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Sourcing is the practice of procuring products made elsewhere, usually in plants owned by others.
A company’s sourcing strategy is determined by its strategic plan and marketing strategy. Sourcing decisions must support performance targets in terms of product, quality, price, and timing. Companies must determine what functions to source & where to source them in order to maximize their marketing strategy.
.). store brand. . etc. private label. quality.. brand (branded.Evaluating Core Competencies A company’s sourcing requirements depend on the core competencies of its product development team. design. Type of product. etc. fabric sourcing.
Make. refers to special customs regulations that allow garment components that are shipped offshore for finishing (after which the completed garments are reimported) to qualify for special trade benefits. . and Trim (CMT) Full-package Suppliers Outward Processing.Sourcing Levels Cut.
Rule 807A Rule 809 . and then imported back into the United States. is cut to shape in the U.S. exported abroad for assembly. Tariff Schedule that provides a duty reduction whenever fabric. Rule 807 refers to a part of the old U.S. regardless of its origin.
A shared ownership of facility with a business based in another country. Domestic Licensing International Licensing .Sourcing Options Domestically owned manufacturing facilities Domestic Contracting The trend toward Offshore Sourcing Offshore Contractors Owned offshore Production Facilities Joint Ventures.
International Trade Policy - A brief History of International Trade Policy Tariff and Quota. Bilateral Agreements. General Agreement on Tariffs & Trade (GATT) The Current Status of International Trade Policy World Trade Organization (WTO) Regional Trade Blocs NAFTA. CFTA. - - .
Evaluating Sourcing Options. Vendor Evaluation Criteria Political Stability & Economic Climate Proposed Country’s Infrastructure Sourcing Costs Quality Standards Production Capabilities Response Time Working Conditions Channels of Communication .
To be successful in the global market. which generates the following expenses: . A typical mistake is to make the decision based solely on a comparison of domestic manufacturing cost and the landed duty paid cost of importing the product. a buyer needs a well established support structure.Cost The primary issue for most of sourcing companies is COST.
agent or staff Legal consultants Merchandising and manufacturing technical specialists Custom broker Banking charges . Computer and telephone link Courier service Buying office.
A good sourcing executive should carefully evaluate a potential contract partner for: ■ Financial Capacity ■ Plant Space Capacity ■ Available Workforce Capacity .Capacity Capacity is an important consideration when a potential sourcing alternative is being evaluated.
Most of the contractors will not accept orders for fewer that a specified number of units per style and color.Minimums Not only must a company be considered about how much volume a contractor can handle. that is minimum order quantities. but it must also be concerned with how little. Minimums vary by country & contractor. .
. which lists an inventory of equipment.Labor Skills Since performance in apparel manufacturing depends mainly on the skills of the sewing operators and the adequacy & the quality of equipment. operator skills assessments. can be used to analyze the capabilities of the contractor. that is labor and equipments. A formal contractor evaluation form. the buyer must carefully evaluate the contractor’s true capabilities. & production capacities.
However. Unfortunately. choosing them as a sourcing partner may prove costly. sufficient capacity and appropriate skills & equipments. . if their country doesn't have an adequate infrastructure.Infrastructure Many international contractors can provide low cost labor. in most third world countries the developing infrastructure lags behind sewing capability. Infrastructure is taken for the granted in developed countries.
material suppliers and shippers. Road and transportation can also be an critical factor in moving raw material & finished products as well as getting the workers from remote villages to factory sites. it must carefully analyze the infrastructure and the other factors including the following: Availability of quality raw materials. Availability and reliability of electric power. . trims and packaging suppliers and the testing laboratory for testing the same. When an apparel company is considering a new global sourcing supplier.
Throughput Time As fashion change more frequently than they used to. merchandisers must meet the needs of their customers by improving service and delivery with faster total throughput time (The time it takes for a production order to be processed from authorization to shipping). One factor that affects throughput time is the type of production system used. .
The better international contract factories are usually fully booked early in a new production season. . Therefore. Other considerations are the distance from the distribution site to the factory. the transportation system available & the levels of Government bureaucracy required to import raw materials. orders must be placed with these factories well in advance of actual start of production. which may add weeks or months to the total throughput time.
. the quality of garments produced in Honk Kong. Taiwan and Korea improved to the point where many customers look at the labels as a sign of high quality.Quality Quality standards are of great concern to the executives making sourcing decisions. Decades before. product quality has improved as developing countries mature as manufacturing resources. the label “Made in Hong Kong” denoted cheap prices & poor quality as far as apparel product is concern. Historically. Over the years.
Merchandisers must be very careful not to trade price for the quality. The average wages of sewing operators has increased by almost 900 percent. labor costs skyrocketed in these countries. . Low cost cannot be compensate for poor quality and the effect of poor quality will have on a company’s reputation. As the quality improved. Sample garments do not always reflect the production quality at a factory.
.Competition There is constant pressure to find the next “ideal” sourcing location. It is important to “keep an eye on the competition” when it comes to selecting the next sourcing opportunity. A company can either be a leader in developing new sourcing suppliers or follower.
has a good infrastructure. & is easily accessible by air and sea. A follower must know exactly when to jump into a new sourcing arena in order to keep up with the leaders. A leader must find the next “virgin territory” – one that has low cost skilled labor. is capable of meeting quality requirements. . has qualified local management. has a stable government.
.Distance Another concern to sourcing executives is the distance from the overseas contractors to domestic distribution centers and support personnel.
laws and complex reporting procedures related to the importation of apparel products. Constant changes in regulations & procedures make the job even more of a challenge.Government Regulations There are myriad of government treaties. . tariffs.
Duty Duty is a tax charged by the government on imported products. Another word for duty is tariff. .
Developing countries are usually fraught with problems of a political & economic instability. Hong Kong.Political and Economic After experiencing the relative stability of Japan. . Taiwan and South Korea. global sourcing has had to follow a risky path through developing nations in order to find the lowest labor cost.
Human rights issues that are of specific concern to the apparel industry are : ► Child Labor ► Forced Labor ► Healthy and Safety . humanely and ethically.Human Rights Human rights are the basic rights of all human beings to be treated lawfully.
►Freedom of association and the right to collective bargaining. ►Discrimination ►Disciplinary practices ►Working hours ►Compensation Human rights issues are being addressed by many apparel companies and organizations through social accountability statements and standards. .
The Role of Sourcing in Product Development As soon as the merchandising plan is finalized. fine-gauge or bulky sweaters. shirts. or tops all affect the sourcing partners utilized in a given season. the sourcing team begin to line up seasonal production capacity. blouses. . Decisions as to whether the line will focus on wovens or knits.
The sourcing team may also be present during editing of the line to point out styles that are risky in terms of quality. or price. . Contractor prices are generally quoted as free on board (FOB). The sourcing team tracks costs from initial estimates through changes in development to final production. Any time a design is modified throughout the design process. the sourcing team must be in the loop to assess how the change may affect scheduling or price. timing. & it negotiates or calculates the price for the landed garments.
Future of sourcing Sourcing options will be easier to locate in the future with the advent of electronic sourcing networks. .
Keiser. Garner . The Synergy of Apparel Product Development. Myrna B.Reference Book Beyond Design. Chapter 13. Sandra J.
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