Gap, Hellmann detail operations at final Trade Connections event of 2009

Latin America plays an important role in retailer Gap’s global sourcing strategy and has the opportunity to expand due, in part, to its proximity to the U.S. market.

With stores located all over the world, “a global sourcing strategy is essential,” Mark D’Sa, a Gap Senior Director of Sourcing and Production, told participants at WorldCity’s Trade Connections event in Miami Dec. 16.

He was joined on the panel by Jonathan Bales, representing Hellmann Worldwide Logistics, who oversees the German logistics company’s cruise industry business, and WorldCity President Ken Roberts. Trade Connections is sponsored by Seaboard Marine and Miami International Airport.

Gap has 780 suppliers worldwide, but about 40 of these handle 52 percent of business, he said.

Thirteen countries in Latin America currently supply products for Gap and 10-12 percent of the company’s products are sourced in region.

Latin America “plays a crucial role” and “has a huge opportunity” to handle a greater share of the apparel business, D’Sa said. Even though labor costs in Latin America and the Caribbean are higher than those of many Asian countries, suppliers in the hemisphere are closer to the huge U.S. market and companies therefore can carry out better planning and logistics management. This means regional producers may offer cost advantages.

In addition, he pointed out that transportation in the international apparel sector has a far larger carbon footprint than the entire production process — from making yarn to finishing the fabric. So sourcing apparel production closer to a key market like the United States can produce a clear benefit — reducing carbon dioxide emissions.

D’Sa noted that quality jeans are produced in several nations, including Brazil, India, Pakistan, Turkey, Italy and Mexico. But during the first six months of 2009, the largest number of jeans imported by the U.S. came from next door — Mexico.

D’Sa also pointed out that 70-80 percent of the apparel factories operating and expanding in Latin America are owned by investors from Taiwan, South Korea and Singapore, among others.

The Gap executive made several other points during his presentation:

— Prices of jeans are about the same today as they were 10 years ago in this highly competitive sector.
— Before investing, Gap looks carefully at a country’s record in terms of social responsibility, including labor conditions and environmental responsibility, to insure that they can comply with the company’s standards.
— Recent contacts with government and legislative officials in Washington, D.C. indicate that they are open to increasing trade, but that the issue takes a distant third place to health care legislation and the Afghanistan war.
— Gap plans to open is first three stores in China (Beijing, Shanghai and Hong Kong) and also will launch new stores in Japan and Europe.
— Gap is interested in using organic cotton for its apparel, but there are impediments: The world supply is extremely limited, the cost is very high and there are very few qualified agencies that can certify organic cotton.

Hellmann’s Bales has a challenge unlike most in the logistics business, which tends to be time-sensitive. The end point of his supply chain is a moving target — literally.

“This is a very time-constricted business,” said Bales, Global Operations Manager, Cruise Industry, at Hellmann. “Keeping a vessel in port longer than scheduled costs a lot of money.”

“We have to be able to receive the goods, consolidate and deliver on time.”

Hellmann, whose clients include Norwegian Cruise Lines and Royal Caribbean Cruise Lines, works with hundreds of vendors and supplies cruise ships with almost everything they need, including provisions, bed linens, ship parts and equipment — whatever is used on the ship.

The company — which also supplies the gift shops on cruise ships — is the world’s largest private freight forwarder.

As an example of how much delays can cost, one cruise ship in New York that was held up in port paid $14,000 an hour extra in fuel alone, he said.

Hellman, with a large presence in South Florida, operates out of every major cruise port in the United States and Europe. It stocks ships directly and sends containers of goods and equipment to foreign ports to supply cruise vessels as they arrive.

The company recently opened a new warehouse in Weston, west of Fort Lauderdale, to consolidate South Florida-based cruise ship distribution for U.S. and some overseas vendors, Bales said.

Hellmann’s employees work with onshore and onboard provision teams from the cruise lines to coordinate exactly what each ship will require before it docks. Sometimes, Hellman holds stocks of high-demand supplies — like plates, glasses and bed linen — in its own warehouse to cut down on the time required to obtain them from vendors.

What’s essential for a ship? A cruise vessel may leave port without a particular brand of beer, Bales said, “but if they run out of hand sanitizer, they cannot sail.”

Hellmann’s system must be able to deal efficiently with vendors who regularly supply large volumes of items, as well as a single vendor who supplies just one item to a ship.

The company receives shipments from large numbers of vendors, often using bonded warehouses, and consolidates food, technical items and other supplies, which are delivered to different parts of a ship. “We try to make the product flow efficient, seamless and invisible to passengers,” Bales added.

Commenting on prospects for 2010, Bales said he was optimistic: “Things are looking up, at least in my part of the business.”

Things also seem to be heading in the right direction, according to the latest trade data.

South Florida trade figures for the first 10 months of 2009, while still down from last year, are improving and have declined far less than other parts of the country, WorldCity President Ken Roberts said.

Trade in the Miami Customs District from January through October totaled $64.36 billion, down 15.3 percent from $75.98 billion during the same period last year, Roberts said, using data compiled from the latest U.S. Census Bureau figures. Total exports were $40.49 billion, down $5.39 billion or 11.7 percent, while imports declined by $6.23 billion or 21 percent.

Overall U.S. trade fared much worse than South Florida, falling by 27 percent in the January-October period.

“The bottom line — we’re not doing as bad as others and things are getting better,” Roberts told those attending the fourth and final Trade Connections event of the year.

The October decline in trade for the Miami District, when compared to the previous October — down $1.03 billion — was the smallest since March and suggests an improving trend.

As for the Miami District’s top five trade partners year-to-date through October, Brazil remained in the No. 1 slot ($8.96 billion, down from $10.99 billion the previous year), while Colombia moved from third to second place ($4.5 billion, down from $4.73 billion) and Venezuela slipped from second to third place ($3.64 billion, down from $5.27 billion).

Imports of gold, mostly from Colombia, rose sharply while imports of refined petroleum products from Venezuela took a dive.

The Dominican Republic and China tied for fourth place, each with $3.23 billion. China’s trade for the first 10 months of last year was $4.01 billion (putting it in fourth place) while the Dominican Republic’s trade was $3.82 billion, giving it fifth place.