2. 2 3
ABSTRACT
“Simplicity is the ultimate sophistication”
Leonardo da Vinci
At Ecru, we strive to provide the high quality, cutting edge
garments to our consumers. Our company is based solely on
social responsibility and code of ethics. Our basics line will be
available all year round and is perfect for the trendy customer
looking to make a smart addition to their wardrobe, while still
standing out of the crowd.
Through much research in sourcing and manufacturing we
have determined the values in what Ecru is specifically looking
for. In order to meet our margins and keep our costs down
we have spent much time researching facilities all across the
world in order to determine which will best suit our needs. These
countries include, India, China, Sri Lanka, El Salvador and the
Philippines.
As an up and coming company it is very important to
minimizeourrisks andultimately increaseouroverallopportunities
for both our company and our supplier. We have developed a
placement strategy that includes many factors such as country
and supplier analysis and ranking, costing, negotiations, and the
evaluation and analysis of the strategy development factors. This
strategy will aid us in our ability to make the best decision when
it comes to the manufacturing of the Ecru Basics garments.
4. 6 7
TABLE OF CONTENTS
INTRODUCTION
STRATEGY
DEVELOPMENT
PROCESS
COUNTRY
ANALYSIS
SUPPLIER
ANALYSIS COSTING
Company Profile 8
Who We Are 10
Our Products 12
Target Market 14
Why Develop a Strategy? 16
Values 18
Sourcing Guidlines 21
Products, Volumes,
& Seasons 22
Sales Plan 24
Countries’ Highlights
& Textile Industies 27
Sri Lanka 28
El Salvador 42
India 52
Philippines 60
China 72
SWOT Analysis 79
Country Ranking 84
Suppliers’ Highlights
& Textile Industies 92
Sri Lanka 93
El Salvador 99
India 104
Philippines 108
China 111
Suppllier Ranking 116
Preliminary Costing 122
Initial Costs vs
Preliminary Costs 124
STRATEGY
DEVELOPMENT
SOURCING
STRATEGY
COMPARISON
OF
FINAL COSTING CONCLUSION APPENDIX
Sales Plan 126
China 128
Sri Lanka 132
El Salvador 135
The Future
of ECRU 139
China 141
Sri Lanka 144
El Salvador 147
Placement
Strategy 150
Preliminary Costing vs.
Final Negotiatiated Prices 153
Conclusion 157
Cost Sheets 161
Tech Packs 167
Sourcing Guidelines 213
Supplier Emails 220
Bibliography 234
5. 8 9
Vision
Enhancing Life with Grace and Simplicity
Mission
To be the ultimate house of simple sophistication and style through the creation of
desire now and forever
Values
Aesthetic Competence Creativity Diplomacy
COMPANY
PROFILE
Fairness Integrity Perseverance Teamwork
ECRU is a high-end women sportswear retailer with its
flagshipboutiqueinSoHo,NewYork.Weprovidewomenhigh-
quality sportswear with minimal, natural, and sophisticated
aesthetics and styles to our customers. ECRU also has an
extension line called “ECRU Basics” which provides basic
yet high quality garments throughout the year.
ECRU incorporates its values throughout the company
and its products since the main proirity is to assure our
customers receive the best quality and fashionable outfits
that reflect their lifestyles and identities.
6. 10 11
WHAT WE
STAND FOR
ECRU is a French word for “unbleached“ or “raw”. It
also means a shade of light greyish-pale yellow or beige-like
tones. This type of color appears on raw and natural yarns
and fabrics. The name reflects the company’s philosophy
and core values in which we consider the pure quality and
rawness throughout the products. That is why our designs
and aesthetics are rather simple yet sophisticated in
craftmanship. Ecru is the signature color palette through out
our collections and packaging, which also makes us stand out
and distinguishes our customers from other leading brands.
ECRU also concerns about sustainability and corporate social
resposibility. We take serious agreement on transparency and
integrity with our partnerships from sourcing guideline to every
process of the production.
SInce ECRU values the importance of environment
and sustainability, the products are made of 100%
natural fiber yarns and fabrics such as cotton and
linen. The company has been trying to reduce carbon-
footprint by sourcing and utilsing fabrics within the
same countries. Our company is also working toward
more eco-friendly and organic fabrics in the future.
ECRU offers both fashion and basic collections. Our
products range from woven and knitted tops, bottoms,
dresses, and accessories. Though ECRU basics collections
have lower price range, we still maintain and assure our
customers the same level of quality of our products. ECRU
basics are offered throughout the whole year with new
several pieces added to the collections each season to
keep updated with current color trends for each season.
8. 14 15
TARGET MARKET
ECRU caters toward female New Yorkers within ages of 25-40. Our
customers are considered as young digerati living in the urban and afflu-
ent lifestyles around Manhattan and Downtown Brooklyn. They are sophis-
ticated, thoughtful, and stylish. With high level of education and career
success, our women are independent and confident with their lifestyles
and fashion choices. They are innovators and experiencers who always
look forward and keep up with new trends and styles, but yet don’t want
to overdress themselves. They want to dress well enough so that people
can appreciate their looks as well as their status. Their preference in styles
is considered clean, minimal, yet unique in design and aesthetic. Our cus-
tomer also value high quality and craftmanship.
ECRU Basics line serves as fundamental pieces that our women must
have and wear them in their daily lives no matter what occasions or plac-
es they go.
CUSTOMER
PROFILE
Family Income: $308,721 (Personal - $97,000)
Education: MBA in Marketing at NYU
Competitive Stores/Brands: Stella McCartney, Chloe, and Bloomingdales
Fashion Cycle: Innovation Stage
VALS: Innovator/Experiencer
Buying Behavior:
• Expect great customer service / Enjoy shopping experience
• Best quality products
• High brand loyalty
Grace Smith
Age: 27
Marketing Consultant
From Upper East Side,
NYC
9. 16 17
STRATEGY DEVELOPMENT PROCESS
Ecru,meaningpure,simpleandclean,isaluxurywomen’sreadytowear
brand with a mission to be the ultimate house of simple sophistication
and style through the creation of desire now and forever. Ecru has a
goal to create sophisticated and timeless pieces of women’s clothing
while valuing aesthetic, diplomacy, fairness and integrity, as well as
giving back philanthropically.
These five country profiles from El Salvador, India, China, the Philippines
and Sri Lanka is meant to overview the countries in all aspects from
their culture, to their economy to their manufacturing, to ultimately
determine which country is the best for Ecru to source their luxury
garments from.
When determining which country to chose for the manufacturing of
our luxury women’s woven tops Ecru’s looked firstly at the codes of
conduct for each of the manufacturers as well as the way the country
does business overall. Because ethics and overall conduct is such a
strong value for Ecru, it is very important that the manufacturers share
these similar goals. Our other considerations must obviously include
the overall cost of creating the garments, the export industry as well
as the over textile and apparel industry of each of the five chosen
countries.
Why Develop a Strategy?
Values
Sourcing Guidlines
Products, Volumes,
& Seasons
Sales Plan
10. 18 19
VALUES
ECRU is built upon several values we believe will allow our company
to grow and be successful. We aspire to be a brand that is looked up
to and respected by our competitors and customers alike. These same
values helped build ECRU’s sourcing guidelines as we are committed to
producing quality garments that will be worn with pride.
Perseverance
We believe in our company and its products and we will work hard to
overcome obstacles in whatever form they may take in order to deliver
apparel that lives up to our standards.
Fairness
We believe in equal opportunity and rights free from any form of
discrimination.
Diplomacy
Working with foreign companies can bring its own set of challenges, but
we are dedicated to resolving conflicts and finding common ground to
benefit both ourselves and our manufactures as we wish to successfully
grow our business as well as theirs.
Creativity
At ECRU we know the best solution isn’t always the most obvious and
believe in the power of creative thinking and play to be innovative.
Aesthetic
We strive to deliver garments that will be appreciated by our customer
for both the care that was put into its design and creation and for its
overall look. We believe in simple luxury and want our customers to
confident whether they are wearing our basic line or our fashion line.
Teamwork
ECRU is more than just a team; we are a family of people who all believe
in our product and are committed to working efficiently not only within
our company but also with our manufacturers in order to create the
best products.
11. 20 21
Integrity
We stand by our beliefs and values and strongly believe in transparency.
We are dedicated to making sure that our employees are happy and
being treated fairly, especially those who are manufacturing for us.
We strive to give everyone a voice, free from worry, to ensure that our
standards are being lived up to.
Competence
At ECRU we strive to know our customer and her needs in order to meet
them. We pride ourselves on every piece of merchandise that displays
the ECRU name and go to great lengths to find manufacturers that are
knowledgeable and reputable in the products they create for us.
ECRU’s Code of Conduct is in line with values that are core
to its company. Fairness, teamwork, diplomacy and integrity are
some of the values that come across strongest in our code, as ECRU
strongly believes in fair treatment of workers as they are more than just
employees. They are people with their own families and needs, and
we want to ensure their safety and well-being as we value them and
the role they play in our brand. Our Code of Conduct is applicable
to all suppliers, their subcontractors and other business partners that
conduct business with Ecru. Our code can be found in the appendix
and strongly details our requirements in regards to the health and
safety of the work environment, worker’s rights with an emphasis on
basic rights, wages and restrictions on working hours, and monitoring
and enforcement which outlines transparency requirements, our right
to make unannounced audits in addition to our scheduled bi-annual
audits, our right to appoint an external auditor, should we see it fit and
the consequences of not taking corrective action should a violation
come to light.
SOURCING GUIDELINES
*See full sourcing guidelines in Appendix
12. 22 23
Products, Volumes, & Seasons
Look 1: Latte
76,000 Units
Season: Year round
Loose fitting women’s 100% pima cotton
blouse with narrow, cowl neck and extended
sleeve openings.
Look 2: Barley
90,000 Units
Season: Year round
Loose fitting women’s 100% pima cotton
blouse with ¾ length folded sleeves.
Look 3: Ivory
105,000 Units
Season: Year round
Loose fitting women’s 100% pima cotton,
sleeveless, collared button-down.
Look 4: Bisque
85,000 Units
Season: Year round
Loose fitting, wide neck women’s 100% cotton
poplin blouse with cutouts on sleeves.
Look 5: Desert Sand
94,000 Units
Season: Year round
Women’s long-sleeved, 100% pima cotton,
high-low, button-down shirt with princess
seam, back detailing and right breast pocket.
Total Annual Volume: 450,000 Units
13. 24 25
SALES PLAN
Because we are a high-end luxury company, our margins, princes
and sales are quite high. In the first year after the Ecru Basics collection
launches we are projecting to do over $59 million in sales. This number
is derived from selling 450 units divided between 5 garments and sku
numbers.
Our retail prices are going to range from $90 up to $180, due to
the fact that we are a luxury brand and retailer. We are selling these
garments online and in our own flagship store solely at this current
moment, which means will not have wholesale prices. This will reflect
highly on our margins, resulting in them being between 65% and 66%
for each garment. Our average cost for production is about $5 per
garment, making our total production cost for 450,000 units, 2,250,000.
14. 26 27
COUNTRY ANALYSIS
COUNTRIES
Sri Lanka
El Salvador
India
Philippines
China
Countries’ Highlights
& Textile Industies
Country Selection
Ratings Spreadsheet
Sri Lanka
India
El Salvador
Philippines
China
Our five countries, China, India, the Philippines, El Salvador and
Sri Lanka were selected by our professor, but have been selected
for a reason. During the duration of the strategy we have made
it our goal to determine which countries are the best sources of
manufacturing for creating our luxury, woven women’s tops. There
are many determining factors, but most importantly we have looking
into the business and textile climate and industry, the costs, the
logistics as well as the manufacturers reliability and code of conduct.
Each of these five countries has something different and special to
offer to the world of manufacturing and we have taken great time
and detail in assessing which of the five will rise to the top.
15. 28 29
SRI LANKA
Country Introduction
Endless beaches, breathtaking ruins, flavorful food and teas, legendary
temples and oodles of elephants packed into over 3000 years of history
and culture on the island of Sri Lanka.
Sri Lanka offers incredible experiences stretching from the mountains
to the sea. The country is packed with rich history, diverse wildlife, a
variety of climates and eco-systems, cultural and religious heritage,
wide-spanning beaches and offers hundreds of ancient ruins to explore
and discover. It is Southeast Asia’s hidden gem that is waiting to be
traveled and charted by tourists, nature lovers and history enthusiasts
alike. (Data Monitor)
With all that this country has to offer, it has even more in manufacturing
and business practices and has been awarded in many areas of
“Green” business practices for their manufacturing facilities and
factories. This country is beginning to thrive and make a name for itself
on the map with tourists as well as import and trade businesses and
manufacturers. (Data Monitor)
Sri Lanka is an island country located of the southern most
tip of India. The country has a rich history documenting back over 3000
years ago. Sri Lanka has a very strong Buddhist heritage. The country
was very important during the time of the ancient Silk Road and has
continued to grow and expand their trade and exports, making
them the top contributors to Sri Lanka’s economy. Even though the
country is just starting to rebuild it self from a thirty-year civil war which
ended recently in 2009, Sri Lanka is beginning to thrive once again
in manufacturing and tourism, giving them a strong and growing
economy. (Data Monitor)
16. 30 31
Sri Lanka, also known as, Ceylon, is an island in the Indian Ocean with
a population of about 20 million people. The highest concentration of
the population is located in the larger cities, particularly in Columbo,
the countries capital, main port, and industrial center and hub. Sri
Lanka is ethnically, linguistically and religiously diverse, with over ten
different languages cultures and religious beliefs being practiced.
(Data Monitor)
The flag of Sri Lanka is also known as the Lion Flag. It depicts a
gold lion holding a sword in its front paw, a dark red background, four
golden leaves, one in each corner and two vertical stripes, one green
and one orange. The lion represents the bravery of the Sri Lankan
Nation, while the other symbols represent the countries past history,
culture and religious beliefs. (Data Monitor)
Socio-Economic-political Analysis:
The Sri Lankan politics take place in a presidential representative
democratic republic framework. This is where the president of Sri
Lanka is both the head of the state and the head of the government.
The political make up also includes legislative power, which act under
both the government and the parliament. For many decades, politics
in Sri Lanka have been dominated by the Sri Lankan Freedom Party
and the Conservative United Nation Party. (Datamonitor)
The president Mahinda Rajapaksa was elected in November of 2005
and is part of the Freedom Party. The Prime Minister, Disanayaka
Mudiyanselage Jayaratne, who was elected in 2010, is also a member
of the Freedom Party. The President is elected for six-year terms and has
the power to hire and fire the Prime Minister. The day-to-day running
of the government lies to the prime minister and his cabinet, which is
drawn from the legislature. (Datamonitor)
In July of 1983 the Sri Lankan Civil War broke out and began an on
going conflict all across the island. The government rose to fight against
the rebellious Liberation Tigers of Tamil Eelam (LTTE), also known as the
Tamil Tigers. The Tamil Tigers are a military organization that formed in
order to break away from Sri Lanka and form an independent Tamil
state called Tamil Eelam in the north and eastern region of the island.
The war led on for 26 years when the Tamil Tigers were finally defeated
by the Sri Lankan military in 2009. (Datamonitor)
This war lasting almost three decades left Sri Lanka in a sheer state
of turmoil. Over 100,000 citizens were killed and even more were
injured. The country was hurt culturally as well as economically. Much
damage was done to the country physically which has detracted
tourists, investors and has damaged manufacturing facilities. With all
that being said, in the 5 years that the war has been over, Sri Lanka
and its citizens have done all that they can to revitalize the country
and restore it to what it once was. (Datamonitor)
17. 32 33
The government figures in Sri Lanka have been stable for many years
as well as their representative democratic republic political system. The
country is swiftly able to make decisions that benefit the communities
and the people as a whole. However, the war has certainly affected
the country significantly and even though Sri Lanka is making all efforts
to restore and revitalize, it is still a potential drawback when looking at
prospective manufacturing locations.
Economic traits:
Sri Lanka has a world ranking of 90 from the 2014 Index of Economic
Freedom and a ranking of 16 in the overall Southeastern Asian
hemisphere. (IEF) The country is continuing to see strong economic
growth following the conclusion of the 26-year Civil War. During the
war there was much turmoil economically and the country suffered
greatly. It is now that Sri Lanka is making all efforts to
reconstruct and bring back one they once had. (CIA World Factbook)
The Sri Lankan governments very high debt payments have contributed
almost 100% to the country’s high budget and fiscal deficit. However,
the global 2009 recession and economic crisis actually caused a boom
for Sri Lanka and nearly balanced their debt payment crisis. This has
given Sri Lanka the ability to now focus on their greatest assets, being
their trade and exports, and agriculture. (CIA World Factbook)
The Sri Lankan governments very high debt payments have contributed
almost 100% to the country’s high budget and fiscal deficit. However,
the global 2009 recession and economic crisis actually caused a boom
for Sri Lanka and nearly balanced their debt payment crisis. This has
given Sri Lanka the ability to now focus on their greatest assets, being
their trade and exports, and agriculture. (CIA World Factbook)
The country is constantly looking for new ways to expand and improve
their most lucrative markets, apparel manufacturing and agriculture,
which combined employ over two thirds of the population and bring
in the majority of the revenues for the country. Because the main
revenues and income for the country do come from trade and exports,
particularly apparel but also tea, rubber and technology, there is a
large incentive for the country to constantly keep up to date and
advanced to beat out the competition across the world. Sri Lanka
is currently ranked at number four of the top apparel manufacturing
countries in the world and
has great potential to reach number one in the upcoming years.
(World Factbook)
Sri Lanka’s currency is the Indian Rupee; and as of April 2014,
the U.S Dollar is valued at .0077 of 1 Rupee. The current Sri Lankan
unemployment rate is at 4%, ranking #49 in the world. Revenues in
2013 reached $8.43 Billion, while expenditures were at $12.57 Billion.
18. 34 35
The Sri Lankan inflation rate both increased and decreased significantly
over the past 10 years. In the past 3 years the rate of inflation has gone
from 6.11% in 2012, to 9.9% in 2013 and all the way down to current
4.2% that it is today. This is very unusually for the rate to fluctuate so
drastically, but the country has been in a serious state of turmoil after
the war, which directly influenced their economic structure. Looking
towards the future, Sri Lanka is making all the possible amends to
even out and steady the drastically changing inflation rate. (Trading
Economics)
Due to these high rates of fluctuation in both revenues and the
inflation rate, Sri Lanka does show potential risks when looking into
supply and manufacturing. The country is still in quite a high amount of
debt and is spending significantly more than they are bringing in. This,
and the drastically changing inflation rate may cause serious problems
and will be a great concern if Ecru business is done in Sri Lanka.
Labor and Labor Laws:
TheLaborforceinSriLankaisverystrongandmakesupasignificant
amount of the population, of both males and females. About 48.2%
of the population works in labor, 67.2% being male and 31.3% being
female. The labor tasks in Sri Lanka include agriculture, industry and
services. In 2012 30.7% of the population worked in agriculture, 26.6%
worked in industry and 42.6% worked in services. (Labor Force Survey)
The unemployment rate has seen a significant decrease in the past
ten years dropping from 8.4% in 2003 down to 4.0% in 2012. The rate
of unemployment for men is at about half the percentage of that for
women. This is a significant decrease in a short period of time and is all
due to the ending of the Civil War and Sri Lanka’s ability to quickly start
rebuilding the country. (Labor Force Survey)
Sri Lanka’s main exports are apparel, rubber and tea. These
three categories make up a large percentage of revenues for the
country. Sri Lankan apparel manufacturing supplies a wide variety of
garments ranging from sportswear, lingerie, and lounge wear, to ready
to wear, bridal, swimwear and children’s wear. This gives Sri Lanka the
opportunity to supply to many different companies and with a wide
variety of style, quality and price points. (Labor Force Survey)
Since apparel manufacturing is such an important aspect to the
economy in Sri Lanka, many laws have been put in place to protect
the employees and their employers. Laws, codes of conduct and rules
of ethics are made very clear to the employees and are 100% geared
towards making their careers greater and more enjoyable. Companies
in Sri Lanka have very in depth laws regarding workers rights, women’s
rights, employee legal work rights and employee termination rights
and once again these laws and how they work are made very clear
to the apparel-manufacturing workers. Sri Lanka is currently close to
being the number one apparel manufacturing country in the world
19. 36 37
and they will be chosen so because of their incredible ethics and
the amount of integrity with which they treat their employees, their
customers and of course, the environment. (Labor Legislations)
Sri Lanka is constantly making sure that they are treating their
employees and their customers with the utmost respect and integrity.
Because high integrity is one of Ecru’s top values, the way that Sri Lanka
manages their facilities is something that really resonates with us. The
ability to have respect in the workplace is something Ecru is certainly
looking for when reviewing countries and manufacturing facilities.
current Textile and Apparel Industry:
Sri Lanka’s textile and apparel export industry is the largest and
most significant contributor to the country’s economy. The industry
has seen sizeable growth over the past four decades and today the
apparel industry makes up 52% of the countries exports and economic
stimulus. This fast growing industry also provides over 300,000 jobs to
Sri Lankan men and women across the country. The 350 garment
factories and 16 textile and fabric manufacturers are privately owned
entities but do manage well with the Sri Lankan government, seeing
that they are bringing in the majority of the countries revenues. These
technologicallyinnovativefactoriesplayakeyroleintheadvancement
of the Sri Lankan apparel industry and are quickly paving the way to
be the top supplier country in the world. (EDB)
The apparel manufacturing industry is incredibly competitive,
but Sri Lanka has many attributes that make them stand out. Each
factory in Sri Lanka is 100% environmentally friendly and many have
won incredible awards including the world’s first LEED Platinum
certification. They operate under strict ethical principles and
guidelines that are made clear to the workers as well as the brands
and companies. The manufacturing facilities are also highly focused
on innovation, giving back to their country and maintaining a strong
reputation all across the world. (EDB)
Sri Lanka’s apparel categories include sportswear, lingerie,
lounge wear, ready to wear, bridal, swimwear and children’s wear
and the United States and the United Kingdom have been the
largest apparel buyers for many years. Longstanding relationships
with companies across the world, and a strong drive to make quality
pieces, keeps buyers and brands coming back again and again to
Sri Lanka. These relationships have made the apparel industry in Sri
Lanka even more reputable, stronger and more prosperous. (EDB)
Sri Lanka is a producer of Garments Without Guilt and the “Made
in Sri Lanka” label, both of which are synonymous with high quality,
reliability, social and environmental standards, code of ethics and
accountability. Each of these standards is made present in each of
the factories, the working environments, as well as how the garments
are produced. Within the past three decades the country has
evolved into creating high quality and sophisticated designs,
20. 38 39
allowing the country to appeal to even more companies and brands.
(EDB)
Because the apparel industry makes up such a large percentage
of Sri Lanka’s economic stability and make up, all of the factories
and manufacturing facilities in the country take part in giving back
to the community. This is a very important aspect of these facilities
and shows a philanthropic side that will resonate with many different
fashion brands, again making Sri Lanka an ideal country to source
from. Businesses and manufacturers are always looking to grow
and expand and currently there are 10 new facilities being built. Sri
Lanka has recently been named one of the top three countries out of
the top 50 most important suppliers and has promise of becoming the
top supplier in the world in a few short years. (EDB)
Because the textile and apparel industry in Sri Lanka is one
of their top industries, they are constantly looking for new ways to
improve and expand. With that being said, the manufacturers are still
incredibly focused on building strong relationships and reputations
with customers. This in turn helps Sri Lanka keep their best customers
coming back and gives them potential new customers for additional
revenues. Ecru would be happy to manufacturer in a country that is
focused on giving the customer exactly what they are looking for and
making sure they have a great experience along the way.
Logistics and importation
Exporting goods from Sri Lanka into the U.S. has become a very simple
and quick task. There are many shipping and freight companies that
service Sri Lanka and a large majority of the goods are going back to
the Unites States. The routes are well established and there are multiple
to choose from depending if the goods are being delivered to west
coast or the east coast. Because the majority of the manufacturing
facilities are located in Colombo, the port city capital, or very close
by, getting the garments and apparel to the port is not an issue.
Hundreds of shipping companies travel from Sri Lanka to the United
States including ZIM Shipping Line, Maersk Line and Hapag-Lloyd. The
majority of exporting and shipping out of Sri Lanka is done through sea
and there are limited airfreight companies coming to Sri Lanka. ZIM
Integrates Shipping Services ltd. was established in 1945 and has grown
to be one of the largest container shipping companies in the industry.
The company is committed to providing their customers with reliable
shipping solutions around the world. An exporting container ship leaves
from Colombo, Sri Lanka every two days and takes approximately 3
weeks to arrive in New York, United States. The container ship takes two
routes: one from Sri Lanka through the Middles East and Mediterranean
into southern Europe. From there it goes on to the port in New York.
(ZIM)
21. 40 41
Maersk Line is one of the top leading cargo-shipping companies in the
world and has been rising to the top of the market since 1928. Their
strong commitment to the environment as well as customer service
keeps people coming back. The ship leaves the Colombo port every
Friday at 12 pm and there is a one-day cut off period for canceling a
shipment. The vessel takes about 3-4 weeks to arrive in New York. The
line goes from Colombo to Rotterdam and then arrives in New York.
(Maersk Line)
Haypag-Lloyd is a container freight company operating in more than
300 locations across the world. The company has been in business for
over 165 years and continues to keep their values of environmental
protection, compliance and sustainability prevalent in their work.
Exporting a container from Sri Lanka to New York will take about 22
to 28 days on a Haypag-Lloyd ship. The ship leaves twice a week and
sails through the Middle East and Mediterranean, making one stop in
Halifax before then landing in New York. (Haypag-Lloyd)
22. 42 43
EL SALVADOR
Country Overview
El Salvador is a small Central American Country that has been gaining
footing in the textile and apparel industries and is the closest country
to ECRU’s New York headquarters out of the five countries we have
been researching. This means that manufacturing in El Salvador gives
the advantage of a short lead-time. It is also the only country we
have researched which has established a free trade agreement with
the United States, through the Central American Trade Agreement-
Dominican Republic (CAFTA-DR). El Salvador was the first Latin
American country to sign CAFTA-DR which was implemented in March
2006 and would allow ECRU to import any garments we manufacture
there tariff-free, as long as the labor and all the materials originate
from one of the countries within the agreement. This is not the only
tie El Salvador has to the US, as El Salvador adopted the US Dollar in
2001 as its currency which gives control over its monetary policy to the
United States (Coleman 63; “Country Intelligence” 7). This has helped
to stabilize the country’s inflation rates which are now predicted to
increase steadily around a 2% change from the previous year in the
near future (“Country Intelligence” 5-6). The dollarization also has
eliminated the need to keep an eye on exchange rates between
the US and El Salvador. The United States is El Salvador’s main trading
partner, which receives half of El Salvador’s exports. The United States
has invested over $2.5 billion into the country to help boost industries
and infrastructure. In addition, approximately 1 in 5 Salvadorans lives
in the US, 1.2 million of which are immigrants (Meacham).
23. 44 45
Political
El Salvador is a Democratic Republic that has been gaining stability
since it’s 12-year civil war. It has a president who is elected for a single
five year term. Current President, Mauricio Funes will be succeeded
by his Vice President, Salvador Sánchez Cerén in June; both of which
are left-wing members of the Farabundo Marti National Liberation
Front party, or FMLN (Meacham). Sánchez Cerén has proposed
“expanding rehabilitation programs, job training for convicts, and
increasing support for police” in addition to adding welfare programs
and development projects to help strengthen the economy and
reduce poverty (Meacham).
Social and labor
Nearly half of El Salvador’s labor force is employed in agricultural
and commercial activities while manufacturing accounts for 15.5%
(“Country Intelligence” 15). Men make up the majority of the workforce;
however, women have been gaining footing in recent years. As of 2010,
there were 4.13 million people who are of working age with a labor
force of 2.58 million (“Country Intelligence” 15). The population growth
has been slowing but remains positive at 0.7% per year; however, the
labor-force is predicted surpass the population growth rate until 2040
due to El Salvador’s age structure, as there are more people entering
the workforce then there are retiring (“Country Intelligence” 10). Both
male and female children typically attend school for 12 years with an
estimated 80.2% of the population over 15 years of age being literate
(Coleman 115). El Salvador will not lack for intelligent employees in the
years to come as literacy has been increasing and a strong amount
of the population is young. El Salvador is often listed as one of the
most dangerous countries, having a murder rate over 40 per 100,000
people in 2013, wide spread gang problems (particularly with the
Mara Salvatrucha and the Barrio 18), drug trafficking and corruption;
however, it often ranks among the top ten happiest countries (Klahn;
Meacham).
Economy
El Salvador has had a mixed economy since the 60’s and 70’s when
expanded into manufacturing and it is currently one of the most
industrialized countries in Central America. Agriculture employs half
of the country’s work force and includes the growing of sugarcane,
coffee and cotton. Currently El Salvador has a “sluggish economic
performance” with imports exceeding exports although the growth
rate has been taking a turn for the positive and is predicted to remain
so in the medium-term. The country has low investment rates resulting
in slow capital accumulation that “reflect a low national savings rate,
a weak investment climate and poor human capital development”
(Country Intelligence” 10). As El Salvador adopted the US Dollar as
its currency, it no longer has control over its monetary policy which
is dictated by the United States (“Country Intelligence” 7). Inflation is
24. 46 47
clearance, port and terminal handling and inland transportation and
handling (“Doing Business”). Acajutla is El Salvador’s major cargo
seaport, followed by Puerto de La Union Central. The Cutuco Port had
been inactive since 1996 and underwent renovations in January 2005,
making it the most important port infrastructure project in over 30 years
as it would double the cargo holding abilities of Acajutla (“Puerto”). It
was inaugurated Puerto de La Union Central on June 21, 2008.
By ocean, ships can travel from one of El Salvador’s ports through the
Panama Canal and on to one of many U.S. ports where it can then
travel by train or truck to its destination. Cargo can also travel across
El Salvador to either Honduras or Guatemala as both countries have
sea ports along the Atlantic coast. Crowley is a shipping company
headquartered in Jacksonville, Florida with capabilities to transport
merchandise from El Salvador to ECRU’s New York City location.
Crowley would transport ECRU’s cargo from El Salvador to a port in
Guatemala where it would then sail to the Fort Lauderdale Port (Port
Everglades) in Florida. Next the cargo would ship via motor rail to New
York City. Ships travel from Guatemala to Fort Lauderdale 3 times a
week with a transport time of 5 days. Trains set out daily and cargo
will reach New York in 4 days. Crowley gave a quote of $5,755 for
the transportation of a filled 40ft shipping container of apparel from El
Salvador to New York City (Phone Interview).
predominantly driven by food, fuel and energy related wares and El
Salvador’s adoption of the US dollar has helped to stabilize inflation
which is expected to increase by 1.9% in 2014, a much lower rate than
surrounding countries (“Country Intelligence” 5).
Exporting
Exporting from El Salvador requires 7 documents including a bill of
landing,acargoreleaseorder,acommercialinvoice,acustomsexport
declaration, a packing list, a technical standard/health certificate
and terminal handling receipts (“Doing Business”). According to the
World Bank Group, it takes 13 days and around $980 to prepare a
container for export: this accounts for document preparation, customs
25. 48 49
Textile Industry
El Salvador has built a vertically integrated supply chain and is the
only Central American country that has developed a full synthetic
cluster, producing nylon, polyester and microfiber fabrics which ECRU
may wish to utilize at a later date (“Specialized Textiles”). Apparel
production cost per minute in El Salvador is $0.10; which in line with
many of El Salvador’s neighbors including the Dominican Republic
and Guatemala. Mexico and Colombia on the other hand are more
pricy with costs around $0.12-$0.14 per minute. El Salvador’s textile
and apparel association, the Chamber of the Textile, Clothing and
Free Zones of El Salvador (CAMTEX), makes its mission “To promote,
represent and support the textile, clothing and free zones of El Salvador,
to strengthen their competitiveness,” and is a valuable resource when
sourcing and learning about the industry (CAMTEX).
The apparel and textile industry in El Salvador has been growing;
production saw an increase of 4.1% in 2013, while exports grew by 9%
to 2.394 billion (Melara). The industry accounts for 44% of the country’s
exports; broken down further, fabrics accounted for 64%, followed
by synthetic garments and fibers at 25% and woven apparel and
fibers at 11% (Melara). 73,795 direct jobs were created in the industry
during October 2013: a 3% increase from October of the previous
year (CAMTEX). El Salvador’s agency for Promotion of Exports and
Investments (PROESA) held a seminar in November of 2013 with aims
to identify new opportunities in the textiles and apparel industry with
a focus on how to utilize benefits of the CAFDA-DR trade agreement
(“Salvadoran Government”). Due to the textile and apparel industry
accounting for 16.3% of industrial GDP (2013) and 44% of exports,
it was identified as one of the sectors with strong growth prospects
in the short term (Salvadoran Government; Melara). As a result, the
government will develop training programs to shift human resource’s
focus to identifying new business opportunities in this sector.
Climate
A variety of natural disasters affect El Salvador typically causing the
evacuation of thousands, the destruction of infrastructure, homes,
buildings and land. These natural disasters could result in the destruction
of manufacturing buildings or the evacuation of employees that
would render them unable to work, affecting product production and
the ability for goods to be transported. El Salvador experiences two
seasons; the rainy season occurring between June and November,
and the dry season, between December and May. During the rainy
season, flooding and landslides have proven to be risky. Deforestation
has been a problem in El Salvador which increases its susceptibility to
these occurrences as roughly 85% of the country’s natural land-cover
has been removed: making 65% of the country vulnerable to landslides
(“Disasters Risk” 19). El Salvador has been called the Land of Volcanos
and has over 20 volcanoes, 3 of which have been active in recent
years and have resulted in the evacuation of thousands (“Disasters
26. 50 51
Risk” 20). El Salvador is known for its vulnerability to hurricanes and
tropical storms as well as for earthquakes, as it is located on one of
Earth’s most seismically active regions (“Disasters Risk” 18-19).
27. 52 53
INDIA
Social
India has the second largest population in the world with around 1.2
billion people in 2012. The social environment is very stable and people
live together harmoniously since many are religious and live their lives
under the doctrine of karma (over 80.5% are identified as Hindus)
Indian cultures have been perceived as diverse and exotic. There are
18 major languages in India. However, many Indians can speak English
since it is the second official language. Hierarchy is influenced by the
caste system and still important in Indian society. Younger people
respect the elders, and lower rank employees also have to respect
their bosses and higher executives.
Indiaisstillamale-dominatedsocietywherewomenhavelowerpriorities
and wages than their male counterparts. Poverty and healthcare are
still major problems in India. Many water resources are contaminated
in India, and air pollution is almost the worst in the world. Many people
have diseases and are unable to obtain adequate healthcare (only
7-8% of the central budget is allocated for healthcare). Even though
the caste system was eliminated, people from lower caste ancestry
are still regarded as unclean and are given less priority and benefits
than higher-status people. There are still issues related to the large
wealth gap and disparities in the society that cannot be improved
within the short period of time (Marketline).
Economic
In 2011, India’s estimated GDP was $1.843 trillion with 7.8% growth rate.
Indiaeconomyhasbeenimprovingandgrowingsteadilyinthepastfew
28. 54 55
years. Middle class populations are increasing in numbers and earning
higher disposable incomes. Foreign portfolio and direct investment
inflows also have risen significantly in the recent years. Proposals for
direct foreign investment are supported by the government and are
also considered by the Foreign Investment Promotion Board.
US-India bilateral merchandise trade in 2008 was almost nearly $50
billion. Major US imports from India include textiles, ready-made
garments, internet-enabled and IT services, gems, leather products,
and chemicals. The US is also India’s largest investment partnet with
a 13% share. India exports have also grown at a very fast pace
accounting for 23.9% of the country GDP in 2012 (Marketline)
However, India’s economic growth is constrained by inadequate
infrastructure (usually electricity), a cumbersome bureaucracy,
corruption in service sectors and governments, regulatory and foreign
investment controls, and high fiscal deficits. The rising fiscal deficits,
inflation, and external debt have resulted in depreciation of rupee
and negative credit rating (BBB-) India’s stage of economy has rather
been a mixed between positive and negative aspects.
Political
According to Globaledge, the Indian government is considered as
federal republic, however “ the central government has greater power
in relation to its states and also has adopted a British-style parliament
system; the parliament consists of Council of States (Rajya Sabha) and
House of People (Lok Sabha)”. “The President of Indian is elected by an
electoral collage of elected members from both houses of Parliament
and the legislatures of the states for a five-year term” (CIA). India has
28 states and 7 union territories. President Pranab Kumar Mukherjee is
the Chief of State, and Prime Minister Manmohan Singh is the Head
of Government (Global Edge). The current diplomatic representative
from US is Ambassador Nancy J. Powell (CIA).
Labor
India has the second-largest labor force in the world, which accounts
around487 million workers.In2013, India’s unemploymentratewas 8.8%
with 29.8% of population below poverty line (CIA). Textile and apparel
industry employs over 35 million workers and is also the second largest
provider of employment after agriculture. Many unskilled workers
are well-trained in their sectors. The current labor cost in apparel
manufacturing sector is $0.51 per hour; the overall wage is still higher
than the same sectors in Bangladesh, Cambodia, Pakistan, Vietnam,
Sri Lanka, and Indonesia (Emerging Textiles). The growing number of
young population in India implies the potential and active workforce
in the world which looks positive for outsourcing for skilled and talented
labors; more than 70% of population will be working age in 2025.
Trade Agreement
India has no Free Trade Agreement partnership with the US. However,
29. 56 57
the country has several bilateral trade agreements with other countries
and within WTO such as AIFTA (ASEAN-India Free Trade Area) which
allows tariff liberalization over 90% of products including textiles. The
trade agreement is however beneficial to the US companies in the
way that they can gain benefit from cost reduction if they decide to
use materials such as raw materials, fabrics, or components from one
of the ASEAN countries, which will be delivered to India to be made
into final garments. India also has SAFTA (South Asian Free Trade Area)
and with the new government recently has agree to start on bilateral
trade ties with the EU and Canada in the future.
Risks
Though India has a potential growth in manufacturing and labor
force. There are still some problem associated with poor infrastructure
and business protocol that might create risks to the production and
company such as punctuality and discipline issue.
There are high risks associated with late inadequate shipment and time
consuming process, which will tremendously cause the loss of profit in
the business. Inefficient implementation of regulations and Code of
Conduct is also another risk. Child labor, unhealthy and unsafe working
environments, and unfair wages are still considered major issues. Many
companies have a hard time identifying the transparency level of the
suppliers since the production is done oversea. It is a huge risk in losing
reputation of the company if any unlawful or inhumane practices are
discovered at the partnered suppliers
Textile and Apparel Industry
The domestic apparel market in India was worth about $38 billion in
2012. India is ranked as the sixth largest apparel exporter in 2013 with
the total estimated value of $14.4 billion. The apparel sector accounts
for almost 10% of the overall exports. India has been regarded as one
of the best producers of cotton fabrics (especially hand-loomed) as
well as raw cotton exporters (ranking #2 in 2013) in womens wear,
blouses and Indian ethnic wear comprise the largest segment with
75% share of the entire segment. The market is expected to grow at
9% for the next five years at the value of 22.3 $billion. The monthly
wages of a worker in the Indian apparel industry was approximately
$169.67 which was also the fourth lowest paying following Bangladesh,
Cambodia, and Haiti.
The overall apparel industry is expected to grow at a compound
average growth rate of 9% over the next decade. In 2012, there
was an introduction of 10% excise duty on branded apparel with
an abatement rate of 55%. There are also differences in tax rates
depending on the states; “the government in Delhi, Uttar Pradesh,
Punjab, and Rajasthan charge a VAT of 5% on apparel”, while other
states charge 4%. The service tax was also increased by 2% in 2012
(Gugnani) The rise in taxes resulted in increased average sales price of
30. 58 59
apparel by 5-6% Most retailers had encountered a negative growth of
4-5% in sales during the fiscal year of 2012 (Gugnani).
According to Indian Ministry of Textile, the textile and apparel industry
in India have strong growth in demand and policy support, which
has resulted in government investment schemes (TCIDS and APES)
and commitment of both domestic and foreign investments ($140
billion in value) (IBEF). The Technology Upgradation Fund Scheme
(TUFS) provides budget of $0.5 billion for modernization of the power
loom sector and stress more on mechanization (IBEF). The FY14 union
budget also provides infrastructure support and tax sops and financial
packages that help reducing duty for imported textile and machinery
and eliminate excise duty for the cotton and manmade garments as
well (IBEF).
Why we didn’t choose India:
Even though India is known for cheap labor costs (in general),
ready-made apparel industry, woven and knitted cotton fabrics,
there are some factors that made us had to eliminate India over
other smaller countries like Sri Lanka and El Salvador. First problem
is poor infrastructure, especially electricity and roads; losing power
during the production process might create huge loss of time and
profits, and might also delay the production. Poor road condition
and environment also create problems with delivery as well. Second
problem is poor atmospheric and working environment; India is
known for having very high level of air pollution and contaminated
water resource, water is needed in production and it’s vital that it’s
clean before manufacturing into actual products. Dirty environment
and poor air condition will also affect the workers’ health which
might result with problems in the future. The third issue is about
sourcing guideline in which many places in India still don’t comply to
the code of conduct honestly and child labors and unfair payments
to the workers still happen everywhere. India also has no free trade
agreements with the US which means it is automatically subjected
to 15.4% tax over every product imported to the US. Though the
suppliers that ECRU contacted are very professional and have higher
rank scores on ECRU supplier ranking, their price quotes are very high
compared to ECRU initial estimated costs.
31. 60 61
PHILIPPINES
INTRODUCTION
There is more involved in the design process of apparel than sketches
and swatches. After all of the designs and measurements have been
made, it is required to source a manufacturer who will be capable
of fulfilling production needs at the right price, in the right time,
and incurring minimal risk. The purpose of this report is to analyze
manufacturing opportunities in the Philippines to determine where
ERCU will entrust its designs. We want to keep rational feasibility in
mind while also not compromising our core values and ethics in the
creation, distribution, and lifecycle of our proposed products.
SOCIAL
The total population of the Philippines as of June 2012 was 103,775,002,
evenly divided between males and females with an average age of
23.1 years. According to philstar.com, about 40 million of these make
up the labor force while the unemployment rate stands around 6.9%
and the inflation rate as of May 9, 2013, was at 3.2%. Because of their
Spanish background, religion in the Philippines mostly consists of Roman
Catholics (81%) and Protestants (12%), followed by Muslims (5%) and
others (2%), which should not pose any serious restraints on conducting
business. It is also convenient that in addition to speaking their native
language, Filipino, the nation also lists English as their second official
language.
32. 62 63
POLITICAL
In February 1987, the Philippines adopted a new constitution that
instituted the presidential-style republican form of democracy, which
resembles the U.S. model much more than the European parliamentary
system. One key difference between the Philippines and U.S. systems is
that the Philippines is a unitary republic, whereas the United States is a
federal republic, with significant powers reserved for the states. In the
Philippines, by contrast; the national government is not challenged
by local authority. The ratification of the 1987 constitution—the fourth
in the nation’s history—by national referendum signaled the country’s
return to democracy following the autocratic rule of Fernando Marcos
(1965–86). Politics in the Philippines is somewhat tumultuous. In February
2006, the president declared a state of emergency after quashing
the attempted coup staged by the political opposition. The current
president of the Philippines is Benigno Aquino and Philip Goldberg is
the current ambassador to the Philippines from the United States.
ECONOMY
The economy of the Philippines is an anomaly in the Asia-Pacific
region in that it has lagged behind other economies, such as those
of Singapore, South Korea, and Taiwan. From a position as one of the
wealthiest countries in Asia after World War II, the Philippines is now
one of the poorest. Since the 1970s, which were a relatively prosperous
decade, the Philippines has failed to achieve a sustained period of
rapid economic growth and has suffered from recurring economic
crises. This persistent underperformance has occurred in spite of the
Philippines’ rich natural and human resources.
The reasons are rooted partly in history, partly in policy. As a
legacy of the U.S. colonial period, oligopolies have dominated the
economy, particularly in agriculture, where farmland continues to
be concentrated in large estates. In the post-World War II period, the
Philippines pursued a strategy of import substitution industrialization,
whereby domestic goods are substituted for imports. This strategy
required protectionist measures, which led to inefficiencies and
the misallocation of resources. Although some trade protectionist
measures were relaxed in the early twenty-first century, the Supreme
Court continues to support restrictions on foreign ownership of land and
other assets in effect since the constitution of 1935. These restrictions,
plus widespread graft and corruption, have suppressed inbound
foreign direct investment. A historically low rate of taxation—only
about 15 percent of gross domestic product (GDP), partly as a result of
widespread tax evasion—has led to underinvestment in infrastructure
and uneven economic development.
Although trade barriers were scaled back, industrial cartels split up,
and limited reform measures taken in the late twentieth century,
political instability, continuing high levels of corruption, and resistance
to reforms by entrenched interests have prevented the Philippines
from pursuing a consistent and effective economic course. The
33. 64 65
industrial sector continues to decline relative to services, an economic
bright spot in which the Philippines apparently enjoys a comparative
advantage, although some argue that services represent an employer
of last resort. As of April 13, 2014, one Philippine Peso (PHP) was equal
to $0.023 (USD). In 2005 the services sector accounted for about 53.5
percent of GDP; industry, 31.7 percent; and agriculture, forestry, and
fishing, 14.8 percent.
GEOGRAPHY
The Philippines are made of about 7,107 islands located off Southeast
Asia, between the South China Sea on the west and the Philippine
Sea on the east. The major islands are Luzon in the north, the Visayan
Islands in the middle, and the Mindanao in the south. The total area
is about 186,411 square miles including about 185,168 square miles of
land and about 1,243 square miles of water. The Philippines consists of
volcanic islands, including active volcanoes, with mostly mountainous
interiors surrounded by flat lowlands and alluvial plains of varying
widths along the coasts. Research on the Philippines by the Library of
Congress indicates that the islands are also prone to floods, landslides,
earthquakes, and tsunamis. This and the fact that the islands are
located along the typhoon belt which experiences 15 to 20 typhoons
a year, of which five or six may cause serious distraction and/or death,
makes the Philippines a very risky location to choose to manufacture
ECRU’s woven tops.
TRADE
The United States and the Philippines have had a very close trade
relationship for more than a hundred years. According to the Office of
the United States Trade Representative, the US meets regularly with the
Philippines under the auspices of a Trade and Investment Framework
Agreement (TIFA) signed in November 1989. Several additional
agreementshavebeensignedunderTIFAauspices,includingacustoms
administration and trade facilitation protocol (2010), a memorandum
of understanding to cooperate on stopping illegal transshipments of
textiles and apparel (2006), and a memorandum of understanding
regarding the implementation of minimum access commitments by
the Philippines (1998).
U.S.-Philippines Trade Facts
The United States is among the Philippines’ top trading partners, and
it traditionally has been the Philippines’ largest foreign investor. Two-
way goods and services trade between the United States and the
Philippines totaled to $22 billion in 2011. Exports totaled $9.9 billion;
imports totaled $12.1 billion. The U.S. goods and services trade deficit
with the Philippines was $2.2 billion in 2011. The stock of U.S. foreign
direct investment in the Philippines exceeded $5 billion.
Data from the United States Embassy in Manila indicates that the
Philippines is currently the United States’ 36th largest goods trading
partner with $17.6 billion in total (two ways) goods trade during 2012.
34. 66 67
Goods exports totaled $8.1 billion; goods imports totaled $9.6 billion.
The U.S. goods trade deficit with the Philippines was $1.5 billion in 2012.
Trade in services with the Philippines (exports and imports) totaled $5.2
billion in 2011. Services exports were $2.2 billion; services imports were
$3.0 billion. The U.S. services trade deficit with the Philippines was $827
million in 2011.
Exports and Imports
The Philippines was the United States’ 33rd largest goods export market
in 2012. U.S. goods exports to the Philippines in 2012 were $8.1 billion, up
4.6% ($355 million) from 2011, but down 8.3% from 2000. The top export
categories (2-digit HS) in 2011 were: Electrical Machinery ($2.7 billion),
Machinery ($867 million), Cereals (wheat) ($618 million), Flour and
soybean meal ($511 million), and Aircraft ($453 million). U.S. exports of
private commercial services (i.e., excluding military and government)
to the Philippines were $2.2 billion in 2011, 8.7% ($173 million) more
than 2010 and 38% greater than 200 levels. The other private services
(business, professional, and technical services) and travel categories
accounted for most of U.S. exports in 2011.
The Philippines was the United States’ 35th largest supplier of goods
imports in 2012. U.S. goods imports from the Philippines totaled $9.6
billion in 2012, a 4.8% increase ($436 million) from 2011, but down 31.3%
from 2000. The five largest import categories in 2012 were: Electrical
Machinery ($4.0 billion), Machinery ($1.1 billion), Knit Apparel ($617
million), Fats and Oils (mainly coconut oil) ($532 million), and Woven
Apparel ($531 million). U.S. imports of agricultural products from the
Philippines totaled $2.3 billion in 2012. Leading categories include:
coconut oil ($531 million), raw beet and sugar cane ($107 million),
processed fruit ($131 million), tree nuts ($97 million), and fruit and
vegetable juices ($68 million). U.S. imports of private commercial
services (i.e., excluding military and government) were $3.0 billion in
2011, up 12.2% ($324 million) from 2010, and up 94% from 2000 levels.
Other private services (business, professional and technical services)
travel and passenger fares categories account for most of U.S. services
imports from the Philippines.
Investment
U.S. foreign direct investment (FDI) in the Philippines (stock) was $5.3
billion in 2011, a 1.1% decrease from 2010. Reported U.S. FDI in the
Philippines is mostly in the manufacturing sector.
Philippines FDI in the United States (stock) was $114 million in 2011, up
10.7% from 2010. The distribution of Philippines FDI in the United States
is not available. The Office of the United States Trade Representative
also indicates that sales of services in the Philippines by majority U.S.-
owned affiliates were $3.3 billion in 2010 (latest data available), while
sales of services in the United States by majority Philippines-owned
firms were $37 million.
35. 68 69
US & PHILIPPINES TRADE AGREEMENT
TheUnitedStatesandthePhilippineshavehadaclosetraderelationship
for more than a century. The two sides meet regularly under the
auspices of the TIFA, which is the coordinating mechanism for trade
and investment policy discussions between our two governments.
Total goods trade between the United States and the Philippines is
about $18 billion, up 41 percent since 2009. Services trade is growing
rapidly and exceeded $6 billion in 2012, also up 41 percent from
2009. U.S. foreign direct investment in Philippines is roughly $5 billion,
concentrated in manufacturing.
The United States and the Philippines today concluded a two-day
meeting under the Trade and Investment Framework Agreement
(TIFA), agreeing to a program of expanded engagement in coming
months on bilateral, regional, and multilateral issues. The meetings
were chaired by Assistant U.S. Trade Representative Barbara Weisel
and Philippine Undersecretary of Trade Adrian Cristobal. In addition,
senior officials from other agencies on both sides participated in the
meeting, including Philippine Agriculture Department under Secretary
Segfredo Serrano and Edgardo Albon, Chairman of the Philippine
Tariff Commission.
On bilateral issues, the United States recognized the considerable
efforts the Philippines has made to strengthen its intellectual property
regime and overall framework for protecting worker rights, two areas
of focus of recent U.S.-Philippine cooperation. The two sides agreed
to establish a new work program on labor affairs under the TIFA to
further our efforts. In addition, the United States and Philippines held
detailed discussions of agricultural trade, including related to rice and
meat, and these discussions will continue in the coming weeks.
In response to Philippine interest in the Trans-Pacific Partnership (TPP)
agreement, the United States briefed the Philippines on the goals and
objectives that the twelve TPP countries are seeking to achieve. The
two sides began a program of technical consultations to provide
the Philippine government the detailed information it will need to
consider whether to seek to join the TPP agreement. The Office of the
United States Trade Representative also found that the United States
and Philippines also agreed to intensify cooperation on U.S.-ASEAN
issues and on the trade and investment agenda for APEC, which the
Philippines will host in 2015.
36. 70 71
CONCLUSION
There are many benefits to come of manufacturing in the Philippines,
however there are great risks, specifically the unpredictable nature
of their numerous natural disasters. The quality of their manufacturers
is still unclear as far as meeting the standards of ECRU, however, I
am very interested in the technology of creating eco-friendly and
sustainable fiber from pineapple and banana, which would certainly
coincide with the ECRU values. In closing, the Philippines may not
be a viable first candidate in our search for a manufacturer, but it
cannot be overlooked given it’s recent advances in technology and
sustainability.
Why we didn’t choose Philippines:
The Philippines was eliminated for many reasons. First, the political
environment is not very assuring. More specifically, the ease of
corruption makes for a disheartening business climate. If the
Philippines government is unreliable to their own business climate,
they surely will not be flexible to foreign businesses. Also, the textile
industry is not supported by the government and there are currently
no trade agreements in place between the Philippines and the
United States.
In addition, the natural disasters in the Philippines are numerous and
would not support ECRU’s need to have a steady flow of product for
our Basic’s line. There is a monsoon season that could be tolerable
as long as we manage the amount of product being manufactured
at that time, however there are also active volcanos, earthquakes,
and tsunamis that could make product investment more of a risk
than affordable for a small company like ECRU.
Finally, of the five countries researched, the Philippines had
great potential in their manufacturing facilities, however there
was little information to be found and contact was very difficult
to establish. The selection highlighted more disposable bag
manufacturers, weavers, and sports bag manufacturers. Of the
seemingly suitable manufacturers, none replied to ECRU’s emails.
The emails were either invalid or kicked back due to a full inbox.
When phoned, the manufacturers failed to answer. Of those who
had voicemails, none of the calls were returned - even when we
provided our country code in the telephone number and spelled out
our email address. All of these reasons, when compared to the other
four countries, presented us with a situation where we saw it best to
move on without the Philippines.
37. 72 73
CHINA
Economic Climate
Economy Structure and History
• Market socialism economic system
• GDP-real growth ranked 14 and GDP-purchasing power ranked 3
• The economic development started since the economy reformin1978
Currency
• Use Yuan /RMB as currency unit
• Current currency 1 USD= 6.25 Chinese Yuan
• Currency rate is controlled by the government
Inflation
•Inflation rate has a increasing tend
Unployment Rate
• Current unemployment rate is 4.1%
• Stable near 4% since 2008
Labor Cost
• Minimum monthly wage is $293, $0.085 per minute in Apparel
Industry
• Rising minimum wage for couple times in past years
• Labor cost will continue in growth
Reform and Promoting
• Reform in 1978, joined WTO in 2001, Free Trade Zone in Shanghai
2013
• Chinese governor state China rules out strong economy stimulus
38. 74 75
Political Climate
Voice and Accountability
• Government controls over the freedoom of expression
• The Media is controled by the government as well
• Government lack of accountability
Political Stability
• Taiwan and Tibet Indpendence issue
• Xinjiang Violence against government
Government Effectiveness and Corruption
• Government effectiveness rated 60.7 (100 is highest) is at an
acceptable level
• Goverment is corrupted
• Some companies violate the regulation and bribe the governors for
avoiding punishment
Counterfeiting
• Chinese government lack of protection of Intellectual property
• Counterfeiting is a big isssue in Chinese Apparel industry
China's Free TradeAgreements
Name
Effective Date
Countries
Textile and Apparel Related Regulation
China-ASEAN FTA
January 1st
2005
Indonesia,
Brunei,Malaysia,Vietnam,
Singapore, Burma,
Thailand,Cambodia,
Phillipines,Laos
Using "negatvie list" method for FTA for goods. Goods not on the negative list are
regarded as regular goods. ( woven apparel falls into the regular goods category)
Tariff to the old members of ASEAN was removed since 2010 Jan 1st ( for regular
goods) and Tariff to the new members of ASEAN will be removed in 2015.
China-Pakistan FTA
July1st 2007
Pakistan
Most of the woven fabric falls in the list of "Zero Tariff to Pakistan"
Detail on fta.mofcom.gov.cn -"zero tariff list to Pakistan"
China-Chile FTA
Apirl 13th 2008
Chile
No tariff for apparel and textile
China-New Zealand
FTA
October 1st
2008
New Zealand
New Zealand will remove all the tariff for leather garment, knitting apparel, shoes in
2016 Jan 1st (part of them was removed in 2014 Jan1st) Since 2009 China has
signed the preferential agreement for all wool and wool products imported from
New Zealand and no tariff
China-Singapore FTA
January 1st 2009
Singapore
No tariff for goods export from China to Singapore since January 1st 2009
No Tariff for 97.1% goods import from singapore since January 1st 2012
China-Peru FTA
April 28th 2009
Peru
The goods were divided into 5 different categories and most of the apparel and
textile products fall into the first two categories and the tariff would be removed
within 5 years after the FTA signed.
Mainland-Hong Kong
Closer Economic and
Partnership
(CEPA)Arrangement
2003
Mainland-Hongkong
"One country, Two system" No tariff
Mainland-Macau
CEPAArrangement
2003
Mainland- Macau
"One country, Two system" No tariff
China-Costa Rica FTA
Nov-08
Costa Rica
No tariff for 90% of the goods (both export and import) since August 1st 2011,
Textile and Apparel falls into the 90%
China-Iceland FTA
April 15th 2013
Iceland
No tariff for 99.7% of the goods export from china to Iceland, and no tariff for
81.56% of the goods import from Iceland to China. Textile and Apparel falls into
these categories.
China-Switzerland
FTA
July 6th 2013
Switzerland
Reduced the tariff for textile and apparel that export from China to Switzerland
The Asia-Pacific Trade
Agreement (APTA)
1975
China,Bangladesh,
India, Republic of
Korea, Lao People's
Democratic Republic
and Sri Lanka
1767 Tariff lines originating from Bangladesh and the Lao People's Democratic
Republic are given conventional tariff rates for exports to China. These countries are
trading with a preferential tariff 0.5% to 5.0% lower than the applied MFN tariff for
50-63 HS
Trade Agreeements
39. 76 77
Textile Industry
TheApparel/industrywasoneoftheindustriesthatChinesegovernment
choice to start for the open door policy (the reform in 1978) and it
is one of the essence industry since then. The industry had a sign of
continuing growth since 1979, the average annual growth rate of
total value of textile and clothing output was 13.2%, the total industrial
value increase about 7% every year from 1997 to 2002 (except the year
Asian financial crisis,1998). And after 2002, the year China joined the
WTO, most of the products in this industry grow even faster. (See detail
in the image 4.7) Currently, China is the biggest player in producing
apparel and textile including cotton, yarn, wool fiber, cotton fabric, silk
fabric, garments, chemical fibers and knitted goods. (Detail data in
the size section) It has a trend of reduced employment in the apparel/
textile industry, however, it is a sign of development in productivity and
efficiency. The industry will be continuing in growth, and with the rise
of labor cost and advancing technology it has a trend of entering the
high-end market section.
The Chinese textile market has a total value of 161.7 billion dollars (2012)
and in the past five years the CAGR is 10.8 %. The Fabrics account
76.5% of the total and yarns account for 23.5%. In Asia-Pacific industry,
it accounts 41.0% of the total. (Marketline)
Position in the Country
Apparel and Textile industry is one of the pilar Industry in China since
the release of open door policy. Since then, China gained a substantial
market share in the international apparel and textile trade. In 1980,
China was accounting for 4.6% of the world’s total exports, and ranked
as number nine and then since 1995, it ranked number 1 in the world
and the growth steadily continued. (Qiu) From China National Textile
and Apparel Council statistics, the value of China exported garment
and textile products worth $42.4 billion in first two months of 2013 and it
was 34.1 percent higher than the same period in 2012 and 8.3 percent
higher than the general export growth in the country. (Xinhua) All
these data showed evidence of the importance of apparel/ textile
industry in China and its steadily growing trend.
Government Support &WTO
There are three major supports to the apparel/textile industry from
government, since the release of 11th 5-Year Plan for the Textile
Industry in 2006 by the State Development and Reform Commission.
These policies are, develop the innovation and building Chinese brand
to the world market, and improve the technologies and equipment
and restricting inefficient polluting. (Qiu) Another important action
made by the government was being member of WTO. Since WTO
allow Members to seek resource in WTO organization, it benefited
Chinese Apparel/Textile industry because of the limitation reduction
on exporting.
40. 78 79
Reasons for Business
China is known as the biggest manufacturer in the world especially in
apparel industry. There are several reasons made China to be the first
choice of manufacturing for their garments. First, China has the biggest
textile industry, which is the nature advantage for manufacturing
apparel. China produces bulk amount of silk, cotton, and wool. Besides,
China has Free Trade agreement with Australia (known for best quality
wool) and could import wool from Australia without tariff and FTA with
Peru for high quality cotton, Thailand for high quality silk as well.
Second, China has abundant experience of exporting. China is the
biggest exporter and second largest importer. Since the revolution in
1979, Chinese government started to support international trading.
Nowadays, they are really experienced in trading internationally and
strong government support. Thirdly, Sophisticated logistic system and
various choices of suppliers are other advantages of manufacturing
our garments. China has more than 1500 apparel manufacturers and
manyofthemalsoprovideP.Oserviceandclearcustomsforcustomers.
This could bring convenience to us for avoiding extra process to bring
the merchandise into U.S
COUNTRIES - SWOT ANALYSIS
SWOT ANALYSIS
Strength
- Green Conscious
-Sufficient Labor Force
- Strong Connections
with Customers
- High Standards For
Quality and Craftsmanship
Weakness
- 30-Year Civil War Ended in
2009
- Sri Lankan People Lost
Trust in Government
- StrictBusinessEtiquetteto
FollowWhenConducting
Business
Opportunity
- Becoming Number One
Apparel Exporter in World
- Political and Economic
Stability
- Leaders in Green and
Sustainable
Manufacturing
Threat
- High Amount of Debt
- Losing Revenues After War
- Much Competition
Throughout the World
- Monsoon and Typhoon
Season 9 Months/Year
SRI LANKA
41. 80 81
SWOT ANALYSIS
Strength
- Dollarized
- Close ties to the US
- Stable labor force
- $0.10 /min manufacturing
cost
- Government support for
apparel and textile industry
- Part of CAFTA-DR
Weakness
- Gang violence
- Corruption
- Costly transportation
- Weak accountability
of government
- Apparel focus is
predominantly on
knitwear and
synthetics
Opportunity
- Elimination of tariffs with
CAFTA-DR
- Government held conference to
identify opportunities in Apparel
sector
- Close proximity could result in
receiving product quicker
- Recently rebuilt port may
become a hub for
transportation
Threat
- Prone to natural disasters
- Political uncertainty with
newly elected president
EL SALVADOR INDIA
SWOT ANALYSIS
Strength
- Skilled and specialized labors in
apparel sector.
- Second largest young workforce
in the world
- The largest cotton producer as
well as cotton products.
- Supportive foreign policy
- Many English spoken
professionals
- Cost advantage
Weakness
- Poor infrastructure
- Inadequate discipline and
management
- Corruption
- Weak implementation on
compliance in code of conducts
- Unclean environment
- Uncertain time management
Opportunity
- Ease of investment
- New government supporting Free
Trade Agreements and other
policies
- Improving economy
- Readymade garments dominate
exports
- Rising incomes and growing
middle-class
- Increase in exports
Threat
- Low proportion of high technology
exports
- Increasing air pollution
- Recent terrorisms discourage
investors
INDIA
42. 82 83
SWOT ANALYSIS
Strength
-High growth potential
-Young & growing labor
force
-Developing textile
technologies
-Logistic convenience
Weakness
-Corrupt government
-Long lead times
- Limitedproductplacement
-No Trade Agreements with
the U.S.
Opportunity
- Free Trade Zone, remove
trading barriers
- Continuing trend for
industrialization
-‐
Opportunity
for
investment
Threat
-Natural Disasters
-High inflation rate
-Currency manipulation
allegation
-Government Restriction
Philippines
SWOT ANALYSIS
Strength
-High growth potential
-Sufficient Labor Force
-Leading position in the
industry
-Government support for
apparel and textile industry
-Logistic convenience
Weakness
-Unstable government
-Lack of Intellectual
Property right protection
- Weak accountability of
government
-High tariff
Opportunity
- Free Trade Zone,
Remove trading barriers
- Continuing trend for
industrialization
-‐
Huge
market
for
investment
Threat
-Increasing labor cost
-High inflation rate
-Currency manipulation
allegation
-Government Restriction
CHINA
43. 84 85
The factors we took into consideration to compare the countries
for placing our products are listed in the chart. Overall, El Salvador
has the highest score, follow by China and India, Sri Lanka, and
Philippines was rated to be the lowest.
We broke down 6 factors, including communication convenience,
textile industry condition, labor cost, trade agreement, overall
atmosphere in trading apparel and location, to evaluate the benefits
for each country. Based on this evaluation chart, we rated China, India
and El Salvador to be the higher ones. China has the most sophisticated
textile industry and FTA with many other countries could with the textile-
supplying sources. India has the cheapest labor cost compare to other
countries, and communication convenience. El Salvador is the nearest
country to the United States and has assigned CAFTA with the U.S.
Philippines and Sri Lanka have fewer benefits.
COUNTRY RANKINGS
44. 86 87
We evaluated countries’ business climate based on 5 aspects, the
logistic performance, lead time to export, ease of doing business,
government support, opennes to foreigners. China and Sri Lanka were
rated to be highest countries, India and El Salvador were slightly lower,
Philippines has the lowest score majorly because apparel industry is not
supported by government and people are more likely to make money
in other industries.
Cost
India has the lowest labor cost among these five selected countries,
which is $0.080 per minute for apparel industry, and $200 dollars per
month for general minimum wage. China is the second lowest, $0.085
per minute and $240/month minimum wage, however because of
the continuing growth of labor cost recent years, China was rated
the same as Philippines and Sri Lanka (around $0.10 per minute). El
Salvador was rated slightly higher than China, Philippines and Sri Lanka
because of the exemption of tariff that lower the total cost.
Government
Generally, these five countries’ government overall are not in positive
position, and each country has its own issues. The Chinese government
hasalackofaccountability,overcontrolofmedia,lackoftransparency
and has some corruption issues as well. Sri Lanka just ended the Civil war
in 2009, the government lack supports by citizens and has corruption
issues as well. The Philippines’ government is heavily corrupted and has
many embezzlement issues. El Salvador has a newly selected president
with anti-US associates, and the government has foreseen instability
concerns. So, these four countries were all rated as 5. Comparatively,
India has a more stable government. India has a new government
with promising bilateral trade ties but some corruption issues still exist.
45. 88 89
Location
India, Sri Lanka, and the Philippines are all located in southwest Asia
and have long lead-times for shipping merchandise to the U.S. China
is closer to the U.S and has a more sophisticated logistic system which
made China’s rating 1 point higher than the other three countries. El
Salvador, located in Central America, has the advantage of having
the shortest leading time.
The comparison factors of risks for selected five countries are listed
in the chart above and evaluated threats from these aspects. Each
country has its own issues and generally China, India and El Salvador
have fewer risks for conducting business.
Social Stability
Factors such as, the happiness of people in the country, uprisings, war,
gang violence, population growth were taken into consideration to
evaluate social stability of the selected countries. China’s biggest
concern for social stability is the internal terrorist threats, and the
Xinjiang violence. The Tibet independence issues are also influencing
46. 90 91
the Chinese society in a very negative way. India has internal and
external terrorist as well. In Sri Lanka, citizens are not happy with the
new government that just established after the civil war. The major
concern for El Salvador’s social stability is the gang violence, and
the crime and violence is threatening the social development. The
Philippines has a more stable society with no big threats compared to
other four countries.
Sourcing Guidelines
Sri Lanka, the Philippines, and El Salvador companies all have
acceptable sourcing guidelines that match with ECRU’s, especially Sri
Lanka which known for green production. China’s sourcing guideline
is not matching international standard and had several issues while
trading, but the latest news indicate the government is enforcing the
labor laws and trying to improve the current condition. India has child
labor issues but the overall sourcing guidelines control is not as bad as
China.
Textile Industry
Among these five countries, China has the biggest strength in textile
industry with abundant raw materials like silk, cotton and wool. Besides,
the Chinese government has also invested large amounts of money
in purchasing high quality facilities with new technology. India is the
second strongest, it has abundant raw materials as well and the overall
industry is in a high growth condition. The supply for raw material in Sri
Lanka is not as strong as China and India, but they have many factories
and textile/ apparel industry is their biggest industry in the country.
El Salvador is specialized for producing knits and synthetic textile but
lack of raw materials and versatile for production. The Philippines was
rated to be lowest because of the textile and apparel industry, which
is not supported by the government and in a slow development pace
especially in infrastructure.
Trade Agreements
El Salvador is the only country that has a Free Trade Agreement with
U.S. The CAFTA-DR gives free trade if all parts of product are sourced
in a participating country. No quotas on imports to U.S. China has 12
FTA with other countries, like Australia, Peru, ASSEAN (south east Asian
countries) that could bring benefits for sourcing materials from other
countries with lower costs. India only has FTA with ASSEAN and
negotiation FTA with Canada and EU countries. Sri Lanka has FTA with
Pakistan and India. Philippines has no trade agreement could benefit
apparel and Textile industry
47. 92 93
SUPPLIER ANALYSIS
Sri Lanka
• Brandix Lanka Limited Pvt. Ltd.
• Hirdaramani International
Export Pvt. Ltd.
• Eam Maliban Textiles Pvt. Ltd.
El Salvador
• Industrias Merlet S.A. de C.V.
• Picacho S.A. DE C.V.
• Vexsal, S.A. De C.V.
Supplier Selection
Suppliers’ Highlights & Textile Industies
Country Selection
Ratings Spreadsheet
India
• Karle International Ltd.
• Mira Exim, Ltd
• Eves Fashion
Philippines
• Reliance Apparel & Fashion Manufacturing, Inc.
• Hamlin Industrial Corporation
• Excellent Quality Apparel Inc.
China
• SC International Garment & Accessories Ltd.
• Jiaxiang Jingle Fashion
• Hangzhou Ourun Fashion Co. Ltd.
Countries with Top 3 Suppliers
SRI LANKA - SUPPLIERS
Sri Lanka’s apparel industry is the highest contributor to the Sri Lankan
exports as well as the countries over all economy. The manufacturing
industry has grown significantly in the past three years and now employs
600,000 workers. Sri Lanka benefits highly from its positioning at the
intersection of the major trade routes between Africa, South and East
Asia, Europe and the Persian Gulf. The manufacturers and factories in
Sri Lanka have won numerous awards for their “Green” practices and
are setting the bar very high for other top manufacturers in countries
around the world. Sri Lanka manufactures apparel for companies
ranging from high end to low end, including Burberry, Fifth and Pacific
Companies, Ralph Lauren, Levi Strauss, Nike, Patagonia, Guess, Gap,
Banana Republic and many more. (Panjiva)
48. 94 95
1) Brandix Lanka Limited Pvt. Ltd.
409 Galle Road, Colombo 3
Sri Lanka
Phone: +94 11 4727222
Fax: +94 11 2575485
Email: info@brandix.com
www.brandix.com
Specialization: Woven, Knitted Garments, Intimates and Activewear
Brandix is the largest apparel exporter in Sri Lanka. The company
opened its first plant in 1972 and they now operate 42 plants across
the island and employ over 47,000 individuals. The company sends
about 80 shipments a month and they also create their own buttons,
thread, fabric and hangers in house. Brandix’s customers include Gap,
Old Navy, Lands End, Banana Republic, Lucy Active Wear and Diesel
USA. (Panjiva)
The company has very strong ties to creating green, environmentally
friendly factories and have created the worlds first even LEED
Platinum rated manufacturing facility. Brandix values integrity,
teamwork, customer service, learning and development, ownership
and commitment. The company’s values and commitment to the
environment match Ecru’s company make up seamlessly. The
fact that this company has worked with well known brands and goes
above and beyond to make the customer, as well as their employees
happy is something that certainly resonates with Ecru. (Panjiva)
(brandix.com)
2) Eam Maliban Textiles Pvt. Ltd.
261, Siri Dahmma, Mawaatha
Colombo, Sri Lanka
Phone: +94 1268 6391
Fax: +94 1269 9513
Email: nelum@triburgsl.com
www.maliban.com
Specialization: Blouses, Shirts and Bottoms
Eam Maliban Textiles opened 38 years ago in 1976. The factory
delivers anywhere from 20 to 200 shipments each month and produced
a total of 1200 shipments in 2012. Their customers include Gap, Lands
End Joseph A. Banks, Banana Republic, Burberry, Brooks Brother and
Ralph Lauren. The company is part of the Garments Without Guilt
Organization and adheres to a strict code of ethical guidelines and
practices to develop their products economically. (Panjiva)
This manufacturer takes part in corporate social responsibility
and maintains sustainable levels of water, chemical and energy
usage, practices safe waste disposal and continuously acts to improve
their carbon footprint. Eam Maliban contributes much of its efforts
49. 96 97
to improving the country, community and lifestyles of its employees
and offers them and their families many benefits outside of the work
environment. (Panjiva)
Eam Maliban is “committed to producing world class products”,
and again they would be a great manufacturer for us to work with.
They have supplied to top retailers, on the same level, quality and
price points of our garments. But, they also
have a strong social, economically and philanthropic commitment to
their country, their community and their workers, which is very important
to Ecru. (Panjiva) (maliban.com)
3) Hirdaramani International Export Pvt. Ltd.
Level 23, West Tower, World Trade Center
Echelon Square, Colombo, Sri Lanka
Phone: +94 77 7744180
Fax: +94 11 2446135
Email: vinod@hirdaramani.com
www.hirdaramani.com
Specialization: Woven Garments
Hirdaramani International Export has been in business for 120 years
and operates 28 factories in Sri Lanka, Bangladesh and Vietnam. The Sri
Lankan Factory opened in 1954 and has grown to reach a capacity of
1 million garments per month. The facility delivers about 250 shipments
each month. Their customers again range from high-end to lower end
but the facility mainly specializes in woven garments. Their customers
include, Levi’s, Patagonia, The North Face, Guess, Fifth and Pacific
Companies, Liz Claiborne, Ralph Lauren, Nike, Eddie Bauer and many
more. (Panjiva)
The company’s main focus has always been on fit, style and quality
and they have been called “the pioneers in the apparel industry”.
Hirdaramani has a high focus on corporate social responsibility and
has become the first carbon neutral factory in Asia. They are constantly
looking for new ways to cut back to improve their carbon footprint
and help the environment. Hirdaramani also adheres to a strict ethical
code of conduct and standards. The company offers free
healthcare to their employees and their families, they offer free training
programs
and leadership opportunities for staff members and are constantly
investing back into the community in local sports and schools to help
further the country as a whole. (Panjiva)
This manufacturer would be perfect for Ecru. Their amazing
sustainability act and their motivation to cut back on emissions and
help save the environment is something Ecru is very passionate about
as well. Creating a business that has strong integrity and gives back
to the community is what Ecru has made it our mission to do. Creating
garments with such a sustainable and philanthropic manufacturer
like Hirdaramani is exactly the right partner to have on our mission.
(Panjiva) (hirdaramani.com)
50. 98 99
EL SALVADOR - SUPPLIERS
El Salvador has 62 suppliers that manufacture apparel, 15 of which
manufacture women’s apparel. Many of the manufacturers lack a
website and several show inactivity in recent years on Panjiva. Although
El Salvador produces both woven and knit apparel, the woven apparel
is predominantly for bottoms, children’s wear and men’s button down
shirting while knit apparel has greater diversity and is produced in
much larger quantities.
1) Industrias Merlet S.A. de C.V.
Merlet was established in 1980 and specializes in knitwear, loungewear
and active-wear but also produces women, misses and juniors blouses
(Merlet). They are located at Industrias Merlet, S.A. de C.V. Calle
Why we selected these manufacturers:
When looking at these manufacturers it is clear that they are all very
concerned with the quality and craftsmanship of their garments as well
as their ethical standings in the workplace and with the environment.
Because both Sri Lanka and Ecru very invested in keeping the
environment safe, this country and its apparel facilities is a very strong
contenders for manufacturers Ecru’s women’s woven tops. Due to the
fact that not all of these manufacturers specialize in woven wear, we
have narrowed down the selection to the top three; Hirdaramani, Eam
Maliban and Trendy Wear.
51. 100 101
Circunvalación, Polígono A #3, Urbanización Industrial La Laguna,
Antiguo Cuscatlán, La Libertad, El Salvador, C.A. and can be found
online at http://www.imerlet.com/. Merlet’s Vision is “To become
a leading international apparel company, providing integrated
production capabilities, design and commercialization services with
the highest quality standards; thus satisfying our customers’ demands in
a prompt, efficient and reliable manner, which permits us to enhance
and support the economic and social development of our associates
and Country” (Merlet). They are well developed in knit apparel
and capabilities include design, development, manufacturing and
distribution of fabrics and apparel. Customers include Levi Strauss,
Tailgate Clothing Co. and Carhartt. Merlet has experience with over
1,754 shipments and is able to produce 400,000 units/week, while lead
time varies between 2-12 weeks (“Technical Profile”).
Merlet’s values appear to be in line with that of Ecru’s as they practice
nondiscrimination and equal opportunities and value safety and
hygiene through the conduction of internal and external audits.
They do not employ anyone under the age of 18 and abide by all
government laws including hours of work, overtime compensation,
minimum wage and fringe benefits.
2) Picacho S.A. DE C.V.
Picacho is a woven apparel manufacturing company located at
Km. 26.5 Carretera a Santa Ana La Libertad, El Salvador which was
established in 1992 with a mission to become the regional leader in
quality dress shirt manufacturing. In 2006 Picacho merged with BVM
which has their corporate headquarters in New York. Picacho’s
website can be found at www.picacho.com.sv/home.htm and more
information can be found at www.B-W-A.com under manufacturing.
Picacho’s customers include Ben Watcher Associates which has
orderedover900shipmentsprimarilyofmen’spoplinshirts,LizClaiborne,
LL Bean, Dillard’s, DKNY and Izod. The majority of their orders have
been cotton shirting although products include woven sport shirts
and blouses, high end security uniforms, sleepwear and loungewear.
Although their orders are predominantly men’s wear, they produce
women’s and children’s wear as well as their “main goal is to be
flexible, to respond quickly and efficiently, making sure that your order
is processed promptly and according to your exact specifications”
(Products and Services). Their capacity is 350,000 units a month and
50,000 units per week specifically in woven shirts (“Manufacturing
Specs”). Lead times for garment production are 30 days from date of
fabric received at the factory and garments are shipped FOB from El
Salvador or LDP from BVM public warehouses in Miami Florida (http://
b-w-a.com/manufacturing-2/ ).
Production facilities include a sewing room, a cutting room, a
trims warehouse, a fabric warehouse, a product development office
and an administrative building. The company strongly believes in in the
well-being of their employees and invests in them through the offering
52. 102 103
of a healthcare clinic where employees and their families receive free
medical attention, a community school for the children of employees
ages 5 through 17, a free daycare open to the community as well as
employees staffed by trained nannies, a cafeteria and bakery and
a discount store in addition at having recreation facilities such as a
soccer field and volleyball court (“Social Responsibility”).
3) Vexsal, S.A. De C.V.
Vexal is a manufacturing company which specializes in men’s woven
shirts. Of the 242 shipments that appear on Panjiva, 170 utilized cotton
fabric, while 53 included woven shirts. Clients include Wal-Mart, Nu
Image Fabrics, Paris Accessories Inc and Ben Elias Industries Corp.
Vexal is located at Carretera Panamericana Ote Km 15 San Martin and
although they lack a website, they were recommended to me by the
Vice President of Pro Dept, Ali Gitomer. In speaking to Roberto Bonilla,
I learned that Vexal has been in business for 22 years and produces
60,000 units/week with a 2.5 week lead time. The company values
their employees and only hires those ages 18 and above although
most employees hired are age 20 and above. Employees work 44 hour
weeks, earn minimum wage plus a bonus and are subsidized food. In
the same phone interview I learned that Vexel strives to be ecofriendly
and recycles bi-products and all cartons and gives left over fabric to
recycling companies for reuse.
While El Salvador has been making advancements in the
apparel and textile industry, it is knitwear and synthetic textiles that
they predominantly produce. Some woven apparel is made but it is
almost always for bottoms. In speaking with some of the manufacturing
companies, it became very apparent that El Salvador is not the place
for ECRU to manufacture it’s woven tops as they could only direct me
to 2 companies that produce woven tops, and one of them only makes
wovenshirtsformen.IfforsomereasonnoneoftheothercountriesECRU
is sourcing are a better option, I would recommend manufacturing
with Picacho as they already work with several American companies
and their values seem align with those of ECRU. I would suggest visiting
the factory and talking to the owners and employees prior to making
any decision if ECRU does decide to manufacture in El Salvador.
53. 104 105
India has almost 850 suppliers that manufacture and specialize in
woven apparels. Women apparel industry in India is very competitive
and many companies’ contact and information are available online
through individual and trade websites. However, many companies
don’t provide valid information about their customers, product
quality, and sourcing guidelines; some produce only knitted clothing,
some don’t have adequate services, and some don’t even do
businesses with the US companies. ECRU was able to find several
suppliers that meet the criteria in terms of ability in making quality
women’s woven cotton tops, valid customers, services, production
capability, and management. Among the 5 suppliers we initially
selected, we narrowed down to 3 potential suppliers that are able
INDIA - SUPPLIERS
to produce ECRU’s products. Not only these suppliers can make
women’s woven tops but also their customers are notable and high-
end US retailers that provide similar products to ECRU. They provide
other services and capability that will help ECRU grow as a company
in the future.
Ecru looks for suppliers who have these following criteria:
1) Karle International Ltd.
This supplier can produce any type of garments from basic to
fashion. It can also manufacture casual wear, activewear (seam
sealed jackets, rain gear, jogging suits, swim shorts), and refined
collections. Products offered range from tops (shirts/blouses),
bottoms (pants/skirts/crop), and outer wears (jackets/blazers/
overcoat) The supplier not only specializes in womenswear but also
have abilities to make menswear and childrenswear as well. The
most important thing is that Karle International is able to produce
women woven tops from cotton fabrics for ECRU. The factory locates
in Bangalore where it’s known for IT hub and woven apparel area.
There are over 6500 employees working in four manufacturing
units. The company has annual turnover around $55 US million and
manufacturing capacity of 450,000 units monthly. Its customers
consist of notable retailers such as Ann Taylor, J. Crew, Esprit, Express,
Ralph Lauren, American Eagle Outfitters, Eddie Bauer, Nordstrom,
