PUMA Group’s sourcing functions, referred to as PUMA Group sourcing (PGS), manages all sourcing related activities for PUMA and Cobra, including vendor selection, product development, price negotiation and production control. These activities are centrally managed by PUMA International Trading GmbH (PIT), the Group’s global trading entity, with its head office in the Corporate headquarters in Herzogenaurach (Germany). In addition, PIT is responsible for procurement and supply into the PUMA distribution channels worldwide. PIT receives volume forecasts from PUMA subsidiaries and licensees worldwide, translates these forecasts into production plans which are subsequently distributed to the referenced vendors. The PUMA subsidiaries confirm their forecasts into purchase orders to PIT, which in turn consolidates these requirements and purchases from the vendors. There is a clear buy/sell relationship between the sales-subsidiaries and PIT and between PIT and the vendors, for added transparency.
The centralization of both the sourcing and procurement functions, along with the rollout of a cloud-based purchase order collaboration and payment platform, linking the sales-subsidiaries, PIT and the vendors, has enabled the digitalization of the supply chain creating transparency, operational efficiency and reducing complexity. For example, container fill rates are optimized, foreign currency risks are managed by PIT directly via a centralized currency hedging policy, and all payments to vendors are automated and paper free.
In order to meet our customers’ requirements concerning service, quality, social and environmental compliance we focus on six core strategic pillars of collaboration, product, quality, growth management, margins and landed cost, and sustainability. The centralization of sourcing and procurement allows for continuous improvements in all of these areas. Furthermore, the integration of the PUMA sustainability function (social, environmental and chemical) into PGS, ensures these focus areas are part of our day-to-day business.
Another key aspect in our sourcing setup since 2016 has been the PUMA Vendor Financing Program. The program allows vendors to be paid earlier and is based on PUMA’s credit rating. The International Finance Corporation (IFC), banking group BNP Paribas and HSBC as well as Standard Chartered offer attractive financing terms to our suppliers, which are able to maintain their own lines of credit.
The year 2021 saw the resumption of demand in our key markets after extended lockdowns in Europe, America and other parts of the world in 2020. As a result, our focus shifted to building capacity across our supply base in all product divisions. Starting from the second quarter of this year, we started to experience significant challenges on the supply side due to regional COVID-19 related lockdowns. Bangladesh and certain parts of China were exposed to temporary production disruptions. More notably, South Vietnam suffered from a twelve-week extended lockdown resulting in office restrictions, manufacturing closures and curfews. During this time our suppliers had to keep factories closed or could only operate at reduced capacity. We immediately focused on supporting our suppliers during this time, while health and safety of the employees was our top priority. To mitigate capacity constrains in South Vietnam, we rebalanced production allocation to other areas such as China, Cambodia and North Vietnam; this also applied for products still in development and sampling stage. At the same time, we prioritized our orders in alignment with the sales subsidiaries. Once the lockdown situation started to ease, we shifted our efforts to tracking and restoring capacities with our partners.
During the financial year 2021, PIT purchased from 134 independent suppliers (previous year: 139) in 27 countries worldwide. The strategic cooperation with long-term partners did not only remain to be one of the key competitive advantages, but it was also crucial in navigating through the supply chain challenges of 2021.
Asia remains the strongest sourcing region overall with 95% of the total volume, followed by the Americas with 3% and EMEA with 2% (thereof Europe with 1% and Africa with 1%).
As a result, the six most important sourcing countries (93% of the total volume) are all located on the Asian continent. Vietnam remained to be the strongest production country with a total of 32%. Due to lock downs during the third quarter Vietnam saw a minor decrease of global production share by three percentage points compared to last year. Mainly China compensated for the situation in Vietnam and increased its share by three percentage points to 29%. Bangladesh, with a focus on apparel, was in third place at 14% and Cambodia was in fourth place at 13%. Indonesia, which focuses on footwear production, produced 4% of the total volume and was in fifth place. India was in sixth place at 2%.
Rising wage costs, fluctuating material prices and macroeconomic developments, have continued to influence sourcing markets in 2021. Such impacts need to be taken into account in allocating the production to ensure a secure, sustainable and competitive sourcing of products. In this regard sourcing has extended its local supply chain initiatives for markets such as China, India, Latin America, Turkey and others.
