-hand, PO receipt acknowledge
    • Customer determines model stock (service level)
    • Factory generates In-Take schedule
    • Measured by inventory turn and stockout at customer’s warehouse
    August 4, 2011 Confidential
  • 29. August 4, 2011 Confidential The Direct Replenishment
    • The Direct Replenishment process is divided into nine steps:
      • (1) Front-end agreement
      • (2) Joint business plan
      • (3)~(5) Sales forecast collaboration
      • (6)~(8) Order forecast collaboration
      • (9) Order generation/delivery execution
    Source: “CPFR for Beginners,” M. Johnson (Syncra Systems) and L. Roth (Kimberly-Clark)
  • 30. August 4, 2011 Confidential Catalogue Order
  • 31. Activity Based d Management System
    • Management Of Workflow For Service Based Tasks
    • A Combination of Activity Based Costing System, Project Management System and Financial Reporting System
    • Planning, Execution & Control
    • Knowledge Management
    August 4, 2011 Confidential
  • 32. August 4, 2011 Confidential
  • 33. August 4, 2011 Confidential
  • 34. Challenges
    • Paradigm Changes
      • Internal
      • External
    • Execution
      • Right Partners
      • Zero Defect Product And Pick/Pack
      • Lead Time
      • Freight Cost
      • Returns
    • Etc………
    August 4, 2011 Confidential