1. Arezzo&Co Investor Day
Sourcing and Logistics
| Apresentação do Roadshow
Márcio Jung,
Sourcing Director
1

2. | Shoes Market

3. 1 1. Global Industry
Brazil is a major shoe producer with a competitive cost of women leather
shoes for the domestic market
CHINA
Lead time: 120 to 150 days
Production (pairs): 10.000 mi
ITALY
Cost (FOB): US$ 16/pair
Lead time: 70 days
Cost (DDP): US$ 40/pair
Production (pairs): 202 mi
Cost (FOB): US$ 26/pair
Cost (DDP): US$ 38/pair INDIA
Lead time: 160 days
Production (pairs): 2.000 mi
Cost (FOB): US$ 15/pair
Cost (DDP): US$ 23/pair
VIETNA
Lead time: 120 to 150 days
Production (pairs): 682 mi
Cost (FOB): US$ 15/pair
Cost (DDP): US$ 23/pair
BRAZIL
Lead time: 40 days
Production (pairs): 894 mi
Cost (w/ taxes ): US$ 19/pair
Cost (w/ taxes ): US$ 29/pair
Note:
DDP: delivered duty paid
Source: Abilcalçados, Assintecal, Arezzo&Co FOB: free on board
3

4. 1 2. Brazilian Industry
Arezzo&Co mainly sources its products in the South of Brazil, the world’s
largest footwear manufacturer cluster, specialized in women leather shoes
Brazilian Shoes Production (2010)
Vale dos
South
South Region
894 Region
Sinos
(RS)
million
Production - # pairs (million) 302 ~187
pairs
Export - # pairs (million) 32 ~20
Export - (million USD) 733 ~455
Jobs (thousand) 130 ~81
Other Main producer Companies 3.400 ~2.000
66 States
7% Sports Expertise in the production of women leather shoes
88
10%
Other producer regions:
Rubber
487 Southeast Northeast
Southeast Region Northeast Region
55% Region Region
Leather
253
Production - # pairs (million) 189 Production - # pairs (million) 399
28%
Export - # pairs (million) 9 Export - # pairs (million) 102
Export - (million USD) 152 Export - (million USD) 595
Jobs (thousand) 90 Jobs (thousand) 126
Companies 4.000 Companies 627
Source: Abilcalçados, Assintecal, Arezzo&Co
Expertise in the production of men leather shoes Expertise in the production of sports shoes
4

5. | Sourcing and Outsourcing Model

6. 2 1. Sourcing and Logistics Cycle
Constant involvement of Sourcing, R&D e Commercial departments ensure
control of the entire chain
Solid sourcing model
Knowledge of the cost structure of each SKU
Flexibility to supply our product at multiple factories
and to maintain tight quality control
Delivery at Integration between engineering, R&D and Supply
the stores
Chain
Engineering Transportation Ability to keep up with new trends
Sourcing of a large variety of SKU’s
Specialized manufactures
Fast response to the market
Production Distribution Center Agility in the development, production and delivery
of new products to the stores
Source: Arezzo&Co
6

7. 2 2. Sourcing and Supply Chain Cycle
Sourcing model based on outsourcing, with constant monitoring of sourcing
options
2,000
Outsourcing-based model
Manufacturers
■ Low use of capital in Vale dos
■ Benefit from strong oscillation of the production Sinos
demand
Focus on
■ Grow potential
60 engineering, R&D 100
Active and process Accredited
manufacturers auditing to assure manufacturers
the quality
Management of the entire supply chain
Other various inputs Over 40
- jute, rubber, leather suppliers
synthetics, metal, etc
7a9
Collections
Over 90 Strong quality
manufacturers control and terms
of the productive
process
Source: Arezzo&Co
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8. 2 3. Strategic Inventories
Strategic inventories to reduce stock-out and obtain economies of scale
Continuables Various SKUs
■ Greater stock efficiency and better production costs
■ Products that repeat along various collections Lines
■ Arezzo Classic and Schutz Essential
3% to 5% - Models
continuable¹
30% to 35% -
repetition of the model Materials Suede Velvet Varnish Animal print
65% to 70% -
repetition of the construction (line) Colors
Formação de estoques antecipados
800.000
■ Idle time at the factories 600.000
■ Opportunity to obtain discounts 400.000
Anticipation for the
■ Good results in the pilot projects Winter Collection
200.000
Anticipation for the
Winter Collection
Note:
(1) Repetition of the same SKU 0
Source: Arezzo&Co nov/10 jan/11 mar/11 may/11 jul/11 sep/11 nov/11
Production Idleness 8

9. | Logistics and distribution

10. 3 2. Distribution center
Receiving: 100,000 units / day
Simultaneous Stocking: 100,000 units / day Located near the production
consolidation Picking: 150,000 units / day chain and the South and
and distribution Distribution: 200,000 units / day Southeast regions
in national scale Replacement of the milky run strategy