supply chain 101 journey of a t-shirt
DESCRIPTION
Using a t-shirt as an example, shows the entire supply chain from planning to customer delivery. Can be used in conjunction with the NPR Planet Money series on the manufacturing of a t-shirt.TRANSCRIPT
Supply Chain 101The Journey of a T-Shirt
What is a Supply Chain?• The sequence of processes involved in the production and distribution
of a commodityPLAN MOVEMAKE SELL
Planners ManufacturersSuppliers Wholesale, Retail, DirectShippers End Users
Supply Chain Impacts You Everyday
• Your clothes - Brought to you through a supply chain that includes:• Cotton farmer• Textile, button, thread manufacturers• Shipper• Clothing manufacturer• Retailer
• Your morning coffee - Consider the various supply chains involved to provide you with:• Municipal water and electricity• Coffee beans• A filter• Cream• Sugar• A cup
Why a T-Shirt?
• Simple product – very few inputs• Product familiar to everyone• Global product – supply chain spans the globe
Raw Materials - Cotton
• Cotton can be grown where land and labor are cheap, but…• US cotton is still king – US is #1 producer in the world
• Cotton is treated as a high-tech product• Ninety percent of US cotton is from genetically modified seed• Harvesting equipment is mostly automated
• All US cotton is tested and graded after harvest, giving consistency• Subsidies
• Crop insurance• Price protection• Direct payments
• One farm in Mississippi grows enough cotton for 9 million t-shirts every year
Yarn
• The cotton is shipped to Indonesia• The cotton is combed• And combed again until it is like cotton candy• Then pulled, twisted and spun to create yarn (thread)• All in an automated factory running 24x7• Indonesia is current sweet spot for yarn
Cloth
• The yarn is shipped to Bangladesh• Yarn is knitted into cloth• Six miles of yarn in one t-shirt• Washed• And dyed
Assembly
• T-shirt assembly was in Bangladesh (men’s) and Columbia (women’s)• Sewing is still done by hand• Garment manufacturing moves from one low labor cost country to
another as labor rates rise (England -> US -> S. Korea -> China -> etc.)• T-shirts are then shipped to New York, where printing occurred
Why These Countries? MFA
• In 1970’s, S. Korea became major garment exporter, threatening US jobs• Under President Nixon, US and Europe signed the Multi-Fiber
Arrangement (MFA), setting strict import limits by source country• S. Korea hit the limits, so opened shops in Bangladesh• Bangladesh now has over 4,000 garment factories• The MFA did not stop the flow of jobs from the US and Europe – just
where those jobs went
Why These Countries? Tariffs
• “The book of everything," officially the Harmonized Tariff Schedule of the United States determines tariff rates• Average tariff on goods imported is 2%• For T-shirts, it is 16.5%, unless for select countries, then its zero• Textile tariffs have been in place since 1789
Tailor Shops to the World
• Textiles and clothing as a share of a country’s total manufacturing exports• Most countries move into new
industries over time• Bangladesh stands out on the
graph for a few reasons• Apparel exports make up a bigger
share of Bangladesh’s exports than they ever did for any of the other countries
• That share is still rising.
Old way of shipping
• Loading ships used to be more art than science• Each pallet, bale, container or barrel loaded individually• It could take weeks and hundreds of workers to load / unload a ship
Containerization / Intermodal
• Devised in 1955 by Malcom McLean to bypass pre-Interstate roads• Goods loaded at origination point, unloaded at receiving point• Same container used on ocean, rail and truck (intermodal)• Standard size is 40’ long x 8’ wide x 9’ 6” tall• Drastically cut cost of transport around the world
The Last Mile Problem
• Getting the goods to the end customer• Most expensive cost in the t-shirt• Can be 28% of total item cost
T-Shirt Cost breakdown
• $12.42 approximate cost per t-shirt• The men’s shirts cost approximately
10 cents to ship to the United States from Bangladesh. • The women’s shirts cost about 7
cents to ship to the United States from Colombia.
T-Shirt Travels
CottonYarnClothT-Shirt
Customer
Planet Money Podcast
• Listen to the entire t-shirt podcast series: http://www.npr.org/tags/190719989/planet-money-t-shirt
• A podcast just on what UPS is doing to make the last mile more efficient: http://www.npr.org/blogs/money/2014/05/02/308640135/episode-536-the-future-of-work-looks-like-a-ups-truck
Questions?