Artisanal Supply Chain Overview (Case Study of Ghanaian Wood Carving)

Bridget K-Darko
Aid to Artisans Ghana July 2012

Session objectives
Understand the entire supply chain from procurement through final sale to consumer; Understand the distribution channels for the handicraft business; Understand what a supply chain is; Appreciate who the actors are and the process steps involved in the supply chain for the handicrafts industry;

Session objectives
Understand where one fits into the overall supply chain Understand the inter relationships between the various players in the industry;

Encourage teamwork and networking

What the challenges in the artisanal supply chain for the handicrafts industry are and how these can be addressed

Acknowledgement
This presentation was originally developed by IBM Corporate Service Corps for Aid to Artisans Ghana (ATAG) Some adjustments have been made to the original presentation to adjust it to the objective and format of this Workshop. Some information has also been taken from the ACCESS for Businesswomen in International Trade.

Distribution channels for handicrafts

The definition of supply chain

A network of actors in an industry (suppliers, producers, retailers, exporters, agents, transporters, storage facilities, forwarders, shippers, importers/wholesalers/resellers, buyers etc..) The process of planning, implementing, executing and controlling the operations from the point-of-origin to the point-ofconsumption

What is supply chain mapping?

A pictorial view of the network of producers, agents, buyers and customers that operate in an industry process approach who does what and when cross functional approach organization toward the end customer focus on communication to increase efficiencies and reduce costs and cycle time while ensuring quality

Process approach to supply chain

Focuses on logical steps throughout the supply chain (who and what not how). Many times the steps are the same but the product, responsible party or time required change (e.g. Brass vs. Wood Carving). Why take a process approach? Educate the players within the industry Understand where improvements can be made (productivity, cycle time, quality) Highlight bottlenecks within the supply chain (e.g. capacity, cycle time) Find synergies and/or partnerships Understand factors that impact the price of the product

Actors in the crafts industry supply chain

Wholesales (Raw Material) Producers Master/ Apprentice End customer

Vendor Local Supplier

ATAG

GTT

Buyer foreign retailer Local Shop

Agents Exporters

Shipping Customs

High level picture of the handicraft supply chain

Raw material s

Producer

Exporter/Ve A Agent ndor

Forwarder

Shipper

Buyer

End Customer

Raw material development

Industry development & training (Design, Production, Business)

Trade facilitation Fairs, producer/agent relationship

Craft Shops

ATAG Other industry support facilitators

10

IBM Team 2

16-Jul-12

Wood carving - Ahwiaa, Kumasi Ghana End to end process

Buyer 13-4 times/yr
Attends trade fairs Delivery to Retailer

18
Ocean = 30 days Air = 7 days

ATAG
Locates Agent or Producer

2
Forwarding & Loading & Export Consolidation Services Services
1-7 days

Forwarder

Agent

2-7 16 days

17

2-6 months

Works with the exporter to develop 3product Creates/procur es Sample Pricing, Production Quantity 1-4 months

DuPro Quality Checks

DuPro Inspection

Final Quality Check & Payment

1 day

Finishing & Staining

hours

9a
Sets production schedule Works with producer to secure raw materials 7 Sanding
2 days

12a

14

15

Exporter

4 Producer

6
Carving 1-3 per day

1-4 months

Drying
1 week - 1 month depending on piece

Sale to Exporter/Agent

Material Suppliers

10
Sources wood & Perform 1st Cut

4-12 hours

11

12

13

1 day

Deliver to Producer

8
Typical Product Development Timeline: 12 weeks to 20 weeks 11
Supply Chain Process Step Product Development Step

1-2 weeks

Typical Production Time: 1 week to 4 weeks IBM Team 2

Typical Supply Chain Time: 3 weeks to 9 weeks 16-Jul-12

Overall findings and challenges

Products:
All Crafts are handmade or hand finished. Major crafts in the region include: wood carving, straw weaving, brass making, pottery, Kente cloth and beads. Response to market demand in terms of product development is ranging from none (beads) to some (wood or pottery)

Actors:
The lines of the stakeholders are very blurred with agents acting as exporters and artisans acting as agents in many examples, lead to many models and additional complexities.

Raw Materials:
Most raw materials are sourced locally out of naturally existing materials or recycled products. Access to raw materials of competitive price and quality is critical to the industry. Challenges are especially showing in the areas of wood carving, straw and brass.

Production:
Production cycle time tends to be long There is very little automation throughout the raw material gathering and production process. Quality Management need to happen as early as possible in the supply chain. Currently problems in the wood carving area.

Collaboration and Communication:

12

Producers have little to no access to communication channels, few phone nor email. All communication is managed through the exporter and agent. Little to no communication between parties was performed over email There are very little touch points between the producer and retailer/buyer (pottery seems to be the exception).
IBM Team 2 16-Jul-12

Crafts supply chain High level recommendations Production Cycle time should be in line with market demand Look at reducing cycle time through parallel activities and automation in the production cycle. Quality Management Quality Management needs to happen as close to the problem as possible. Root cause analysis and preventive actions must be put in place. Cost of quality management problems should be transparent in the industry.
13 IBM Team 2 16-Jul-12

Crafts supply chain High level recommendations

Collaboration and cooperation

Information flow in the product development and production cycles needs to be improved dramatically Collaboration should happen vertically as well as horizontally

Let buyers/retailers interact directly with producers during product development.

When collaboration does not work vertical integration (forward or backward) should be considered

MMI

Importer Position in the Value Chain Colleen Pendleton Mercury Marketing International

MMI

Importer Position in the Value Chain

Role of the importer

An importer, sometimes also called a wholesaler or distributor, is an important player in the supply chain. The importer/wholesaler gets products from producers to the retailer and on to the consumer.

An importer/ wholesaler buys product from the producer, usually in very large amounts, and in turn sells them to retail establishments at a marked up price.

MMI

Importer Position in the Value Chain

Understanding the business of the importer

Your target customer is the importer.

You produce product to sell to and importer.

You have expenses and a profit margin in your final price to the wholesaler. The importer buys your product.

MMI

Importer Position in the Value Chain

Understanding the business of the importer

The importers target customer is the retailer.

The importer buys product to sell to the retailer.

The importer has his expenses and profit margin in the final price to the retailer.

MMI

Importer Position in the Value Chain

Understand the business of Importer

Many producers or exporters ask the question, why does the importer mark up their product 2-3 times higher then the producer price The answer is the mark-up is paying for necessary activities that get product sold in the US market. If the importer does not do these activities he has no business and no reason to buy product from you.

Which means you have no business.

MMI

Importer Position in the Value Chain

Understand the business of Importer

Just like you the Importer wholesaler is in business.

The importer/wholesaler wants to make money like you.

There are activites the importer must do to successfully sell your product in the market.

MMI

Importer Position in the Value Chain

What does the importer do to sell your product in the market Buy the product from you. organizes the shipping of product from your country to the US. Clear the product through US customs. Warehouse the product. Repackage the product for resale. Designs and prints catalogs of the product. Produces a website featuring the product. Presents the product at tradeshows where retailers buy product. Takes orders and ships the product. Does on-going marketing of product to retailers.

MMI

Importer Position in the Value Chain

Understand the business of Importer

Do these activities cost money? Yes!

In the next section on costing and pricing we will look at costing and pricing from the importers side.

Importer Position in the Value Chain

Understand the business of Importer

Do these activities cost money? Yes!

In the next section on costing and pricing we will look at costing and pricing from the importers side.

Questions?

24

IBM Team 2

16-Jul-12

Wrap-up

IBM Team 2

16-Jul-12

Pass it on!
Take 2 minutes to think of sharing what youve learned today: What information would be valuable to pass on to colleagues, customers? What activities will help you share what youve learned? Use booklets to spread the word Discuss how you could use what you learned today in your own work!

26

IBM Team 2

16-Jul-12

26

MEDAMOSA

27

IBM Team 2

16-Jul-12

Back-up

28

IBM Team 2

16-Jul-12

Step
1 2 3

Activity description for wood carving

Trade Fairs are held 3-4 times per year by ATAG, exporters and various trade groups. Additionally many of the large retailers participate in buying trip and some have representation within Ghana who make purchasing decisions. ATAG is available to assist with identification and location of agents, suppliers and exporters. Agents serve as the central point of contact for buyers; they work with the exporters and producers to create a sample product. Agents and buyers will jointly develop product specifications and safety features. Exporters will work with various producers to create a product sample and provide to the buyer for feedback and changes. Production of a quality sample does not guarantee a purchase order. Assuming that the sample is accepted by the buyer, the exporter will work with the producer to develop a quantity pricing scheme and set a production schedule. Exporter and producer will jointly work with supplier to secure raw materials. Craft carvings mostly use scraps that cant be used for production of other materials. Wood utilized in the production of handicrafts are extracted from the forest through a chain saw operation. The raw material supplier must submit a application in order to cut wood. The first cut will be made in the forest prior to being delivered to the producer. The supplier will arrange for transport to the producers workshop. Buyers develop stringent quality checks and production tolerances, the agent ensures that the exporters and producers are meeting these requirements. The production process is overseen by the exporter. Carving is performed in a workshop, usually with a master and multiple apprentices. Sanding, Drying and finishing could be co-located or depending on local practices within a short radius from the carving. The producer sells to the exporter. In most cases the exporter utilizes a fleet of vehicles to pickup from the producer location. Upon final quality check the exporter will pay the producer. A consignment model have not been used yet, but are being considered.

4 5/6

7 8/9

9a/12a 10-12 13 14

15

Who performs the finishing depends on the nature of the relationship between parties, however in most cases the exporter performs the final touches such as staining and adding additional detail. The exporter will source from many producers and combine products, such as wood and straw.
The exporter will normally perform the packaging for international transport and according to the buyers casing requirements (for example: 12 to a box, retail tagging and addition of promotional tags). Additionally the agent will complete the export documentation for submission to Ghanaian government. Prior to exportation a physical inspection is performed by a customs agent to validate the declaration.

16

17
18

Most forwarders provide consolidation services to combine multiple agents freight to achieve the lowest cost. The agent will work with the transportation providers to determine optimal routing based on the customers delivery expectations.
There are many forwarders, sea freight and parcel carriers operating out of Ghana, including: Logistics Air, Top Express, Panalpina, Maersk, DHL, UPS and Fedex. The incoterms vary depending on the terms of the agreement.

29

IBM Team 2

16-Jul-12