Walter Wilhelm from Walter Wilhelm Associates and Barbara Zeins from Gerson & Gerson analyse the advantages and challenges of sourcing from countries in the Western world compared to Asia.
Items to Consider when Sourcing in a New Region
Why Move? – Remember new relationships inherently have more unknowns and more risk than existing relationships
What Benefits? – Normally companies are looking for cost savings but speed-to-market and flexibility may be equally important incentives
Profile Potential Contractors – Do they match your requirements in terms of products and quantities; where do you find the information?
Consider Communication and Audits – Language/Travel
Is Social/Environmental Compliance a Factor?
Cultural Differences may be important.
Historic Factors Influencing US Sourcing
In the past, “Bigness” was synonymous with “Goodness”.
Pro-Asia
Lowest cost
Full Package
Large quantities
Pro-Western Hemisphere
Geographic proximity
CMT Production
Trade Preferences (NAFTA/CAFTA)
Today’s Factors Influencing US Sourcing
Today, “Nimbleness” is synonymous with “Goodness”
Pro-Asia
Low cost (but higher % increase)
Full Package (but less of a differentiator)
Clustering
Large quantities
Pro-Western Hemisphere
Speed-to-Market, Replenishment
Smaller quantity capability
Full Package and/or CMT Production
Trade Preferences (NAFTA/CAFTA)
Recently – costs increasing faster in Asia; capacity concerns because of internal consumption demands
Examining Factors Influencing Sourcing
Labor Rates (US$) – Estimated minimum hourly including taxes & fringes in different countries are :
United States : $8.70
Germany : $14.50- $19.00+
China : $0.52 – $1.10
India : $0.39
Bangladesh : $0.19
El Salvador, Guatemala, Honduras : $0.75
Nicaragua : $0.41
Dominican Rep. : $0.62
Haiti : $0.39
Mexico : $0.55
Other Factors Influencing Sourcing
Availability of Raw Materials and Components
Asia :
China has clustered most raw materials and components so available and very efficient
Other Asian countries are not as efficient but OK.
Western Hemisphere :
US Suppliers – Many mills have closed; other suppliers have difficulty competing globally.
CAFTA-DR – Limited fabric (especially woven) available but trims and components normally exist.
Mexico – Has decent resources but other infrastructure problems.
Shipping Time Comparison (including estimated costs to Germany, 40 Foot Container)
From/To Surface Cost Estimate
China (Guangzhou)/Bremen; Sea 30 Days $2,985
China (Guangzhou)/Bremen; Rail 18 Days More Expensive
DR/Hamburg 14 Days $2,800
Includes estimated time Factory to Port
Does not include Customs Clearance or in-country shipping to Distribution Center or Retail Store
Sea shipping can be accelerated (slightly) but at higher cost and larger carbon footprint
Communication, Partnerships, Technology
Communication :
Product Communication – Veracity of status sometimes questionable
Travel Differences – consider risk, time, difficulty of travel
Cultural Differences – In general, Western Hemisphere will be better aligned with Europe
If you are going to source in CAFTA-DR :
Join the AAPN, the only industry association that dedicates efforts to the region. Membership is not expensive, the meetings are awesome
Start by finding a service that understands the region and will help you “get started”
Embrace Technology to Facilitate Communications :
PLM, Supply Chain Management
A Few examples of Exceptional Factories
Denimatrix – Vertical jeans operation; Guatemala
Valley/Hilasal – Woven & Knit Apparel, Vertical Towel; El Salvador
Rocedes – Nicaragua
TexOps – Performance knitwear; El Salvador
Grupo M/CODEVI – Woven & Knit Apparel, Dom Republic/Haiti
Closing Comments
Some Europeans have expressed concern that contractors in Central America are unreliable. Is this justified?
The “good” factories are world class and reliable. The “trick” is in finding which ones are good/reliable and locking in some capacity guarantees.
Is there a different “mentality” between manufacturers in Central America and Asia? What are the major differences?
US companies were the drivers in developing Latin America. They forced the companies to operate as “Maquilla” (assembly) operations and later as CMT; until 2005 there was almost no full-package from Central America.
Central American companies are normally privately owned with little or no government support. Asian companies (especially China) often receive support from support and incentives from government.
US companies also had a major influence in Asia but it wasn’t practical to have Asia as an assembly only operation; full package almost from the start
Skills are comparable; work ethic in Asia is A+
Closing Comments
Follow similar guidelines to doing business as in any region of the world.
Work with a partner that knows the region (AAPN is a good place to start)
Use the M&S approach of “partnering” with your vendor; develop long-term relationships
Don’t be an absentee manager; visit your partners
Communicate, Communicate, Communicate (help develop the protocols, if necessary)
About the Authors
Barbara Zeins :
President of major girls dress company for many Years
Has personally sourced products in Asia, Central America and South America
Participated in study of Dominican Republic apparel industry
Frequent speaker at industry events involving regional sourcing
Walter Wilhelm :
Chairman/CEO of Walter Wilhelm Associates LLC
Has opened and been responsible for offices in Hong Kong, Taipei, Jakarta, Europe (UK, Germany, Italy, Sweden)
Has worked extensive in the CAFTA-DR region plus Haiti and Mexico for 10 year including major studies in El Salvador, the DR, Haiti and Mexico (for UNIDO) (for UNIDO)
Contact details :
Walter Wilhelm
Walter Wilhelm Associates LLC
2744 E. Eagle Way
Salt Lake City, UT 84108 USA
801.582-1967 [email protected]
Barbara Zeins
Gerson and Gerson Inc.
100 W. 33rd Street, Suite 911
New York, NY 10001 USA
212.244-6775, ext. 222 [email protected]
Profile of Valley Manufacturing
Social Responsibility : Group’s Labor and Social Welfare Policies are fully compliant with national labor laws and regulations. More importantly, they are based on mutual respect and dignity for the individual.
Wages – The vast majority of our employees are paid well in excess of the legally mandated minimum wage.
Working Hours & Working Conditions – 44 hour workweek, allowing for voluntary overtime work with compensation according to law. There are strict industrial and employee safety programs in place in order to guarantee a safe, clean and labor-harmonious working environment.
Benefits – Workers are entitled to : Subsidized health care; Pediatric clinic for the children of employees; Annual health and vaccination fairs; Paid maternity leave; Two-week paid vacation; Retirement plan; Christmas bonus; Personal loans at preferential interest rates; Student loans and scholarships; World class educational facility with a 3-year curriculum in english and computer literacy for employees and their families; Employee transportation.
Child Labor – No one under the age of 18 is employed. Extensive safeguards are in place to ensure total compliance with this policy.
Equal Opportunity – No discrimination based on gender, race, religion or ethnic origin.
Right of Association – Employees have the right of free, peaceful and lawful association.nviaroment
Enviromental Policies : Hilasal plays a leadership role in promoting environmentally conscious practices and programs.
State of the art water treatment and conservation facilities and environmentally friendly boiler
Provide water treatment expertise and laboratory services to other companies in El Salvador
Work with environmentally conscious suppliers
Use biodegradable dyes
Promote annual national reforestation programs
Contact details :
Export Salva Free Zone
Km. 24 Carretera a Santa Ana – Colon, La Libertad, El Salvador, C.A.
Tel. +503 2319-2230 Fax +503 2319-2285 Email : [email protected]
(Contact person : Katya Delgado-Vásquez)
TexOps’ customers are amongst the finest active and performance wear brands and retailers. TexOps is a “Multi-Style” factory producing a wide variety of active and performance knitwear. Production cells are cross trained ir at least 2-3 different sew types per operator. Cells flexible to produce both tops and bottoms. Factory averages 19 style changes per week.
3D Prototyping : Fit approvals can be accomplished in days instead of weeks. Reduces product development cycle by 60 days. Savings on courier charges back and forth, reduced carbon footprint.
Contact details :
Textiles Opico SA de CV
KM 31.4 Carretera a Santa Ana
San Juan Opico, La Libertad, El Salvador
T: +503.2319.0800 Email : info@TexOps co
Profile of CODEVI
CODEVI was founded in 2003. Currently it supplies 6.8 million pants, 2.9 million Dozen shirts and 2.4 million ladies intimates each year to U.S. leading brands – from concept to retail. CODEVI is a division of Grupo M, a Vertical Textile Corporation in the Dominican Republic founded in 1986
