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ICILInternational Conference on Industrial Logistics

14th - 18th February, 2005Montevideo, Uruguay

Laboratorio de Transporte y Sistemas TerritorialesLaboratorio de Transporte y Sistemas TerritorialesCoordinacin de Ingeniera de SistemasCoordinacin de Ingeniera de Sistemas

INSTITUTO DE INGENIERIAINSTITUTO DE INGENIERIAUNIVERSIDAD NACIONAL AUTNOMA DE MXICOUNIVERSIDAD NACIONAL AUTNOMA DE MXICO

[email protected]@[email protected]@iingen.unam.mx

LOGISTICS PROCESSES IN THEAPPAREL INDUSTRY IN MEXICO

Rodrigo Alarcn, Juan Pablo Antn, Anglica Lozano y Rodolfo Hernndez

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IntroductionIntroduction The apparel industry is a relevant sector for Mexicos economy.The apparel industry is a relevant sector for Mexicos economy.

This sector was chosen to be analyzed in orderThis sector was chosen to be analyzed in order to apply a recent developmentto apply a recent developmentmethodologymethodology ((AntnAntn, JP; Lozano, A;, JP; Lozano, A; HernndezHernndez, R;, R;AlarcnAlarcn, R; 2004)., R; 2004).

For the characterization and the formulation of aFor the characterization and the formulation of a prospective diagnostic onprospective diagnostic onlogistics practiceslogistics practices of this sector, as well as in the identification of itsof this sector, as well as in the identification of its moremorerelevant problems.relevant problems.

The final purpose is toThe final purpose is to formulate innovative strategiesformulate innovative strategies in the logistics processesin the logistics processes

operations.operations.

This article presents theThis article presents the logistics practiceslogistics practices within the apparel sector, obtainedwithin the apparel sector, obtainedfromfrom 30 Cases of Study30 Cases of Study amongamong the most representative companiesthe most representative companies, taking into, taking intoaccount their localization, size, as well as their importance inaccount their localization, size, as well as their importance inside theside theproductive chain of the sector.productive chain of the sector.

The results here presented are part of the StudyThe results here presented are part of the StudyGreat Vision of Logistics,Great Vision of Logistics,carried out by the Institute of Engineering at the UNAM, for thecarried out by the Institute of Engineering at the UNAM, for the Ministry ofMinistry ofEconomy, Federal Mexican GovernmentEconomy, Federal Mexican Government ((AntnAntn, JP; Lozano, TO;, JP; Lozano, TO; HernndezHernndez, C;, C;

AlarcnAlarcn, R; 2003)., R; 2003).

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LOGISTICS PRACTICES INLOGISTICS PRACTICES IN

SMALLSMALL

COMPANIES OF THE APPARELCOMPANIES OF THE APPARELSECTORSECTOR

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Small Clothesmaker

Thread maker

(Synthetic

fiber)Fabric maker

(regional)

Thread maker

(Regeneratedfiber)

Fiber maker

Fabric Pieces

supplier

Regional Boutiques

Tianguis

Downtowns

Wholesaler

Sales

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LOGISTICS PRACTICES INLOGISTICS PRACTICES IN SMALLSMALL COMPANIES OF THECOMPANIES OF THE

APPAREL SECTORAPPAREL SECTORCostumer ServiceCostumer Service

Synthetic thread makerSynthetic thread maker The costumer service is centered in theThe costumer service is centered in the product qualityproduct quality andand

probably in someprobably in some technical advisorytechnical advisory for its handling during thefor its handling during theproductive process.productive process.

Regenerated threadRegenerated thread makermaker With theWith the lack of flexibilitylack of flexibility of the fabricof the fabric pieces suppliers, thepieces suppliers, the

customer service of the regenerated thread makercustomer service of the regenerated thread maker is almost nullis almost null..

ClothesClothes makermaker Clothes maker offers aClothes maker offers a basic customer servicebasic customer service, based on the, based on the

qualityquality of the product, on the productof the product, on the product priceprice and probably onand probably onaffordableaffordable terms of paymentterms of payment..

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In general, the transport operations are madeIn general, the transport operations are made of one linkof one linkof the chain to the next oneof the chain to the next one (fiber suppliers transport the(fiber suppliers transport theproduct to the thread maker's door.)product to the thread maker's door.)

There isThere is not outsourcingnot outsourcing in transport operations within thein transport operations within thesmall companies of the apparel sector.small companies of the apparel sector.

The majority of the small companies take in chargeThe majority of the small companies take in charge

transport operations, with the objective of offeringtransport operations, with the objective of offering productproductdelivery as a service to their clientsdelivery as a service to their clients, however, in general, however, in generaltermsterms they ignore the costthey ignore the cost that this action represents.that this action represents.


APPAREL SECTORAPPAREL SECTOR

TransportTransport

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It is important to highlight that, from the production of theIt is important to highlight that, from the production of thefiber to the elaboration of the garment the product isfiber to the elaboration of the garment the product ispushedpushed, that means, the production comes first so later, that means, the production comes first so later

on can be sold.on can be sold.

What has been mentioned above, creates an entire seriesWhat has been mentioned above, creates an entire seriesofofcomplications in the inventory managementcomplications in the inventory management and itand it

shows a very diffused idea among small managers:shows a very diffused idea among small managers: to haveto havean inventory of finished product implies to have a chancean inventory of finished product implies to have a chanceof latent sale.of latent sale.

LOGISTICS PRACTICES INLOGISTICS PRACTICES IN SMALLSMALL COMPANIES OF THECOMPANIES OF THEAPPAREL SECTORAPPAREL SECTOR

Inventory ManagementInventory Management

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Many times theMany times the characteristicscharacteristics of the garmentsof the garments to beto beproduced as well as theproduced as well as the production planproduction plan are defined by theare defined by the

owner of the company advised by an agent of sales, whoowner of the company advised by an agent of sales, whofeels market trends.feels market trends.

The order processing is very simple, it only consists onThe order processing is very simple, it only consists on

phone calls and in logged orders by hand.phone calls and in logged orders by hand.

LOGISTICS PRACTICES INLOGISTICS PRACTICES IN SMALLSMALL COMPANIES OF THECOMPANIES OF THEAPPAREL SECTORAPPAREL SECTOR

Order processingOrder processing

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Within this marketWithin this market fashion trends are not developedfashion trends are not developed, it is, it isonly a matter ofonly a matter ofcopying and improvingcopying and improving what expensivewhat expensive

stores and public media offer.stores and public media offer. There isThere is any systematic or formal mechanism for dataany systematic or formal mechanism for data

collectioncollection in order to control the logistics chain, thatin order to control the logistics chain, thatmeans,means, there are not precise datathere are not precise data of what garment hasof what garment has

been already sold, where that happened and in whatbeen already sold, where that happened and in whatamount.amount.

Within the logistics chain the rule is to define onWithin the logistics chain the rule is to define on intuitiveintuitivetermsterms what is marketable or not.what is marketable or not.



Information management for logisticsInformation management for logistics

chain controlchain control

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LOGISTICS PRACTICES INLOGISTICS PRACTICES INMEDIUMMEDIUM COMPANIES OF THECOMPANIES OF THEAPPAREL SECTORAPPAREL SECTOR

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Medium Clothesmaker

Fabric suppliers(National)

Fabric suppliers(National) Regional Boutiques

Commercial Chain

Department Store

Sales

Fabric

suppliers(International)

Regional Wholesaler

Cutting

Washing

C.D.

Design Trading

Maquila

Full Package Commercial Chain

Department Store

Global Brand

3PL

C.D.

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Costumer ServiceCostumer Service

National fabric suppliersNational fabric suppliers Costumer ServiceCostumer Service is generally goodis generally good, offering, offering regularregular pricesprices, standard, standard qualityquality andand

enoughenough flexibility within a minimum production level;flexibility within a minimum production level; however there arehowever there are importantimportantdesign problems.design problems.

Clothes makerClothes maker Concerning the Concerning the maquilamaquila, companies offer, companies offer good qualitygood quality as well asas well as efficiencyefficiency in theirin their

productive processes.productive processes.

Regarding Full Package, in addition to the aboveRegarding Full Package, in addition to the above--mentioned features, they offermentioned features, they offerselfself--designed samplesdesigned samples and sometimesand sometimes delivery on client's doordelivery on client's door..

With reference to the internal market, clothe companies offerWith reference to the internal market, clothe companies offer response capacityresponse capacity, in, insome cases providesome cases providedoor to door" servicedoor to door" service (to stores or to distribution centers) and(to stores or to distribution centers) andmainly productmainly product high qualityhigh quality..

LOGISTICS PRACTICES INLOGISTICS PRACTICES IN MEDIUMMEDIUM COMPANIES OFCOMPANIES OF

THE APPAREL SECTORTHE APPAREL SECTOR

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TransportTransport

National fabric suppliersNational fabric suppliers

UsuallyUsually done or at least negotiateddone or at least negotiated by fabric makers,by fabric makers,(product price includes transportation costs).(product price includes transportation costs).

International fabric suppliersInternational fabric suppliers

Suppliers negotiate transportationSuppliers negotiate transportation until the Mexicanuntil the Mexican

borderborder, where clothes makers transport the product by, where clothes makers transport the product bymeans of a hired company.means of a hired company.

The supplier negotiates transportationThe supplier negotiates transportation until clothesuntil clothesmakers doormakers door..



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TransportTransport

Clothes makerClothes maker Goods movements during de production processGoods movements during de production process

When a companyWhen a company subcontractssubcontracts an specific process,an specific process,

transportation is made by the providerstransportation is made by the providers..When processes are madeWhen processes are made by the companyby the company, but, but

goods must be physically moved, this kind ofgoods must be physically moved, this kind oftransportationtransportation is carried out by the company itselfis carried out by the company itself(with its own fleet).(with its own fleet).

Final product delivery is generallyFinal product delivery is generally carried out door tocarried out door todoor"door", by means of, by means ofits own fleetits own fleet oror subcontractingsubcontracting a locala local

transport suppliertransport supplier

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Clients located abroadClients located abroad MaquilaMaquila(International subcontracting), Mexican manufacturerMexican manufacturer

negotiates good transportation eithernegotiates good transportation either to Mexican port or foreignto Mexican port or foreignportport, from where the client will take the load and will carry out th, from where the client will take the load and will carry out theefinal transportationfinal transportation

Full packageFull package,, negotiatenegotiate all the transport operationall the transport operation to the placeto the place

required for the client.required for the client.

Regarding departmental stores or commercial chains,Regarding departmental stores or commercial chains,

garment delivery is made in their Distribution Centersgarment delivery is made in their Distribution Centers.. On the other hand, when clients are small regionalOn the other hand, when clients are small regional

boutiques, delivery is carried out through aboutiques, delivery is carried out through a nonnoncentralized (multiple stops) physical distributioncentralized (multiple stops) physical distribution

operation.operation.


THE APPAREL SECTORTHE APPAREL SECTORTransportTransport

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As in the previous segment but in a smaller scale,As in the previous segment but in a smaller scale,the informationthe information available for the mediumavailable for the medium

companies of this sector, relatedcompanies of this sector, related to their potentialto their potentialdemand, it is very reduceddemand, it is very reduced, generating, generating highhighinventory levelsinventory levels of raw materials as well as in theof raw materials as well as in thefinished product.finished product.




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Order processingOrder processing

National marketNational market Order processing is usuallyOrder processing is usually carried out through a salespersoncarried out through a salesperson, to whom the, to whom the

client informs the quantity of the required productclient informs the quantity of the required product

The salespersonThe salesperson consults the existing stockconsults the existing stockin the warehouse and in thein the warehouse and in the

case of not finding the required product, the order iscase of not finding the required product, the order is sent directly to thesent directly to theproduction lineproduction line

Once this is carried out, the salesperson informs to the clientOnce this is carried out, the salesperson informs to the client the deliverythe deliveryconditionsconditions

MaquilaMaquila or Full package or Full package The ordering processThe ordering process becomes complicatedbecomes complicated, since a period of time is, since a period of time is

required in orderrequired in order to show the designs and the garment to the clientto show the designs and the garment to the client, during, duringthis process the client defines the quantity to be bought.this process the client defines the quantity to be bought.



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In this segment the warehousesIn this segment the warehouses start to play astart to play acertain important rolecertain important role, however these warehouses, however these warehousesare simplyare simply used for storageused for storage, without implementing, without implementing

any adds valueany adds value services during the process.services during the process.

RegardingRegarding distribution centersdistribution centers, these are used, these are used

exclusively by bigexclusively by big commercial distributorscommercial distributors ininMexico and abroad, for example departmentalMexico and abroad, for example departmentalstores and commercial chains.stores and commercial chains.



Warehouses and Distribution CentersWarehouses and Distribution Centers

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In this segment the purchase departmentIn this segment the purchase department takestakes

relevancerelevance, due to, due to quality requirementsquality requirements of exportof exportand relevant national clients,and relevant national clients, quality standards arequality standards aremore demandingmore demanding not only in fabric but in gears,not only in fabric but in gears,boxes or labels.boxes or labels.



"Sourcing", purchasing and supplies"Sourcing", purchasing and supplies

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In this segment, companies doIn this segment, companies do not generate anynot generate anyinformationinformation coming from the sale point, whichcoming from the sale point, which

obviously causesobviously causes dysfunctions in the supply chaindysfunctions in the supply chain..

BesidesBesides there is no flow of informationthere is no flow of information betweenbetween

thethe

apparel companyapparel company

and theand the

transportationtransportation

supplier, therefore he must attend the immediatesupplier, therefore he must attend the immediatecompanys necessities.companys necessities.





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LOGISTICS PRACTICES INLOGISTICS PRACTICES IN BIGBIG

COMPANIES OF THE APPARELCOMPANIES OF THE APPARELSECTORSECTOR

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Confection

Fiber maker Commercial Chain

DepartmentalStores

Sales

Fabric suppliers

(International)

Sales Point

Cutting

Washing

C.D.

Design Trading

Maquila

Full Package Commercial Chain

DepartmentalStores

Global Brand

3PL

C.D.

Fabric manufacture

Printings andfabric design

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National fabric suppliersNational fabric suppliers Generally provide aGenerally provide a poor Costumer Servicepoor Costumer Service, which is translated into, which is translated into highhigh

prices, variable fabric quality, poor design and innovationprices, variable fabric quality, poor design and innovation, key issue focused, key issue focusedon theon the lack of flexibilitylack of flexibility in relation to their minimum production volumes.in relation to their minimum production volumes.

International fabric suppliersInternational fabric suppliers OfferOffer good qualitygood quality,, good designsgood designs in fabric and printings,in fabric and printings, competitive pricescompetitive prices

(in fact better than the national ones), as well as a great(in fact better than the national ones), as well as a great flexibilityflexibility

concerning the minimum production level, but theconcerning the minimum production level, but the

main inconvenient is themain inconvenient is the

time of deliverytime of delivery..

National fibers suppliersNational fibers suppliers Offer aOffer a well developed servicewell developed service to the clientto the client;; usually they provideusually they provide technicaltechnical

advisingadvising in terms of fiber management within production processes ofin terms of fiber management within production processes ofthread, time limit ofthread, time limit ofpayment of 30 dayspayment of 30 days,, time deliverytime delivery depending on clientdepending on clientrequirements andrequirements and direct deal with sale agentsdirect deal with sale agents in case of any eventualityin case of any eventuality

LOGISTICS PRACTICES INLOGISTICS PRACTICES IN BIGBIG COMPANIES OF THECOMPANIES OF THE

APPAREL SECTORAPPAREL SECTORCostumer ServiceCostumer Service

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The vertical integration mentioned above has come to aThe vertical integration mentioned above has come to apoint wherepoint where the tendencythe tendency of these big companies has beenof these big companies has beentoto buy transport companiesbuy transport companies or toor to develop business unitsdevelop business units

that are focused on logistics aspects.that are focused on logistics aspects. In generalIn general raw materialraw material transportationtransportation is carried out by theis carried out by the

suppliersupplier, but the, but the internal and final deliveryinternal and final delivery is carried out byis carried out bythe company.the company.

In caseIn case clients are located abroadclients are located abroad, transport of goods from, transport of goods fromthe Mexican port to the clients door will be negotiatedthe Mexican port to the clients door will be negotiatedthrough athrough a 3PL3PL..



TransportTransport

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In many cases, the stock management is carriedIn many cases, the stock management is carriedout using aout using a specialized softwarespecialized software, which gives the, which gives the

advantage of having aadvantage of having a better controlbetter control of the goodsof the goodsthat are in the warehouses of raw material andthat are in the warehouses of raw material andfinished products and in traffic.finished products and in traffic.




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In general terms, order processing systems areIn general terms, order processing systems are totallytotallyautomaticautomatic

An agent of sales process a client order, which enters toAn agent of sales process a client order, which enters tothe system that defines if there is product in stock or if it isthe system that defines if there is product in stock or if it is

necessary to pass an order to productionnecessary to pass an order to production Once this is carried out, the salesperson informs the clientOnce this is carried out, the salesperson informs the client

the delivery conditionsthe delivery conditions

Like in the previous segment, in the case of Like in the previous segment, in the case of maquilamaquila and andFull package,Full package, the order processing its complicatedthe order processing its complicated: Before: Beforeclosing a contract, a series of design and garments samplesclosing a contract, a series of design and garments samplesare presented to the client, who chooses one or severalare presented to the client, who chooses one or several

samples, defining the quantities needed from each onesamples, defining the quantities needed from each one


APPAREL SECTORAPPAREL SECTOROrder processingOrder processing

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Warehouses and Distribution CentersWarehouses and Distribution Centers play a central roleplay a central rolewithin the supply chainwithin the supply chain

Many of them areMany of them are equipped with last technologyequipped with last technologyconcerning: racks, freight elevator, transportation belts,concerning: racks, freight elevator, transportation belts,

code bar readers, etc .code bar readers, etc .Also, it is important to point out that inside these facilities,Also, it is important to point out that inside these facilities,

adds value processes are already being developedadds value processes are already being developed..

It is important to highlight that it prevails the idea ofIt is important to highlight that it prevails the idea ofusingusingthe Distribution Center basically for storagethe Distribution Center basically for storage..



Warehouses and Distribution CentersWarehouses and Distribution Centers

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This segment has focused itself on a global marketThis segment has focused itself on a global marketin which thein which the quality demands, design and garmentquality demands, design and garmentinnovation are quite relevantinnovation are quite relevant, a purchase, a purchase

department is required to identifydepartment is required to identify supplierssuppliers, both, bothnational and international, which not only fulfillnational and international, which not only fulfillcompletely high performance standardscompletely high performance standards but alsobut alsoare able to design unique products that can beare able to design unique products that can be

adapted to what companies wants.adapted to what companies wants.



"Sourcing", purchasing and supplies"Sourcing", purchasing and supplies

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Vertical integration, has allowed them toVertical integration, has allowed them to optimize and tooptimize and tosystematizesystematize tools that can manage useful informationtools that can manage useful information

within their supply chain.within their supply chain. However these companies have expanded so much thatHowever these companies have expanded so much that

suchsuch information has difficulties to flow through the severalinformation has difficulties to flow through the several

departments and business unitsdepartments and business units

LOGISTICAS PRACTICES INLOGISTICAS PRACTICES IN BIGBIG COMPANIES OF THECOMPANIES OF THE




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MUCHAS GRACIAS!!

[email protected]@[email protected]@iingen.unam.mx

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