Global Sourcing: The Strategy Report T.K.P. Anna Thompson Sara Kuykendall Megan Rose Phillips FASM 420 Prof Canepa
Global Sourcing
Mar 09, 2016
Country and factory reports for international sourcing.
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Global Sourcing: The Strategy Report
T.K.P.
Anna Thompson Sara Kuykendall
Megan Rose Phillips FASM 420
Prof Canepa
Abstract:
The goal of this project was to create a global sourcing strategy for T.K.P. The goal is
to develop and implement a strategy to ensure the values and mission of T.K.P. is consisted
through all aspects of the company: from the initial design concept to the final product in the
store. This was completed by conducting research on the top three countries for woven
apparel, determining the best manufacturers in each country, developing a line plan and
placement strategy and negotiating final costs. In addition, each manufacturer and country
was evaluated for risks and benefits. After the evaluation, T.K.P. decided on a strategy that
further reduced any risks, no matter how small. Upon completion of the assignment we
ourselves with a strong placement strategy that not only meets our current needs, but will be
beneficial in upcoming seasons as T.K.P. continues to grow as a company and brand.
Table of Contents
Introduction……………………………………………………………………………………………………..... 1
Strategy Development Process ……………...……………………………………………………………. 3
Country Analysis………………………………………………………………………………………………… 5
Supplier Analysis………………………………………………………………………………………………… 15
Costing……………………………………………………………………………………………………………….. 21
Strategy Development…………………………………………………………………………………………. 23
Comparison of Final Costing………………………………………………………………………………… 29
Conclusion…………………………………………………………………………………………………………... 31
Appendix………………………………………………………………………………………………………………33
Works Cited…………………………………………………………………………………………………………..35
Introduction T.K.P. is the newest up-and-coming woven bottoms brand for women’s apparel. It
is the result of a mutual friendship of three students at Savannah College of Art and
Design. The brand was developed for women who desire high quality products at a
reasonable price, as well as an emotional connection to the clothing they purchase. The
new brand focuses on a concentrated product line consisting of woven Shorts, Capris,
and Pants. T.K.P. believes it is better to focus on perfecting the quality and fit of each
individual product in order to gain the trust and loyalty of each customer. Once the
brand gains the trust and loyalty of the customer with exquisite products, T.K.P. will
expand into other woven goods and perhaps knits.
T.K.P. establishes an emotional connection with each customer by donating a portion of
the cost of each product to the charity of their choice.
The T.K.P. target market is directed towards women at the age of 23-35. This
woman has just entered into the real world and is looking to obtain or continue working
at her dream career. This customer is very fashion conscious but also desires apparel
that will stand the test of time and is created in an ethical manner. Our customer strives
to give back to the less fortunate and looks for simple ways to do so in everyday tasks.
T.K.P. not only provides these women with high quality, fashionable, comfortable, and
affordable merchandise that will last through thick and thin but a means to give back as
well.
Introducing the typical T.K.P. customer
Name: Brianne Allen Location: Manhattan, NY Age: 24 Education: Purdue University Marital Status: Married Occupation: Graphic Designer Combined Income: $148,00+ Hobbies: Pilates, reading good literature, wine nights with close friends, and volunteering at AmeriCares.
As mentioned before, T.K.P. offers extraordinary woven bottoms to the female
customer. The first products that the company will present to the public are cotton twill
Shorts, Capris, and Pants.
The T.K.P. brand was developed for the woman who is able to afford a well-
structured pair of Pants at a higher price. She is willing to spend more money for
products that will last and are made of the top quality components. The products are
priced at these levels because of the quality, time and effort put into the creation of each
individual product as well as the additional donation to charity. T.K.P. uses only the best
materials and the best manufacturers, which results in a higher price. In order to create
an emotional bond with our customers, whenever a T.K.P. product is purchased, a
percentage of that purchase goes to a charity that the customer selects. The focus is on
creating product lines featuring the high quality design, fabrics and craftsmanship as
well as consistent fits and detailing that our customers expect of T.K.P. Everything that
the brand is built on is catered towards the wellness of each customer, community, and
environment; and in the following pages, T.K.P. will explain the process involved
developing and sourcing its product to remain true to the company values.
Strategy Development Process
The most important step in the development of a new company or brand is the
strategy plan. This is where the company needs to stay true to its values and concerns of
the product and people. If a company promises one idea, but does not deliver it, it may
cause customers to lose their loyalty in the company they used to support because of the
original values. When developing a strategy, much research is conducted in order to find
manufacturers who share the same ideals, values, and goals. It is important to remain
true to each and every value that the brand uses as a guideline for selecting others to
their build a business with. The T.K.P. brand created sourcing guidelines to eliminate any
other company that did not share the same values. Some guidelines include, but are not
limited to decent working hours for individuals, overtime and on time salary, adequate
working facilities, and safe working conditions. (Please see appendix for full sourcing
guidelines).
T.K.P. holds strongly to its values and considers them the foundation of the
company. Without these values there would not be a T.K.P. brand. The values of T.K.P.
are all about the quality and care that are provided by the company. They are very aware
of the importance of a socially conscious company, which is why T.K.P. donates a portion
of the proceeds to charity. It is not a business that is provided, but a means to give back
to the world. Lifestyle merchandising is T.K.P.’s business and passion. They strive for the
brands to connect with the clients and customers to create a personal bond with the
company as well as an emotional bond. The passion of the clients and each individual
customer are the focal point of the reason and inspiration of what T.K.P. brand creates.
Our product strategy is illustrated in the line plan below. T.K.P plans
manufacture 1,000,000 units. 500,000 will be devoted to Pants, 250,000 will be Capris
and the remaining 250,000 will be Shorts. Since Shorts and Capris are seasonal items,
they will have a smaller volume than the Pants. The majority of each style is
concentrated in their highest selling months and no Shorts or Capris will be produced
between October and January.
STYLE # NAME JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER TOTAL
Quantites Quantites Quantites Quantites Quantites Quantites Quantites Quantites Quantites Quantites Quantites Quantites
1001 Shorts 0 5000 28000 38000 50000 62000 60000 4500 2500 0 0 0 250000
2001 Capri 0 2000 55000 60000 29000 15000 10000 35000 28000 16000 0 0 250000
3001 Pants 73000 64000 23000 18000 12000 5500 5500 28000 34000 56000 88000 93000 500000
TOTAL 73000 71000 106000 116000 91000 82500 75500 67500 64500 72000 88000 93000 1000000
HOLIDAY
SEASON
TKP Line Plan
SP/SU SUMMER
Country Analysis
Since T.K.P. is based on promising a high quality product, the company
researched the top countries of the world that produce the best woven products. After
extensive research, the top three countries that the company felt were appropriate to
source from are Bangladesh, Sri Lanka, and Dominican Republic. While researching
these countries, T.K.P. also took into consideration each country’s culture, social,
political, business, geography, and other important qualities.
Bangladesh was a top choice for the T.K.P. brand. The apparel industry in
Bangladesh has had tremendous industrial growth and has captured the attention of
government bodies and other private investors. Because of the availability of low wages,
and competitive energy costs, textile and apparel exports have positioned Bangladesh as
an important regional apparel development location in Asia. In addition, the rapid
increase in labor wages and raw materials in other countries such as China, India, and
Thailand, has further positioned Bangladesh as an ideal destination for international
apparel for sourcing world-class fabrics and finished clothes.
Currently, the apparel industry in Bangladesh accounts for 45% of all industrial
employment and contributes approximately 5% to the total national income. Because of
such a large investment in exports and employment, the Bangladeshi government
actively supports the country’s textile and apparel industry. The government recently
bailed out 270 closed readymade garment production facilities in order to restore their
productivity. By having adequately trained garment workers, it will help increase the
country’s garment exports. The government also implemented a training program for
40,000 workers and officials that are conducted by the BGMEA. The Finance Minister of
Bangladesh, Abul Maal Abdul Muhuth, agreed to provide small to medium sized garment
exporters with an additional 5-10% increase in cash incentives on the total value of
exports.
Another consideration that T.K.P. looked into when sourcing countries for
production were trade associations that each country was involved in. A bilateral
investment treaty was signed in 1989 between the US and Bangladesh. The United States
and Bangladesh currently have an excellent relationship. The relations were boosted in
2000, when President Clinton visited Bangladesh, the first ever visit by a sitting US
President. A huge part of the bilateral relationship is a large US aid program. The US
economic and food aid programs concentrate on long-term development. In total, the
United States has provided more than $5.5 billion in food and development assistance to
Bangladesh. Other US development assistance has a huge emphasis on family planning
and health, agricultural development, and rural employment. The United States regularly
receives updates from the Bangladeshi government to ensure that everything is being
used to its maximum benefits. There has been trade related issues between the countries
involving export-processing zones. The Bangladesh government provides several tax,
foreign exchange, customs and labor incentives to investors in these zones. For example,
one incentive provided was an exemption from certain labor laws, which had the effect
of prohibiting trade unions from the zones. The US Generalized System of Preferences
(GSP) law requires the beneficiary country to satisfy certain conditions dealing with
labor rights. A bill was passed allowing limited trade unionisms in the export-processing
zones. However, execution of this law in Bangladesh has been slow, and a US labor
organization has filed a petition to suspend Bangladesh’s GSP privileges because of the
lack of progress on the labor rights issues.
There is extensive tariff-free access to the European Union, US, and Japan under
the GSP and reduced tariffs for exports to India and China. As a lesser-developed
country, Bangladesh enjoys tariff and quota-free access under the GSP to the European
Union market for all its products provided that they satisfy the European Union rules of
origin. These demand that the manufactured products have to be adequately worked or
processed in the exporting country in order to qualify as having originated there.
Bangladesh also enjoys tariff-free access to exports of manufactured products to the US
and Japan under their respective GSP.
Bangladeshi is a member of South Asian Free Trade Area (under the South Asian
Association for Regional Cooperation). The objectives are to promote and enhance
mutual trade and economic cooperation. They eliminate barriers to trade in, and
facilitate the cross-border movement of goods between territories. The agreement
promotes conditions of fair competition on the free trade area, and ensuring equal
benefits for all countries included. Also, SAFTA establishes a framework for further
regional cooperation to expand and enhance the mutual benefits of this agreement.
Bangladesh has a bilateral trade /potential free trade agreement with India. Over
15% of Bangladeshi imports come from India. Bangladesh exports to India receive tariff
concessions under SAFTA. This commits India to reduce its tariffs on a wide range of
products. However, they account for less than 1% of India’s total imports. Even though
Bangladesh and India have a bilateral trade agreement, illegal trade between the two
amounts to approximately ¾ of regular trade. In 2005, Bangladesh signed the Asian-
Pacific Trade agreement, which enables the country to reduce trade gaps between itself
and other nations such as China, South Korea, and India. Another aspect of the
agreement is to be given duty free access to its products.
The Dominican Republic is the second country that was chosen by T.K.P. to
conduct business with. In the Dominican Republic, the textile and apparel industry
represents one of the major productive sectors for the countries in the CAFTA-DR
region, both in terms of generating foreign exchange and employment. Currently the
industry consists of more than 500 apparel companies, 250,000 skilled jobs, 50 textile
companies that offers knit and woven fabrics of cotton, man-made fibers and mixtures as
well as more than 250 suppliers of services and accessories.
To move from full package to ready-to-wear or even to brand is quite a challenge.
At this moment the CAFTA-DR region is an option to be a partner in a currently
successful supply chain where many U.S. brands are participating together. The value of
the strategic alliances between full-package garment makers in the region and U.S.
retailers gives the industry the opportunity for everyone to focus on what we are best at.
The Central American region can also produce quality apparel according to the
environmental compliance and supply goods to the final stores, as well as a wide variety
of accessories for the apparel industry. The CAFTA –DR is the second largest region that
supplies the U.S. markets.
The CAFTA-DR is the Dominican Republic-Central America-United States Free
Trade Agreement. It consists of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua,
the Dominican Republic and the United States. It is the first free trade agreement
between the United States and a group of smaller developing economies. It represents
the third largest U.S. export market in Latin America, behind Mexico and Brazil and was
signed August 2004 by President Bush.
The agreement entered into force for the United States and El Salvador,
Guatemala, Honduras, and Nicaragua during 2006 and didn’t actually enter the
Dominican Republic until March 1, 2007. The CAFTA-DR encourages new economic
opportunities by, eliminating tariffs, opening markets and investment opportunities,
reducing barriers to services, and promoting transparency. 80 percent of U.S. consumer
and industrial goods exports to the CAFTA-DR countries are no longer subject to tariffs.
Woven apparel was one of the five largest import categories in 2009 with $1.4 billion.
The third country that T.K.P. was very confident with in manufacturing the
brand’s product is Sri Lanka. Despite a long-running civil war, Sri Lanka has seen steady
economic growth of 5% for the past 10 years. During the war the north and south were
divided, making growth difficult. Since the end of the war, the reintegration of the
country has fueled growth in all major areas and tourism has also spiked. As a
developing country, Sri Lanka depends heavily on a strong global economy and did see a
slight drop in growth during the 2009 recession. However, since the end of their civil
war they have seen strong economic growth with an increase of 8% in total gross
domestic product (GDP). Currently they boast a GDP of $50 billion (official exchange
rate). In addition, inflation, which reached double digits during the height of the civil
war, has dropped to 8.6% (as of March 2011). The Central Bank of Sri Lanka predicts
that as the Sri Lanka continues to recover from the war, the GDP will continue to grow
and inflation will remain in single digits.
The textile and apparel industry is both the most important contributing sector of
Sri Lanka’s economy as well as one of the most stable. From 2009-2010, the textile
industry saw a growth of 6.5% despite economic recessions in its largest markets. As of
February 2011, Sri Lanka’s apparel industry has surpassed the US $ 4 billion mark for
the first time in its export earnings and has every indication that it will continue to grow.
This proves particularly impressive in light of the fact that the European Union
had recently suspended its preferential trade agreement with Sri Lanka in protest over
the country’s human rights record. The textile and apparel industry has remained stable
despite the temporary loss of an incentive to foreign buyers. Experts believe that foreign
buyers are continuing to place orders for Sri Lankan garments due to their high quality,
and timely and efficient delivery. The textile industry has also been able to maximize
capacity by their appropriate use of technology, which allows for lower prices. As of
now, Sri Lanka has regained some of its preferential trade agreements due to their
cooperation with the United Nations and the National Peace Council. This will only help
the industry to continue to grow and improve. The Joint Apparel Association Forum
states that the apparel industry will continue to aggressively penetrate new markets and
has focused on a number of markets outside traditional markets. The country is looking
at identifying growing markets such as India, China, Japan and Brazil and as well as
expanding to Turkey and Spain.
T.K.P. has invested in Sri Lanka for the trade agreements as well. The United
States and Sri Lanka have several trade agreements. Like with most countries, the US
has a Trade and Investment Framework Agreement (TIFA) that provides a framework
and basic principles for the discussion of trade and investment opportunities between
the two countries. Under the TIFA, the countries agree to meet once a year to discuss
new opportunities and any potential problems that may have occurred.
The US also has a Bilateral Investment Agreement (BIT) with Sri Lanka. The BIT
has been in effect since 1993 and exists to encourage greater investment from US
companies. It offers a legal framework for how businesses and investors are expected to
treat and protect their investments.
Both these agreements allow open communication between the United States, Sri
Lanka and those who conduct business in both countries. It also protects any
investments made in Sri Lanka, which adds a level of security when placing product
overseas. If any issues do come up, these agreements ensure that they will be addressed
and resolved by authorities in the United States
In 1977, Sri Lanka introduced a more open economy by opening its borders to
allow free trade, dismantling price control, and eliminating import tariffs. Today, all of
Sri Lanka’s traditional products have been superseded by the Apparel Industry. Sri
Lanka's major exports consist of apparel, tea, rubber, gems and jewelry which totaled
$8.3 billion. Sri Lanka has been advised to diversify its exports beyond garments and tea.
In response, they have worked to grow their information technology (IT) and business
process outsourcing (BPO) sectors.
The United States is Sri Lanka's second-biggest market for garments, taking almost 40%
of total garment exports. Exports to the United States, Sri Lanka's most important single-
country market, were estimated to be around $2.1 billion for 2011. The European Union
as a whole, however, remains Sri Lanka's biggest export market and largest apparel
buyer. Sri Lanka’s exports to the EU used to qualify for duty-free entry under the
Generalized System of Preferences (GSP) market access program, which was granted in
2005 to help them rebuild after the 2004 tsunami. However, in August 2010, this benefit
was revoked due to Sri Lanka’s poor human rights record; in particular their refusal to
investigate war crimes during the end of the war. Despite this, Sri Lanka’s exports
continue to see strong growth. Sri Lanka does continue to receive limited tariff
preferences under the EU GSP program and it is likely that their benefits are only
temporarily revoked.
Sri Lanka also received preferential access to the U.S. market under the U.S. GSP
program. This program was temporarily suspended but in July 2012, the US decided to
continue with (GSP) trade concession. Tensions do continue however in bilateral ties
after Washington backed a resolution censuring Colombo on its human rights record.
The reinstatement of the GSP program does not include textiles and apparel but should
help Sri Lanka’s economy improve overall.
In January 2006, South Asian nations, including Sri Lanka, belonging to the South
Asian Association for Regional Cooperation (SAARC) established a South Asia Free Trade
Area (SAFTA). SAFTA offers regionalized tariff reductions for imports from member
countries. SAARC members aim to reduce duties for imports from member countries to
between zero and 5% over a period of 7-10 years, under the SAFTA. The SAFTA
agreement has had limited impact in trade to date.
These three countries are important to T.K.P. because they all have strived to
increase their textile and apparel industries, and they continue to grow. Not only is the
apparel industry thriving in these countries, but the trade agreements that each country
is involved in greatly improves business. Even if the country has no significant
agreement with the United States, they have an alliance with another country that
provides a greater abundance of imports and exports that helps increase trade and
production of manufacturers.
Bangladesh Explanation D.R. Explanation Sri Lanka Explanation
Business Climate 7Steadily growing and
becoming more stable8
Rich/strong
business
environment
7
Good for textiles ,
Lots of Manufacturers,
Fairly Free Economy
Costs 9 Very low labor costs 5
Not very competitive
with South Asian
countries
8 Inexpensive for the quality.
Government 4
Not very stable
Frequent clashes
between different
political parties
8Stable. No major
issues7
New and stable, but needs
to be watched. Stil l
recovering from recent civil
war
Location 3 Very far from US 95 hrs to Savannahby
plane5
Very far from US but lots of
ports
Risks 6 Flooding 6
Security is stable
but lots of
corruption
5
Civil war ended 2009,
tsunami in 2004, tropical
storms. Needs to be
monitered
Social Stability 5
Economy is supported
by agriculture industry
but overall weak
infrastructure in
majority of Country
8 Very Stable 6
Needs to be watched. There
is sti l l unresovled conflict
from the war
Sourcing Guidelines 6In place, but watch for
violations7
In place; however,
need to be on the
lookout for
violations.
7
Child labor issues,
environmental violations in
the past. Stricter laws have
reduced violations but they
may stil l occur.
Textile Industry 8Well developed for
woven garments8 ery developed 8
Well developed with lots of
excellent suppliers and
high quality goods.
Trade Agreements 5Has trade agreements
but with other countries10
One of the best due
to CAFTA-DR6
None. However, they have
preferences on certain
products.
Trained Work-force 7
Employees are well
trained but there is a
high unemployment rate
8 Plenty 8Plenty of well trained
workers
Socio-eco-political 5
Is becoming more
stable but needs to be
watched for political
disputes
8
Steadily growing,
recovering from
economic slowdown
in 2009. Positive
growth rate
7
Needs to be watched due to
recent civil war and
economy is heavily
dependent on foreign aid.
Total 65 85 74
Average 5.9 7.7 6.7
Country RankingScale of 1 to 10 with 1 being the worst and 10 the best
Supplier Analysis
Once Bangladesh, Dominican Republic, and Sri Lanka were chosen as the top three
countries for T.K.P. to use for manufacturing, suppliers in each country needed to be
examined. When researching for potential suppliers, a strategy needs to be set into place. In
order to find the best manufacturers for the product, T.K.P. referred to the sourcing guidelines
that the brand created and believed in as their policies. Each manufacturer’s sourcing
guidelines were the first quality that was looked at when investigating possible suppliers. If
the guidelines and beliefs of that company coincided with T.K.P.’s values, then customers,
quality checks, factories, and other factors of the supplier was researched.
Having well-known, prestigious customers is very important when researching
manufacturers. It gives a company an excellent sense of how the quality of the products will
be in the end, and shows what, and how well or poorly a manufacturer can produce the
garments. Companies need to look at the abilities of that particular manufacturer to see
exactly what the supplier can do, and the steps it takes to produce a product. The number of
factories and capacity of a supplier is also very important. Since T.K.P. is producing one
million products a year, the size and services that are offered are very critical when deciding
on suppliers. T.K.P. needs a manufacturer that is large, and can complete a hole product in
one location to reduce lead-time, which transitions into another important quality for the
brand to look in to. Lead-time is important for T.K.P. because the brand is based on woven
bottoms, for the time being. T.K.P will need a quick lead-time for anticipating a fast turnover.
T.K.P., also, wants to create a business with a supplier who has excellent management
to enforce the manufacturer’s guidelines, as well as have a visionary strategic outlook. The
brand wants a company who looks to expand, and be innovative with manufacturing
equipment and design.
Once an analysis was found on the initial suppliers, individual rankings were
examined to compare each supplier against the other to determine what the best manufacturers
would be for the T.K.P. brand. Evaluation of the suppliers was based on the same standards of
the initial search for manufacturers. However, since this was for T.K.P. to find the best
producer for the products, rankings were made among the suppliers to determine which
supplier offered more service, quality, better costs, greater lead-time, etc for the T.K.P. brand.
The most appropriate suppliers from each country were chosen based on the rankings (See
individual supplier rankings in appendix). The following names are the final suppliers: DIRD
Group, Global CMT Corporation, and Hela Clothing.
The DIRD Group is located in Dhaka, Bangladesh. It started running in 1983 with
its engineering company, DIRD Private Ltd. One year later, the company entered into the
garment industry sector with its first woven garment unit named DIRD Garments Ltd. IT
was one of the leading woven bottom manufacturing company at the time. Today, DIRD
Group has diversified into different textile sub-sectors of Bangladesh. The vision of the
company really corresponds with the sourcing guidelines. It strives to establish itself as
a one-stop source for the global apparel market. They satisfy and meet customers’
expectation by developing and providing products and services on time, which offer
value in terms of quality, price, safety and social responsibility. Also, they try to assure
complete compliance with the international quality standards. With the employees, the
company provides them with acceptable working conditions and standards, and
promote the developments and best use of human talent and equal opportunity
employment.
DIRD Group was chosen as a final supplier for the T.K.P. brand because of what it
had to offer. The group has a textile company, engineering company, and agriculture
company. It is well rounded in every sector that it occupies. Under the textile sector it
contains Textile Limited, DIRD Garments Limited (woven bottoms), DIPTA Garments
(knit garments), a washing plant, and printing & embroidery unit. The company offers to
produce products from beginning to end. DIRG Group is also able to expand into other
products once T.K.P. establishes itself in the industry. When T.K.P. is ready to expand,
The DIRD Group is able to. This keeps the brand from having to find a different supplier
that can create products that the manufacturer may not.
Global CMT Corporation is located in Santiago, Dominican Republic. Global CMT
was created in 1995, and is a sister company of Empresas T&M, which is an industry
leader for over 25 years in tailored clothing. Its mission is to become a world leader in
the manufacturing of clothing for men, women, and children, for world-class brands.
This is great for T.K.P. since the supplier is looking to strive forward to create only the
best. T.K.P. is very concerned with quality in their products, and will only conduct a
business with those manufacturers who’s outlook is to move forward and become
better.
Global provides all aspects of the manufacturing process, such as product
development, planning, components, assembly, and the logistics and services that T.K.P.
needs in order to receive the brand’s products. By offering all the steps in the
manufacturing process, Global is a valuable supplier to be associated with to help begin
the T.K.P. brand. Global’s customers are among the top with consumers from Bayer
Clothing Group, Lanier Clothes, and Oxford Industries. Store clients for Global are
Nordstrom, Macy’s, and Lord & Taylor. With this excellent client list, T.K.P. is able to
know that the manufacturer produces fine quality, and that Global is able to produce and
keep up with higher end products.
Hela Clothing was incorporated in 1992 as Hemas Garments with the first factory
in Hendala, a city just north of Sri Lanka’s capital Colombo. Today the company is fully
owned by The Fielding Group (TFG) and also enjoys a strategic partnership with the Eco
Apparels Group, which has three fully functional factories. The fielding Group is a
company that supplies clothing and accessories to many of the UK's top retailers with
ventures in garment and fabric manufacturing in Bangladesh and Sri Lanka along with
trading partners in over nine countries.
Originally, they manufactured high-quality children’s knit wear but have since
expanded and now produce many woven items, including women’s woven bottoms.
Currently they employ over 3800 employees, have three production facilities and
maintain a monthly output of 1.8 million pieces a month. Hela Clothing states that “As
part of our stringent compliance procedures, we maintain the highest standards of
Health & Safety for employees”. Each facility has a fully equipped first aid center, offers
awareness and training programs and has optional bi-weekly visits from a doctor.
Because they began as a major supplier of children's wear, they state that safety
is very important to them. They have strict needle control policies, conduct product
safety, audits regularly, and provide continuous training on product safety. This fits
perfectly with T.K.P.’s sourcing guidelines and beliefs. T.K.P. brand is based on quality,
and connection to the customer through clothing and charity. T.K.P. needs to stick to
their morals to keep that connection since that is what the brand has been created off.
Hela has two woven’s manufacturing facilities in Kaduwela and Palapathwala
with the capacities ranging from 225,000 to 275,000 units. This information helps T.K.P.
know that Hela is capable of running large amounts of product. Also, Hela obtains four
knit facilities if T.K.P. was ever to expand into knitwear. Hela Clothing has a partnership
with Eco Apparels Group that has an embellishment unit, and other services such as in
house laboratory, logistics/warehousing, and cutting edge technology. By having this
connection, T.K.P. products can be started and completed in one location as opposed to
being shipped across Sri Lanka or to other manufacturers to be finished. The current
customers of Hela Clothing include Levi’s, Nike, Armani, Tesco and Sainsbury’s. By
knowing the customers, it helps T.K.P. be aware that the quality that Hela Clothing
produces is able to withstand higher end brands. Even if product appears damaged or
incorrect, Hela’s quality assurance enables T.K.P. to challenge and have their products
perfectly made.
Country: Bangladesh Country: D.R. Country C: Sri LankaSupplier B: DIRD Reason Supplier: Global CMT Reason Supplier: Hela Reason
Abilities 9
Captive power supply,
Line source,
Generators
9
Constanly updating
technology and growing.
Over 3000 workers. Sister
company with T&M
10 Member of Fielding Group
Capacity 10 20,000/day 0 Did not specify 9 1.8 mill ion/month
Costs 0
No quotes received but
costs should be
acceptable based on
current customers
0
No quotes received but
costs should be acceptable
based on current customers
0
No quotes received but
costs should be
acceptable based on
current customers
Customer
Service8 Responsive to Contact 5
Seem like they would have
great customer service but
did not respond
7Contacted quickly but no
useful info
Customers 10Walmart, Zara, H&M,
Target, JC Penny10
Bayer Clothing Group,
Lanier Clothes, Oxford
Industries, Nordstrom,
Macy's, Lord and Taylor
9 Levi's, Armani, Nike, Tesco
Flexibility 8 100% Export RMG facil ity 9
Option of full and partial
packages, Suits, pants,
women's, men's and
children's clothing
8
Can do knitwear
Lots of different facil ities
and supplier connections
Lead-time 0 No Response 0 No Response 0 No response
Management 9Has many directors and
managers for each facil ity10
Great management team,
Everyone has over 16 years
of experience in the
industry
10 Large Corporation
Quality 10Have Quality Control
system with hourly checks10
Guarentee quality service
and quality garments and
finishes based on
customer's specifications
9 Customers
Services
Offered10
Washing, embroidery,
printing, delivery, 9
facil ities for textiles,
engineering, garment
construction and
agriculture
10
Central receiving
warehouse, production
planning department,
pattern/marker making
facil ities and sample room,
cutting room, seweing
plants and modern
finish/pressing rooms
7
Member of UK based
Fielding Group
good contacts
Strategic
Outlook10
Constantly looking for new
customers; only remaining
leading woven bottoms
manufacturer
8Great enthusiasm, outlook
is focused on expansion10
Connections with Fielding
Group
Very high ethical and
safety standards
Sourcing
Guidelines10
No child labor, clean
facil ites, overtime
payment, Cares for
workers and the
environment
9 Values match TKP's 10
Member of Fielding Group
(UK based)
and is audited throughout
the year
Total 94 80 89
Average 7.8 6.7 7.4
Top Three Supplier RankingsScale of 1 to 10 with 1 being the worst and 10 the best
Costing
In order to remain profitable, T.K.P must maintain an average margin of 68% on
all products. T.K.P. currently has three products: Woven Pants, Woven Capris and
Woven Shorts. They will sell at a retail price of $120, $90, and $75 respectively. As a
new company, T.K.P. will sell each product at wholesale (50% off the retail price).
In order to achieve a margin of 68%, the cost of each product cannot exceed the
following prices:
Pants: $19.20
Capris: $14.40
Shorts: $12.00
After careful analysis of the risks, benefits and costs for producing each product
in the Dominican Republic, Bangladesh or Sri Lanka, the projected average cost per unit
was $7.77. This allowed for a profit margin of 84.6%. (Please see the Initial Margin
spreadsheet below).
After receiving final quotes from the suppliers, T.K.P.’s average cost per unit
became $8.01; an increase of $0.24. This increase in cost resulted in a profit margin of
84.17%; which is a decrease of 0.43% (from the original profit margin of 84.6%).
(Please see the Prelim. Margin spreadsheet below).
Wholesale Price Retail Price
Pants 60.00$ 120.00$
Capris 45.00$ 90.00$
Shorts 37.50$ 75.00$
T.K.P
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Mar
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1
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Avg
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Avg
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7
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Avg
Mar
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s $
4
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Avg
Mar
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84
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%
Avg
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7.7
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Ma
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81
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9%
84
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To
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Strategy Development
Our company is based on comfortable, affordable, classic pieces that will last our
clients a lifetime and not just a season. We are focused on perfecting the base line for our
woven bottoms line, which is why we chose such classic pieces to engage in first. Our
product line all consists of extremely well tailored fits that flatter all of our client’s
figures. We decided on woven bottoms because we believe that it is the base of any
outfit. We wanted Shorts so that our customers could be comfortable in the hotter
weather, Capris for mild days, and Pants they could wear year round.
We chose the volumes that we did because of the different products we are
offering. The Shorts are the most seasonal and will not be carried throughout the whole
year, mainly February through September, numbers depending on the climate. The
Capris are seasonal as well and will be carried from February through October. Lastly
the Pants will be carried year round with less in the summertime as it heats up.
As for the components we wanted a nicer fabric for the best quality we could
offer but still affordable enough for our clients. The colors we choose are very classic, to
be worn day to night and at the office or on the weekends. We also wanted a hint of
color, so we went with the mint green for a more trendy color.
We selected the top 3 countries that best produce woven bottoms. We chose
Bangladesh because it has a competitive garment manufacturing service due to low cost
and a hard-working workforce. We chose Sri Lanka because their textile and apparel
industry is both the most important contributing sector of Sri Lanka’s economy as well
as one of the most stable. We lastly chose the Dominican Republic one, they are the most
important trading partner in the US, and two, they are much closer than our other two
countries, giving us good variety.
Sources
Bangladesh: DIRD Group
DIRD GROUP started running in 1983 with its engineering company named DIRD
PRIVATE LIMITED. In 1984 DIRD GROUP stepped into the garments sector with its first
woven garments unit named DIRD GARMENTS LIMITED, which was one of the leading
woven bottom manufacturing company at that point of time. DIRD GROUP has today
diversified into different textile sub-sectors of the country. Their factory is a sister
concern of Dird Group which is located at Nagarchar, Rajfulbaria, Savar, Dhaka near the
River Bangshi, west from the Dhaka Aricha main road. It has covered the floor space of
total 44,629.75 sq. ft. Dird Group is one of the leading manufacturer and exporters of
readymade garments in Bangladesh. Since its inception in 1984, the group has been able
to create distinctive image amongst European Garment Buyers as makers of high quality
garments. They specialize in heavier weights and bottom line garments such as Pants,
Shorts, bermudas and skirts etc. They also make Overalls, Shorts, and western type
Jackets. Their top importers are, chain stores, and mail order houses. Their customers
include but are not limited to Target, H&M, and ZARA.
Their vision is to establish their selves as a one-stop course for the global apparel
market. They satisfy and meet their customer’s expectations by developing and
providing products and services on time, which offer value in terms of quality, price,
safety and social responsibility. They want to attain the highest level of competence
through continuous development of the professional management system.
DIRD Group is fully aware of our responsibility to protect our environment & to
create eco-friendly atmosphere for our work areas. They give highest priority to
preserve the nature. They set Biochemical Treatment technology in the effluent
treatment plant for waste management. The treated effluent is discharged in an
oxidation lagoon before final disposal.
Sri Lanka Source: Hela Clothing
Hela Clothing was incorporated in 1992 as Hemas Garments with the first factory
in Hendala, a city just north of Sri Lanka’s capital Colombo. Today the company is fully
owned by The Fielding Group (TFG) and also enjoys a strategic partnership with the Eco
Apparels Group, which has three fully functional factories. The fielding Group is a
company that supplies clothing and accessories to many of the UK's top retailers with
ventures in garment and fabric manufacturing in Bangladesh and Sri Lanka along with
trading partners in over nine countries. Originally, they manufactured high-quality
children’s knit wear but have since expanded and now produce many woven items,
including women’s woven bottoms. Currently they employ over 3800 employees, have
three production facilities and maintain a monthly output of 1.8 million pieces a month.
Hela Clothing states “As part of our stringent compliance procedures, we
maintain the highest standards of Health & Safety for employees”. Each facility has a
fully equipped first aid center, offers awareness and training programs and has optional
bi-weekly visits from a doctor. Because they began as a major supplier of children's
wear, they state that safety is very important to them. They have strict needle control
policies, conduct product safety audits regularly and provide continuous training on
product safety.
Hela is also committed to ethical sourcing. They are a member of the Fielding
Group, a team headed by a UK trained Compliance Manager that visits the factories
frequently to audit, educate, and ensure consistency of standards. Hela has also been
certified by ETI, WRAP-Platinum, GWG & Fairtrade. Current customers of Hela Clothing
include Levi’s, Nike, Armani, Tesco and Sainsbury’s.
Dominican Republic: Global CMT Corp
Global CMT is a sister company of Empresas T&M, which is an industry leader for
over 25 years in tailored clothing. Both are located in Santiago, Dominican Republic.
Global was conceived to provide T&M’s client base with the option of full and partial
packages. They are very valuable as they provide all aspects of the manufacturing
process, such as product development, planning, components, assembly and the logistics
and services that we would need as we are in the pursuit for increased sales. They offer
excellent products of superb appearance and value.
They say that quality, punctuality, and value define the essence of their
philosophy and help them to achieve maximum customer satisfaction, which goes hand
in hand with what TKP is all about. They have over 300,000 sq. ft. of production space,
employing close to 3000 workers with diverse, efficient and flexible product capabilities.
They have the advantage and upper hand against others because of their modern
facilities, quality system, trained workers, state of the art equipment and administrative
systems. They are constantly updating their technology, equipment, methods, facilities,
and systems. They have made major advances to their central reviving warehouse,
production planning department, pattern/marker making facilities and sample room, as
well as their cutting room, sewing plants, and modern finish pressing rooms.
The minimum experience of their executive staff is 16 years in the industry. They
specialize in the production of tailored clothing for men, women and children, as well as
uniforms and tuxedos. They have clients such as Bayer Clothing Group, Lanier Clothes
and Oxford Industries. Stores such as Nordstrom, Macy’s and Lord and Taylor carry their
products. The excellent finish and quality they provide make Global CMT our number
one pick in the Dominican Republic.
Preliminary costs vs. initial quotes and product qualities
The preliminary costs are within our margins.
Risk vs. benefits, distance & lead-time, quality & flexibility, capacities, value added services & raw material requirements
Bangladesh:
In Bangladesh flooding and drought are some risk factors and their political
parties always seem to be feuding. A plane ride to Bangladesh is about 30 hours from
our home office. We negotiated a lead-time FOB Savannah of 8 weeks, a letter of credit
and a recede of goods net 20. We also negotiated a clause in our contract for quality.
Sri Lanka:
The risks in Sri Lanka are very low, there is some risk in the complication of
weather, they did have a tsunami but other than that it is a great place to manufacture in.
Sri Lanka is a 29-hour plane ride from our home office. We negotiated a lead-time, FOB
Charleston of 6 weeks and will be able to renegotiate in 3 months. They will also include
a factoring service. We also negotiated a clause in our contract for quality.
Dominican Republic:
The Dominican Republic is considered a secure country in proceeding business
with. There is a low threat from terrorism in the Dominican Republic. The security
situation in the Dominican Republic is stable. The global economic crisis, and in
particular the U.S. recession, started to impact the Dominican economy in 2008. But
since then their economy grew at a healthy pace and is stable. The Dominican is just
about a 3-hour plane ride from our home office. We negotiated a lead-time, FOB
Savannah of 7 weeks and will be able to renegotiate in 3 months to 4 and ½ weeks. We
also decided on a letter of credit and a recede of goods Net 15. We also negotiated a
clause in our contract for quality.
All of our manufactures are able to accommodate manufacturing all of our units
in the time specified, and all have adequate sources and suppliers.
Future requirements
In the future the TKP brand will strive to remain to its true values and morals and
will continue to work with the suppliers and manufactures that establish their sourcing
guidelines. We want to perfect each of our product lines so that we will only have the
best. As we further our business we will venture out into other lines of clothing and
remain our classic minimalist style of clothing, well structured quality and always
maintain the best of quality with any products that we make.
Value added services
At TKP we have great customer satisfaction. There is no limit to making our
clients have the best experience possible and gain an emotional relationship with them
through our clothing. We also build an emotional relationship with them through giving
back to charities of our client’s choice.
Maximized margins
Our target margin was 68%. We had an increase of 16.1 % from our target profit
margin which translates to a maximum margin of 84.17%.
Comparison of Final Costing Due to the time constraints, T.K.P was unable to obtain preliminary costs from
each manufacturer. Therefore, the preliminary costs, the final costs and their respective
margins are the same.
T.K.P. had an initial target margin of 68%. The final margin percentage is 84.17%,
which is an increase of 16.17%. Although a greater margin could have been achieved,
T.K.P. divided the manufacturing between the Dominican Republic, Bangladesh and Sri
Lanka in order to reduce risk. Although the Dominican Republic has the highest overall
cost, it also has the shortest lead times. For this reason, T.K.P decided to utilize it for
replenishment purposes as this may ultimately lead to higher sales and/or profit
margins.
Co
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2$
7
.80
$
Ma
rgin
$3
1.5
0$
-$
50
.76
$
2
9.0
0$
3
5.5
0$
50
.20
$
3
0.5
7$
37
.48
$
5
2.2
0$
Ma
rgin
%8
4%
85
%7
7%
79
%8
4%
82
%8
3%
87
%
To
tal
Wh
ole
sale
50
,62
5,0
00
$
3,7
50
,00
0$
-$
5
,40
0,0
00
$
3
,75
0,0
00
$
3,3
75
,00
0$
4,8
00
,00
0$
1,8
75
,00
0$
7,8
75
,00
0$
19
,80
0,0
00
$
To
tal
Pu
rch
ase
8,0
14
,60
0$
60
0,0
00
$
-$
8
31
,60
0$
8
50
,00
0$
71
2,5
00
$
7
84
,00
0$
3
46
,50
0$
1
,31
6,0
00
$
2
,57
4,0
00
$
To
tal
Ma
rgin
s4
2,6
10
,40
0$
3
,15
0,0
00
$
-$
4
,56
8,4
00
$
2,9
00
,00
0$
2
,66
2,5
00
$
4,0
16
,00
0$
1
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8,5
00
$
6,5
59
,00
0$
1
7,2
26
,00
0$
Av
g W
ho
lesa
le5
0.6
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Av
g P
urc
ha
se8
.01
$
Av
g M
arg
ins
$
42
.61
Av
g M
arg
ins
%8
4.1
7%
Av
g C
ost
/U
nit
8.0
1$
FIN
AL
PLA
CE
ME
NT
& M
AR
GIN
SS
up
pli
er:
Glo
ba
l C
MT
Su
pp
lie
r: H
ela
Conclusion
Bangladesh, the Dominican Republic and Sri Lanka are important to T.K.P.
because they all have strived to increase their textile and apparel industries, and they
continue to grow. Not only is the apparel industry thriving in these countries, but the
trade agreements that each country is involved in greatly improves business.
We chose Bangladesh because it has a competitive garment manufacturing
service due to low cost and a hard-working workforce. We chose Sri Lanka because their
textile and apparel industry is both the most important contributing sector of Sri Lanka’s
economy as well as one of the most stable. We lastly chose the Dominican Republic
because one, they are the most important trading partner in the US, and two, they are
much closer than our other two countries, which allows for flexibility in regards to lead
times and automatic replenishment.
Within these countries, manufacturers were carefully evaluated and were selected based
on their costs, sourcing guidelines and services offered. Although each country and
manufacturer does not have any major risks that would prevent T.K.P. from conducting
business with them, T.K.P. understands that sometimes problems arise from nowhere.
In order to further reduce the risk of any unforeseen problems, T.K.P. divided production
among the three countries. The majority of each product is placed in the country and
with the manufacturer who offered the lowest overall cost. In order to reduce risk, the
remaining product was placed in another country as well. Because of the proximity to
the United States, Global CMT in the Dominican Republic will produce a portion of each
style. This will allow for fast replenishment of goods that either sell better than expected
or are unable to be produced with their original manufacturer for any reason.
This strategy allows T.K.P. to capitalize on the benefits of global sourcing by maximizing
its profit margins, minimize its lead times, inventories costs and risks. By working with
three manufacturers, T.K.P. will establish working business relationships with
companies that can assist them with further production opportunities. In addition, each
manufacturer has the capability to produce products that T.K.P. may add once it has
been established.
Above all else, this strategy allows T.K.P. to proudly inform its customers, investors and
shareholders where they produce their products.
Appendix
T.K.P. Sourcing Guidelines: - Maximum work hours per week: 58 - No child labor: minimum age 16 - Overtime compensation - Timely proper wages (depending on country $/hr)
o Paid weekly and without hold - Workers must have a minimum of 15 minute break at least every 4 hours - Safe work environment
o No open wires o Adequate space, lighting, air conditioning, heat, ventilation o Training Facility
- No harsh Treatment on Worker - Maternity Leave Benefit - Total Compliance with Safety Requirement - Hygienic Sanitary Facility - Proper disposal of trash in dumpster.
o Dumpster must be emptied when full to local landfill. - Prohibition of Discrimination including, but not limited to:
o Race o Gender o Country of Origin o Sexual Orientation
- Environmental Guidelines o Recycle materials in proper bins
Works Cited http://www.kwintessential.co.uk/resources/global-etiquette/bangladesh.html
https://www.cia.gov/library/publications/the-world-factbook/geos/bg.html
http://globaledge.msu.edu/countries/Bangladesh
http://www.dirdgroup.org/about.php
http://www.pmfashionsltd.com/
http://pioneergroupbd.com/
http://www.state.gov/r/pa/ei/bgn/3452.htm
http://www.bangladesh.gov.bd/
http://www.onlinenewspapers.com/banglade.htm
http://www.mof.gov.bd/en/
http://www.bbc.co.uk/news/world-south-asia-12650940
http://travel.state.gov/travel/cis_pa_tw/cis/cis_1011.html
http://travel.state.gov
http://www.bbc.co.uk/news/world-south-asia http://www.state.gov/ http://www.supremecourt.lk/ http://www.tourslanka.com/index.htm http://globaledge.msu.edu/Countries/Sri-Lanka http://www.amcham.lk/ http://www.investsrilanka.com/ http://www.doc.gov.lk http://www.ustr.gov/ http://www.paho.org/english/sha/prfldor.htm
http://www.drlawyer.com/fr/publications/dominican-labor-law.html http://www.nathaninc.com/resources/dominican-republic-textile-and-apparel-export-competitiveness http://www.apparelcentralamericadr.com/cecatec-dr/index.php? option=com_content&view=article&id=3&Itemid=3 http://www.kwintessential.co.uk/resources/global-etiquette/dominican-republic-country-profile.html http://www.state.gov/r/pa/ei/bgn/35639.html http://dev.prenhall.com/divisions/hss/worldreference/DO/introduction.html http://globaledge.msu.edu/countries/Dominican-Republic
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