Supply Chain Exam #1
Synthetic fibers
- Come in filament form (long continuous strand) - Became popular in 1950's - Easy to use in production - Created by chemicals or natural sources like wood pulp
Third-Party Certification Organizations
* In result of Kathy-lee, Bill Clinton called meetings about the issue and the outcome were these meetings that created the below... ⎼Fair Labor Association - mission is to improve the lives of workers by addressing "abusive labor practices" ⎼Social Accountability International - mission is to ensure human rights in the work environment ⎼Worldwide Responsible Accredited Production - ensure workers are safe and treated in an ethical way ⎼Sustainable Apparel Coalition - foresees on footwear and textiles & works to prevent environmental harm and to create positive outcomes for people and their communities ⎼OIA Sustainability Working Group - assist companies in achieving environmental and socially best practices
Well Dressed
* the authors discussed durable clothing and the idea that to be more sustainable and lessen the impact on the environment one should produce and purchase clothing that has a lasting value * designers should make a conscious effort to design clothing that lasts longer so the consumers would purchase less products (could buy 2 shirts a year rather than 10)
In a demand driven market retailers can.....?
* they focus on consumer preferences in a proactive matter to deliver the right product to the right consumer at the right time - can keep inventory lower - reduce waste - increase ability to meet consumer demand * Retailers prefer a customer, market, and demand driven market (less guessing than a forecast driven market) * Demand driven network optimizes resources (significant change from traditional supply chain management)
Sales and Marketing Department (marketing)
* without ______________________________ department a company would find itself with no orders to produce. _______________________ is the most important part of any business activity. it is what creates customers and generates income, guides the future course of a business and defines whether it will be a success or a failure
Dot-Com Boom
- .com advances were driven by by military needs - in the 1990's the web became used commercially because of its search engine capability
What were some of the major advancements during the Industrial Revolution?
- 1807 = Car invented by combustion engine - 1844 = R. H. Macy opened his first store - 1850 - Singer invented affordable sewing machine - 1857 = First elevator was installed in NYC - ******1913 = Ford assembly line forever changed mass production - ****** 1972 = Aaron Montgomery Ward produced 1st mail-order catalog (Money back guarantee)
Effects Barcoding had on the Supply Chain?
- 1952 - Norman Woodland & Bernard Silver patented a barcoding system (not standardized) - Barcodes needed to be able to read the code quickly and a standardized process to facilitate transactions across multiple platforms - THEN Barcode standardization was developed by George Lauer
Big events that occurred in the 1960's
- 1960 = Electronic data interchange (EDI) was invented - 1962 = Sam Walton founded Walmart -Mid 1980 = FedEx provided almost real-time information about packages - 1971 - Gap founded - 1975 - Inditex founded - 1983 - UNIQLO founded
United States & United Kingdom Post WW11
- Both saw a boom after WW11 - This was undercut by outsourcing due to cheaper labor
Japan after WW11
- Devastated (40% of factories and infrastructure destroyed) - they rebuilt their economy and soon became a leader - focused on education (better educated labor force) - they could invest in new things, advantage over other established countries _ oil crisis hurt them, moved away from apparel and focused on cars and electronics
Pros & Cons of Unions
- Pros * advocates for workers rights, wages, benefits, and other opportunities - Cons * pose big threat to supply chains.......could go on strike
Brands that practice CSR
- TOMS - Warby Parker
Phaseout
- The impact was not fully felt until the final phase of the quota was lifted on December 31, 2004 because major countries like the U.S, Canada, and the Europe Union were not obliged to use the quota eliminations until the final phase
Fast Fashion
- a retailing culture focused on the production of new fashion concepts *From 2000 - 2014 garment production has doubled (purchasing increased by 60%) *Company clothing collections went from 2 a year to 5 a year * People are keeping clothing for shorter amounts of time
Mostly Kenya & Ethiopia (Kinda ... East Africa)
- drawing interest from global retailers for apparel production - Some companies are using these places for bulk production of core basic items like t-shirts (British companies in particular) * can test the market on a small scale and create a brand presence in Africa
Infrastructure
- governments play an important role in supporting or limiting the global supply chain - As areas become more accessible factories move farther inland where the costs of land might be cheaper
How do fast fashion retailers keep up?
- identifying alternative material sourcing solutions - establishing vendor relationships with vendors who can produce right off the runway - use manufacturing abilities that keeps costs low
Original Equipment Manufacturing (OEM)
- level of talent has to advance from CMT, they have to source raw materials and do production activities
Assembly / Cut, Make, Trim (CMT)
- one of the easiest factories to set up, not much capital or talent to make, least entry barriers, sent all raw materials
- Access to natural resources
- there is not an abundance of textile mills - because they are capital intensive & requires an advanced skill set to run a mill - countries with textile mills are very attractive for production
LOOK AT CHART..... Chapter 2 ppt slide #18
-******* KNOW ORDER OF CHART (CMT -> OEM --> ODM -> OBM) *** AND Difference between all of them
•Trans-Pacific Partnership (TPP)
-12 countries including U.S., Mexico, Chile, Peru, Australia, New Zealand, Malaysia -We left in 2017
•North American Free Trade Agreement (NAFTA)
-1992 -Eliminate trade barriers •Rise of exports •Foreign investment •Job growth
•Central American Free Trade Agreement (CAFTA)
-2005 -Expanded NAFTA to include: Guatemala, Nicaragua, Costa Rica, Honduras, El Salvador, & Dominican Republic
Supply Chain Evolution
-Customer-focused, differentiated supply chain plans were created. -There was cross-functional integration within the supply chain. -Training in knowledge-based learning (talent management) began.
•Business Impact (of supply chain breakdowns)
-Drop in sales growth -Increased production costs -Rise in inventory
•Free Trade Area of the Americas (FTAA)
-Extension of NAFTA -North, Central & South America plus Caribbean *still being negotiated
•Signs of Supply Chain Break-downs
-Lost revenue -Lost consumer confidence
Quota Constraints
-Prior to MFA quota systems, factories were set up and maintained because they had capacity to produce garments within constraints of the quota - This means that the main reason a factory was selected for production was that it had the capacity to produce (not that it had the talent or manufacturing processes that guaranteed a quality & efficient assembly line AFTER quota constraints ended in 2005..... - companies began to select factories based off performance (invest in talent, increased their management costs, and pay fair wages) - they also facing requests for greater compliance, increased transparency, and lean sourcing capabilities)
Original Design Manufacturing (ODM)
-cmt & oed (sourcing) plus design activities! ( more skilled labor in this factory and ppl who know current trends and how to design)
Natural fibers
-come from minerals, vegetables, animals, and plants -Short fibers twisted together to make a yarn -Only filament natural fiber is Silk
Quotas
-restrict quantities of textiles and apparel that can be imported into the U.S for certain categories
Standard Shipping Containers
-these were introduced In 1955 as steel shipping containers with a standardized dimension -made domestic and international shipping more affordable * Malcom McLean obtained a patent for the shipping container
***** What are the two sectors involved in the construction of fabric? (know difference)
1. Primary (Mills & Converters.... produce & finish fabrics) 2. Secondary (Resale of yarns & fabrics....jobbers, wholesalers, retailers, brokers, manufacturers)
What are the two primary methods that countries use to adhere to the country of origin guidelines set forth by the WTO?
1. Substantial transformation method - confers origin based on where the greater value is added to the product (most commonly used) 2. Value added percentage test - defines the degree of transformation required to confer origin on the good in terms of minimum percentage value that must come from the originating country or the maximum amount of value that can come from the use of imported parts and materials
Intrapreneuring
Creating and maintaining the innovation flexibility of a small business environment within the confines of a large, bureaucratic structure * coming up with good ideas within a company that will help better the company
What are Amazon's core competences within the online shopping business model?
1. sourcing (helps them have a huge selection) 2. distributing (goal to deliver to anyone quickly) 3. customer care
*****What year did USA manufacturing hit its peak?
1978 (due to increased competition from abroad & trade agreements) * Then.... outsourcing began and US manufacturing decreased drastically
How long would it take for a company to re-bound from a supply chain mistake and re-gain consumer confidence?
2 years
What percentage of the garments cost is accounted for labor?
40%
Who was the first company to leverage a Supply Chain in an internet setting?
Amazon * their supply chain is their competitive advantage (fast shipping, now everyone has to compete or become irrelevant) * they have leveraged their supply chain infrastructure and brand recognition to compete in the fashion industry
What were the two key factors of very early internet shopping?
Availability & realibility * Those two things are still desired outcomes of an effective supply chain today
Global Sourcing is a _______________________ to ____________________ type business
Business to business
The Supply Chain is a _____________________ to ______________________ type business.
Business to consumer
****Decisions about what raw material to use are driven by who??
Consumers
What apparel sector is looking into moving to South Africa?
Footwear is a big opportunity for them
Textile Supply Chain is different from overall supply chain.... what is the process it goes through?
Fiber ---> yarn ---> fabric
Ethiopia has potential for what?
Has potential to become a major supplier of raw materials like COTTON
1940's Western film created the first iconic retail clothing item.... what item was this?
Jeans! (Levi's)
What was the catalyst that made manufacturing issues relevant?
Kathy lee Gifford 1996 - her brand using child labor in Honduras and people finding out
What was the first store to use barcodes (modern scanning system)?
Kroger
Why do companies choose to manufacture in particular counties?
Labor costs (labor cost is a huge factor when working within the supply chain)
Sustainability
Means meeting the needs of the present without compromising the future
Who is the biggest consumer group at the moment?
Millennials
Omni Channel vs. Multi Channel
Omnichannel retailing pursues the consumer wherever the consumer chooses to engage, whereas multichannel retailing the consumer must opt into a specific channel. - The messaging for multichannel retailing lacks the customer-centric messaging of an Omnichannel strategy. - In Omnichannel retailing, there are multiple, individualized marketing touch points based on what consumers prefer from their web searches. As a result, consumers purchase more with Omnichannel compared to multi-channel sales
What was the early name for what we know today as "supply chain" ?
Procurer Logistics
Original Brand Manufacturing (OBM)
Product and sell their own line of garments ( more infrastructure, training, its own supply chain all together)
Country of Origin Rules
The US government requires that the country of origin be permanently affixed and visible at the point of purchase - World trade organization members need to ensure that country of origin is defined as the place where the product is produced and that the rules are transparent
******** What is the name of the fiber they are trying to make out of spoiled milk??
Qumilch
CSR
Refers to companies taking responsibility for their impact on society
******Who is the Father of the Internet?
Sir Tim Berners-Lee * lead inventor of the world wide web
What is one of the fastest growing emerging markets right now?
South Africa
*******Most synthetic fibers are created by forcing a chemical compound through what is called a ___________________
Spinneret * Spinneret is similar to a shower head, with many small holes through which the chemical compound passes; when the chemicals hit the air after passing through the spinneret, they harden to form the yarn
Global sourcing is a component of the __________________ ______________________ ?
Supply Chain * The Supply Chain encompasses everything (GS is one part of the whole picture)
T/F... The CEO is required to work with finance and accounting department to create a (top down) budget
TRUE * CEO and the finance & accounting department have to sit down and come up with budget...... then the budgets get assigned to each department * Budgets have to be approved by the board of directors * BUDGETS ARE NOT BOTTOM UP
T/F... Fashion is a market/demand driven economy, not a manufacturer driven economy?
True
T/F... When we had a manufacturing-based economy manufacturers used to make decisions on raw materials based on type of equipment
True * Now consumers make decisions on raw materials instead of manufacturers
T/F... -Findings and trims have a direct effect on cost and production?
True * must do quality assurance exams on findings and trims to make sure they work
T/F... Companies would keep the design and marketing functions of the brands in the U.S (the highest profit areas) and outsourced the less profitable and sometimes most risky aspects of their business.... their apparel manufacturing
True * these companies became "manufacturers without factories"
Who passed a minimum wage law first.... USA or UK?
UK * They became even less competitive than other emerging markets, Drove them to offshore production
What happened for other countries when the Quotas were eliminated?
When quotas were eliminated the apparel manufacturing market became favorable for emerging economies such as India, Pakistan, and Bangladesh because of their relatively cheaper cost
Bilateral trade agreements
contractual relationships that governed the exchange of goods and investment between two countries, without seeking congressional approval
Business Development
has a significant impact impact on a supply chain and in some instances is influential in directing a company to redefine itself and restart from ground up
Wholesale department
in a fashion company would have the responsibility to sell to other retailers and even its own outlet stores if applicable
Partner Africa
is a leading nonprofit social enterprise driven by a mission to improve the livelihoods of workers and producers and to enhance access to global markets * Also wants to improve working conditions & lives * offers ethical trade services to global brands and suppliers
Sourcing and production
is composed of several subsets; logistics, quality assurance, CSR/sustanibility, and legal/security all of which are key departments that interact with the supply chain at such high levels
Vertically Integrated
is when a company controls more than one stage of the supply chain. - Gap & JC Penny stopped vertical integration and started to rely on external vendors to produce their goods - US Companies started using offshore production
****Keiretsu
large modern industrial groupings that shared resources and talent and focused on a common area of industry Ex. all manufacturing in same area even if it was for different companies
What is an un-anticipated consequence of stopping all fast fashion?
major job loss in developing countries
Information Technology
often overlooked in the supply chain or sometimes taken for granted, has the ability to transform how companies do business
Investor relations
only pertain to companies who are publicly traded and have a responsibility to provid information and services to shareholders
Human Resources
plays a critical role in fashioning the supply chain by making sure that the right people are in the right positions at the right time and for the right cost
African Growth and Opportunity Act (AGOA)
products can be shipped to the US duty-free * major attraction for companies who are producing in certain regions on Africa *92% of Kenyas production went to the US in 2013
Design department
relies on information developed by the sales and marketing teams to develop future products
Quota constraints & capacity
when we had quota constraints we were only focused on capacity to produce ( I think?)
What caused standardized sizing in apparel?
standard sizing was created for men's uniforms during the Civil War (mass production also) * This was possible bc data that was taken from military men for sizing * Men's ready-to-wear came first and women didn't follow until the beginning of the 20th century
Near-shoring
the movement of production closer to the consumer, is being used by retailers to to reduce production lead times * closer to home, ships faster, narrow production window
Auxiliary level
this is the only level that functions with all the other levels simultaneously. This level is composed of all the support services that work to keep the consumer aware of fashion trends; it includes advertising, visual, and fashion consultants and researchers
Departments within a fashion company
typical structure of a publicly traded global fashion company ⎼Shareholders •Demand a certain level of performance from CEO & Board of directors •Board of Directors ⎼Elected or appointed ⎼Jointly oversee activities of a company •CEO/President ⎼Works with BOD to set goals, finance to set budget
Greige Goods
unfinished textiles that are knit or woven in their raw state with no color or finishing added
****Multi-Fibre Agreement (MFA)
•1974-2005 in the U.S. & the E.U. •Quotas were put in place to limit impact (amount of goods able to be imported from developing countries •Quotas on: raw materials, finished products *elimination of quotas had a detrimental effect on US apparel manufacturing because of the reduced labor costs of emerging economies
****Agreement on Textiles & Clothing (ATC)
•1995 •Put in place by the WTO to phase out the quotas over 10 years - effective in 2005 - ****U.S lost over 900,000 apparel manufacturing related jobs
Reciprocal Trade Agreement Act (RTAA)
•FDR in 1934 •Presidents could negotiate bilateral trade agreements without congress (opposite of isolationism - when a country is self-reliant rather than participating in global trade) -Gave presidents a key role in shaping U.S. trade policies - free flowing global trade environment
****Samuel Slater
•Memorized factory technology & brought his knowledge to the US •Father of the American Industrial Revolution •Increased speed & production of spinning thread into yarn •Could produce apparel in larger quantities
•4 Levels in the fashion business?
•Primary •Growers & producers of raw materials •Secondary •Manufacturers & contractors of semi-finished or finished goods •Retail •Direct distribution to customers •Auxiliary level •All support services (advertising, visual, fashion consultants) •Works simultaneously with others
Third-Party Certification Organizations in Practice
•Provide info to the consumer & investing community •A link does exist between CSR & profits •Cost considerations (********Do consumers care and see value in this???) ⎼Cost of people ⎼Cost of changing a product ⎼Cost of referring to a 3rd party •Hope consumer sees the ***********VALUE in those costs
Early Vendor Compliance
•Varied from company to company •Each had own set of standards •Series of documents & contracts
Post-Kathie Lee
⎼Emergence of groups to develop policies & practices to address corporate social irresponsibility ⎼Focus on transparency