Continental Breakfast and Exhibits City Center Ballroom Sponsored by

Strategic Sourcing, Customs, and Logistics Integration Conference

Welcome Bryan Wolfe Vice President of International Trade Ann Inc.

Opening Keynote Address Duncan Scott Vice President, External Products New Balance Athletic Shoe, Inc.

SOURCING TRENDS

Duncan Scott VP External Products, New Balance April , 2015

Confidential

Sourcing Trends • Asia has been the key MTS source for Developed Markets for 35 years

As Asia becomes more expensive, three possibilities have to be considered:

• Re-shoring of production to or near the EU and US markets • Shifting of the supply chain beyond Bangladesh & Myanmar to Africa • Greater efficiency within Asia that keeps Asia competitive

Confidential

Sourcing Predictions Predictions: • Greater Asia/India will remain very strong sourcing hubs • Africa will emerge as a strong hub for low cost commodity items • LAM & countries such as Turkey will play a niche role in Customized Speed to Market • The US & EU will also play a significant role in Customized & Speed to Market

Confidential

Sourcing Trends – The environment • Market purchasing power is shifting to Asia and India

• Manufacturing Expertise is shifting to Asia • Consumers are demanding speed and variety at an ever-accelerating rate • The Digital Revolution is enabling better processes & greater efficiency Given the above we need to consider: • How will the shift in the Consumer Base change Sourcing Strategy?

• How will the Digital Revolution and Manufacturing Trends affect Sourcing?

Confidential

Sourcing Trends • Between 1970 and today, the source base shifted to Asia, and then within Asia. • Throughout, the consumer base remained heavily concentrated in the US & Europe. • Today that is changing.

Nate Herman – AAFA 2012

Confidential

Shift of Middle Class Consumption “Middle-class Consumption: -Expected to grow from US$ 21 trillion (2009) to US$ 56 trillion by 2030 -80% of that growth is coming from Asia.” *

* Source: Ricardo

10

Hausmann and César A. Hidalgo – World Economic Forum Report, 2012

Confidential

Shift of Middle Class Consumption •

As of 2012: – Japan, United States, & the EU covered fully 60% of Middle Class Consumption. – India & China were 5% of global middle class consumption

•

By 2025: Those numbers are expected to equalize

•

By 2050 : They will be flipped

•

Demand moves to US$ 56 trillion(2030) from US$ 21 trillion(2009)

•

80% of that growth comes from Asia. Source: Kharas, H. (2010) The Emerging Middle Class in Developing Countries. OECD Development Centre, Working Paper. Available at: http://www.oecd.org/dataoecd/12/52/44457738.pdf Pg.

11

Confidential

Who are the new Consumers? Thanks to the Digital Revolution, Global Consumers are better connected than ever. Middle Class Consumers in all areas of the globe want much the same things: • Speed • Differentiation • Connectivity to a Brand or trend • High Quality • Great Value

Confidential

Same Day Delivery? TaoBao introduced same-day delivery in China in 2009

Confidential

Confidential

Customization – in as little as 2 days

Confidential

Sourcing Trends • Consumers who seek individuality will pay for customization • They expect turnaround in a couple of days or at most a week. • That will require in-market production capabilities. • Consumers who want to touch and feel product will shop at retail. • They may value brand connectivity over customization • They will expect never-out-of stock: -missing size or colors shipped within a few hours or days. • Consumers who know what they want may order directly over the internet • They will expect delivery within a few hours. Paradoxically the need for speed still requires a make-to-stock model But what’s changed is: Greatly increased speed means: • low inventory & replenishment capabilities are a must • Customization requirements are amped up to compliment MTS

Confidential

Sourcing Trends • How will Sourcing shift to meet the new consumer demands?

Czech Republic Bulgaria S. Korea

Turkey Bangladesh Dominican Republic, El Salvador, Puerto Rico, Nicaragua

India Colombia

Sri Lanka

Paraguay

17

Confidential

Thailand Cambodia

Japan Taiwan Philippines

Malaysia

Sourcing Trends • Asia has been the key MTS source for Developed Markets for 35 years • LAM & Turkey offered Quick-to-Market capability locally and for the EU & US

Again: • As Asia becomes more expensive, three possibilities have to be considered: • Re-shoring of production to or near the EU and US markets • Shifting of the supply chain beyond Bangladesh & Myanmar to Africa • Greater efficiency within Asia that keeps Asia competitive

Confidential

Sourcing Trends Asia continues to be a manufacturing powerhouse – and they are getting better Then

19

Now

Confidential

Sourcing Trends • “On-Shoring” or “Near Shoring” will likely impact China & India more than US/EU • The need for speed in these markets and the volume will drive efficiency • Manufacturing generally evolves fastest where it’s highly concentrated • The same process expertise driving TaoBao & JingDong influences manufacturing • Taiwan & Korea Materials infrastructure benefits from other industries.

20

Confidential

But will Cheap Labor Win Anyway? Question Asked at Prime Source Forum March 2015 : What will be the top 5 Sourcing Bases for Apparel through 2020? (Biggest growth in $ value) Top Growth Apparel Source Bases ($) through 2020 0

Africa Vietnam Bangaladesh Myanmar India China Indonesia Mexico Eastern Europe Turkey

Africa 5 Bangladesh China Eastern Europe India Indonesia Mexico Myanmar Turkey Vietnam

10

15

20

Confidential

25

Will Cheap Labor Win Anyway? Infrastructure is a limiting factor in growth. A challenge for emerging sources 30 years on, materials Infrastructure remains in Korea, Taiwan & China. Supply lines are stretched even to SE Asia

22

Confidential

Questions: What about Africa? • Africa has fast-growing populations and low cost labor. Despite that, Africa faces significant challenges: • Infrastructure limitations • Innovation and worker knowledge challenges • Limited purchasing power and therefore a smaller market It is likely that Africa may develop in a similar way to LAM • Pockets of export manufacturing centers limited by • Innovation • Logistics

23

Confidential

Will Europe & the US manufacture more? • Maybe some – where speed matters – but: The EU and the US have: – Declining economies of scale vs. Asia, India, & Africa. – Ability to add value remotely due to digital revolution – Continuing growth and strength in the Service Sector.

24

Confidential

How Will Trade Barriers Affect Sourcing?

• Export Growth closely follows with Regional Trade Agreements • Most Governments will realize that and open trade

25

Confidential

Sourcing Crystal Ball Predictions: • Greater Asia/India will remain a very strong sourcing hub • Asia will benefit from overwhelming economies of scale • Asia will lead through process & automation improvements • Higher tech (MTS) Items will be made in Asia • Asia will lead in material innovation • Africa will emerge as a strong hub for low cost commodity items • Africa will be challenged by lack of industry infrastructure • Africa will be challenged by lack of cutting edge process engineers • Africa will be challenged by time to market as speed gets more important

• LAM & countries such as Turkey will play a niche role in Customized Speed to Market • The US & EU will also play a significant role in • Customization and Speed to Market (Local to Local within US & EU) • Branding and Design (with strong brands , Marketing and trendsetting) • Manufacturing & Process excellence exported digitally

Confidential

Thanks!

27

Confidential

Sourcing Trends and Challenges: Where’s next? Kurt Cavano, Founder, Vice Chairman and Chief Strategy Officer, GT Nexus Brian Bensman, Senior Director of Strategic Sourcing, Cintas Corporation John Strasburger, Senior Vice President Global Supply Chain, Williamson-Dickie Manufacturing Company Moderator: Rick Horwitch, Vice President, Strategy, Solutions Business Development and Marketing, Bureau Veritas Consumer Products

BUREAU VERITAS – OVERVIEW

1828

18 (120)

1

2015

196 (243)

151

AAFA Sourcing/Customs/Logistics Conf - April 14, 2015

29

THE CHALLENGE & OBJECTIVE – Consequences of Non-Compliance FOR EVERYONE

AAFA Sourcing/Customs/Logistics Conf - April 14, 2015

30

INDUSTRY CHALLENGES

Cheaper

Total Cost Improvement

Faster

Reduce Cycle Times

Better

Improve Final Product Quality

Safer

Consumer Protection, Brand Integrity

Smarter

Business Intelligence for Better Decision Making

AAFA Sourcing/Customs/Logistics Conf - April 14, 2015

31

UNDERSTANDING THE SUPPY CHAIN PUZZLE

AAFA Sourcing/Customs/Logistics Conf - April 14, 2015

32

Technology to Overcome Supply Chain & Organization Silos

Natural barriers to supply chain visibility exist, but…

Big Data Augmented by

…Technology & the Internet of Things are erasing these barriers. GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM

| 33

Cintas Global Supply Chain

Cintas Global Supply Chain

State of Sourcing 2015 & beyond John Strasburger



Very dynamic state; however . . . some things never change.



Expectations are Higher . . . internally & externally.



Dealing with New, Unexpected, and Elevated Risk Factor.

Sourcing Trends and Challenges: Where’s next? • State of sourcing 2015 and beyond – innovation and collaboration within your organization • Shifting sources, capacity, and costs – risks of chasing lowcost sourcing models • Qualifying new vendors – Supply Chain Risks / CSR Influences • Adjusting to change – impacts on your supply chain and lead times

Coffee Break and Exhibits City Center Ballroom Sponsored by

Global Expansion’s Impact On Your Supply Chain Laura Noonen, Director of Trade Compliance and Imports, Ascena Global Sourcing Tom Travis, Managing Partner, Sandler, Travis & Rosenberg, P.A. Tony Anzovino, Global Apparel Sourcing, Haggar Clothing Co. Moderator: Gary Barraco, Industry Development, Amber Road (formerly ecVision)

Expansion  Growth  Expansion

Expansion  Growth  Expansion

Justice in Latin America

Haggar in Canada

What are the drivers? • Internal • External • Customer demand • Increase in product line • Multiple sales channels

Why is there a need for global expansion? • Brand expansion • Emerging markets

The Challenges: Rules, Regulations and the Reality on the Ground • The need to deliver a top quality product, at an acceptable cost, with strong profit performance on a global scale. • Multiple teams and external parties • Regulatory differences region-to-region • Product compliance • Import/Export compliance • Duty and Taxes

• Cultural differences • Brand integrity no matter where

Opportunities: A focus on the hot markets and why

• Preferential Trade/FTZ • Country of Origin Restrictions • Economic factors: labor costs, material costs, etc.

Suggestions from the road weary

Lunch and Exhibits City Center Ballroom Sponsored by

Global Expansion Facilitated Discussion Facilitator: Nate Herman, Vice President of International Trade, American Apparel & Footwear Association

Logistics Keynote Address Mario Cordero Chairman Federal Maritime Commission

Federal Maritime Commission

About the FMC 

Established by Congress in 1961



Independent Regulatory Agency



Regulates Liner Ocean Transportation in U.S. Foreign Trades

FMC Statutes and Regs. 

Shipping Act of 1984, as Amended 

(Ocean Shipping Reform Act, 1998 (OSRA))



Merchant Marine Act, 1920



Foreign Shipping Practices Act of 1988



Financial Responsibility for Death or Injury to Passengers and for Nonperformance of Voyages 



(Public Law 89-777,1996)

Code of Federal Regulations - CFR Part 500

FMC’s Mission To foster a fair, efficient and reliable international ocean transportation system and to protect the public from unfair and deceptive practices.

Strategic Goal 1 Maintain an efficient and competitive international ocean transportation system.

Strategic Goal 2 Protect the shipping public from unlawful, unfair and deceptive ocean transportation practices and resolve shipping disputes.

Oversight of Agreements Ocean common carrier (and marine terminal operator) agreements are analyzed for potential anticompetitive effects prior to implementation.

Agreement and carrier activities are systematically surveyed in areas relevant to the Commission’s statutory standards.

Comprehensive monitoring is maintained to assess relevant competition, economic and commercial activities in major U.S. trade lanes.

Substantially Anticompetitive Agreements Shipping Act of 1984, Section 6(g): If, at any time after the filing or effective date of an agreement, the Commission determines that an agreement is likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost, it may bring a civil action in the U.S. District Court for the District of Columbia to enjoin the operation of the agreement.

West Coast Ports Congestion Forum September 15 , 2014

Chairman Mario Cordero

Mid-Atlantic and Northeast Ports Congestion Forum October 1, 2014

Commissioner Richard A. Lidinsky, Jr.

Mid-Atlantic and Northeast Ports Congestion Forum October 1, 2014

Commissioner William P. Doyle

South Atlantic Ports Congestion Forum October 30, 2014

Commissioner Michael A. Khouri

Gulf Coasts Port Congestion Forum November 3, 2014

Commissioner Rebecca F. Dye

Coffee Break and Exhibits City Center Ballroom Sponsored by

Logistics Facilitated Discussion Facilitators: • Bryan Wolfe, Vice President of International Trade, Ann Inc. • Kristina Lutz, Director Global Accounts – Retail, APL Logistics • Quinn O'Rourke, Director of Compliance and Logistics, LaCrosse Footwear, Inc. • Nate Herman, Vice President of International Trade, AAFA • David Lapidus, Manager of Government Relations, AAFA

Logistics Facilitated Discussion The current situation at the west coast ports will most likely happen again in the future. • What do you need to have in place to prepare for this in the future? • How would you use the following to help plan? • Topic 1: Lessons learned/Hindsight • Topic 2: Risk Management/Mitigation strategies • Topic 3: Technology

What’s the Congressional Agenda? Kaitlin Singhilofi from the Office of Representative Charles Boustany, Jr. (R-LA 3rd) John Porter from the office of Senator John Cornyn (R-TX) Moderator: Steve Lamar, Executive Vice President, American Apparel & Footwear Association

Closing Bryan Wolfe Vice President of International Trade Ann Inc.

Continental Breakfast and Exhibits City Center Ballroom Sponsored by

Welcome Juanita Duggan President & Chief Executive Officer American Apparel & Footwear Association

Trade Keynote Address Ambassador Robert Holleyman Deputy United States Trade Representative

Conversation with Customs Deputy Assistant Commissioner Sandra Bell Office of International Trade, U.S. Customs and Border Protection Interview by Nate Herman, Vice President of International Trade, American Apparel & Footwear Association

Coffee Break and Exhibits City Center Ballroom Sponsored by

Q & A with Customs and Trade Experts Tom Travis, Managing Partner, Sandler, Travis & Rosenberg, P.A. Jon Fee, Partner, Alston & Bird, LLP Moderator: Steve Lamar, Executive Vice President, American Apparel & Footwear Association

Closing Bryan Wolfe Vice President of International Trade Ann Inc.

Thank you!