Chapter 6 1 PEST Analysis Four parts that are used for consideration for going into a country for sourcing What does PEST stand for tax policies trade agreements import export regulations currency exchange rates unemployment rates inflation rates P olitical environment analysis and or political stability etc E conomic environment analysis etc S ocial environment analysis apparel industry etc T echnological environment analysis ocean and ground transportation the degree of automation in the textile and apparel industry etc work ethics culture quality of the labor force in the textile and ease of communication infrastructure related to air 2 Intellectual property rights IPR What are the 4 major intellectual property rights Who enforces the IPR for goods brought into the country Why is it difficult to enforce IPR processes and products that the sourcer may uniquely possess name logo color and 3D images drawing designs websites or marketing materials Trademarks Copyrights Patents Trade secrets the supplier In the U S Customs and Border Protection CBP Immigration and Customs Enforcement ICE enforce the IPR for goods brought into the country any confidential or classified information that the sourcer may only share with Difficult to enforce because sourcers may have no power over the supplier s acts 3 What are some of the trade barriers How do they affect costs Tariffs duties taxes imposed on goods being imported from foreign countries o Ad valorem based on the percentage of the value of the products that are being imported o Specific based on a pre determined monetary amount per unit o Combination based on both ad valorem and specific tariffs Trade barriers raise the overall product cost either through tariffs or quotas this increased price then reduces the overall demand for such products Retailers and importers favor little or no trade barriers Domestic manufacturers and producers want trade protectionism with more restrictions on imports 4 What is a quota What are the two types of quotas in the US Quota given period of time set a physical limit on the quantity of a good that can be imported into a country in a o Absolute quota o Tariff rate quotas TRQ when country A sets an absolute quota against country B on a product C during the period country B could ship only a certain amount of quantity of product C during that period allow a specific quantity of merchandise to be entered into country A from country B at a reduced duty rate during a specific period quantities above and beyond the specific quantity specified will be subject to higher rates of duty the amount of products entered with TRQ is monitored by Tariff Preference Levels TPL 5 What is an FTA What are the five common provisions of FTAs Free Trade Agreements FTA eliminating or reducing tariff rates and easing government trade rules qualified goods would gain duty free access to other FTA member countries resulting in lower prices for the goods The U S has FTAs with 17 countries negotiated to promote trade among member countries by o FTAs are established to ensure reciprocal market access o Most FTAs have the yarn forward rule of origin to be duty free o Most FTAs have a safeguard mechanism that allows tariff snapback if imports cause damage to domestic markets Ex sudden drops in price through dumping products at below the market price o FTAs have policies on illegal transshipment goods entered in ultimate destination country with a false country of origin o Most FTAs have rules of short supply 6 What is a Trade Preference Program Trade Preference Program TPP legislated by U S Congress and provides duty free entry of apparel products into the U S if the apparel is cut and assembled in a designated beneficiary country using U S fabrics made of U S yarns Chapter 7 supplier 1 At which level of analysis do sourcers look into specific factories and compare for selection as a Micro level analysis for supplier selection analyzes strengths and weaknesses of each supplier to find who would produce the rights products in the right condition in the right quality at the right time at the right price 2 What is included in Social and Environmental compliances Social and environmental compliance enforcement policies past records of such compliance practices 3 What is WRAP Why would a retailer sourcer use the services of WRAP WRAP independent and objective body that helps apparel and footwear companies around the world verify that they re operating in compliance with local laws and internationally accepted standards of ethical workplace practices 4 What is the role of Customs and Border Protection in protecting the supply chain To improve the safety and security of private companies supply chains against terrorism 5 What are the 3 Rs to consider when selecting suppliers What might affect each of these Right product each garment factory is organized to produce single or a few particular product categories sourcing personnel must clearly understand the product category to be sourced and create a pool of right suppliers who can produce the right products for the sourcer Right quality Right time more important than ever production lead times can be affected by the supplier s production efficiency capacity and obligations to other buyers delivery times may be affected by shipping distance availability and frequency of logistics options and or natural environmental conditions that may delay international shipping the quality expected by the target consumers of the products 6 What are the five major direct costs when selecting a supplier Fabric Labor Trims embellishments Transportation duties 7 What are the indirect costs Cost of making and shipping samples Cost of reworking products if production failed during inspections Cost of monitoring pre production and production processes Cost of communicating through emails phones Cost of expediting the shipments due to production delays Tainted reputation due to irresponsible business activities Chapter 12 1 What are the major changes that have occurred in global sourcing look at comments under each one on slides Diversification of sourcing regions partners o Increasing pressure to find new sourcing regions and partners in Cambodia Vietnam o No more all in china due to sharp increase in labor costs and unpredictable export and Central South Americas policies o diversification helps mitigate risks that may arise by being dependent on one region or one partner Increase in U S sourcers control and