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Global Sourcing Consumables


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Global Sourcing Consumables

  1. 1. Confidential Retailer • The move to increase margins on non-consumables is paramount given the current state of the business and the movement of increased business in consumables at lower margins. • The following slides focus on a Global Sourcing strategy to address non-consumable product categories sourced in worldwide locations to drive higher margin dollars. • Unknown variables include current sourcing structure at Confidential Retailer, % penetration of Globally Sourced Products, sales and margin goals. 1 Submitted by Nora Gomez
  2. 2. Brazil Southern Non-Food Global Sourcing 5% China 4% Central America 10% Pakistan/India 5% Southeast Asia- Central China Indonesia 38% 8% Vietnam 7% Northern China Western China 18% 5% Submitted by Nora Gomez 2
  3. 3. The China Factor • Southern China (primarily Hong Kong and Guangdong Province): This area specializes in production for goods that have sophisticated design. The factories with the most experience are usually joint ventures with Hong Kong and Taiwanese business partners. Labor costs in this area are the highest and production in Southern China focused on high-value products. This region is lowest in importance for Confidential Retailer • Central China (Shanghai): With a population of over 230 million people within the four-hour driving radius of Shanghai, its strength is in labor. Local Chinese entrepreneurs developed most of the factories in this central coastal area and it is easier to negotiate production rates and varying quantities with these factories. In addition, cost of labor is approximately 15% cheaper than in Southern China. Core competencies in this region are focused on apparel, home textiles, glass, ceramics, home decoratives and toys. The port of Shanghai further makes this an excellent hub for sourcing. This region is highest in importance for Confidential Retailer • Northern China (Qingdao and neighboring areas of Beijing): Joint venture factories in northern China are mainly Korean influenced. Many vendors are also run by the local Chinese entrepreneurs. Labor and infrastructure costs are approximately 25% cheaper than Southern China with strong expertise in metal, apparel, home textiles, ceramics and glass. This region is second highest in importance to Confidential Retailer due only to its development of factory base. • Western China (Chengdu): This area is similar to the Shanghai region of 20-25 years ago. Workers from Szechuan returned to this region and brought back production expertise to start their own businesses. This is an emerging opportunity for Confidential Retailer • Hard Goods sourced from China are mostly not subject to quotas of antidumping by the U.S., so its importance in the production of hard goods was not insignificant. Submitted by Nora Gomez 3
  4. 4. Beyond China…Central America • Central America-Honduras (San Pedro Sula-the industrial capital), Guatemala, Costa Rica, Nicaragua, Dominican Republic, El Salvador • Chemicals- Pharmaceuticals, fertilizers, cosmetics, plastics, rubber, polymers, medicati ons, insecticides. Costa Rica is the US leading Central America export market in the sector accounting for 41% of total US chemical exports. Under the Caribbean Basin Initiative (CBI) and the Caribbean Basin Trade Partnership Act (CBTPA), all Central American chemicals exports will continue to receive duty free treatment. • Consumer Goods-Toys, furniture, appliances, various recreational and sporting goods. Costa Rica is the US leading export market in this sector accounting for 30%. • Paper and Paper Products-Costa Rica and El Salvador are the leading US export market in this sector accounting for 35%. • Textiles and Apparel-Guatemala, El Salvador, Honduras, Costa Rica and the Dominican Republic are Submitted by Nora Gomezexport market in this sector 4 the leading US
  5. 5. Beyond China…Indonesia • Cocoa-The third largest producer of cocoa in the world after Ghana and the Ivory Coast. The Island of Sulwesi accounts for 50% of cocoa exports yielding $700m/year. • Coffee-Harvests 500,000 tons of beans per year, selling 65% overseas. Fifty percent of these beans are exported through the Lampung port in Sumatra. • Furniture-Key areas include Surabaya for garden furniture, Jepora for wood based and teak based furniture and Cirebon and West Java for rattan. • Palm Oil-Produced from the Palm plant in Sumatra, Central Kalimantan and North Sulawesi. • Textiles, Apparel and Textile Products-Produced in Java, Banten, Jakarta Special Province. • Stationary Non-Paper • Spices-Black and White Pepper, Cinnamon from Jambi and West Sumatra, Tobacco from North Sumatra and Java, and Nutmeg from Maluku to name only a few. Submitted by Nora Gomez 5
  6. 6. Beyond China… • Vietnam-Key supplier of wood, glass, shoes, gardening items, seasonal products. • Southeast Asia-Key market for wood and furniture. • Pakistan and India-Key markets for Apparel, home textiles and handicraft items made of metal. These areas are limited by their ability to produce for the mass market for most of the product categories for hard home goods. • Brazil and Mexico-Key markets for food and beverage, chemicals, electronics, furniture and furnishings, gifts, hardware lighting, rubber and plastics, tools and toys, textiles and leather, office and school supplies, paper and personal care items. • Emerging parts of the world-Poland, Czech Republic and Russia mainly driven by lower labor costs, these areas are still underdeveloped but assuredly emerging as a key part of a global sourcing strategic plan. Submitted by Nora Gomez 6
  7. 7. Differentiating Factors of Successful Retailers Emerging Customer Needs and Product Opportunities Consumer testing that Marketing must showcase reduces risk of product how the offering is different innovation and fundamental to the customer’s lifestyle. Inventory Management Product Development and Capabilities that can shift Sourcing that balances products to the places of savings , quality and greater demand and commercial appeal maximizes prices. Tight Relationships with Sourcing Vendors that enable manufacturing to scale up quickly and quality to be maintained. Submitted by Nora Gomez 7
  8. 8. Agent/Trading Company/Factory Direct Trading Company Agent Factory Direct • Often third and fourth party • Direct Factory Relationships • Direct Factory Relationships relationships • Large Retail Customer Base • Avoid third party loads • Smaller Customer Base • Package Deals • Package deals • % Load • % Load • Products • Products • Products • Certifications • Certifications • Certifications • Factory Profiles • Factory Profiles • Factory Profiles • Quality Control • Quality Control • Quality Control • Services and Support • Services and Support • Services and Support • Government Support • Trading Services • Government Support • Represents Factories • Represents Customer Submitted by Nora Gomez 8