I & J Trading in partnership with Samduk Tongsang CO., LTD specializes in OEM/ODM to satisfy all levels of costumer demands through a thor-ough observance of deadlines and outstanding quality control.

I & J Trading Company and Samduk Tongsan’s Partnership and Strategy for Innovative Production in Out-sourcing Topper

2. FACTORY IN PUSAN

3. EXTERNAL FACTORIES

4. SPECIFICS AND THE DIRECTION OF PARTNERSHIPS

5. MANAGEMENT STRATEGIES FOR EACH SECTOR

6. EXPECTED EFFECTSIND

EX

1. KOREAN MANUFACTURING AND FINAL ASSEMBLY SITES BRIEF SUMMARY

KOREAN MANUFACTURING SITES

PUSAN MAIN FACTORY EXTERNAL FACTORY

PUSAN, KOREA KOREAN INDUSTRIAL COMPLEX

Name SAMDUK TONGSANG CO., LTD. SAMDUK STAFILD CO., LTD.

EmployeesManagement : 80

Production : 100PERSONSManagement : 20PERSONSProduction : 2,700PERSONS

ScaleLand : 6,600 m2

Structure : 5,600 m2

Land : 26,400 m2

Structure : 20,000 m2

Production Capacity

ASSEMBLY : 75,000PRS/MONTHSEWING : 200,000PRS/MONTH

ASSEMBLY : 130,000PRS/MONTH

ItemCasual Shoes, Semi Athletic/Athletic Shoes, Walking Shoes, Sports Shoes, Safety Shoes , Trekking Function Shoes, Military Boots, Law Enforcement Footwear, Utility Boots, Hiking Boots,

ORGANIZATION CHART

FACTORY PRESIDENT

Vice President

Planning & Coordination

Executives

Production/Plan-ning Q.C

Manage-ment

R&D Insti-tute

Marketing

MANAGEMENT DEPT.

Production TeamManagement

Team

Quality Team

(Inspec-tion,

Quality)

Manage-ment

(Planning)

Research Team

(Analysis)Tailoring

TeamSewing

Team

Manufac-tureTeam

(Prepara-tion)

Technology Team

(Press)Tailoring

Team

Materials

HISTORY

1999. OCT Superb Small Businessmen Award(Exports)

1999. NOV 36th Trade Day, 5 Million Dollars Exports award

2000. NOV37th Trade Day, 10 Million Dollars Exports award

2000. DEC ISO 14001(Environmental Management Sys-tem Certification)

2003. APRAppointed as a Quality Assured Company, Achieved the ‘Q’ Mark

2005. OCT Presidential Award (Industrial Technology Development Merit)

2008. JUN INNO-BIZ Certification

2008. OCT Establishment of Samduk Tongsang’s Re-search Institute

2008. NOV 2nd External Industrial Complex relocated af-ter expansion

2009. JUL Appointed as a Venture Firm (Technology Rat-ing Star Company)

2009. SEP CERTTIFIED AND AWARDED (IMS)

2009. NOVNew Art of Shoe Technology Competition – Grand Prize in Functionality

2011. SEP CERTIFICATED BEST HRD

2011. SEP AWARDED FIRST S-OJT

2012. SEP SET UP EXT. FACTORY IN INDONESIA

MAIN PRODUCT

We are manufacturing/supplying products under OEM/ODM manufacturing alliances with numerous firms such as NEW BALANCE, OTB FOOTWEAR, PRO-SPECS, ASICS, K2, Z-COIL, and CHUNG-SI. Not only high-functionality sports, lifestyle and casual footwear icorporating Gore-tex technology, but also military and industrial/utility footwear. We manufacture/supply high quality products with R&D Technology as our base. We strive to reduce overhead and supplementary costs and to meet production and delivery deadlines.

OEM ODM

K2(Gore-Tex)

MAIN PRODUCT

PROSPECS

ASICS

OTB ABYSS Boots were designed and engineered at the request of the U.S. Navy SEALS. A maritime boot for use in any rocky or muddy situation,

the sole unit also works well in dry conditions. With its superior fit and drainage features this boot also works great with a pair of waders.

MAIN PRODUCT : OTB BOOTS

High abrasion TPU upper material resists scuffs for outlasting conventional leather

Upper material is treated with a DWR (durable water repellant) having minimal water absorption characteristics

Tactical Rubber Technology™ for superior silent traction on both wet and dry surfaces

Lugged and razor siped sole to help facilitate water dispersion

Perforated lugged jungle sole unit allow for instant water drainage

Recessed arch on the outsole helps identify center of gravity when climbing ladder rungs

Ballistic mesh placed between the outsole and upper prevents small stones and debris from entering the boot, yet still allows for water to drain freely

Rubber reinforced toe and heel help aid in climbing maneuvers

Mesh ports throughout the boot allows for water drainage and breathability resulting in quick dry comfort for increased foot health

Reticulated foam used for all upper padding will not absorb water under any circumstances

Mesh tongue pocket holds tied laces in place preventing snags on out-croppings

Sea/Air/Land - SEAL footbed™ aids in water drainage as well as breathability for unsurpassed foot health in a wide variety of conditions

The SEAL footbed has a patented removable shank that allows the user to customize the fit for any condition, wet or dry - eliminating the need for half sizes

PRODUCT SPEC SHEET STYLE: DESERT LITE COLOR: DESERT TAN

PARTS COL 3 Y`STICK MATERIALS

BACK WEBBING REINF, NAT 　 NY 210D/A+ADHESIVE(W/12MM)

TONGUE REINF, " 　 "

TOE BOX REINF, WHT 　 CAMBULLAR+ADHESIVE(W/23M/M)

EYELET OVERLAY TAN 　 1 COLOR WEBBING TAPE(W/12MM)

COLLAR TAPE " 　 1 COLOR WEBBING TAPE(W/35MM)

HEEL TAPE " 　 1 COLOR WEBBING TAPE(W/20MM)

EYELET TOP TAN 　 INJECTED NYLON 66(HOOK)

EYELET BOTTOM " 　 INJECTED NYLON 66(EYELET)

VAMP MEDIAL PATCH " 　 synthetic leather(toppicol)

TONGUE LOGO TAN 　 1 COLOR EMBROIDERY

EYESTAY(LATERAL)LOGO --- 　 HEAT PRESS

THREAD 　 　 NY 210D/3P

ZIGZAG THREAD --- 　 P 30S/3P

ARIANCE THREAD TAN 　 NY840D/4P

SHOE LACE TAN 　 1 COLOR (NEW ROUND LACE)

INSOLE TAN 　 GAUZE MESH+CUP INSOLE

INSOLE LOGO 　 　 HEAT TRANSFER

INSOLE BOARD --- 　 JV170 PG-031H FROM J&V

MIDSOLE TAN 　 1 COLOR PHYLON SOLE(Hardness:63+-2)

OUTSOLE TAN 　 1 COLOR RUB SOLE(sticky)

SIZE LABEL WHT 　 HEAT TRANSFER

PARTS COL 1 THICKNESS MATERIALS

BACK WEBBING REINF, BLK 　 NY 210D/A+ADHESIVE(W/12MM)

TONGUE REINF, " 　 "

TOE BOX REINF, " 　 CAMBRELLA+ADHESIVE(W/23M/M)

EYELET OVERLAY BLK 　 1 COLOR WEBBING TAPE(W/12MM)

COLLAR TAPE " 　 1 COLOR WEBBING TAPE(W/35MM)

HEEL TAPE " 　 1 COLOR WEBBING TAPE(W/20MM)

EYELET TOP " 　 INJECTED NYLON 66 (HOOK)

EYELET BOTTOM " 　 INJECTED NYLON 66(ROUND SHAPE)

VAMP MEDIAL PATCH " 　 synthetic leather(toppicol)

TONGUE LOGO BLK 　 1 COLOR EMBROIDERY

EYESTAY(LATERAL)LOGO --- 　 HEAT PRESS

THREAD 　 　 NY 210D/4P

ZIGZAG THREAD --- 　 P 30S/4P

ARIANCE THREAD BLK 　 NY840D/4P

SHOE LACE BLK 　 1 COLOR (NEW ROUND LACE)

INSOLE BLK 　 GUAGE MESH+CUP INSOLE

INSOLE LOGO WHT 　 HEAT TRANSFER

INSOLE BOARD --- 　 JV170 PG-031H FROM J&V

MIDSOLE BLK 　 1 COLOR PHYLON M/SOLE(HARDNESS:63+-2)

OUTSOLE BLK 　 1 COLOR RUB SOLE(sticky)

SIZE LABEL WHT 　 HEAT TRANSFER

PRODUCT SPEC SHEET STYLE: JUNGLE LITE COLOR: BLK/BLK

MAIN OFFICE INFRASTRUCTURE

Production Ca-pacity

Busan : Land 6,600 m2, Structure 5,600 m2 , 2 manufacture lines(75,000pairs/m)

Total Number of workers

185 ( 50 management, 35 R&D, Production 100)

R&DSamduk Research Institute : Within Samduk Tongsang CO., LTD. (Officially Approved)PATTERN, PRE-PRODUCTION, PU SCREEN, NO SEWING, ETC TOTAL 35PERSONS

ADDVANTAGE

HIGH LEVEL OF TECHNICAL WITH USE IN GORE-TEX & OUTDOORCAD/CAM PU SCREEN/HIGH FREQUCNCY/NO/SEWING FACILITIES IN R&DA/S SYSTEMFOCUSING ON Q.C

PRODUCTION FLOW

Samduk(Busan)BuyerOrder Placed(Order sheet)

Order sheet placed

Delivery

Delivery after fixation

Depending on difficulty and time constraints, direct production/delivery

Shipment

Purchase domestic subsidiary materials

Sorting/Inspection/Sampling/transferring1. Subsidiary Materials Stocked

2. Prototypes created (Dyed, processed)3. Partly-manufactured Goods Stocked4. Processing/Needlework/Completion5. Quality Management/Sampling/ Packaging/

By establishing a collaboration of factories, an in house production sys-tem and a dramatic reduction of distribution terms are achieved

Transportation to External Factory for A/S purposes only takes 1 day

ONE STOP TOTAL -

1

2

3

4

5

6

7

8

9

10

A/S requestSamduk(External

Factory)

GORE-TEX

We are the proud producer of Gore-tex. As a

licensed factory we strive for excellence in all

areas of footwear production.

We will continue to improve Gore-tex with

utmost attention to detail new application of

emerging technology.

FACTORY INFRASTRUCTURE

PersonsEquip-ment

CAPA( 月 )

Cutting 160 80 200,000

Saw 1050 22lines 200,000

Prepare 250 99 120,000

Press 370 44 200,000

PersonsEquip-ment

CAPA( 月 )

Pyron 80 24 100,000

Prepare 250 4lines 200,000

Make 250 4lines 130,000

ETC 290

FROM RAW MATERIAL, CUTTING TO ASSEMBLY, In-House System

FACTORY INFRASTRUCTURE

PROCESS

FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

EXAMNI-NATION

LEATHER METER 1 5,000 8 4

TEXTILE METER 1 5,000 8 4

CUTTINGOIL PRESSURE

MACHINE75 8,500 8 152

TOTAL 77 160

PROCESS

FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

LINE

PREPARATION LINE

4 8,5008

250

ASSEMBLY LINE 4 5,400 250

TOTAL 8 500

ASSEMBLY & PREPARATION FOR ASSEMBLY

CUTTING

FACTORY INFRASTRUCTURE

PROCESS FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

SEWINGLINE 2

8,500 8 900MACHINE 650

STRAWBELLGATHERING 3 6,000

16

6

MACHINE 14 7,000 20

EYELET

D-RING 11 5,500

20AUTO RIVET 10 5,000

AUTO D-RING 4 2,000

INNER SOCKER

SEAMSEALING 6 2,000

8

20TESTER 2 2,000

SEW. MACHINE 20 2,000

PARTS

HOT MELT 60 14

MAMMER 30 30

MOLDING(C/H) 10 10

COMPUTER(G) 430

COMPUTER(N) 30

TOTAL 719 1050

SEWING

FACTORY INFRASTRUCTURE

PROCESS FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

EMBROI-DERY

MACHINE 2 5,000 24 15

HIGHFREQENCY

CUT.PRESS(G) 45,000

16

5

CUT. H.FRE. 48 119

WINSEALNO SEWING

PRESS 10 5,000 26

HOT MELTPRESS MA-

CHINE2 8,500 14

SCREEN 20M TABLE 6 5,000 29

SHARPEN-ING

MACHINE 24 8,500 43

TOTAL 99 250

PREPARATION FOR SEWING

FACTORY INFRASTRUCTURE

PROCESS

FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

ROLLER

KNEADER 2 15,000

21

60CALENDER 1

MIXING ROLLER 3 15,000

CUTTING 5 12,000

PRESSOIL PRESSURE 44 12,000

160AUTO CUTITNG 2 3,000

TRIMMING MACHINE 16 12,000 90

BUFFING GRINDER 20 12,000 60

TOTAL 95 370

PRESS

FACTORY INFRASTRUCTURE

PROCESS

FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

PRESSOIL

PRESSURE(H/C)16 3,850

21 62

UV

UV LINE 1 8,500

UV MACHINE 2

COOLING MAC. 1

TOLUENE WASH. 3

8 18WASHER 1 5,000

DRYER 1 5,000

TRIMMING 10 7,000

TOTAL 31 80

PHYLONE MIDSOLE

FACTORY INFRASTRUCTURE

PROCESS FACILITY CAPA/DAY HOUR/DAY PERSONS

MODEL MACHINE 5SET 8 7

MODEL, PATERN, FRAME

FACILITY Q’TIES

SUN LAMP TESTER 1

FORCE CONVECTION OVEN 1

WASH TESTER 1

UNIVERSAL WEAR TESTER 1

DIGITAL BURSTING STERNGTH TESTER

1

DENSIMERTER / MD300S 1

SHOE FLEXING TESTER 1

NBS ABRASION TESTER 1

UNIVERSAL TENSILE STRENGTH TESTER

1

TIME SLICE TESTER 1

CROCK METER 1

LAB.

PLAN

SHORT TERM BASE : SET UP WITHIN DEC. 2011

INSOLE : 200,000PRS/MONTHIP MIDSOLE : 120,000PRS/MONTH

99% IN HOUSE SYS-

TEM

CUTTINGSEWING

DECORATION(PU SCREEN, HIGH

FREQUENCYNO SEWING, TPR,)

INSOLEMIDSOLEOUTSOLEASSEMBLY

MIDDLE TERM BASE : SEP UP WITHIN MAR. .2011

HO-SKIN : 120,000PRS/MONTHTPR : 100,000PRS/MONTH

PRODUCTS COMPETITIVE POWER AND TECH-NIQUE COMPETITIVE POWER

PLAN

Tianjin, China Factory

PROCESS FACILITY Q’TIES CAPA/DAYHOUR/

DAYPERSONS

SEWING LINE 4 1,200 8 300

ANALYSIS ON EFFECT

Each year, Samduk’s quality and productivity increases through

continuous quality control and educational training. High level

intensive management training courses are provided and at-

tendance required by all levels of management

Division

2007 2008 2009 2010

QualityProductiv-

ityQuality

Productiv-ity

QualityProductiv-

ityQuality

Productiv-ity

China 80% 90% 90% 95% 85% 　 85% 　 80% 80%

Korea 70% 100% 70% 95% 70% 　 95% 　 75% 　 95% 　

Ext. Fcty 90% 70% 95% 90% 100% 　 95% 　 100% 　 100% 　

PARTNERSHIP PRODUCTS

Establish a strategic manufacturing system for a more stabilized and efficient production

ManufactureManufacturing

in External FactoriesSewing

Supply for Domestic Demand as a base

Maximum 900,000pairs/year

Maximum 2,400,000pairs/year

Maximum 1,500,000 Pairs/Year

COMPETITIVENESS

Creation of a prepared Manufacture infrastructure for Outsourcing Production

Moral Management ▶ ① Employment practice ② Human Rights ③ Environmental Pollution ④ Corruption Determent ⑤ Moral Responsibilities

Operation Research Team ▶Process Analysis, Manufacture Quality Research

Technical Support Team ▶Standards, Technical Support, R&D

A/S : Quality Control and Costumer Satisfaction achieved through operating A/S Centers.

Establishment of a Gore-tex shoemaking system

External Factory Line : Establishment of a manufacturing line for Skechers

Establishment one of the world’s best environmental management system1

2

3

4

5

6

7

WHAT’S DIFFERENT

ExistingSituation

Limitations are created as products are produced domestically or produced abroad

Utilizing Busan HQ Factory Utilizing External Factory+

Country of Origin Problem Solved(100% Made in Korea)

- Delivery Term Reduced- Stabilized distribution

system achieved

- Cost Competitiveness - Exclusive manufacturing

System created

Contributes to reputation of high quality and reliability by acquiring Quality Products and Delivery priority using brand’s Exclusive Manufacturing Lines

Using Cost Reduction as a foundation, a strategic viewpoint can be implemented through securing core capabilities and competitive superiority.

Effect

WHAT’S DIFFERENT

Classification Company A Company B Company C Samduk

In House system

Sewing(Semi-manu-

factured prod-ucts)

Outsourcing China / Vietnam Outsourcing Ext. Factory

Shoemaking(Complete Products)

Busan China / Vietnam Outsourcing Busan, Ext. Factory

Materials and partial pro-

cessingOutsourcing Outsourcing Outsourcing External Factory

Quality of Labor

Pros High Quality Average Average High Quality

ConsWages burden,

rapid aging of la-bor force.

Frequent job changes, wage raises, Quality

Competitiveness deterioration

immeasurable Stabilized employment

Prime CostCompetitive-

nessRelatively Low Average Average High Quality

Price Reasoning

1. All processes beside completion

is done through outsourcing

1. Can’t label as Made in Korea as

the product is completed abroad

1. Lack of man-agement due to a

lack of an In-house System

1. In House System – Price competitiveness

2. Limitations on domestic produc-

tion

2. Deindustrializa-tion occurs even

Locally,

2. Limitations of Outsourcing Pro-

duction

2. Stabilized production through Salary Caps(less than 5%) and the fact that it is impossible to change jobs

3. When an out-sourcing problem occurs, there isn’t a countermeasure

3. Impossible to reduce delivery

term

3. Lack of a sense of ownership

(Responsibility )

3. Through non-price com-petitiveness, extra com-

petitiveness expected (De-livery, origin of produc-

tion)

DELIVERY

• Distribution Period, includ-ing customs procedures, takes only 1 day (24Hours)

• Containers 3times/weekDelivery Service 6times/week

• EX) Departure from Ext. Factory at 2pm → Arrival at a distribution center in Seoul at 4pm

• High-difficulty products

or products that are

tight on schedule are

processed at the head

office (Same Price Ap-

plied)

China(and other Southeast Asian Countries)

Excessive Distribution Term

Wages are ona rising Trend

Korea ↔ China

Total Delivery Date : 25~40 Days

Busan ↔ External Factory

I & J Trading Company and its partner Samduk’s business philosophy is

to fulfill customer satisfaction by a thorough observance of delivery

deadlines, created by sending orders to adequate sources of supply and

setting plausible delivery deadlines.

1dayTotal Delivery Date : 60~70days

LABOUR MANAGEMENT

Early StageSimple LaborManpower-

focused

Quality

Enhancement

of Productive

Capability!!

• Productivity improvement

• Task Division

• Management Skills

• Safety Education

• Health/Environment

• Cost reduction

• Theory education

• Skill education

• Hands-on education

Job DutyUnderstanding

Job DutyCompletion

Job Duty

Improvement

• Utilization of high quality labor force.• Implementing Incentives: By implementing a separate incentive system other than the basic paycheck, productivity/quality enhancement is shown

Great emphasis is placed on providing extra training to employees to maximize smooth and continuous production

Acquire skillful workers by implementing regular employee

training sessions and continuous individual training sessions.

PRODUCTION MANAGEMENT

Our Core Competitiveness is to operate an operational research

team, technical support team, and state of the art laboratories.

Also, we will operate a separate STAFF team for processing Skech-

ers’ orders.

Operation Research Team Technical Support Team

Elimination of the source of quality defect → Production Efficiency Enhancement

Laboratories

Guarantees Credibility through various Experiments of (Material) Properties

Creation of A system that can evaluate the R&D and effectiveness of a product in one-stop

All details related to experiments are managed systematically

Gore-tex exclusive Labs

Operation Research Team takes exclu-sive responsibility of process analysis(production/quality/research)Technical Support Team supports standards,technological backup, and SPEC

Qualitative Quality Enhancement through efficient FEED-BACK activities

QUANTITATIVE EFFECTS

- The reduction effect increases gradually in proportion to the increase of orders. - Expectations of a self-owned factory creation effect without implementing separate training sessions or tangible/intangible investments.

- Processing Prices reduced - Completed Product Prices rise as the products are now labeled as Made in Korea

- Delivery Costs are reduced by using professional delivery business vehicles. - Cost reduction by minimization of warehouse storage costs due to immediate payment system - Business Travel Costs are reduced by running Shuttle Busses.

Problems of Diminishing Production rate and Risk reduced

Price Competitiveness Increase

Cost Reduction

QUALITATIVE EFFECTS

Category Detail

Delivery TermTime/Money saving is possible through shortening of the delivery term.

Quality Competi-tiveness

With skilled/educated workers, high quality prod-ucts are manufactured. Contracted Brands’ Quality Competitiveness is enhanced

Outsourcing Ef-fect

Fundamental Cost reduction from removing addi-tional personnel management/labor management administration

Securing Market Competitiveness

Market Competitiveness is secured by labeling Made in Korea

ZERO-Defect Ef-fect

Defects are returned to Samduk Tongsang’s A/S Center to be fixed and delivered back –> Zero-De-fect Effect