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TOM TAILOR SOURCING STRATEGY
JACOB ROJENS DIRECTOR GLOBAL SOURCING
Capital Markets Day, November 28, 2012
GLOBAL SOURCING – BIG PICTURE
2
No magic sourcing country
China is changing. Fast
Efficiency
Cost is going up
Change
GLOBAL SOURCING – BIG PICTURE
IN NUMBERS
3
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
SOURCING CHALLENGES IN 2010
4
Rapid wage increases and inflation in developing economies
Increasing and strong domestic Chinese demand as well as a
recovering global economy
Lead-times increased resulting in higher freight cost
Cotton. Prices tripled over 12 months. Rampant speculation
A need for a TOM TAILOR presence in Asia to safeguard capacity
and production space for continued growth
MOVE FROM AGENTS TO OWN SOURCING
5
Small companies
Country / product specific
Ineffective structures
Vested interest
“One interest only”
One oversight
Risk management
Cross divisional efficiency by
bundling capacities
Optimize buying power
Doing more with less suppliers
3rd party agents Own sourcing structure
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)
6
Establish TOM TAILOR Sourcing
with Asmara International
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
TOM TAILOR SOURCING:
ACHIEVEMENTS FIRST 12 MONTHS
7
Bangladesh transition
India focus
Bundle capacities and reduce supplier
base
Devised sourcing strategy for biggest
product categories:
T-shirt category
Better manufacturers
Structural achievements Sourcing achievements
FOCUS ON BANGLADESH AND INDIA LEADS
TO CHANGING SOURCING LANDSCAPE
8
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%
Bangladesh +32%
India +28%
Indonesia -8%
China -11%
* fob = free on board
Change in fob sourcing
2012 versus 2011
China:
18 people
Hong Kong:
6 people Bangladesh:
46 people
Vietnam:
14 people
Indonesia:
20 people
India:
26 people
TOM TAILOR SOURCING: NETWORK
9
Present in
6 countries
7 offices
130 people
Exclusive
procurement
for TOM TAILOR
Group
as of November 2012
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
BUNDLING SUPPLIERS: DOING MORE
WITH LESS SUPPLIERS
10
0 €
4.000.000 €
8.000.000 €
12.000.000 €
16.000.000 €
20.000.000 €
1 51 101 151 201
2011 Suppliers and volume
Strategic direction
Sourc
ing v
olu
me
Number of suppliers
Comments
Reduce number of suppliers
from 47 to 18
Reduce number of markets
from 9 to 3 markets
Develop better manufacturers
on quality, price and speed
SOURCING STRATEGY BY CATEGORY:
T SHIRTS
11
€ 1.8m saving on fob turnover
Sourcing by category 2011
T-shirts 19%
Knit 15%
Denim 14%
Shirts 13%
Pants 10%
Jackets 8%
Sweat 8%
Polo 4%
Other 11%Target
BONITA: SOURCING SPLIT BY COUNTRY
12
BONITA sourcing by fob turnover 2012
Turkey 33%
Asia 26%
Germany 21%
Italy 4%
Netherlands 4%
Others 12%
Turkey 29%
Asia 53%
Germany 6%
Italy 1%
Netherlands 1%
Others 10%
* fob = free on board
BONITA sourcing by fob turnover 2015
Europe: From 29% to 8%
Asia: From 26% to 53%
Turkey: From 33% to 29%
Others: From 12% to 10%
Targeted changes in fob
sourcing 2012 versus 2015
2012 2015
BONITA: PRODUCT OPPORTUNITIES
13
Polo Pique Turkey 18 € India 8 €
Blouse Importer 25 € China 15 €
Coordinates Turkey 29 € Indonesia 16 €
Bonita bought 11 million pieces 2011
BONITA: PRIORITIES 2013-2015
14
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
2015: Reduction of fob expense by € 10m;
Measure: quarterly fob averages by product category
Target
TOM TAILOR SOURCING:
OUTLOOK 2013
15
Expand cross divisional synergy in key categories
€ 150m managed by TOM TAILOR Sourcing (60%)
Exit from all 3rd party agencies completed
Continue to build a world class sourcing organization for TOM
TAILOR