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China ! are you ready for 2005 ?
1. CHINA !?..
Is it a threat?
Is it an opportunity?
Can it affect the EU?
Hürriyet, Turkish newspaper, March 13th, 2005
2. Jan 1st – Feb 28th 2004 & 2005
Chinese Export to EU Comparison
• Category 6 – Trousers
–Exports increased by 568 %!
–Unit price decreased by 16 %
from 4,35 Euro to 3,66 Euro!
Turkish average selling price is 6,85 Euro
3. Jan 1st – Feb 28th 2004 & 2005
Chinese Export to EU Comparison
• Category 5 – Knitted sweatshirt
–Exports increased by 475 % !
–Unit price decreased by 29 % !
4. Jan 1st – Feb 28th 2004 & 2005
Chinese Export to EU Comparison
• Category 4 – Knitted T-shirt
–Exports increased by 155 %!
–Unit price decreased by 35 % !
5. Is Anybody Favouring China in EU?
• There are 26 countries in EURATEX
• Producer countries are against China.
– Turkey, Italy, Spain, Portugal,…
• Trader countries are in favour of China.
– Germany, The UK, Holland, …
6. Can China Really Affect the EU?
• US is the largest clothing importer in the
world…annual 86 billion USD volume !
• 10.000 workers lost their job in 2005 Jan-Feb.
• China has a share in total US clothing imports
– In 2001 …… 10 %
– In 2002 …… 30 %
– In 2003 …… 54 %
– In 2004 …… 70 %
7. Different cases for the same order…
• Order size = 100.000 singles
• Target price = € 7,00
• Estimated SMV = 20,00 minutes
• Anticipated second quality rate = 3 %
• Supplier’s SMV cost = € 0,14
• Fabric + trim + ….. = € 4,00
• Will this supplier accept the order ???
• NO, since he calculates € 1.031 loss…
8. How sensitive are you to SMV?
• CASE 1
• Supplier’s actual is 1
minute more than
estimated 20 minutes
• This is - 5% error..
• The loss will be
€ 15.464 !!!
• Supplier is right to
refuse this order.
• CASE 2
• Supplier’s actual is 1
minute less than
estimated 20 minutes
• This is + 5% error..
• The profit will be
€ 13.402 !!!
• Supplier regrets to
lose this order.
9. How sensitive you are for quality?
• CASE 1
• Actual SMV is 20
minutes…
• Supplier’s second
quality rate is worse
than anticipated, 4%
• The loss will be
€ 8.333 !!!
• Supplier is right to
refuse this order.
• CASE 2
• Actual SMV is 20
minutes…
• Supplier’s second
quality rate is better
than anticipated, 2%
• The profit will be
€ 6.122 !!!
• Supplier regrets to
lose this order.
10. Does it make sense to invest in
efficiency and quality?
• Suppose you have managed to reduce your
actual SMV to 19 minutes and your
second quality rate to 2%….
• The profit will be € 20.408 !!!!
on one order only !!!!
• You might lose this contract to your neighbour or take
the order and suffer a big loss with just 5% error!
13. Lessons learned…
• Nothing is as clear as the picture by
Meninas in real life.
• Business life presents reality in a
transformed way as in the picture by
Picasso.
• Whoever looks at the picture by Picasso
but can see the picture by Meninas would
be successfull in business.
Others will lose out…..
14. What are the “others” doing?
• Some “others” are investing in China, moving their
business from their home country.
• Some “others” are closing down their manufacturing
business and sourcing from China in their own country.
• Some “others” are investing in efficiency & quality
systems…..
15. A Chinese proverb…
If you want to be happy for an hour, go to sleep,
If you want to be happy for a day, go fishing,
If you want to be happy for a month, get married,
If you have to be happy for a year, find a heritage,
If you want to be happy for lifetime, love your
business