Monthly Archives: June 2020

Wal-Mart – What Makes Them America’s Number One Company?

America, land of “free-enterprise” has millions of companies in its market. The metropolitan statistical area of Houston, Texas in fact has over 600,000 businesses, most employing from 2 to 10 employees. As companies grow in the number of people they employ, fewer and fewer companies surround them. Most companies never grow beyond the smallest group size for many reasons. Some companies grow to become the target of the competition or the “model” on which the smarter more savvy managers base their practices to achieve “best of class” status in their industry or market. Wal*Mart has certainly earned its position at the pinnacle of American business and global retail dominance.

Founded by a retailer named Sam Walton with his brother in 1962, Wal*Mart has become that company to watch and emulate in the twenty first century. Walton, a “Ben Franklin” franchisee between 1945 and 1962 collaborated with his brother Bud Walton to found the first Wal*Mart in 1962 in rural Arkansas. Their strategy was simple. They opened discount-merchandising stores in rural America where big business and big retailers typically ignored “fly over” territory. The strategy of mass buying power and passing on the savings to customers took flight as the company grew steadily into the seventies and eighties.

As Walton situated stores in small towns with populations between 5,000 and 25,000 he implemented his plan “To put good-sized stores into little one-horse towns which everybody else was ignoring.” He thought that if they offered, “Prices as good or better than stores in cities that were four hours away by car…people would shop at home.” David Glass, CEO, explained, “We are always pushing from the inside out. We never jump and then back fill.”

Walton successfully instilled a small town friendly caring atmosphere in America’s number one company by indoctrinating “associates” in the idea that Wal*Mart “Has its own way of doing things.” He habitually shopped the competitors like K-Mart and Target. He would count the number of vehicles in their parking lots and “measure their shelf space.”

Sam Walton believed the number one key to the company’s success lay in the way the company treated their “associates.” He felt that if he wanted his associates to care for the customers then the associates must know that the company was taking care of them. Do to his foresight in people management the company many associates became wealthy as the stock price continued to climb the value turned everyday individuals in to wealthy people. Walton discouraged such shows of wealth claiming that such behavior did not promote the company’s reason for existence, to take care of the customer.

Walton described his management style as “Management by walking around.” Walton said about managing people that, “You’ve got to give folks responsibility, you’ve got to trust them, and you’ve got to check up on them.” This philosophy required sharing information and the numbers. The target was to empower associates, maintain technological superiority, and build loyalty within associates, customers and suppliers.

Free flow of information to associates gave associates a true and actual sense of ownership of the organization and allowed them to exercise authority to continually improve their processes especially their main institutional profit driver, supply chain management and process improvement. One of their key tools to managing an element of their chain, inventory, is called “traiting.”

Traiting in the Wal*Mart sense is described by Bradley and Ghemawat in their article as “A process which indexed product movements in the store to over a thousand store and market traits. The local store manager, using inventory and sales data, chose which products to display based on customer preferences, and allocated shelf space for a product category according to the demand at his or her store. Pairing inventory to exact store market demand eliminated or at least mitigated the need for advertised sales or “fire sales” allowing the company to brand it as the customers’ preferred venue for “everyday-low-prices.” Walton and later Glass insisted on lower than market average expenditures for advertising complimented with a “satisfaction guaranteed” policy to instill customer-buying loyalty.

Cost containment caused customer loyalty. In store operations, Wal*Mart, in 1993 incurred rental space of an average of 30 basis points lower than competitors. Its new store erection costs were substantially lower than competitors K-Mart and Target. Wal*Mart dedicated 15% less inventory space than the industry average thus allowing for more dedicated square footage for sales inventory. Square footage sales ranked around $300 per foot compared to $209 and $147 for Target and K-Mart respectively. Stores tended to stay open more flexibly than competitors, which also contributed to higher per square footage sales numbers.

The company organized each store into 36 departments and a department manager as a store within a store ran each department. The company had outpaced K-Mart by installing uniform product codes (UPC) electronic scanning equipment in 1988. Labor expense for individually labeling inventory was eliminated by installing shelf tags instead. The company spent $700 million dollars to connect the stores with headquarters in Bentonville, Arkansas via satellite. Collecting and sharing such sales and inventory information allowed managers to pinpoint slow moving inventory and manage the supply chain by reducing purchased avoiding pileups and deep discounting.

The company manages the distribution chain. They instituted “cross-docking” to reduce and minimize inventory sitting in a warehouse. When an in-bound truck arrives at the warehouse, an out-bound truck is parked right next to it or close and shipments are offloaded from the inbound truck and moved directly to the out-bound truck thereby eliminating the need to sit in inventory. This method of moving it out as it arrived contributed to Wal*Mart’s almost one percentage point of sales less cost than the competition for like costs.

Wal*Mart treated its distribution chain as a profit center as well by strategically locating a warehouse or distribution point geographically where it could serve 150 stores and each truck leaving the warehouse can serve or deliver on the same route to four neighboring stores. Distribution gave store managers various delivery options as well as nighttime deliveries.

Wal*Mart manages its vendor relationships in a well-known “no-nonsense” manner. Unlike other retailers especially department stores, Wal*Mart buyers are not greeted and seated in a buyers’ office. Sam would not have preferred that haughty presentation and image. They are simply placed in a bare room with table and chairs. The company was sued administratively in 1992 when manufacturers’ representatives initiated unsuccessfully proceedings with the Federal Trade Commission. The company has not permitted a single vendor to account for greater than 3% of purchases further enhancing the leverage it exercises over companies.

Wal*Mart is a pioneer in information sharing and partnering with vendors. In its relationship with companies like GE and Proctor and Gamble, they interlinked computers to show real-time sales and inventory product specific data so that such firms could manage their own supply chain delivery. “They expanded their electronic data interchange to include forecasting, planning, and shipping applications.”

In 1992, Fortune magazine listed Wal*Mart as “one of the 100 best companies to work for in America.” David Glass, CEO, claims “There are no superstars at Wal*Mart” which could embellish the team environment. He said, “We’re a company of ordinary people overachieving.” The largest company in the United States is non-union. Associates are trusted and treated like owners and information is shared and entrusted to them. Vendors comment on the loyalty and dedication of their associates.

Associates are encouraged and rewarded for bright ideas, which in many other companies would go, unrecognized or stolen by owners or managers whom would steal credit. Stealing such credit and voiding the proper party to the credit only works to beat down associates and instill a feeling of worthlessness. Wal*Mart does just the opposite. Everyone is rewarded for profitability through contributions to the associates profit sharing account. In 1993 Sam instituted his “Yes we can Sam” program for ideas and then a “Shrink incentive plan” to reduce theft and inventory loss. The program allowed Wal*Mart to remain at least 3 tenths of a percent lower than the industry average in slippage.

Sam and David were smart enough to realize that they could not be in hundreds of stores all the time if at all so they decided to properly compensate each of the store managers who can earn in excess of a hundred thousand dollars annually. The company offers incentive pay on top for reaching and exceeding profitability and forecasting targets. The company offered health benefits to employee who work more than 28 hours weekly and also gives productivity and profitability bonuses to such hourly workers.

Tight fisted management names Sam Walton’s successors, David Glass and company. He instituted weekly Friday morning meetings where they shout and yell about individual items sold but before the meeting is adjourned, issues are resolved. Glass promotes the idea that “There is no hierarchy at Wal*Mart and that everyone’s ideas count and that no accomplishment is too small.”

The company began diversifying its store mixes in the early eighties by acquisition of other chains and opening Sam’s Clubs. The idea included offering only a limited number of stock-keeping units (SKUs). They financed inventory through accounts payable and generated net income principally by charging “members” for the annual privilege of entering and shopping at the “Club.”

Inventory costs at Sam’s Clubs was further reduced since only 30% of inventory was ever shipped from a Wal*Mart warehouse. 70% was sent directly from vendor. Since inventory was turned so frequently during the year, Sam’s Clubs really never paid for inventory until it was sold or even after.

Now, Glass has been quoted as telling managers “That if they didn’t think internationally, they were working for the wrong company,” Discount Store News, (June 1994). Furthermore, Glass mentioned to Business Week in 1992 that “You can’t replace Sam Walton, but he has prepared the company to run well whether he’s here or not.”

Essentially, Wal*Mart was founded by a man who was smart enough to realize that since he could not be everywhere to serve customers that he need to create and maintain an atmosphere where the people who worked for him wanted to make money and serve customers. As he grew the company he and his management staff continually assessed the supply chain and thought of and enacted pioneering ways many times considered unorthodox that created better and better customer value and lowered the cost of giving the customer what he wanted which was the purpose of the company to begin with not to mention why the company got paid. By encouraging idea cultivation from the grass roots of the organization, Wal*Mart has become the premier retailer at the bottom of the price pole.

This author recommends that Wal*Mart management look to diversify within the store by adding more of what it already does well, maximizing the life experience on the cheap within the store. Other ancillary services could be added to any unprofitable square footage like barber shop, dentists, etc…

The Latest Long Island MacArthur Airport Developments

1. Declining Figures:

Long Island MacArthur Airport, owned by the Town of Islip, has, since its inception, been caught in a vicious cycle. Airlines have long been reluctant to provide service because of a lack of passengers, while passengers have been reluctant to use the airport because airlines failed to provide the service they sought. During the last half decade, this phenomenon has virtually choked it into nonexistence.

Although 1.8 million passengers in its eastern Nassau and Suffolk County catchment area make an average of 3.7 annual trips, these favorable facts end here, since only 25 percent of them use MacArthur for their travel. Increasing to 50 percent if only nonstop service is considered, this statistic emphasizes the benefit to carriers if they would provide it.

Indeed, during the five-year period from 2007 to 2012, the number of annual departures declined from 14,784 to 7,930, the steepest reduction of all US mid-sized airfields, virtually reducing the Long Island facility to its 1999 status, the year Southwest Airlines sparked the latest growth cycle.

Aside from being victim to the recession and escalating fuel costs like these other terminals, it has been historically forced to operate in the shadow of the three major New York airports, thus drawing upon much of the same market base, yet it relies almost exclusively on a single carrier, Southwest, for its service. The increasing trend toward airline consolidation furthermore results in fewer potential air service providers, almost all of which have operated from the airport some time in the past, while current fuel prices have rendered their code share regional jet operations unprofitable, prompting the withdrawal of the carriers that had once provided vital hub feed, such as Atlantic Southeast (ASA) to Atlanta, Comair to Cincinnati, and Continental Express to Cleveland.

Electing to deviate from the philosophy of operating from underserved, overpriced, secondary airports upon which it had been founded, and responding to passenger demand for major market presence, Southwest has progressively rebalanced aircraft assets from smaller to larger cities to maximize revenues, but has dismantled much of the Islip market it itself created cultivated in the process.

Countering this assessment, Southwest indicated that this strategy reflected systemwide industry changes and not those restricted to MacArthur.

The Long Island market involves factors beyond systemwide industry trends, however. Spurred by the additional slots it obtained at La Guardia Airport after its AirTran acquisition, Southwest itself increased frequencies and destinations from the higher-yield and -load factor airport.

Having operated a peak of 34 daily departures from Long Island, it gradually reduced its presence, discontinuing service to two of its focus cities-namely, Nashville and Las Vegas–thus removing the flight connections they represented.

By the time its Chicago-Midway service had been discontinued and shifted to La Guardiia in June of 2012, its number of flights had been almost halved, to 18.

While it had been credited with resurrecting the airport, it had, in many ways, now become the obstacle to its growth. Because of its dominance and low fare structure, it served as a deterrent to other airlines contemplating service there, particularly on routes, such as those to Florida, on which it holds a monopoly. Yet, like walking a tightrope, Town of Islip officials have consistently made considerable efforts to maintain a close relationship with the airline, since the airport’s future hinges upon it.

However, that future depends upon more than flight and passenger figures. It also depends upon financial ones-and these have been anything but optimistic. During the three-year period from 2010 to 2012, for example, the airport has lost almost $4.2 million, forcing it to use funds collected from its $11 million sale of a land parcel to the Long Island Rail Road in 2009 to compensate for the deficit, as well as attract businesses to lease in-terminal storefronts; impose, for the first time, a general aviation landing fee; and reduce staff counts and overtime hours.

But what is needed are far more reaching strategies to turn the tide. Based upon prevailing conditions, are there any?

2. Infrastructure Improvements and Proposals:

As the economic engine of the region, Long Island MacArthur Airport can only be kept running if the Town of Islip seeks innovative ways to attract the airline service that fuels it and it has therefore implemented a series of infrastructure improvements to do so.

On the landside, a $10.6 million terminal roadway realignment, whose construction commenced in September of 2011, was undertaken to redirect and streamline vehicular traffic, and included the introduction of a building-fronted island and 750-foot canopy, to facilitate passenger drop-offs and pickups from both private and public transportation. The project also included lighting, drainage, and a vehicle security checkpoint.

Funded by passenger user fees collected through ticket sales, it was completed two years later, on January 10, and $300,000 under budget.

Another landside project occurred on the airport’s west side, along Smithtown Avenue. Entailing the demolition of 52,000 square feet of antiquated and unsightly wood, steel, and concrete block structures, it was intended to attract businesses and operators deterred by the existing blight.

Of its three fixed base operators, Sheltair agreed to invest $20 million over a seven-year period in exchange for a 40-year lease on 25 of its 36 acres, paving the way for construction of 29,000 square feet of office and 161,000 square feet of hangar space.

ExcelAire also signed a 40-year lease, similarly committing $4.5 million to upgrade its facilities. Recently acquired by Charleston, South Carolina-based Hawthorne Global Aviation, the corporate jet service company demolished an adjacent building and planned to add 32,000 square feet of office and hangar space in order to be able to accommodate the new generation of ultra-large business jets, such as the Bombardier Global Express, the Gulfstream 650, and the Falcon 7X.

Within the airport, Mid-Island Air Service followed suit with its own lease and refurbishment agreement.

Mirroring the landside roadway realignment was an airside taxiway reconfiguration. A $4.5 million grant awarded to the airport, of which 95 percent came from the FAA and the other five percent from the state’s and the town’s Department of Transportation, facilitated the streamlining of aircraft taxiing toward Runway 33L, reducing turns, times, and fuel consumption. The project entailed the extension of Taxiway B, the realignment of Taxiway E, and the installation of airfield signs, lights, and pavement markings.

Bids were awarded to Rosemar Contracting of Patchogue (taxiway construction), JKL Engineering of Maryland (taxiway design), and Savik and Murray of Ronkonkoma (runway obstruction removal and equipment supply).

Other projects, the result of the airport’s short-, medium-, and long-term master plans, included a light rail people-mover to connect the terminal with the Long Island Rail Road station and the extension, to 7,000 feet, of a second runway in order to increase the safety of existing operations and to attract new, longer-range ones.

Even transforming the airport into an international gateway was proposed. Initiating a public campaign toward this end, Senator Charles Schumer, long-time MacArthur advocate, held a press conference on June 10, 2013 to urge US Customs and Border Patrol to establish a single-gate facility so that carriers could begin flights to the Bahamas and Aruba, often-demanded sun-and-sand travel destinations.

The campaign, spurred by letters of interest sent by Interjet, a low-fare Mexican carrier, and FlyA, a similarly priced, but only proposed, long-range European operator, could greatly expand the airport’s realm of operation.

Although a Department of Homeland Security bureau regularly reviewed the need for such requests, its own resources were already stretched thin and it was unlikely that it would commit to potential, not actually-needed, facilities, the adequately-equipped New York airports themselves immediately able to accommodate such flights without infrastructure changes.

These ambitious proposals created their own Catch-22 situation, much like the airport’s vicious airline-passenger cycle. While they may have succeeded in attracting new carriers and routes, it was virtually impossible to justify their costs when declining traffic barely required the existing ones.

3. Airlines:

Although these infrastructure upgrades and promising proposals may have improved current carriers’ operational experiences, it was, in the end, the Town of Islip’s ability to attract the airlines that would pump the lifeblood into the Long Island regional airport. It therefore made several significant efforts to do so.

A. Existing Airlines:

Having repositioned its aircraft to La Guardia Airport, Southwest, whose latest presence was only a shadow of its peak one, was unlikely to increase frequencies or inaugurate service to new destinations under prevailing economic conditions.

Nevertheless, it emphasized its continued dedication to the regional airfield. Although a provision in its 25-year contract could theoretically have enabled it to discontinue all service after a decade, it had had no plans to do so.

Despite the considerable retrenchment to the contrary, the 68-percent load factors it had experienced two years ago had been intermittently increased to a present 92 as a result of its service reduction strategy. And, despite the fact that its simultaneous La Guardia and MacArthur presences seemed to dilute the same market, their respective business and leisure orientations dispelled this perception.

Nevertheless, the Town of Islip was successful in negotiating new service-with another existing carrier, US Airways.

As MacArthur’s original tenant-and hence its longest serving one-then-Allegheny, which was subsequently rebranded USAir-re-established nonstop service to Washington Reagan National after the 2001 terrorist attack-imposed flight restrictions forced the cancellation of its original one. The route itself, its second after that to Philadelphia, was facilitated by a slot swap with Delta at La Guardia.

Commemorating the first of two daily, 50-passenger CRJ-200 regional jets operated by Air Wisconsin on March 25, 2012, airport fire trucks christened it with a water curtain after its 12:50 p.m. landing.

According to Newsday, Islip Town Supervisor Tom Croci said, ‘”I look forward to working with our senators and congressmen to ensure the jewel of our town, Long Island MacArthur Airport, gets the resources and attention it requires to live up to its full potential.'”

Providing the vital, downtown link to the nation’s capital, and eliminating the need for the hour train ride from Southwest’s comparable Baltimore service, the aircraft redeparted at 1:28 p.m.

Senator Charles Schumer commented that the new connection only confirmed that Long Island was an untapped market. Although US Airways only carried between six and seven percent of its traffic, it was considered disproportionately important because of the business- and hub-oriented nature of its routes.

B. New Airlines:

Enticing existing carriers to inaugurate service constituted only one side of the town’s strategy coin. Attracting new ones was the other, and, toward this end, the Long Island Association, the largest business and civic organization, expressed interest in potential service by sending a letter to three carriers: the aforementioned US Airways, as well as to JetBlue and Air Canada.

Although the Southwest effect of stimulating demand and expansions at airports it served initially left its imprint on MacArthur for most of the past decade, its retrenchment reversed this trend, and JetBlue, a similar, originally single-aircraft type, low-fare, minimal frills carrier was envisioned as having the same positive influence.

Having already blanketed the New York area with presences at the three major New York airports and its two secondary ones, White Plains’ Westchester County and Newburgh’s Stewart International airports, Islip was one of three new destinations it had recently contemplated serving.

Schumer, instrumental in its original, late-1990s New York service by providing it with 75 slots in exchange for realistically-priced upstate routes, considered the Long Island airfield “the missing piece of the jigsaw” for JetBlue. He, along with previous Islip Town Supervisor, Phil Nolan, emphasized their support in working with the carrier and both state and local authorities to consummate a deal.

Escorted by Schumer himself, JetBlue CEO, Dave Barger, was given a three-hour tour of the airport, an integral part of the carrier’s evaluation process. Walking past some 30 departing passengers, Schumer introduced him and advised them that he was trying to persuade him to inaugurate service, prompting spontaneous applause.

Because of the combined, 2.9 million residents of Nassau and Suffolk counties, Barger considered the region “a decent-sized city,” and because the Caribbean constituted the airline’s targeted growth area, he found the airport’s Caribbean and Latin demographics favorable.

While JetBlue mirrored its Southwest competitor in many ways, those ways, at least relative to the Long Island facility, became the spitting image. Winning an auction for eight slots at La Guardia Airport, it committed aircraft capacity to its New York counterpart instead.

Despite the seemingly disappointing outcome, Barger emphasized that, given the optimum conditions, that service to Islip was not a matter of “if, but when.”

Another airline the town approached, which itself had already expressed interest in Islip service, was Air Canada.

Market studies had indicated that 58 percent of the passengers in the airport’s catchment area had reason to fly to Canada, while more than 30 industrial parks occupying 4,200 acres within the Town of Islip’s control further strengthened the need for such a route. In 2011, New York State’s two-way trade with the country amounted to $34.8 billion.

A Toronto link, specifically, was considered a win-win strategy. As the airline’s 60th transborder connection, it would afford it with an uncongested airport and airspace operation, minimizing fuel costs and delays, while passengers would have access to its principle hub, facilitating Canadian, European, and Asian flight connections. Since pre-clearance immigration and customs facilities were already existent in Canada, no changes were necessary at MacArthur.

But, once again, La Guardia’s dominance only reduced it to a footnote. Because WestJet, its strongest competitor, had just been awarded eight slots at the New York airport, it was more prudent to concentrate its assets there in an attempt to retain its market share than shift them to Long Island.

Alaska-based PenAir, the penultimate carrier with which the town explored new service, bore more fruit.

Achieved with the FAA’s Air Carrier Incentive Plan, which entailed reduced fees for either new entrants or existing ones establishing new routes, the agreement saved it $120,000 in office, rent, operational, and landing costs-or a two-year equivalent-provided it continued the service for two years after that.

Replacing the mulitple-daily Business Express and subsequent American Eagle Saab 340 service to Boston-Logan, but discontinued in 2008, PenAir inaugurated two daily round-trips with the same turboprop equipment on July 25, 2013 in a move it considered a logical extension of its growing northeast route system, which encompassed Bar Harbor, Plattsburgh, and Presque Isle.

Flights departed at 8:40 a.m. and 7:10 p.m. with originations in Boston at 7:00 a.m. and 5:30 p.m. One-way introductory fares were set at $119.

The final carrier contacted, Allegiant Air, equally brought its wings to Long Island.

“Las Vegas-based Allegiant Travel Company,” according to its press release, “is focused on linking travelers in small cities to world-class leisure destinations. The company operates a low-fare, high-efficiency, all-jet passenger airline through its subsidiary, Allegiant Air, while also offering other travel-related products, such as hotel rooms, rental cars, and attraction tickets.”

After market studies indicated the need for air service to Florida’s west coast, the Town of Islip wooed the carrier, which itself found the demographics favorable, announcing its intention on August 20, 2013. It would be its 99th US city that served one of 14 vacation destinations.

“We are pleased to add the beaches of southwest Florida as an affordable, convenient destination option for Long Island residents,” according to the press release. “We are confident the community will appreciate the convenience of flying nonstop to Punta Gorda.”

Offering $69 one-way and $99 round-trip introductory fares, Allegiant inaugurated Punta Gorda/Ft. Myers service four months later, on December 20, with a 166-passenger MD-80 operating as Flight 999 and departing at 7:20 p.m., a date considered the threshold to the traditional holiday and winter Florida season.

Based upon response, additional seasonal and year-round service to Myrtle Beach, St. Petersburg, Orlando, Ft. Lauderdale, and Las Vegas would be considered.

4. Current Service:

Before Long Island MacArthur Airport can make an economic impact on the region, it needs sufficient air service to do so. Yet, with 23 departures offered by January of 2014, two of which were not even daily, that goal has hardly been realized.

Southwest, still the dominant airline, offered five flights to Baltimore, three to Orlando, two to Ft. Lauderdale, two to West Palm Beach, and one to Tampa-or a total of 13-operated by 737-700 aircraft. This was only one more than it had offered in 1999, when it had sparked the airport’s latest growth period, having returned it to its origins.

US Airways, a stronghold since the Allegheny service days, offered four daily de Havilland DHC-8 turboprop flights through its Piedmont regional carrier to Philadelphia and two to Washington with Bombardier CRJ-200 regional jet equipment with Air Wisconsin.

PenAir linked Boston with two Saab 340 departures and Allegiant Air connected the Long Island field with two weekly MD-80 services to Ft. Myers/Punta Gorda.

Restoration of its important business connections to Boston and Washington, each with two flights accommodating 50 or fewer passengers, enabled travelers to avoid La Guardia-associated congestion and commute times, and constituted a step in the right direction. But it was only a baby one. If Long Island MacArthur is to once again mature into a regional provider, reaping its own economic sustainability through landing, operational, office, concession, and parking fees, it needs a much greater injection of air service.

How to Implement GPS Vehicle Tracking

Your business can increase productivity and reduce costs with GPS vehicle tracking. The first step in implementing GPS tracking in your company is to install tracking units in all your vehicles. The hardest part of implementing GPS tracking is how to inform your employees and modify their behavior and to increase productivity and reduce company costs. As challenging as it may be to implement GPS tracking the cost savings and increase in productivity are worth the effort. These are simple instruction on how implement GPS tracking within your company.

Set Up Baseline

The first step is to set up a base line and measure just how much your company is losing from unproductive employees who waste time, idle vehicles or any other activity. This step can show how inaccurate their time sheets can be. By tracking your employees for one month without telling them, the business will have a good base line of what your fleet employees are doing when they are out working in the field. Your company will have an accurate assessment of how much can be saved when GPS vehicle tracking and company policies are changed.

When following this strategy is when you notice employees who are taking excessive personal errands. Or employees will go home during the day early while writing on their time sheets they are working. If employees are allowed to take vehicles home they might use the vehicles for long trips during the weekend. If they have gas cards another thing to look for is how often gas cards are used as well miles driven in-between fill-ups.

GPS Vehicle Tracking Can Improve Employee Productivity

GPS tracking can put to an end all of these activities, helping to save money through behavior modification of your employees. The first step to save money is to inform your employees. When you tell your employees you have installed GPS tracking devices the vehicles. There will be question such “do you trust us?” “we already keep logs of our time why do we need it?”. Easy answers to such questions are if we did not trust you why would we allow you to drive a company truck with thousands of dollars of equipment on it? This new tracking system makes your jobs easier since employees will no longer need to keep time sheets.

Cost savings gained from behavior modification of employees’ use of time and driving habits. Enforcing of a company policy is the only way to achieve cost savings. If you have real time GPS tracking an easy way to enforce policies is to set up real time alerts. Real time alerts can notify you every time a driver idles a vehicle for more than 5 minutes, speeding or any programmable action that could indicate lost productivity.

Automate Employee Behavior Modification

The smart way to send out real time alerts is not just send alerts out to management but also the drivers. Constant text messages also remind the driver that management is monitoring their use of the company vehicle. You can define geographic areas, allowing you to be notified when a employees vehicle is that area. You will even know when employees just go home for the day by setting up a geographical boundary around employee’s houses, or your employee strays outside of an assigned area.

You can increase fleet productivity with GPS tracking. You can add last minutes jobs onto the schedule of an employee without calling all of your employees to figure out where they are. You can route the employee with the shortest travel time using live traffic maps to avoid heavy traffic, adjusting any other schedules as need based on real time traffic condition.

Textiles Exports: Post MFA Scenario Opportunities and Challenges


The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974. The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas.

The Agreement on Textiles and Clothing (ATC) to abolish MFA quotas marked a significant turnaround in the global textile trade. The ATC mandated progressive phase out of import quotas established under MFA, and the integration of textiles and clothing into the multilateral trading system before January 2005.

The Agreement on Textiles and Clothing

ATC is a transitory regime between the MFA and the integration of trading in textiles and clothing in the multilateral trading system. The ATC provided for a stage-wise integration process to be completed within a period of ten years (1995-2004), divided into four stages starting with the implementation of the agreement in 1995. The product groups from which products were to be integrated at each stage of the integration included (i) tops and yarns; (ii) fabrics; (iii) made-up textile products; and (iv) clothing.

The ATC mandated that importing countries must integrate a specified minimum portion of their textile and garment exports based on total volume of trade in 1990, at the start of each phase of integration. In the first stage, each country was required to integrate 16 percent of the total volume of imports of 1990, followed by a further 17 percent at the end of first three year and another 18 percent at the end of third stage. The fourth stage would see the final integration of the remaining 49 percent of trade.

Global Trade in Textile and Clothing

World trade in textiles and clothing amounted to US $ 385 billion in 2003, of which textiles accounted for 43 percent (US $ 169 bn) and the remaining 57 percent (US $ 226 bn) for clothing. Developed countries accounted for little over one-third of world exports in textiles and clothing. The shares of developed countries in textiles and clothing trade were estimated to be 47 percent (US $ 79 bn) and 29 percent, (US $ 61 bn) respectively.

Import Trends in USA

In 1990, restrained or MFA countries contributed as much as 87 percent (US $ 29.3 bn) of total US textile and clothing imports, whereas Caribbean Basin Initiative (CBI), North American Free Trade Area (NAFTA), Africa Growth and Opportunity Act (AGOA) and ANDEAN countries together contributed 13 percent (US $ 4.4 bn). Thereafter, there has been a decline in exports by restrained countries; the share of preferential regions more than doubled to reach 30 percent (US $ 26.9 bn) of total imports by USA.

The composition of imports of clothing and textiles by USA in 2003 was 80 percent (US $ 71 bn) and 20 percent (US $ 18 bn), respectively. Asia was the principal sourcing region for imports of both textiles and clothing by USA. Latin American region stood at second position with a share of 12 percent (US $ 2.2 bn) and 26 percent (US $ 18.5 bn), respectively, for textiles and clothing imports, by USA. In most of the quota products imported by USA, India was one of the leading suppliers of readymade garments in USA. Though China is a biggest competitor, the unit prices of China for most of these product groups were high and thus provide opportunities for Indian business.

Import Trends in EU

EU overtook USA as the world’s largest market for textiles and clothing. Intra-EU trade accounted for about 40 percent (US $ 40 bn) of total clothing imports and 62 percent (US $ 32.5 bn) of total textile imports by EU. Asia dominates EU market in both clothing and textiles, with 30 percent (US $ 30 bn) and 17 percent (US $ 8 bn) share, respectively. Central and East European countries hold a market share of 11 percent (US $ 11.3 bn) in clothing and 7.5 percent (US $ 4 bn) in textiles imports of EU.

As regards preferential suppliers, the growth of trade between EU and Mediterranean countries, especially Egypt and Turkey, was highest in 2003. As regards individual countries, China accounted for little over 5 percent (US $ 2.8 bn) of EU’s imports of textiles and over 12 percent (US $ 12.4 bn) of clothing imports.

In the EU market also, India is a leading supplier for many of the textile products. It is estimated that Turkey would emerge as a biggest competitor for both India and China. However, with regard to unit prices, India appears to be lower than both Turkey and China in many of the categories.

Import Trends in Canada

Amongst the leading suppliers of textiles and clothing to Canada, USA had the highest share of over 31 percent (US $ 8.4 bn), followed by China (21% – US $ 1.8 bn) and EU (8% – US $ 0.6 bn). India was ranked at fourth position and was ahead of other exporters like Mexico, Bangladesh and Turkey, with a market share of 5.2 percent (US $ 0.45 bn).

Potential Gains

It may be noted that clothing sector would offer higher gains than the textile sector, in the post MFA regime. Countries like Mexico, CBI countries, many of the African countries emerged as exporters of readymade garments without having much of textile base, utilizing the preferential tariff arrangement under the quota regime. Besides, countries like Bangladesh, Sri Lanka, and Cambodia emerged as garment exporters due to cost factors, in addition to the quota benefits.

It may be said that countries like China, USA, India, Pakistan, Uzbekistan and Turkey have resource based advantages in cotton; China, India, Vietnam and Brazil have resource based advantages in silk; Australia, China, New Zealand and India have resource based advantages in wool; China, India, Indonesia, Taiwan, Turkey, USA, Korea and few CIS countries have resource based advantages in manmade fibers. In addition, China, India, Pakistan, USA, Indonesia has capacity based advantages in the textile spinning and weaving.

China is cost competitive with regard to manufacture of textured yarn, knitted yarn fabric and woven textured fabric. Brazil is cost competitive with regard to manufacture of woven ring yarn. India is cost competitive with regard to manufacture of ring-yarn, O-E yarn, woven O-E yarn fabric, knitted ring yarn fabric and knitted O-E yarn fabric. According to Werner Management Consultants, USA, the hourly wage costs in textile industry is very high for many of the developed countries. Even in developing economies like Argentina, Brazil, Mexico, Turkey and Mauritius, the hourly wage is higher as compared to India, China, Pakistan and Indonesia.

From the above analysis, it may be concluded that China, India, Pakistan, Taiwan, Hong Kong, Brazil, Indonesia, Turkey and Egypt would emerge as winners in the post quota regime. The market losers in the short term (1-2 years) would include CBI countries, many of the sub-Saharan African countries, Asian countries like Bangladesh and Sri Lanka.

The market losers in the long term (by 2014) would include high cost producers, like EU, USA, Canada, Mexico, Japan and many east Asian countries. The determinants of increase / decrease in market share in the medium term would however depend upon the cost, quality and timely Review of Indian Textiles and Clothing Industry The textiles and garments industry is one of the largest and most prominent sectors of Indian economy, in terms of output, foreign exchange earnings and employment generation. Indian textile industry is multi-fiber based, using delivery. In the long run, there are possibilities of contraction in intra-EU trade in textile and garments, reduction of market share of Turkey in EU and market share of Mexico and Canada in USA, and thus provide more opportunities for developing countries like India.

It is estimated that in the short term, both China and India would gain additional market share proportionate to their current market share. In the medium term, however, India and China would have a cumulative market share of 50 percent, in both textiles and garment imports by USA. It is estimated that India would have a market share of 13.5 percent in textiles and 8 percent in garments in the USA market. With regard to EU, it is estimated that the benefits are mainly in the garments sector, with China taking a major share of 30 percent and India gaining a market share of 8 percent. The potential gain in the textile sector is limited in the EU market considering the proposed further enlargement of EU. It is estimated that India would have a market share of 8 percent in EU textiles market as against the China’s market share of 12 percent.

Review of Indian textiles and Clothing Industry

The textiles and garments industry is one of the largest and most prominent sectors of Indian economy, in terms of output, foreign exchange earnings and employment generation. Indian textile industry is multi-fiber based, using cotton, jute, wool, silk and mane made and synthetic fibers. In the spinning segment, India has an installed capacity of around 40 million spindles (23% of world), 0.5 million rotors (6% of world). In the weaving segment, India is equipped with 1.80 million shuttle looms (45% of world), 0.02 million shuttle less looms (3% of world) and 3.90 million handlooms (85% of world).

The organised mill (spinning) sector recorded a significant growth during the last decade, with the number of spinning mills increasing from 873 to 1564 by end March 2004. The organised sector accounts for production of almost all of spun yarn, but only around 4 percent of total fabric production. In other words, there are little over 200 composite mills in India leaving the production of fabric and processing to the decentralised small weaving and processing firms. The Indian apparel sector is estimated to have over 25000 domestic manufacturers, 48000 fabricators and around 4000 manufacturer-exporters. Cotton apparel accounts for the majority of Indian apparel exports.

Textiles and Garments Exports from India

The share of textiles and garments exports in India’s total exports in the year 2003-04 stood at about 20 percent, amounting to US $ 12.5 billion. The quota countries, USA, EU and Canada accounted for nearly 70 percent of India’s garments exports and 44 percent of India’s textile exports. Amongst non-quota countries, UAE is the largest market for Indian textiles and garments; UAE accounted for 7 percent of India’s total textile exports and 10 percent of India’s garments exports.

In terms of products, cotton yarn, fabrics and made-ups are the leading export items in the textile category. In the clothing category, the major item of exports was cotton readymade garments and accessories. However, in terms of share in total imports by EU and USA from India, these products hold relatively lesser share than products made of other fibers, thus showing the restrain in this category.

Critical Factors that Need Attention

Though India is one of the major producers of cotton yarn and fabric, the productivity of cotton as measured by yield has been found to be lower than many countries. The level of productivity in China, Turkey and Brazil is over 1 tonne / ha., while in India it is only about 0.3 tonne / ha. In the manmade fiber sector, India is ranked at fifth position in terms of capacity. However, the capacity and technology infusion in this sector need to be further enhanced in view of the changing fiber consumption in the world. It may be mentioned that the share of cotton in world fiber demand declined from around 50 percent (14.7 mn tons) in 1982 to around 38 percent (20.12 mn tons) in 2003, while the share of manmade fiber has increased from 44 percent (13.10 mn tons) to around 60 percent (31.76 mn tons) over the same period.

Apart from low cost labour, other factors that are having impact on final consumer cost are relative interest cost, power tariff, structural anomalies and productivity level (affected by technological obsolescence). A study by International Textile Manufacturers Federation revealed high power costs in India as compared to other countries like Brazil, China, Italy, Korea, Turkey and USA. Percentage share of power in total cost of production in spinning, weaving and knitting of ring and O-E yarn for India ranged from 10 percent to 17 percent, which is also higher than that of countries like Brazil, Korea and China. Percentage share of capital cost in total production cost in India was also higher ranging from 20 percent to 29 percent as compared to a range of 12 to 26 percent in China.

In India, very few exporters have gone in for integrated production facility. It is noted that countries that would emerge as globally competitive would have significantly consolidated supply chain. For instance, competitor countries like Korea, China, Turkey, Pakistan and Mexico have a consolidated supply chain. In contrast, apart from spinning, the rest of the activities like weaving, processing, made-ups and garmenting are all found to be fragmented in India. Besides, the level of technology in the Indian weaving sector is low compared to other countries of the world. The share of shuttle less looms to total loomage in India is 1.8% as compared to Indonesia (10%), Bangladesh (10%), Sri Lanka (12%), China (14%) and Mexico (29%).

The supply chain in this industry is not only highly fragmented but is beset with bottlenecks that could very well slow down the growth of this sector. As a result the average delivery lead times (from procurement to fabrication and shipment of garments) still takes about 45-60 days. With international lead delivery times coming down to 30-35 days, India needs to cut down the production cycle time substantially to stay in the market. Besides, erratic supply of power and water, availability of adequate road connectivity, inadequacies in port facilities and other export infrastructure have been adversely affecting the competitiveness of Indian textiles sector.


It is believed the quota regime has frozen the market share, providing export opportunities even for high cost producers. Thus, in the free trade regime, the pattern of imports in the quota countries would undergo changes. The issues that would govern the market share in the post quota regime would eventually be productivity, raw material base, quality, cost of inputs, including labour, design skills and operation of economies of scale.

It is believed that quotas, by limiting the supply of goods have kept export prices artificially high. Thus, it is estimated that there would be price war in the post quota regime, with competitive price cuts. The price and quantity effects would depend on the efficiency in production process, supply chain management and the price elasticity of demand.

Due to the expected fall in prices, developing countries with high production cost have little choice but to compete head-on with the biggest low cost suppliers. In this process, it is presumed that there would be better resource reallocation in these economies.

It is assumed that quota restrictions would continue beyond 2005 in various forms. It is also widely recognized that removal of quota may not directly provide easy and unrestricted access to developed country markets. There would be non-tariff barriers as well. Standards related to health, safety, environment, quality of work life and child labour would gain further momentum in international trade in textiles and clothing.

Strategies and Recommendations

Cost competitiveness in Indian garments sector has been restrained by limited scale operations, obsolete technology and reservation under SSI policies. While retaining its traditional cost advantages of home grown cotton and low cost labour, India needs to sharpen its competitive edge by lowering the cost of operations through efficient use of production inputs and scale operations. Besides, there are needs for rationalization of charges, levies related to usage of export logistics to remain cost competitive.

As fallout to the quota regime, there would be consolidation of production and restriction on supplying countries, which would necessarily mean improved scale operations. Indian players should also integrate to achieve operating leverage and demonstrate high bargaining power.

It is reported that Chinese textile firms have already invested heavily to expand and grab huge market share in the quota free world. In India, organised players in this sector would require huge investments to remain competitive in the quota free world. These players need to expand and integrate vertically to achieve scale operations and introduce new technologies. It is estimated that the industry would require Rs. 1.5 trillion (US $ 35 billion) new capital investment in the next ten years (by 2014) to lap the potential export opportunities of US $ 70 billion. It is estimated that USA and EU together would offer a market of US $ 42 billion for Indian textiles and garments in 2014.

Technology would play a lead role in the weaving and processing, which would improve quality and productivity levels. Innovations would also be happening in this sector, as many developed countries would innovate new generation machineries that are likely to have low manual interface and power cost. Indian textile industry should also turn into high technology mode to reap the benefits of scale operations and quality. Foreign investments coupled with foreign technology transfer would help the industry to turn into high-tech mode.

Internationally, trading in textile and garment sector is concentrated in the hands of large retail firms. Majority of them are looking for few vendors with bulk orders and hence opting for vertically integrated companies. Thus, there is need for integrating the operations in India also, from spinning to garment making, to gain their attention. This would also bring down the turn around time and improve quality. Indian players should also improve upon their soft skills, viz., design capabilities, textile technology, management and negotiating skills.

Garment manufacturing business is order driven. It would be difficult for the players to keep the workforce full time, even in lean season. This calls for changes in contract labour laws.

Logistics and supply chain would also play a crucial role as timely delivery would be an important requirement for success in international trade. The logistics and supply chain management of Indian textile firms are relatively weak and needs improvement and efficiency. China has already created a world class export infrastructure. Given the volume of projections for exports by India, it may be necessary to create additional export infrastructure, especially investment for modernization of ports. In addition, India needs to invest for creating brand equity, supply chain management and apparel industry education.

To sum up, the ability of Indian textile industry to take advantage of quota phase-out would depend upon their ability to enhance overall competitiveness through exploitation of economies of scale in manufacturing and supply chain. The need of the hour therefore is to evolve a well chalked out strategy, aimed at improvement in the levels of productivity and efficiency, quality control, faster product innovation, quick response to changes in consumer preferences and the ability to move up in the value chain by building brand names and acquiring channels of distribution so as to outweigh the advantages of competitors in the long run.

Source: Export-Import Bank of India, India.

Forex Trading -The Power of Round Numbers

We are constantly rounding off numbers in our day to day activities. It occurs when we go to the market, read the temperature, buy a piece of property or go to the gas station. We are immutably drawn to round numbers and numbers that end in zero. These round numbers play a major role in Forex trading.

Why The Interest In Round Numbers?

In 1999 the Dow Jones Industrial Average hit the 10,000 mark for the first time. Investors were testing this level for almost two weeks before it finally closed over the 10,000 mark. This even was cause for much celebration as it was considered a major milestone.

About seven years later the Dow was trading at only 11,000. The investors that were driven into a frenzy when it hit 10,000 had little to show for it some years later.

In 1999 the success of the Dow was one of the most publicized events of the year. Financial news channels were running four hour specials extolling the event as the second coming. The entire market was totally absorbed by this figure.

Theories abound that humans have developed a numeric systems called “base 10” because they have 10 fingers and toes. Humans also gravitate to numbers that are factors of 10.

The Round Number Effect

Investors and traders have a very strong tendency to enter orders that coincide with round numbers. For example a trader may place an order on a specific stock when and if it falls to a $40 level. If multiple traders also place buy orders at $40 because it appears that the stock is a good buy at that level, the stock will encounter a large pool of buy orders. This often causes a large amount of buying activity and because buyers are outnumbering the sellers the value of the stock will rise rapidly.

In essence, the traders have generated what is called a “support level” at the $40 mark because multiple buy orders have accumulated at that price. This is what is referred to psychological support because it is not based on any prior price activity.

This phenomenon is common to all trading markets but is especially prevalent in the currency market. The reasoning behind this round number phenomenon in commodity, stock and forex trading is that part of humans that is attracted to round numbers. As long as people are involved in trading this phenomenon will be present.

Round Numbers In Forex

The profound influence of round numbers in the Forex marketplace should not be underestimated. A good example of this occurred in early 2005 when the USD/CAD currency pair found support repeatedly at 1.2000. Another example occurred in the early part of 2006 when the EUR/USD found support at about 1.2700. Traders that specialized in round number entry points were able to gain some great rewards.

Banks enjoy substantial commissions when they implement customer orders around these round numbers as large pools of orders tend to accumulate. The fact that these orders do tend to congregate around numbers creates a major strategy for many traders and many traders lean on this as a major trading technique.

The First Bounce Is The Best

Round number support and resistance is extremely attractive to those utilizing a Day Trading strategy. The time frames involved in day trading are typically very short. This happens because of the fact that the first bounce off of the round number support or resistance is usually the one that is the best and most profitable bounce. Traders are constantly looking to make certain that they are seeing this first bounce. Longer trading time frames are ineffective because they can often hide multiple bounces within a single candle spike.

Every time the exchange rate achieves the round number support level orders are executed. As this occurs, the pool of orders that created the support or resistance level diminishes. Once the level of orders is insufficient to affect the support or resistance level that level will eventually break.

It is for this reason that it is vital for traders to take advantage of the first bounce off the round number since it is at this point that the number of orders is the greatest and produces the biggest value. An active trader can also trade the subsequent bounces although they tend to yield smaller profits. Trading requires constant vigilance for success unless you use an automated trading system.

You can learn lots more at

Cosmetics Business in Uganda: Will the Real Black Beauty Come Forth

The beauty industry in the Middle East and Africa was estimated at about $20.4 billion in 2011. Of this figure, South Africa alone represented $3.9 billion, Nigeria was second and Kenya’s market totaling more than $260 million came third on the African continent.

Uganda in the last few years has seen considerable growth in the cosmetic industry with pioneers like Mukwano Group, Mwana Mugimu, Sleeping baby, Movit and the timeless Samona Jelly making progress and opening up the market space for other players.

The older reader might also remember Mekako, Jaribu and Sabuni kanga among the soaps.

The cosmetic and beauty industry is highly lucrative, but success is hinged on focus on target markets and categorizing of a particular product for sale.

What is required to venture into this sector

There are two options for venturing into this business in Uganda:

  • Option 1: Sell local and international brands( Acting as a middleman and agent)
  • Option 2: Create your own brand and product(the main emphasis of this article)

Being a highly competitive sector in the retail industry,you need to have a very succinct business strategy, particularly as you will also be competing with internally renown brands (like L’oreal, Mac and Clinique) that can be freely imported into the country.

There are two options for venturing into this business,

  • Option 1: Sell local and international brands( Acting as a middleman and agent)
  • Option 2: Create your own brand and product(the main emphasis of this article)

A strategic plan that addresses specific needs and an audience niche is the break or make of any product in this industry – anywhere in the world, and in Uganda in particular.

There must also be a strong emphasis on brand creation, distribution channel development and quality of the product as the competition is high from well established brands as already noted above.

It being a locally manufactured product, there are bound to be a number of challenges and consumer behavior perceptions that you will need to address first before reaping big.

One of the guarantees however is that once a niche has been created and a loyalty base formed, sales from customers are guaranteed to be continuous as cosmetic products belong to a specific category of goods that create a ‘ life long bond’ between the user and the product.

Once this is understood and placed into practice, like acquisition of a catchy name, use of exquisite packaging and advertising, marketing strategies, this should be enough to give you and the company a detailed understanding on how the Industry operates and the bottlenecks.

Critical considerations

1. Education base. A formal education in cosmetology and beautification will equip you (or staff you employ for the purpose) with the necessary knowledge on various skin types and how they relate with the different products that you will be making.

The last thing you would need is to create monsters with your products – read destroying people’s skins and beauties. There are local education institutions that offer relevant courses, but it is recommended that an international course is taken to give your product credibility. Unfortunately many of the courses in Uganda do not keep pace of international breakthroughs – which is critical in this cut throat industry.

One noteworthy institution however is the Uganda Industrial Research Institute (UIRI) which has a fully equipped laboratory and has free hands on training for start-up entrepreneurs.

2. Raw materials. It is critical to establish partnerships with raw material providers in advance. One key advantage of Uganda though is that products like Aloe Vera, Avocado, eggs and Shea butter which are used in many beauty regimens are readily and cheaply available in Uganda. There is therefore a real opportunity to set up a contract manufacturing plant here.

3. Quality assurance. Rigorous testing of the product to meet potentially international standards is crucial. Such testing should be regularly advertised as this assurance is critical for a product that will come into contact with the human skin and is being made in Uganda, where the reputation for quality control by the regulators is not perceived to be stringent. It is therefore suggested to voluntarily subscribe to an internationally recognised programme like the ISO requirements.

4. Cash cushion. Owing to the high marketing need combined with the working capital needs, having a cash cushion is critical in this industry.

5. Return on investment. On the basis of my estimates, from a share capital of Shs.39m a return of 1.11 years can be achieved.

Umeshu – The Wonderful Japanese Plumwine

Umeshu is the Japanese plumwine with more than 1000 years of history. It is made of ume-fruit, a base alcohol and sugar.

The alcohol typically is around 12%-14%, which is comparable to western wine. There are two large industrial makers of Umeshu as well as more than 300 private labels with a large variety of different Umeshu. In Japan it also is very popular to make Umeshu at home and many supermarkets offer ready-made kits around May and June during ume-apricot harvesting.

Umeshu is usually made based on one of these four alcohols:

1) Umeshu based on Sake (rice-wine)

Sake is a Japanese alcoholic drink made by brewing rice with water. Depending on the mash used for fermentation sake can be sour, dry or very flowery. It is very popular to make Umeshu based on sake. The sake base can therefore already determine the character of the Umeshu.

2) Umeshu based on Shochu

Shochu is a Japanese alcoholic drink made through distillation. It is made of rice, sweet potato, wheat and occasionally with other ingredients such as sweet chestnut. Whereas most rice shochu are neutral in their fragrance, those made of sweet potato or wheat have a very distinct taste. When Umeshu is made with one of the later it creates an entirely new flavor on ume-apricot and the shochu.

3) Umeshu based on brandy

Many sweet and heavy Umeshu include a little shot of Brandy for the flavor. They nevertheless usually do not exceed 14% alcohol, which is comparable to a heavy red wine.

4) Umeshu based on white liqueur

White liqueur is industrial alcohol with neutral flavor. It is most commonly used to make Umeshu at home. A lot of breweries also use it for Umeshu focussing on the flavor of ume-apricot only as well as for Umeshu with additional flavors such as shiso-mint, green tea or Japanese yuzu-lime.

The second most important ingredient is ume-apricot. There are various types of ume-apricot and it is said the the Shirakaga Ume is best to produce Umeshu due its large size and its ability to easily transfer flavor to the base alcohol.

Because the ume-apricot has a lot of acidity Umeshu gets sweetened. When the ume-apricot is put into alcohol rock-sugar is added. Sometime honey or brown sugar are added too or even entirely replace white sugar.

It recently became popular to add other flavors to Umeshu since the flavor of the ume-apricot also combines well with other ingredients. So far, Umeshu with ginger, shiso-mint, yuzu-lime, passion fruit, banana, green tea and black tea have been found among many others.

It this these many combinations that result a very large variety of different flavors that make Umeshu such a popular and fascinating drink.