Production Solutions: Sourcing Tips Smaller Enterprise

7/1/2005

Here is some advice to help small- to mid-sized apparel firms make the right choices as they forge a global sourcing plan.

after months of creative product development, a medium-sized retail chain is late to market with merchandise bearing its private label, and sales falter. At the same time, a small niche fashion brand is on the shelf one week early at competitive prices, and reorders abound.
What is the driving factor behind these very different outcomes? An integrated, effective sourcing strategy, or lack thereof, often spells the difference.

In this ultra-competitive marketplace, small- to medium-sized producers and retailers are plunging into the global sourcing arena alongside the industry's giants. And they are finding a world that can be very perplexing, with many choices. From which country do you source? How do you manage lead times? How do you control quality?

You must make the right choices, or you may face late deliveries, high costs, unacceptable quality and even business failure.
Let's take a look at some of the basics that are critical to reaching the best sourcing strategy.

How do I get started?
First, there are various sourcing shows throughout the world that you can attend to meet with many suppliers from multiple countries assembled in one location. These shows provide a great perspective on the diversity of suppliers -- large, small, vertical, women's, men's, children's, etc. In addition, trade associations often plan trade missions to targeted countries, where you can meet specific suppliers and government officials to learn more about the sourcing opportunities and issues inherent in that country.

Where in the world do I source?
The answer to this question is usually the first major decision in any sourcing strategy. Many assume that China is the answer, based on the explosion of imports from that country since quotas were lifted. China must certainly be considered, but it is not always the answer. Other strategic regions that should be considered are Central America, Eastern Europe and South Central Asia. You can mitigate risks by employing a portfolio strategy of sourcing, in which you are not overly dependent on one country or region.

In choosing a region of the world and country from which to source, you should consider several strategic factors, including price, turn time and management. It is a common pitfall to determine your sourcing location based on the lowest price quote. There is no doubt that price is an important factor, and it must be at the forefront of your sourcing strategies. But other factors, such as lead times, may dictate that you should source from a country close to your market for quick response and replenishment. You also cannot overlook your potential sourcing partner's management control and the ability to respond quickly to operational issues, such as quality control. A company that carefully considers all of these factors will make successful sourcing location decisions.

Do I need an agent?
The benefit of using an agent typically is to avoid internal staffing costs and excessive travel expenses. For many small companies on a limited budget, agents may be the best choice. However, a major challenge in working through sourcing agents is the difficulty in building a long-term partnership with the supplier base. Direct communication with factories is limited, and this can be frustrating when information flow is time critical.

What capabilities do I need Stateside?
Whether you use an agent or source directly, you must build a sourcing organization in-house that can manage the process. Critical skills required in this organization include merchandising, product development, production planning, quality assurance, transportation and logistics. It is also very important to have someone on the team who has an in-depth knowledge of textile and apparel manufacturing, so that you can make your own assessment of whether a potential supplier is capable of producing your products.

Will an overseas office eventually be necessary?
After you build up some sourcing volume, you must decide whether to open an overseas office. Regional offices offer definite advantages, especially when it comes to building long-term relationships with your suppliers. Information flow and decision implementation are faster. But to justify an overseas office, you must calculate the financial break-even point. Simply put, your firm must determine if the cost of maintaining and staffing a regional office will cost less than managing the sourcing function from a central headquarters. One note of caution here is that you must understand local customs, cultural issues and business practices in recruiting, staffing and managing the regional office.

How do I keep tabs on things?
Finally, the successful execution of a sourcing strategy must include tenacious monitoring and follow-up with your suppliers. The strongest sourcing companies deploy a production and inventory tracking system that is linked to all of their suppliers. Maintaining visibility of the product as it flows through all stages of the supply chain is critical to timely deliveries and inventory control. There are many sourcing software packages on the marketplace, although some apparel companies opt to develop proprietary solutions internally.
There is no question that small- and medium-sized producers and retailers must aggressively pursue global product sourcing. To be successful in this initiative, you must clearly define the sourcing strategy, and then implement it efficiently and authoritatively. With every new season, this strategy should be reviewed, modified and reinforced for continued success.

J. SCOTT MOSTELLER is the founder of Marietta, GA-based FHG Consulting LLC, where he specializes in strategic planning, supply chain optimization, operating unit turnarounds and global outsourcing. A graduate of Harvard Business School and Georgia Tech, he has more than 18 years of global supply chain experience, and has held various senior-level operating roles, both domestically and internationally.
He may be reached at tel.: 678-637-7842 or [email protected].

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