New focus garment supply chain strategic planning


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New focus garment supply chain strategic planning

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