IBM2012 Capstone project Winter 2023

IBM2012 Winter 2023- Capstone project

Course- IBM-M999

Section- B

PROJECT 1: SOURCING AND PROCUREMENT

Dr. Eduardo M. V. Jasson

Submission: 02/16/2023

Full Name Student ID

NEELAM RANI 0800003

PRABHJOT RALL 0805072

VARINDER KUMAR 0802614

RAMANANDAN PRASANNAN 0782341

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IBM2012 Capstone project Winter 2023

Contents
Introduction 3
Background of the company 3
Defining product 4
Customer needs 6
Identification of suppliers 8
Measuring supplier performance 9
Cost estimation 11
Explanation of selecting the supplier 12
Conclusion: 14
Reference List: 15

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IBM2012 Capstone project Winter 2023

Introduction
Trading among countries is a crucial part of supply chain management which can help
to increase the standard of living by purchasing a wide range of products at affordable
prices. Suppliers of different countries are used to making strong communication to fulfil
the demand of customers from different regions. The discussion is focused on the trade
between Indonesia and Canada where Canadian consumers can purchase charcoals
from Indonesia. PT Marwa International and Home Charcoal Indonesia are the two
suppliers who are trading products in Ontario which is the main scenario of the
discussion. The supplied product is sold to and it is further distributed in Canada by P &
N productions. However, the suppliers have collaborated with P & N productions to sell
charcoals to the customers. There are details of products, suppliers, consumers, the
wholesaler included in the discussion which can help to understand the process of
documentation, pricing model, and cost estimation process to understand the entire
supply chain process. The overall sourcing and procurement process depends on the
strong communication system which is the main segment of the report.

Background of the company

P & N productions is a Canadian distributor company that is used to supply charcoal
made cosmetics products in Ontario by purchasing raw materials from multiple
suppliers. The company has been running its business since 2001 by establishing its
headquarters in Ontario. Therefore, the company has been supplying products in the
Canadian market by collaborating with foreign suppliers to supply quality products to
consumers.
Mission statement
The company has the target to provide necessary charcoal made cosmetics products
which are expected by consumers in Ontario by making effective collaboration with
suppliers. Mitigating the desires is the main target of the wholesaler company to
increase profitability.
Target market
Consumers from Ontario are the target market of P & N productions where the company
has a warehouse to distribute charcoal made cosmetics commodities. However, the
company is used to making frequent contact with consumers in the target market of
Canada to fulfil the needs for charcoal products (Monczka, 2020). The company has
been distributing charcoal made cosmetics products for more than twenty years. The
company has selected the specific segment of Canada which is Ontario by
understanding the increasing demand for charcoal made cosmetics products.
Target consumers

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IBM2012 Capstone project Winter 2023

Consumers from households are the main target consumers of the company who are
used to purchasing charcoal made cosmetics products from P & N productions.
However, the company has provided online facilities to consumers to increase the
accessibility to Canadian consumers to purchase products from the company. The
company has taken 20% of the total market share in the cosmetics industry in Canada
by serving consumers in the area of Ontario (statista.com, 2022). Therefore, the place
has been selected by the company to provide effective services to local consumers.

Defining the product

To create charcoal, organic materials like wood, coconut shells, or sawdust are burned
without oxygen, leaving behind a black, porous, and lightweight substance known as
charcoal. By heating the organic material at high enough temperatures, the volatile
chemicals and moisture are driven out, leaving behind a carbon-rich substance that may
be utilized as fuel, as a source of activated carbon, or for other purposes. It is intriguing
to learn that P & N Production, with the support of suppliers from Indonesia as well as
Asian markets, would be supplying charcoal to the Canadian market. Charcoal's
distinctive properties, such as its stiffness and sustainability, make it a sought-after
commodity among shoppers and retailers alike. Indonesia produces over 2.85 million
tons of fresh charcoal annually. In order to maximize output while minimizing
environmental impact, the government has implemented cutting-edge methods for
charcoal production. This is crucial for the industry's continued success and for reducing
the negative effects of charcoal manufacturing on the natural world.
In recent years, cosmetics containing activated charcoal have risen in popularity owing
to claims that the substance is good for the skin. Charcoal's ability to soak up oil and
other greasy substances together with whatever pollutants they may contain has led to
claims that it may help cleanse and detox the skin. Charcoal-based soaps, shampoos,
and facial treatments have all seen a surge in popularity as a result. Charcoal-based
cosmetics are becoming more popular in Canada, reflecting a broader trend towards all-
natural and eco-friendly goods in the cosmetics market. The growing consciousness of
shoppers about the safety of the components in their skincare products has led them to
look out for chemical-free, all-natural alternatives. As a natural and sustainable
substance that can be derived from renewable resources, charcoal fits well with this
movement.

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IBM2012 Capstone project Winter 2023

The market for cosmetics containing charcoal has increased in Canada because of the
rising popularity of Korean beauty regimens. Korean beauty, commonly known as K-
beauty, is based on improving the skin's health and look via the use of natural
substances and multi-step skincare programs. The supposed skin advantages and
distinctive feel of charcoal-based cosmetics have made them a popular addition to K-
beauty regimes. As Canadians seek more eco-friendly and natural beauty solutions, the
market for cosmetics containing charcoal is expected to continue to grow. The
cosmetics market is ripe for companies like P & N Production to develop. P & N
Production may take advantage of Indonesia's competence and reputation in the
charcoal industry by importing charcoal from that nation. By doing so, companies can
better guarantee that the goods they sell in Canada are of high enough quality and
competitively priced to satisfy customers. In addition, P & N Production's decision to get
its charcoal from Indonesia has the added benefit of providing jobs and revenue for
regional businesses.

Characteristics of the product and Aspects of differentiable

There are many various kinds of charcoal on the market, but Indonesian charcoal is
famous for its distinct qualities. A distinguishing feature of Indonesian charcoal is its
excellent quality. Often, it is crafted from high-quality wood like mangroves, which
makes it denser and more resilient. Another quality that sets Indonesian charcoal apart
is its long burning period compared to other varieties of charcoal, making it a more
economical and efficient choice for both cooking and heating. Indonesian charcoal is
simpler to clean and less dirty than other varieties of charcoal since it creates less ash
when burnt.
Indonesian charcoal is notable for its sustainability. Several manufacturers use green
logging methods that are gentler on the environment. Those who care about the
environment will appreciate that Indonesian charcoal is produced in a sustainable
manner. One of the main characteristics of Indonesian charcoal is its sourcing. Charcoal
made from the country's famed high-grade wood may be of higher quality than charcoal
made from other sources. Methods of production are also crucial. The traditional
processes used by Indonesian charcoal manufacturers, such as kiln fire, may impart a
distinct taste and scent to the final product. Moreover, the branding and marketing of
Indonesian charcoal may help set it out from the others. Producers can build brand
loyalty and boost demand for Indonesian charcoal by highlighting the product's high
quality and sustainability, as well as the product's distinctive regional qualities. As
compared to other charcoals, Indonesian charcoal stands out for its superior quality,

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sustainability, and efficiency, making it a popular choice among consumers and

companies alike.
Charcoal-based beauty products are becoming more popular throughout the country of
Canada. A common belief about charcoal's skincare advantages is that it may absorb
toxins and pollutants from the skin. For this reason, many people in Canada are on the
lookout for charcoal-based cosmetics, including face masks, cleansers, as well as
exfoliators. A new market has opened up for Indonesian charcoal manufacturers
because of the country's ability to provide a reliable and environmentally friendly supply
of this in-demand commodity.

Competitive advantage
As Canada is not a producer of good charcoals, Canadians have had to rely on foreign
charcoal-based beauty aids. Due to its many advantages, Canadians are looking for
skincare products that include charcoal. P & N productions have taken advantage of the
rising fresh charcoal imports as a result of this demand. P & N produces a need in the
Canadian market by importing sustainable, high-quality charcoal from Indonesia and
other Asian countries. Companies like P & N productions in Canada now have a chance
to satisfy customer demands and provide a rising market thanks to the popularity of
charcoal-based goods.

Customers need
Charcoal-based skincare products have been more popular in Canada in recent years.
Charcoal's capacity to absorb pollutants and toxins from the skin is only one reason why
its usage in cosmetics has been on the rise. For this reason, many people in Canada
are on the lookout for charcoal-based cosmetics, including face masks, cleansers, and
exfoliators.
The growing public consciousness about the negative effects of conventional beauty
products on human health and the environment has contributed to the meteoric surge in
the popularity of charcoal-based skincare products. Certain conventional cosmetics may
include dangerous chemicals or components; therefore, many shoppers are looking for
greener, safer options. Many people turn to charcoal-based products because they want
to avoid the potentially harmful effects of chemical-heavy cosmetics on their skin.
Many feel that charcoal-based products may help them in a number of ways when it
comes to their skin. Charcoal may help unclog pores and lessen the likelihood of acne
or outbreaks by drawing out impurities and toxins from the skin, such as dirt and oil.
Charcoal has been shown to be effective in exfoliating the skin and removing dead skin
cells, leaving behind supple, healthy skin. Other natural components, including essential
oils or plant extracts, are often used in charcoal-based cosmetics to give even more
benefits to the skin.

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Charcoal-based skincare products are becoming more popular, leading to a rise in the
demand for ethically sourced, high-quality charcoal. As a result, businesses like P & N
productions can now satisfy the demands of Canadian customers by importing new
charcoal from Indonesia and other Asian markets. P & N productions provide Canadian
cosmetic firms with the raw materials required to make charcoal-based skincare
products by obtaining sustainable and high-quality charcoal.

Charcoal-based goods not only have positive effects on people's health and the
environment, but they also provide a novel and eye-catching aesthetic. Products
containing charcoal tend to be jet black or otherwise dark in colour, which may be
aesthetically pleasing and convey an impression of decadence or richness. Those
searching for luxurious and eye-catching skin care items may be drawn to this
distinctivestyle.

Figure: Purchasing capacity of consumers from the target market

(Source: Petruzzi, 2022)

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Identification of suppliers
There are two suppliers named PT Marwa International and Home Charcoal Indonesia
selected by P & N productions for purchasing fresh charcoals from Indonesia. Both
suppliers have branches in Ontario which has helped to make effective collaboration.

Details of PT Marwa International

The company is more focused on supplying products made from raw charcoals rather
than raw charcoals which has helped the wholesaler company to get both raw charcoals
and charcoal-based commodities by making effective partnerships. Products which are
supplied by the company are oil, Activated Charcoal Oil, and cosmetic products which
are mostly used by consumers from Canada. There are some unique products like
virgin charcoals supplied by the company which has increased the demand for products
from the supplier. The quality of products is maintained by the company which has
increased the market size by 14.8% in the Indonesian market (statista.com, 2021). PT
Marwa International is focusing on developing the quality of products by using advanced
technologies of farming which is the main reason behind selecting the supplier.
However, the supplier is used to supply products to both international and domestic
markets which have helped to grow the market size of the company.

Key techniques used by PT Marwa International

Innovation is a key aspect used by the company which is based on the market principle
of mitigating consumer expectations. Therefore, maintaining consistency in quality and
standard is another characteristic of the company which has helped to gain popularity in
the foreign market of Canada (Fatorachian & Kazemi, 2021). P & N productions have
made effective communication with PT Marwa due to establishing a branch in Ontario
which has helped to make direct interactions.

Details of Home Charcoal Indonesia

Another reliable charcoal supplier in Indonesia is Home Charcoal Indonesia which has
gained popularity by supplying standard-quality charcoals to consumers. However, the
supplier is used to producing charcoal on its farms where each process of the
plantation, manufacturing, and packaging are done with the help of skilled employees.
By gathering experience over six years, the company is supplying charcoals in eleven
countries by using advanced technologies and the quality of raw materials needed for
charcoal production. Consumers can get a guarantee from the supplier which has
helped P & N productions to select the company as a potential supplier. Moreover, the
company has a production capacity of 4800 metric tons each year which has helped to
mitigate the demand of consumers from different countries (The best Indonesia
charcoal supplier., 2022). Therefore, analysing the consumption habits of Canadian
consumers, the company has established a physical store in Ontario to make strong
communication with the wholesaler to fulfil the cons.

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Measuring supplier performance

KPI for measuring performance

KPI The process of measurement

Rate of opportunities It depends on the sourcing process and

the capacity of suppliers to supply
products with specific qualities.

The purchasing capacity of P & N Understanding the consumer demand

productions and purchasing capacity of consumers by
the wholesaler of Canada (Sönnichsen,
2020).

Understanding the particular products Analyzing consumers habits in Canada

which are expected by consumers

Understanding legal documents and Keep records of ordering and purchasing

contracts between suppliers and the
wholesaler

Frequent communication and the interest Both the suppliers and the wholesaler
to maintain a supply chain management have to make effective interactions
system through meetings

Profitability of the company Measuring financial statements for

analyzing profitability (Patrucco et
al.,2019).

RFQ of Home Charcoal Indonesia

Details of placing an order by P & N productions
Subject: consolidated the supplier of Home Charcoal Indonesia
The dear, management team of Home Charcoal Indonesia,
I am writing this mail on behalf of the management team of P & N productions to inform
you that I am planning to purchase a large quantity of charcoal and charcoal-based
products from your company to fulfil the demand of consumers from Ontario. There is a
sudden increase in demand analysed by our management team through an effective
market analysis which has created a shortage of charcoals and charcoal products. I am
placing the requirements which I need to fulfil the consumer expectations. High-quality
products are required in each type of commodity which can help to maintain the
reputation of our wholesale business.

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List of products
1. Raw charcoals
2. Activated charcoal powder.
The total amount of product is 1 metric ton.
I am requesting you please approve the order and supply it as soon as possible. Kindly
reply with the quotation which can help to understand the price range of the products
which are ordered.
Receiver quotation
We have received your mail and like to provide you with all the details. It takes some
time to provide you with further details about the order after analysing the availability of
products.
Sender
RFQ of “PT Marwa International”:
Placement of Order by P & N productions
Subject: Supply of charcoal derivative Products
Dear PT Marwa International Management team,
Greetings from P & N productions!
We are pleased to inform you that the management team of P & N productions has
decided to make a strong partnership with your company and for this purpose, we are
seeking to buy various charcoal derivative products from your company. We are
planning to buy a large number of various charcoal products to fulfil the requirements of
the Ontario and Toronto market and hope to increase the business process of the
company in Canada as well. An increase in the requirements of the customers bothers
us to contact one of the best suppliers in the global market. We are attaching the list of
required products and we are hopeful that PT Marwa International is one of the best in
this sector and provides us with high-quality products which will satisfy the demands of
the customers and maintain our reputation in the world market.
Product List:
● charcoal Oil: 2500 Packaged Bottles of 1 Litre
● Activated Charcoal Oil: 2000 Packaged Bottles of 1 Litre
● Desiccated Charcoal: 10,000 Packaged containers weighing 1 Kg of desiccated
charcoal
● charcoal cream: 2,000 Packaged Bottles of 500 ml
Thanks, and regards,
P & N Productions
Receiver quotation
Subject: Supply of charcoal derivative Products
Dear P & N productions Management team

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IBM2012 Capstone project Winter 2023

We have received your details about the requirements for charcoal derivate products. It
will take some time for us to look after the availability of all the products and will surely
supply all your required products within a short time.
Thanks, and regards,
PT Marwa International Management team

Cost estimation
Cost estimation is the process that helps to fix the price of the final products of the
company or products which are supplied from other countries by determining the
manufacturing cost or import cost of the product. As per the view of Nicholson et al.
(2020), the landed cost of the products is estimated for determining the final selling
price of the products which are exported. Additional charges and the charges of logistics
are evaluated in this process to determine the final price of the products in the market.
Business organizations that are working in the wholesale market are required to
determine the landed cost of the charcoals which are imported for the company from
Indonesia. According to Guan et al. (2019), in the process of International trade
conversion, currencies, and fees are calculated to estimate the landed cost of the
product. At first, the companies need to receive a quotation from the supplier with full
details of the products and then it is crucial to determine International freight and then
the rate of currency exchange. According to Salhieh et al. (2019), additional charges
and taxes related to import influences the increase in prices of imported products within
the country.

Supplier Product Unit Unit Price (in Total Sea Final

Quantity Type Canadia FCA Freight Price (in
n Dollar Cost (in Canadia
per Kg) Canadia n Dollars
n per Kg)
Dollars)

PT Desiccat 1000 Kg 1.5 1500 1000 2.5

Marwa ed
Internati Charcoal
onal

Home Desiccat 1000 Kg 1.5 1500 1000 2.5

Charcoal ed
Indonesi Charcoal
a

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IBM2012 Capstone project Winter 2023

Explanation of selecting the supplier

Charcoal provider "PT Marwa International," which operates on a worldwide scale, has
been selected to supply P & N products in Canada. PT Marwa International is the
world's largest exporter of Indonesian charcoals and a pioneer in the creation of
charcoal-based goods. Activated Charcoal Oil, Virgin Charcoal Oil, and Charcoal
Powder are just a few of the charcoal-based goods that PT Marwa International
distributes (Best charcoal exporters in Indonesia. 2022). These items are in great
demand in the global cosmetics market; hence "PT Marwa International" was selected
as a supplier of Indonesian charcoals and charcoal products by Rockwood Search. The
company's "charcoal product," "virgin charcoal oil," and "desiccated charcoal" are all
high-quality cosmetics that have the potential to impact the Canadian cosmetics sector
(Best charcoal exporters in Indonesia. 2022). PT Marwa International also sells charcoal
broomsticks for usage around the home.
The success of the firm's international operations depends on the company's ability to
continue to foster positive relationships with its many stakeholder groups. Customers
can save money because PT Marwa International will cover any fees incurred during
delivery that are not included in the original quote (Best charcoal exporters in Indonesia,
2022). Because of this, the Indonesian firm has been selected as P & N Productions'
primary supplier of charcoal and charcoal-related items in Canada. Moreover, the
company's items are of great quality and may be purchased at reasonable prices (Best
charcoal exporters in Indonesia., 2022). Charcoal for the Canadian market comes from
"PT Marwa International," the industry pioneer in Indonesia, and the company's
consistent quality over the years in the supply process is a major reason for this.
"PT Marwa International" is a frontrunner in the industry due to its use of cutting-edge
technology and innovative approaches to sourcing and distribution (Best charcoal
exporters in Indonesia., 2022). As "PT Marwa International" puts its goods through a
rigorous quality assurance procedure, they are up to the high standards required for
sale on global markets. Maintaining product quality for export is essential; thus, the firm
has invested much in developing its production process (Best charcoal exporters in
Indonesia., 2022). Companies that uphold their social duties in the community tend to
expand both locally and internationally and enjoy a greater share of both markets. The
firm's high-quality dehydrated charcoal has a significant influence on the worldwide
cosmetics industry, and it has helped establish the company as one of the global
leaders in the supply process of desiccated charcoal (Best charcoal exporters in
Indonesia, 2022). As a result of all the above, "PT Marwa International" is the best
option for Canadians looking for charcoal derivative goods. These factors are critical to
the company's ability to increase its sales in the international market and maintain its
position as a worldwide leader in the charcoal business.
Suppliers may more easily prepare for orders using purchase orders since they detail
the exact needs of the purchasers. According to Amengual et al. (2020), purchasers'

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IBM2012 Capstone project Winter 2023

purchase orders function as shopping carts from which they choose things from
vendors. Here you can find P & N Productions' purchase order for charcoal derivative
products from PT Marwa International.

Purchase Order:
Seller: Buyer:
PT Marwa International P & N productions

P&N
Productions
Address: Address:
Jl. Greges Jaya II Blok A-11 Greges, Kec. 7045A Tomken Road, Mississauga, ON
Asemrowo, Kota SBY, Jawa Timur 60183 L5S 1R7
expressgroupind@gmail.com T: (905) 696-0226
+62 812-8747-4074 F: (905) 696-7936
order@p&nproductions.ca

Date: Dispatch Method: Shipment Payment Mode:

February 12, Sea Incoterm: 25% deposit and
2023 FCA the rest will be paid
after the landing of
the goods and
products

Product Code Description Unit Unit Price (in Amount

Quantity Type Canadia (in
n Canadia
Dollars n
per unit) Dollars)

C-Oil charcoal Oil 2500 Package 12 30,000

d Bottles
of 1 Litre

C-V-Oil Virgin charcoal Oil 2000 Package 20 40,000

d Bottles
of 1 Litre

C-Desiccated Desiccated Charcoal 10,000 Package 16 160,000

d as 1
Kg in

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IBM2012 Capstone project Winter 2023

containe
rs

C-Cream charcoal cream or 0 2,000 Package 16 32,000

d Bottles
of 500
ml

Conclusion:
This project is based on sourcing and procurement of charcoal derivative products for P
& N productions in the Canadian Market by the Indonesian suppliers which are “PT
Marwa International” and “Home Charcoal Indonesia ". This project provides an idea
about the business process and vision of P & N productions which is the largest retailer
in Canada along with the backgrounds of suppliers companies and their business
process, vision, and mission statement. This project discusses the requirements of the
customers and the market of the country. This project identifies the suppliers for P & N
productions based on their performance in the international charcoal industry. In the
identification process, this project describes the business process of "PT Marwa
International” and “Home Charcoal Indonesia”. Supplier performance measures for
gaining knowledge about the efficiency of the suppliers and their commitments. This
project provides cost estimation for the import process and determines the final price of
the products. This project concludes with the reason for choosing the particular supplier
for the business process of P & N productions and provides a purchase order.

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Reference List:
Amengual, M., Distelhorst, G. and Tobin, D., 2020. Global purchasing as labor
regulation: The missing middle. ILR Review, 73(4), pp.817-840.
Bag, S., Gupta, S., Kumar, S. and Sivarajah, U., 2021. Role of technological dimensions
of green supply chain management practices on firm performance. Journal of Enterprise
Information Management, 34(1), pp.1-27.
Benton Jr, W.C., 2020. Purchasing and supply chain management. Sage Publications.
Fatorachian, H. and Kazemi, H., 2021. Impact of Industry 4.0 on supply chain
performance. Production Planning & Control, 32(1), pp.63-81.
Guan, C., Yahalom, S.S., Germanakos, L., Lapage, S. and McKeever, B., 2019. Global
soybean trade, supply chain and tariffs. WIT Transactions on the Built Environment,
187, pp.239-250.
Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2020. Purchasing
and supply chain management. Cengage Learning.
Nicholson, C.F., Harbick, K., Gómez, M.I. and Mattson, N.S., 2020. An economic and
environmental comparison of conventional and controlled environment agriculture
(CEA) supply chains for leaf lettuce to US cities. Food Supply Chains in Cities: Modern
Tools for Circularity and Sustainability, pp.33-68.
Patrucco, A.S., Luzzini, D., Moretto, A. and Ronchi, S., 2019. Attraction in buyer–
supplier relationships: Improving supply network performance through purchasing
recognition and proficient collaboration initiatives. Business Process Management
Journal, 25(2), pp.347-367.
Salhieh, L., Mdanat, M., Al-Shboul, M. and Samawi, G., 2019. Transportation landed
cost as a barrier to intra-regional trade. Journal of borderlands studies, 34(1), pp.89-
103.
Sönnichsen, S.D. and Clement, J., 2020. Review of green and sustainable public
procurement: Towards circular public procurement. Journal of cleaner production, 245,
p.118901.
Websites
Best charcoal exporters in Indonesia (2022) PT MARWA International. Available at:
https://charcoalexporters.com/ (Accessed: February 16, 2023).
Petruzzi, D. (2022) Cosmetics market value canada 2021, Statista. Available at:
https://www.statista.com/statistics/814648/cosmetics-market-value-canada/ (Accessed:
February 16, 2023).
The best indonesia charcoal supplier (2022) Home Charcoal Indonesia. Available at:
https://homecharcoal.com/ (Accessed: February 16, 2023).

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