TOM TAILOR SOURCING STRATEGY JACOB ROJENS DIRECTOR GLOBAL SOURCING
GLOBAL SOURCING – BIG PICTURE Cost is going up
China is changing. Fast
No magic sourcing country
Efficiency
Change
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GLOBAL SOURCING – BIG PICTURE IN NUMBERS Country
USD billions apparel exports, 2010
Number of apparel factories
Number of workers in apparel industry (in million)
China
130
18,000
5-10
Bangladesh
16
5,000
4
India
11
11,000
1.5
Vietnam
11
2,000
2-3
Indonesia
7
2,450
0.4
Pakistan
4
7,500
6
Cambodia
3
250
0.3
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SOURCING CHALLENGES IN 2010 Cotton. Prices tripled over 12 months. Rampant speculation Increasing and strong domestic Chinese demand as well as a recovering global economy Rapid wage increases and inflation in developing economies
Lead-times increased resulting in higher freight cost
A need for a TOM TAILOR presence in Asia to safeguard capacity and production space for continued growth 4
MOVE FROM AGENTS TO OWN SOURCING 3rd party agents
Own sourcing structure “One interest only”
Small companies Country / product specific
One oversight Risk management
Ineffective structures
Vested interest
Cross divisional efficiency by bundling capacities Optimize buying power Doing more with less suppliers
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JV PARTNER: ASMARA INTERNATIONAL LTD. Asmara International Ltd. and TOM TAILOR have a long standing relationship Asmara has an established network of offices and professionals across Asia: - 12 Offices - 9 countries - 750 people Decision to found TOM TAILOR Sourcing Ltd. 51% controlled by TOM TAILOR 49% controlled by Asmara International Asmara has a broad customer base in US and Europe, e.g. Abercrombie & Fitch, Olsen, Guess, Marc O’Polo, Zalando, Loblaws (Canada)
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TOM TAILOR SOURCING: ACHIEVEMENTS FIRST 12 MONTHS Structural achievements
Sourcing achievements
Establish TOM TAILOR Sourcing with Asmara International
Bangladesh transition India focus
Shift complete sourcing volume from Asmara to TOM TAILOR Sourcing Terminate existing agency agreements Standardize payment terms Communicate objectives for TOM TAILOR Sourcing in Hamburg and Asia
Bundle capacities and reduce supplier base Devised sourcing strategy for biggest product categories: T-shirt category Better manufacturers
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FOCUS ON BANGLADESH AND INDIA LEADS TO CHANGING SOURCING LANDSCAPE TOM TAILOR sourcing by fob turnover 2011 China 32% Bangladesh 23% India 15% Indonesia 12% Europe 8% Pakistan 5% Vietnam 2% Others 3%
TOM TAILOR sourcing by fob turnover 2012 China 25% Bangladesh 28% India 18% Indonesia 11% Europe 5% Pakistan 6% Vietnam 6% Others 1%
Change in fob sourcing 2012 versus 2011 Bangladesh
+32%
India
+28%
Indonesia China
-8% -11%
* fob = free on board 8
TOM TAILOR SOURCING: NETWORK
Present in 6 countries China: 18 people
7 offices
130 people
Exclusive procurement for TOM TAILOR Group
India: 26 people
Bangladesh: 46 people
Hong Kong: 6 people
Vietnam: 14 people
Indonesia: 20 people
as of November 2012
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BUNDLING SUPPLIERS: DOING MORE WITH LESS SUPPLIERS 2011 Suppliers and volume 20.000.000 €
Strategic direction
236 suppliers in 2011 reduced to 197 in 2012 1% of total buy came from 71 suppliers 2011 47 suppliers 2012 50% of our total buy came from 15 suppliers 2011 20 suppliers 2012
Combining and reducing supplier base to increase efficiency
Sourcing volume
16.000.000 €
12.000.000 €
8.000.000 €
4.000.000 €
0€ 1
51
101 151 Number of suppliers
201
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SOURCING STRATEGY BY CATEGORY: T SHIRTS Sourcing by category 2011
Comments Reduce number of suppliers from 47 to 18
T-shirts 19% Knit 15%
Denim 14%
Reduce number of markets from 9 to 3 markets
Shirts 13% Pants 10%
Develop better manufacturers
Jackets 8%
on quality, price and speed
Sweat 8% Polo 4%
Target
Other 11%
€ 1.8m saving on fob turnover
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BONITA: SOURCING SPLIT BY COUNTRY BONITA sourcing by fob turnover 2012 Turkey 33%
Targeted changes in fob sourcing 2012 versus 2015
Asia 26% Germany 21% Italy 4% Netherlands 4%
2012
2015
Europe: From 29% to
8%
Asia:
From 26% to
53%
Turkey: From 33% to
29%
Others: From 12% to
10%
Others 12%
BONITA sourcing by fob turnover 2015 Turkey 29% Asia 53% Germany 6% Italy 1%
Netherlands 1% Others 10%
* fob = free on board
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BONITA: PRODUCT OPPORTUNITIES Polo Pique
Turkey
18 €
India
8€
Blouse
Importer
25 €
China
15 €
Coordinates
Turkey
29 €
Indonesia
16 €
Bonita bought 11 million pieces 2011
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BONITA: PRIORITIES 2013-2015 Sourcing activities concentrate on 2014 and beyond Set ambitious milestones with product teams
Reduce purchase from EU based importers & traders Move part of Turkey production to Asia Harmonize process and structure with TOM TAILOR Target 2015: Reduction of fob expense by € 10m;
Measure: quarterly fob averages by product category
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TOM TAILOR SOURCING: OUTLOOK 2013 Exit from all 3rd party agencies completed
Expand cross divisional synergy in key categories
€ 150m managed by TOM TAILOR Sourcing (60%) Continue to build a world class sourcing organization for TOM TAILOR