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Why global sourcing?
- Apparel products are labor intensive
- US has high labor costs
- Over 90% of US apparel now produced offshore
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Advantages to sourcing to Japan, HK, Taiwan, and S Korea
- Lower labor rates
- Strong political ties
- Large English-speaking population
- Developing infrastructure
- Sympathetic govts (foreign investment)
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Role of product developer in sourcing
- Small companies = total responsibility
- Mid-size companies = may have sourcing dept who reports to merchandiser
- Large companies = often have their own production department
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External manufacturing approaches
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Benefits to CMT manufacturing approach
- Flexibility of fabric changes
- Reduced investment (fabric is only cost)
- Control over design and fabric resources
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Benefits to full package manufacturing
- Limited tech knowledge needed
- Limited investment (no fabric costs)
- Limited commitment to a resource
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Advantages to domestic sourcing
- Flexibility due to changes in style trends
- Quick response
- Can meet short-term requirements
- Lower support costs
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Advantages to offshore sourcing
- Labor costs
- High productivity (more hours worked)
- One stop shop
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Hidden costs for offshore production
- Lower inventory turns
- Inability to replenish stock
- Markdowns due to inability to adjust orders
- Higher support costs (travel, etc)
- Shipping delays (customs, quotas, backlog of shipments)
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Factors in sourcing decisions - COST
- Should cost be the only factor?
- What support structure do I need if I source offshore? - agents, legal and banking, travel issues, etc.
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Factors in sourcing decisions - CAPACITY
- Financial
- Plant space
- Workforce
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Factors in sourcing decisions - MINIMUMS
- What are they?
- Critical factor for companies who produce smaller runs
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Factors in sourcing decisions - LABOR SKILLS & EQUIPMENT
- Specialized sewing techniques
- Specialized machinery
- Factory expertise
- Contractor evaluation form
- Labor force (piece work or hourly, skill)
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Factors in sourcing decisions - INFRASTRUCTURE
- Roads
- Communications
- Sea access
- Politics
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Factors in sourcing decisions - THROUGHPUT AND LEAD TIMES
- Production efficiency
- Better factories get booked first (must book early)
- Factory's QR abilities (communications)
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Factors in sourcing decisions - QUALITY
- Trade price for quality
- Factory visits
- Communications of standards
- QC audits
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Factors in sourcing decisions - COMPETITION
- Where are they sourcing?
- Do we follow or lead?
- Where is the next production "nirvana"?
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Factors in sourcing decisions - DISTANCE
- Shipping times
- Ocean versus air shipping (cost comparison)
- Support team travel
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Factors in sourcing decisions - GOVT REGULATIONS
- Quotas
- Duties
- Most favored nation status
- QIZ
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Quotas
- Limit on product imported to US
- Unlimited for WTO members
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Qualifying Industrial Zones (QIZ)
- Industrial parks that house manufacturing operations in Jordan & Egypt
- Special free trade zones established in collaboration with Israel to take advantage of the free trade agreements between the US and Israel
- Goods produced in QIZ-notified areas can directly access US markets without tariff or quota restrictions
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Factors in souring decisions - HUMAN RIGHTS
- Human rights compliance
- Child labor
- Forced labor
- Health and safety
- Discrimination
- Working hours
- Compensation
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International business paradigms
- Understanding culture and language
- Cannot apply US business and cultural practices to the global community
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Factors in sourcing decisions
- Cost
- Capacity
- Minimums
- Labor skills & equipment
- Infrastructure
- Throughput and lead times
- Quality
- Competition
- Distance
- Govt regulations
- Human rights
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Domestic sourcing process
- Contract procedures manual
- Research
- Review of potential sources
- Analysis of factors
- Initial process
- Contract and initial order
- Follow up
- Final quality inspection
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Domestic contract procedures manual
- Template for planning and control
- Basic checklist for domestic production process (from raw materials to finished goods)
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How do we find domestic contractors?
- Trade associations
- Govt agencies (chamber of commerce)
- Fabric suppliers
- Internet
- Industry ("word of mouth")
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Factors to evaluate in review of potential domestic sources
- Plant details (machinery, capacity, etc)
- Management setup
- Financial position
- Labor force
- Warehousing
- Finishing and shipping capability
- Industry references
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In choosing a domestic source, must keep in mind...
- What are we making?
- Who is our customer?
- Price vs. quality vs. delivery
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Initial process after selecting a source
- Spec sheet review
- Pre-production sample
- Price quotas
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Contract and initial order
- Typical to have no contracts in apparel industry
- Clear written understanding of expectation (delivery, price, payments, standards, procedures, etc)
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International sourcing process
- Contract procedures manual
- Research
- Sourcing agents
- Review of sources
- Analysis of factors
- Specs, samples, and prices
- Follow-up
- Final quality inspection
- Shipping and importation
- Customs clearance
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What can make international sourcing more difficult than domestic?
- Typically more options making the selection of the "right" factory potentially harder
- Distance, language, and customs
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International contract procedures manual
- Template for planning and control
- Basic checklist for domestic production process (from raw materials to finished goods)
- Labeling requirements
- Quota availability
- Human rights and social compliance
- Shipping
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How do we find international contractors?
- Consulates
- Trade associations
- Fabric suppliers
- Trade shows
- Travel to the region
- Internet
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Sourcing agents
- Represent multiple clients in a region
- Invaluable in region experience
- Communication and culture experts
- Paid as a % of FOB amount
- Is LDP pricing possible?
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Factors to evaluate in review of potential international sources
- Country infrastructure
- Human rights
- Quota
- Communications
- International business paradigms
- Consumer perception of region
- Industry references
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In choosing an international source, must keep in mind...
- Cost - FOB
- Equipment assessment
- Throughput time
- Quality
- Govt regulations
- Matrix for analysis (rates all factors)
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Final quality inspection of internationally sourced product
- Certificate of Inspection
- QC upon receipt
- Regional QA centers
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Customs clearance
- Can take 5 days
- Value of goods
- Proper labeling
- Prohibitive items?
- Correct documents
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SUMMARY of sourcing
- Price vs. delivery time
- Option of "blended sourcing"
- WTO membership
- Increased technology for offshore producers decreases lead-times
- Cost of garment should not be the sole factor in sourcing
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