Altimus Brands Managing Procurement Risk

Group 4
Bhooshan Agnihotri
Arpan Bhim
Saurabh Butala
Akshay Jadhav
Manav Rizwani
Company analysis
Altimus (UK) is a family- owned business with a global
presence in footwear sector
Own 7 premium brands
Marketed in 120 countries
Euro 1.3 billion sales in 2010
Operates 230 Retail outlets & sold through other channels
as well
Rocky Mountain top selling brand
 Core Competencies: Innovation, Design, Quality and Supply
Chain Management
Manufacturing not been central to the business
Pioneers in sourcing through Asia & operating since 1960s
Selection, Management & Development of suppliers are key
to success
PESTLE

Political Economic Social

Customer switching to
Low interest rates
competitors products Change in lifestyle

Favorable international Increase in labor costs

tax agreements of developing countries
Favorable attitude
Changes in taxes & towards branded
Exchange rate risk footwear
manufacturing laws
PESTLE Cont.

Technological Legal Environmental

Use of social media to Need of environmental
build brand image Child labor clearance from
environment ministry
Use of e-commerce

Labor laws, i.e.

Evolving materials & Effluent handling norms
minimum wages
production technologies
Strength
Asset light
Mfg capacity not a constraint
Economies of scale by vendors
Global presence
Flexibility in production
Strong retail network
Weakness
Dependency on mfg countries
Scandals in mfg countries
Inability to forecast demand
sceintifically
Opportunities
Emerging market: China, India
3D printing
Premium brands entering new
markets; H&M, Zara in India
Threats
Increasing labor wage
Anti-dumping duty in EU
Protectionist measures by US
Problem Statement
Cost of Purchase increased
Labour Cost Inflation
Duties & Anti Dumping duties
Continuous change in Fashion & Technology
 Altimus Supply Chain
logistics providers
China Jai Nin 32%
Viiettnam Yu Ven 52%
Indonesia Far Byung 14%
Bangladesh not there
This approach gives Flexibility in production capacity & requires no investment in production
assets
Major limitation:
Control of manufacturing costs remained outside the boundaries of organization Production cost
can be reduced by
1. Price negotiations
2. Product Specifications
3. Supplier Switching
Ethical Trading Initiative - ETI (by UN)
Employment in freely chosen
Freedom of association and the right to collective bargaining are respected
Working conditions are safe and hygienic
Child labour shall not be used
Living wages are paid
Working hours are not excessive
No discrimination is practiced
Regular employment is provided
No harsh or inhumane treatment is allowed
Bangladesh
Fire in Sweatshop April 2013 in Walmart
Media or Press uproar lead to Losing brand equity
Walmart using child labor in Bangladesh
89 children aged 10-14 years
Cancelled contract
Code of conduct for suppliers
Supplier evaluation
factory Yu Ven Jai nin
Fa Byung Footnow
Factors to Consider Indonesi
country vietnam china a bangladesh
Quality labour cost per pair $ 1.5 3.6 2.7 1.1
over head cost per pair $ 2.4 3.4 2.7 1
Capacity Ex
factory total cost per pair $ 17 25 16.5 15.4
Product development capability price
labour inflation 15% 6% 7% 10%
Ethical Standards overhead inflation 10% 2% 4% 2%

Fear capacity pairs per month (1000's) 400 250 125 50

years worked with factory 9 yrs 10 yrs 3 yrs 0 yrs

Destroy trust with existing suppliers
EU duty duty % 8% 8% 4.50% 0%
Infringement by new supplier landed antidumping duty % 10% 16.50% 0% 0%

risks delivery on time Low Low Low Med

communication Low Low Low Med
country risk Low Low Med Med
product quality Low Low Low Med
development capability Low Low Med high
Recommendations
Gradual shifting of orders from established countries to Bangladesh facilities
Capacity constraint 50k/month
Decrease sourcing from Vietnam gradually
Establish ethical code of conduct
New products can be developed
Information sharing with Bangladesh facilities
Developing partner facilitys capability