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Sunday, August 17, 2008

A logistics perspective on apparel outsourcing

This article clip on apparel is from a logistics perspective. Logistics is all about the chain stretching from order placement, design, materials, manufacturing; to order delivery. Clearly, outsourcing is not the cure-all for ills affecting US apparel retail and manufacturing. Although the setting here is the global stage the issues and their solutions are real for local independent enterprises and independent retailer networks, too.

These three things stand out about outsourcing:

The pursuit by apparel companies for lowest prices continues.
The problems of contractor turnover.
Poor apparel/contractor relationships translate into poor product quality.

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Strengthening Outsourcing Relationships
Apparel companies' relationships with contract manufacturers in low-cost countries have historically been transient. Deals sometimes last only a few months as brands continuously pursue the lowest cost. On average, one-third to three-quarters of an apparel company's contractor portfolio turns over every year.
But this relationship-hopping comes with a price: poor product quality and contractors who are unwilling to invest in enhancing operations.
"Flitting from contractor to contractor hinders flexibility, hurts quality, and invites social compliance and visibility risk," says David Aquino, research director of the Industry Value Chain Strategies Service at AMR Research, Boston.
Some brands are ameliorating this risk by taking a more strategic approach and pledging longer-term commitments. They're also putting more feet on the ground -- either their own local personnel or in-country logistics or sourcing partners.

They're hoping a rationalization of suppliers and longer-term deals will build the trust required to spur contractors to invest in technology and equipment, boost quality, and prioritize their work.
Apparel companies are also setting up supplier portals to enhance long-distance communications. The most successful companies build global sourcing infrastructure slowly and methodically, rather than rushing in, Aquino says.
"We prefer to stay with the factories we have good relationships with," says Lisa Kuhns, account manager at The S Group, Portland, Ore., which maintains offices in major production countries to offer a local presence to apparel companies lacking the resources to build infrastructure themselves.
"Having strong relationships gives us better negotiating power, and helps hold down prices on behalf of apparel companies," Kuhns says.
In addition, apparel companies are getting more involved in raw materials sourcing, a task previously left to contract manufacturers. It's a strategy designed to shore up quality, which tends to suffer in the move from factory to factory.

Pinpointing New Low-Cost Countries
Rising prices in southern China are driving apparel companies to new low-cost locations throughout Asia, and focus has begun to shift to African and Pacific Island countries. But sourcing from these countries can be risky because they lack apparel production training and infrastructure.
"Critical mass has to build up before large air and ocean carriers can offer fixed-day service out of a new location," says Tom Wyville, vice president of marketing for FMI, a Carteret, N.J.-based 3PL.
It's a challenge to move to less costly, industrialized areas without higher transportation costs wiping out the savings. 3PLs and sourcing partners are helping apparel companies by opening local offices that offer services to hold down logistics costs and provide visibility and quality control. Logistics strategies include blocking out space with air and ocean carriers and operating consolidation centers.
But the number of new sourcing locations is finite. "The world is round, and eventually you come back to where you started," notes Mark Cohen, CEO of Tracy Evans Ltd., an apparel company that has returned to sourcing from Central America after a brief shift to Asia.Smart apparel companies operate multiple supply chains, balancing near-shore with distant sourcing locations, and maintaining reserve capacity to meet unexpected demand.

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