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General sourcing methods By Henny Jordaan
Your duty as entrepreneur • Execute – Optimization of cost and quality
• Improve – Change of existing in- and external production structures
• Renew – Reshuffling of the supply chain
• Innovate – Think “Out of the box” The knowledge of all parties in the network should be used
General sourcing methods
• • • •
Focus Life cycle Supplier information Material management
Focus on the apparel industry • Quality level of……… • Length number of articles • Width number of sizes
quality
length
3D Focus collection
width
Focus on the apparel industry • • • • • • • •
Design Technical sample production Production planning Buying / coursing Production- and quality-control Transport / logistics Warehousing Distribution policy
Focus Trendsetting
Fashion
Basics / NOS
Stock-lots
Focus on the fashion chain
marketing styling R&D production
• Every step adds value to the chain. • What is your position
distribution consumer
Chain Management Supplier
Demand / Pull
demand pipelines
Wholesale
Retail
Consumer
Supply / PUSH
Supply Demand
Seed farmer
Value chain of a T- SHIRT
Seed wholesaler Cotton farmer Cotton bale Cotton bale wholesale spinning knitting finish
Price at wholesale € 0,95 p/ T-shirt
(In the Netherlands)
apparel wholesale retail
Life cycle 1) Introduction: A product is introduced in the market. Has no recognition. Turnover is low and slow grow. 2) Grow: By means of advertisements and general recognitions. Mouth to mouth communication. Quick grow of turnover. 3) Maturity: The quick growth has gone, partly because the competition sees potential profits. They will bring similar product in the market. 4) Satisfaction: A fierce competition occurs, which leads to less turnover growth. 5) Decline: In this situation the sales will decline and the board of directors will withdraw the product from the market.
Life cycle
satisfaction
Value in €
maturity
decline
grow profit introduction
investments
time
loss
Life cycle apparel BASICS NOS
Mass
C&A
F
H S A
Individual
H&M
G IN T ET S ND E TR ZARA Haute Couture time
IO
MARKET
N STOCK-LOTS
Trendsetting
Driver
importance
Production knowledge
high
small volume
Product
high speed
push low
highly fashionable
Predictability
innovation
100 90 80 70 60 50 40 30 20 10 0
Logistics Risc
Fashion
importance
Predictability Product Production knowledge
low
Large volume Large distribution area
value added
push / pull
mid
Driver
flexibility
100 90 80 70 60 50 40 30 20 10 0
Logistics Risc
Basics / NOS
Product Production knowledge Logistics
low
importance
Predictability
large shipments from stock
basic knowledge standard production
push commodity
very high
Driver
efficiency reliability
100 90 80 70 60 50 40 30 20 10 0
(never out of stock)
Risc
Stock lots
Driver
importance
Product
reasonable
large volume simple process
commodity / push
unique lots
reasonable
Predictability
efficiency
100 90 80 70 60 50 40 30 20 10 0
Production knowledge Logistics Risc
Focus Trendsetting
Fashion
Basics / NOS
Stock-lots
Focus Ishikawa diagram M
N MA HU
H ET OD
OR CT FA
End product
MA TE RI AL
M
AC H
IN
E
MANAGEMENT
global production locations
haute couture trendsetting fashion basics / nos stock-lots
Product development 45 40 35 30 25 20 15 10 5 0
Examine the assortment of your collection • ABC analyzes • The profitability of each individual product • The profitability of the entire collection • The life-cycle per article
Product development ABC method Device the assortment in Fast, Average – A group = 20% articles generate – B group = 10% articles generate – C group = 70% articles generate
and Slow runners. 80% of the turnover (80/20 rule) 15% of the turnover 5% of the turnover
The ABC method can form the basis assortment decisions. A new article could start in group B and grow into A and after a while drop in group C A good balance is needed. Not to many products of your assortment shout be sitting in one group.
ABC analyse Total turnover
A
B 20%
C 50%
100%
No. of articles
Product development
Determine: The profitability of each individual product P = the sales price of product X V = the variable cost for each individual product X Q = number of sold product X (P X -V X)Q X = contribution margin (contribution margin /total profit) x 100 = ……%
vendor management supply chain control i want to drive myself instead of been driven
Chain cost Cost
Raw material
Knitting
Apparel
Wholesale
Retail
Total
Stock
2
2
2
2
1
9
Economic st.
3
1
0
2
4
10
Process
0
5
6
1
0
12
Transport
1
1
1
1
1
5
Administration
2
3
3
1
1
10
Packaging
1
1
4
2
2*)
10
Total
9
13
16
9
9
56
*) recycling cost
Chain cost Cost
Re
c u d
n o ti
Raw material
Knitting
Apparel
Wholesale
Retail
Total
Stock
2
2
2
2
1
9
Economic st.
3
1
0
2
4
10
Process
0
5
6
1
0
12
Transport
1
1
1
1
1
5
Administration
2
3
3
1
1
10
Packaging
1
1
4
2
2*)
10
Total
9
13
16
9
9
56
*) recycling cost
Chain Cost cost
Raw material
Knitting Apparel
Stock
2
Economical st.
Re Apparel
Wholesale
c u d
n o ti
Retail
Total
2
2
6
3
1
4
8
process
0
11
0
11
Transport
1
1
1
3
Administration
2
3
1
6
Packaging
1
4
2*)
7
Total
9
22
10
41
*) recycling cost
From 56 to 41
Key Performance Indicators productivities Fabric Warehousing Cutting Sewing Inspection and make-up Transport
A. …..% B. …..% C. …..% D. …..% E. …..% F. …..%
KPI’s Key Performance Indicators 100
Supplier
95
A B C D E
90 85 80 75
1
2
3
4
Vendor Rating Deming approach 1. Plan 2. Do 3. Control 4. Act 1
4
2 3
Vendor Rating
Determine targets
Progress
Direct vendor
act
Evaluation Improvement of performance
control
Vendor rating
do
Measuring Bonus / males
plan
Develop measuring-system Determine KPI’s Determine targets
Time
Supplier information • • • • • • • •
Strategic questions Core-business Structure sales department The financial situation of the company Product development Product information Total assortment Logistics
Global Fabrics & Textiles Trade Shows
What do we (need) want to know of or supplier? • General strategic questions • Competitive quotations • Dual sourcing • Ethical aspects – Environmental – Employment – Corruption – Secrecy clausal • Geographical aspects • Political aspects • Procurement • Re-tendering • Quota/restrictions • Strategic products • Who is in charge • Alternative scenario’s
What do we (need) want to know of or supplier? •
Company activities • Level of occupation • Bottle-neck situations • Co-maker-ship • Flexible production • Quality-security • Level of income • Machine park • Sub-contracting • Performance guarantee • Production time • Productivities • Skills employees • Technical staff • Future investments • Shortcomings to blame
What do we (need) want to know of or supplier? • Structure sales department supplier • Communication • Process of requests > speed of calculation • After-sales service > accessible / reliable • General conditions > strangling / moderate • Ease to order • Order system > electronically • Order process > slow / quick • Electronic possibilities • Legal aspects > licensees • Delivery time > flexible / slow / quick • Organization • Prize > fixed / flexible • Bad performance
What do we (need) want to know of or supplier? • Financial aspects • • • • • • • • •
Bank guaranties Rebate Payment conditions Factoring Invoicing Complaints Open account Bank payments Currencies
What do we (need) want to know of or supplier? • Product development • Innovative • Inspirer end • Cost • Organization • Skills of staff • Technologic
What do we (need) want to know of or supplier? • Product information • Article code • EAN bar code / RFID • Economical durability • Product life cycle • Technical aspects » Raw materials » Production sequence » Finish » Dyestuffs » Labeling » Packaging and make-up • Size / weight / performance
What do we (need) want to know of or supplier? •
Total assortment • Match of color » Design » Quality » Performance • Assortment broad of deep • Private labeling • Prize / Quality • Licensees
What do we (need) want to know of or supplier? •
Logistics • Certificate of Origin • Packaging • Import quota • Duties • Delivery conditions • Transport » Way of » Cost » Insurance » Companies » Trade Barriers • Track & Tracing • Warehousing • Logistic service providers
Product development
Product management 1) Technical appearance of a product: It is a assembly of raw materials, attachments, make and packaging. 2) Economical marketing perspective of a product: The assembly of properties that satisfies the needs of a customer.
ly e co ste tto r n
po
dy es
tu
ff
Material management in fashion
Raw material and fabric producer
pro
t n e m e cur
Who
lesal
e
Agent
Dis trib uto r pl s
g
ty
gy
ci
in
er
er
at
tri
ag
ee oy
W
ec
ck
gs
ng
ad re th
Ta
En
El
g
pa
in
Em
w Se ni
s
ns
er
tto
pp
Li
Bu
Zi
apparel producer
Life cycle Action ! maturity
satisfaction
Velue in €
decline
grow profit introduction
loss
investment time
Life cycle
Action !
value in €
maturity
satisfaction
decline
grow
profit
stock
introduction loss time
Your duty as entrepreneur • Execute – Optimization of cost and quality
• Improve – Change of existing in- and external production structures
• Renew – Reshuffling of the supply chain
• Innovate – Think “Out of the box” The knowledge of all parties in the network should be used
General sourcing methods
• • • •
Focus Life cycle Supplier information Material management
Focus on the apparel industry • Quality level of……… • Length number of articles • Width number of sizes
quality
length
3D Focus collection
width
Focus on the apparel industry • • • • • • • •
Design Technical sample production Production planning Buying / coursing Production- and quality-control Transport / logistics Warehousing Distribution policy
Focus Trendsetting
Fashion
Basics / NOS
Stock-lots
Focus on the fashion chain
marketing styling R&D production
• Every step adds value to the chain. • What is your position
distribution consumer
Chain Management Supplier
Demand / Pull
demand pipelines
Wholesale
Retail
Consumer
Supply / PUSH
Supply Demand
Seed farmer
Value chain of a T- SHIRT
Seed wholesaler Cotton farmer Cotton bale Cotton bale wholesale spinning knitting finish
Price at wholesale € 0,95 p/ T-shirt
(In the Netherlands)
apparel wholesale retail
Life cycle 1) Introduction: A product is introduced in the market. Has no recognition. Turnover is low and slow grow. 2) Grow: By means of advertisements and general recognitions. Mouth to mouth communication. Quick grow of turnover. 3) Maturity: The quick growth has gone, partly because the competition sees potential profits. They will bring similar product in the market. 4) Satisfaction: A fierce competition occurs, which leads to less turnover growth. 5) Decline: In this situation the sales will decline and the board of directors will withdraw the product from the market.
Life cycle
satisfaction
Value in €
maturity
decline
grow profit introduction
investments
time
loss
Life cycle apparel BASICS NOS
Mass
C&A
F
H S A
Individual
H&M
G IN T ET S ND E TR ZARA Haute Couture time
IO
MARKET
N STOCK-LOTS
Trendsetting
Driver
importance
Production knowledge
high
small volume
Product
high speed
push low
highly fashionable
Predictability
innovation
100 90 80 70 60 50 40 30 20 10 0
Logistics Risc
Fashion
importance
Predictability Product Production knowledge
low
Large volume Large distribution area
value added
push / pull
mid
Driver
flexibility
100 90 80 70 60 50 40 30 20 10 0
Logistics Risc
Basics / NOS
Product Production knowledge Logistics
low
importance
Predictability
large shipments from stock
basic knowledge standard production
push commodity
very high
Driver
efficiency reliability
100 90 80 70 60 50 40 30 20 10 0
(never out of stock)
Risc
Stock lots
Driver
importance
Product
reasonable
large volume simple process
commodity / push
unique lots
reasonable
Predictability
efficiency
100 90 80 70 60 50 40 30 20 10 0
Production knowledge Logistics Risc
Focus Trendsetting
Fashion
Basics / NOS
Stock-lots
Focus Ishikawa diagram M
N MA HU
H ET OD
OR CT FA
End product
MA TE RI AL
M
AC H
IN
E
MANAGEMENT
global production locations
haute couture trendsetting fashion basics / nos stock-lots
Product development 45 40 35 30 25 20 15 10 5 0
Examine the assortment of your collection • ABC analyzes • The profitability of each individual product • The profitability of the entire collection • The life-cycle per article
Product development ABC method Device the assortment in Fast, Average – A group = 20% articles generate – B group = 10% articles generate – C group = 70% articles generate
and Slow runners. 80% of the turnover (80/20 rule) 15% of the turnover 5% of the turnover
The ABC method can form the basis assortment decisions. A new article could start in group B and grow into A and after a while drop in group C A good balance is needed. Not to many products of your assortment shout be sitting in one group.
ABC analyse Total turnover
A
B 20%
C 50%
100%
No. of articles
Product development
Determine: The profitability of each individual product P = the sales price of product X V = the variable cost for each individual product X Q = number of sold product X (P X -V X)Q X = contribution margin (contribution margin /total profit) x 100 = ……%
vendor management supply chain control i want to drive myself instead of been driven
Chain cost Cost
Raw material
Knitting
Apparel
Wholesale
Retail
Total
Stock
2
2
2
2
1
9
Economic st.
3
1
0
2
4
10
Process
0
5
6
1
0
12
Transport
1
1
1
1
1
5
Administration
2
3
3
1
1
10
Packaging
1
1
4
2
2*)
10
Total
9
13
16
9
9
56
*) recycling cost
Chain cost Cost
Re
c u d
n o ti
Raw material
Knitting
Apparel
Wholesale
Retail
Total
Stock
2
2
2
2
1
9
Economic st.
3
1
0
2
4
10
Process
0
5
6
1
0
12
Transport
1
1
1
1
1
5
Administration
2
3
3
1
1
10
Packaging
1
1
4
2
2*)
10
Total
9
13
16
9
9
56
*) recycling cost
Chain Cost cost
Raw material
Knitting Apparel
Stock
2
Economical st.
Re Apparel
Wholesale
c u d
n o ti
Retail
Total
2
2
6
3
1
4
8
process
0
11
0
11
Transport
1
1
1
3
Administration
2
3
1
6
Packaging
1
4
2*)
7
Total
9
22
10
41
*) recycling cost
From 56 to 41
Key Performance Indicators productivities Fabric Warehousing Cutting Sewing Inspection and make-up Transport
A. …..% B. …..% C. …..% D. …..% E. …..% F. …..%
KPI’s Key Performance Indicators 100
Supplier
95
A B C D E
90 85 80 75
1
2
3
4
Vendor Rating Deming approach 1. Plan 2. Do 3. Control 4. Act 1
4
2 3
Vendor Rating
Determine targets
Progress
Direct vendor
act
Evaluation Improvement of performance
control
Vendor rating
do
Measuring Bonus / males
plan
Develop measuring-system Determine KPI’s Determine targets
Time
Supplier information • • • • • • • •
Strategic questions Core-business Structure sales department The financial situation of the company Product development Product information Total assortment Logistics
Global Fabrics & Textiles Trade Shows
What do we (need) want to know of or supplier? • General strategic questions • Competitive quotations • Dual sourcing • Ethical aspects – Environmental – Employment – Corruption – Secrecy clausal • Geographical aspects • Political aspects • Procurement • Re-tendering • Quota/restrictions • Strategic products • Who is in charge • Alternative scenario’s
What do we (need) want to know of or supplier? •
Company activities • Level of occupation • Bottle-neck situations • Co-maker-ship • Flexible production • Quality-security • Level of income • Machine park • Sub-contracting • Performance guarantee • Production time • Productivities • Skills employees • Technical staff • Future investments • Shortcomings to blame
What do we (need) want to know of or supplier? • Structure sales department supplier • Communication • Process of requests > speed of calculation • After-sales service > accessible / reliable • General conditions > strangling / moderate • Ease to order • Order system > electronically • Order process > slow / quick • Electronic possibilities • Legal aspects > licensees • Delivery time > flexible / slow / quick • Organization • Prize > fixed / flexible • Bad performance
What do we (need) want to know of or supplier? • Financial aspects • • • • • • • • •
Bank guaranties Rebate Payment conditions Factoring Invoicing Complaints Open account Bank payments Currencies
What do we (need) want to know of or supplier? • Product development • Innovative • Inspirer end • Cost • Organization • Skills of staff • Technologic
What do we (need) want to know of or supplier? • Product information • Article code • EAN bar code / RFID • Economical durability • Product life cycle • Technical aspects » Raw materials » Production sequence » Finish » Dyestuffs » Labeling » Packaging and make-up • Size / weight / performance
What do we (need) want to know of or supplier? •
Total assortment • Match of color » Design » Quality » Performance • Assortment broad of deep • Private labeling • Prize / Quality • Licensees
What do we (need) want to know of or supplier? •
Logistics • Certificate of Origin • Packaging • Import quota • Duties • Delivery conditions • Transport » Way of » Cost » Insurance » Companies » Trade Barriers • Track & Tracing • Warehousing • Logistic service providers
Product development
Product management 1) Technical appearance of a product: It is a assembly of raw materials, attachments, make and packaging. 2) Economical marketing perspective of a product: The assembly of properties that satisfies the needs of a customer.
ly e co ste tto r n
po
dy es
tu
ff
Material management in fashion
Raw material and fabric producer
pro
t n e m e cur
Who
lesal
e
Agent
Dis trib uto r pl s
g
ty
gy
ci
in
er
er
at
tri
ag
ee oy
W
ec
ck
gs
ng
ad re th
Ta
En
El
g
pa
in
Em
w Se ni
s
ns
er
tto
pp
Li
Bu
Zi
apparel producer
Life cycle Action ! maturity
satisfaction
Velue in €
decline
grow profit introduction
loss
investment time
Life cycle
Action !
value in €
maturity
satisfaction
decline
grow
profit
stock
introduction loss time
