SOURCING

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Author:
hayleyjo2
ID:
154328
Filename:
SOURCING
Updated:
2012-05-16 22:43:41
Tags:
PD Final
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Description:
FIT product development final PART 3
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  1. Why global sourcing?
    • Apparel products are labor intensive
    • US has high labor costs
    • Over 90% of US apparel now produced offshore
  2. 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)
  3. 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
  4. External manufacturing approaches
    • CMT approach
    • Full package
  5. Benefits to CMT manufacturing approach
    • Flexibility of fabric changes
    • Reduced investment (fabric is only cost)
    • Control over design and fabric resources
  6. Benefits to full package manufacturing
    • Limited tech knowledge needed
    • Limited investment (no fabric costs)
    • Limited commitment to a resource
  7. Advantages to domestic sourcing
    • Flexibility due to changes in style trends
    • Quick response
    • Can meet short-term requirements
    • Lower support costs
  8. Advantages to offshore sourcing
    • Labor costs
    • High productivity (more hours worked)
    • One stop shop
  9. 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)
  10. 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.
  11. Factors in sourcing decisions - CAPACITY
    • Financial
    • Plant space
    • Workforce
  12. Factors in sourcing decisions - MINIMUMS
    • What are they?
    • Critical factor for companies who produce smaller runs
  13. Factors in sourcing decisions - LABOR SKILLS & EQUIPMENT
    • Specialized sewing techniques
    • Specialized machinery
    • Factory expertise
    • Contractor evaluation form
    • Labor force (piece work or hourly, skill)
  14. Factors in sourcing decisions - INFRASTRUCTURE
    • Roads
    • Communications
    • Sea access
    • Politics
  15. Factors in sourcing decisions - THROUGHPUT AND LEAD TIMES
    • Production efficiency
    • Better factories get booked first (must book early)
    • Factory's QR abilities (communications)
  16. Factors in sourcing decisions - QUALITY
    • Trade price for quality
    • Factory visits
    • Communications of standards
    • QC audits
  17. Factors in sourcing decisions - COMPETITION
    • Where are they sourcing?
    • Do we follow or lead?
    • Where is the next production "nirvana"?
  18. Factors in sourcing decisions - DISTANCE
    • Shipping times
    • Ocean versus air shipping (cost comparison)
    • Support team travel
  19. Factors in sourcing decisions - GOVT REGULATIONS
    • Quotas
    • Duties
    • Most favored nation status
    • QIZ
  20. Quotas
    • Limit on product imported to US
    • Unlimited for WTO members
  21. 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
  22. Factors in souring decisions - HUMAN RIGHTS
    • Human rights compliance
    • Child labor
    • Forced labor
    • Health and safety
    • Discrimination
    • Working hours
    • Compensation
  23. International business paradigms
    • Understanding culture and language
    • Cannot apply US business and cultural practices to the global community
  24. Factors in sourcing decisions
    • Cost
    • Capacity
    • Minimums
    • Labor skills & equipment
    • Infrastructure
    • Throughput and lead times
    • Quality
    • Competition
    • Distance
    • Govt regulations
    • Human rights
  25. 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
  26. Domestic contract procedures manual
    • Template for planning and control
    • Basic checklist for domestic production process (from raw materials to finished goods)
  27. How do we find domestic contractors?
    • Trade associations
    • Govt agencies (chamber of commerce)
    • Fabric suppliers
    • Internet
    • Industry ("word of mouth")
  28. 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
  29. In choosing a domestic source, must keep in mind...
    • What are we making?
    • Who is our customer?
    • Price vs. quality vs. delivery
  30. Initial process after selecting a source
    • Spec sheet review
    • Pre-production sample
    • Price quotas
  31. Contract and initial order
    • Typical to have no contracts in apparel industry
    • Clear written understanding of expectation (delivery, price, payments, standards, procedures, etc)
  32. 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
  33. 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
  34. 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
  35. How do we find international contractors?
    • Consulates
    • Trade associations
    • Fabric suppliers
    • Trade shows
    • Travel to the region
    • Internet
  36. 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?
  37. Factors to evaluate in review of potential international sources
    • Country infrastructure
    • Human rights
    • Quota
    • Communications
    • International business paradigms
    • Consumer perception of region
    • Industry references
  38. In choosing an international source, must keep in mind...
    • Cost - FOB
    • Equipment assessment
    • Throughput time
    • Quality
    • Govt regulations
    • Matrix for analysis (rates all factors)
  39. Final quality inspection of internationally sourced product
    • Certificate of Inspection
    • QC upon receipt
    • Regional QA centers
  40. Customs clearance
    • Can take 5 days
    • Value of goods
    • Proper labeling
    • Prohibitive items?
    • Correct documents
  41. 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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