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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Hot Topics in Apparel

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.

Apparel: Uncompromising quality?

Quality is job one.

Ford is not the only one with that goal. Local independent apparel retailer owners want to hold a tight-rein on uncompromising quality. But, how accurate is the reality, really?

Retailers rely on manufacturers and suppliers for merchandise to stock their boutique inventory. Typically, this results in retailers stockpiling more inventory than they care. The hope is for a complete sale of all inventory in right size, fit, color, fabric and style to satisfied customers.

So, if quality is defined as the complete presence of size, fit, color, fabric and style are these elements within the control of the local retailer?

I do not wish to disparage manufacturers, but can local retailers fare better in their control of quality with local production?

I have often posed the question:

What's the difference between an upscale dress on the rack at Neiman-
Marcus or Nordstroms and the local independent apparel retailer?
Except for the location and price, none. The same individual who
assembled the Neiman-Marcus dress on the manufacturing floor assembles
the same dress as an at-home independent contractor/entrepreneur for the
local retailer.

Who makes up such a local production core? You can count displaced, experienced apparel production workers among the over 40 million the Home Sewing Association
who sew in their homes. The HSA cannot say whether it is for profit or leisure.

How many of those 40 million people do you think live in your city?
How many do you suppose would enter into a profitable at-home enterprise that allows them to utilize their resources and be creative?
Do you suppose there may just be the number of quality contractors you need for your local dress production?
Do you operate with a 7 to 14 day customer fulfillment window because that's what it takes for your supplier to fill and ship your order?
How much smaller a window would your local contractor enable for your business delivery to your customers?
TSR, Inc. is committed to the development of Independent Contractor Networks together with Independent Apparel Retailers. IC-Networks are local, regional,
state and nationwide. They are more than a social club. They consist of a membership with a wide variety of resources, that is, Knowledge, Skills and Experience
in apparel. They generate income for all members.

A tale of two retailers

Here's a short tale, in two scenarios, of two local apparel retailers. Which one describes your story?

Scenario One

You close shop for the day.

1 You travel to Dallas.
2 You spend the day shopping supplier for the right item and price for your boutique.
3 Among your purchases: one dress at $50 to resell at $120, a 140% markup to yield a $90 profit.
4 Once back at your boutique you drive sales to recover your investment with a a profit.

If number 3 above before you count on that $90 profit take into account a day's closed shop, expenses (fuel and food, plus the $50 out-of-pocket) and number of days the dress is on the rack before it sells.

Scenario Two

You determine to have your dresses made locally:

1 You create your own dress pattern, or
2 You retain a contract service provider (independent contractor) to create your pattern you, or

3 You deliver the dress (whether from a thrift shop, mom's attic or discount store) to a skilled pattern-maker or seamstress who disassembles the dress and creates a pattern with whatever modifications you wish to include.

4 You make a choice of two or three different fabrics.

Leverage your tax-free, resell and discount purchase power on fabric buys. Different fabric choices allow for price choice. Additionally, because the finer the fabric the more challenging to work with you turn certain fabric jobs over to those individuals you know can handle it. You, and your other asemblers, can do quite well with the other fabric choices, still.

5 You retain a contract service provider (or do it yourself) to cut dresses segments for at-home assemblers.
6 At-home contractors assemble your dresses as you receive orders.

If you choose 2 or 3 above you compensate the individual upfront or agree to share sales profit percentage.
If you choose number 5 and compensate the assembler between $30 and $50. You may ask, "What have I saved by not shopping a supplier?"

The difference is you are not stockpliling inventory and you have a quick return on your investment because you have a customer need to fulfill.

You are able to offer the same supplier's dress for considerably less with a considerable profit margin in your accounts ledger, still.

You may also say, "A highly skilled, experienced dressmaker is not going to make a dress for that kind of money." You're right. So, don't go there. There are other highly skilled, experienced individuals who will assemble, in the comfort of their home, at their pace for that kind of money, not minimum wage or cash employees.

If number 6 consider your own local, regional, state and nationwide network of independent contractors. They are not your employees. It is more than a social "dressmakers club", but a source of income for the individual contractors as well as yourself, a pool in ever increasing numbers of others with the Knowledge, Skills and Experience anyone in the network may need to meet their contract expectations, and, yes, the priceless opportunity of an enviroment to interact with your peers.

We know where America's manufacturers have gone and they continue to turn to in the face of labor costs and operating expenses. Where do you go? Who do you turn to that will ensure not only that you survive, but thrive because you acted wisely together with others?

Making enough money

A friend enquired after church wanting to know about my apparel business. After hearing my tale and with a bit of bewilderment in her face she confided. Seems she is quite talented in terms of making apparel as well as purses (or handbag, forgive me ladies, but I won't profess to know the difference).
She does not do it out of need, but simply because she can and is able to immerse herself in the creative garden of her imagination.
It's the reality that intimidates her.
"I'm not sure that I could make enough money to make a living at it" she says.
Therein lies a vastness of doubt and aloneness, not that my friend is a person of doubt or aloneness, but that there are so many people with similar talent as her, and,_ doubt.
True. It's the exceptional person who can go at it alone, with doubts and all, and come out doing quite well for themselves financially.
Herein is the good sense of Independent Contractor Networks. Although I have been told lately "designer" is actually the more accurate word than "contractor" either way I am talking about:
An individual who makes apparel in
their home either by themselves or
with someone else for a retailer.
When one or both of them are in the Network they are in business for themselves, but not by themselves. How can you put a price tag on being in an environment and part of a Network where you interact, share coffee or a meal and exchange ideas and business projects with designers and retailers?
PLEASE! Do not misunderstand the IC-Network model. It's not just a social club of apparel makers. IC-Networks extend to many other areas including computer builders, satellite dish installers and more. This is a Network that generates income for you in addition to what you yourself make personally with your own hands.
What you need to decide for yourself is how important it is to you and your family that you find and take advantage of the means that will make enough for you to make a living. . .and then some.
Thought of the day shared with a friend: Man shall not live on bread alone, but by every word that proceeds from the mouth of God.

The Cost of Services

Talking about someone else's pay is not in my comfort zone. However, when I see independent contractors (IC) and independent retailers (IR) hurting and hear the subject of their cost-of-service I think both need to review their prices. Otherwise, both will continue to cut themselves out of much bigger markets. There are no state or government agencies or laws which can force a change. It must come from the individuals involved. Although my references are to apparel the principal of these observations with recommendations on cost of services have broader application across other areas where Service Providers and Service Recipients conduct business.

The Independent Contractor Service Provider Model

Independent contractors, as Service Providers, tend to structure their service rate on an hourly pay schedule. Often, this rate is based on the top hourly pay he/she received after many years in the industry. A little extra something is added to round it off at about $20. As an example, a 2.5 hour apparel job is priced for the IR at $50. It is a lack of understanding of the resale business on the part of the IC to think the IR can move merchandise on the IR's floor priced far beyond a competitive price and earn a profit. The IR would need to resale the item at a minimum of $51 to regain their $50 plus $1 profit. This is not realistic. ICs overlook the IR's overhead costs (rent, electricity) as part of the reason for the IR's markup. Yes, IC's pay rent too, but more on that later.

Typically, IC fabric purchase prices, for example, are neither bulk nor wholesale. The IC service rate problem is that it comes from an employee experience versus the at-home entreprenuerial environment. They are not the same, for example, the apparel employee who earns $10/hr versus the entrepreneur who charges $10 for a single apparel item. The employee is obligated and commited to an 8 to 5 workday with all the behaviorial expectations including a set break time, lunch, productivity and more. The at-home entrepreneur has nobody to tell him/her how many times he/she steps away from that apparel project to run to the refrigerator, play with their child, visit a friend, talk on the phone, watch TV or run to McDonalds'. The IC knows when the IR expects delivery.

If the IC can do it in 2 hours, but chooses to stretch it out to 8 hours that is the IC's business and nobody else's, this is, to borrow from the popular Mastercard commercial, "priceless".

The Independent Retailer Service Recipient Model

Despite the fact of the independent retailers small size they are treated by merchandisers like major buyers in their apparel purchase. This treatment creates a financial burden large amounts of cash are tied up in inventory. Also, a physical burden is created because of the space these bulk purchases take up in their small boutiques. I believe this treatment and financial burden affects the IR treatment and compensation of ICs for their services. The IR's payment as Service Recipient is based on, or biased, by the bulk low prices they pay merchandisers. That is, the low bulk price they pay the merchandiser is reflected in what they pay for the IC's cost of service.


The IR service rate problem is that IRs often come from the employer experience and tend to regard the IC as an employee. The reality is ICs are on par with IRs from an entreprenuerial perspective, that is, ICs are business people just like IRs. The types of places of business
location, one earns their livelihood in a boutique, another earns their's in their home makes no difference on business status. Terms of compensation for cost of service should be discussed and agreed upon by two people, not one. The relationship between IC and IR is strengthened by mutual respect. Quality of timely delivery of goods and just compensation for services rendered is the best evidence of that mutual respect, because as noted earlier, ICs pay rent, too.


A Competitive Scenario Model

It does not matter how big the competition there is always a way to compete profitably. Is it possible for ICs and IRs to compete against the giant retailers' $10 price tag for a single apparel item? Yes, IF they work together.

That low $10 price cannot hide the retailer's enormous overhead costs including, business insurance, employee benefits, electricity, water, rent and more. Still, that's the magic number ICs and IRs must and can beat because they do not have all these costs. Once the IC gets past the initial setup time involving patterns its up to him/her how fast and many times they replicate a single apparel item to beat the retailers $10 price.
However, if the IC decides to sell to the IR at the $10 price, how can the IC expect the IR to stay competitive and profitable?

Independent Retailers, for your part, if you receive the IC's apparel goods at half the $10 price tag do you resale to match the competition or markup in excess of the $10.

If you markup in excess of the $10 price would you do so as well in how you compensate your IC, that is, your Service Provider?

The biggest retailers and suppliers know they have got to work together on price and delivery if they are to survive, thrive, stay competitive
and be profitable.

This is just as true of the smallest Independent Contractor and Independent Retailer when they network together are to survive, thrive, stay competitive and be profitable.

Do you network?

Two greatly talented women

We spend years making a living using our talents as employees. We have made many an employer wealthy with their use of our wealth. That's not a complain. That's a commitment of mutual advantage called the employer/employee relationship, but I want to tell you about two great talents.

I posed the question to my friend, "What is the difference between an upscale, high-price dress at Neiman Marcus and a similar dress at an independent retail
store"? "None" I replied before she could answer. That is the Neiman Marcus dress is manufactured by an individual on the production floor. The other is manufactured by the same individual in their home as an independent contractor for his/her client, the independent retailer.

I posed this same question with my reply to my friend. She had heard me go on so many times about my business dream for creating apparel networks.

Today, she surprised me. "I used to make dresses for Neiman Marcus" she said.
"Really?" I said.
"Yeah, it was just a few of us in a small shop" she explained.
My friend had just described what I had reasoned, but never really knew for a fact. The truth is, I explained to her, there are hundreds, perhaps thousands,
of small shops like that one in Taylor Texas. The government categorizes them as "independent contractors" and they are vital to apparel manufacturers who outsource work to them.
*
I was visiting with a couple. They had left a familiar setting, lifestyle and country along with their professional careers to come to America. The living room where
we sat was filled with portraits of couples. Most of them wore the most extraordinary wedding dresses found in the best of wedding dress boutiques.
It was her husband who gave me a tour of their portrait gallery explaining, while his wife sat without comment, the wedding dresses were the creation of her hands.

She had been an executive administrative assistant for many years in her country. In America she was helping provide for their family through her custodial
job. Yet, the enormous talent and ability to design and create wedding dresses seemed as easy as boiling water. It was something she had done over the
years, not so much as a hobby and certainly not as a job, but as a favor for friends and relatives.

FOR FREE!

I will not speak of friends and family who would take such advantage. I will speak of her talent. There are many like her.

Is there not an independent apparel boutique specializing in wedding dresses who could not or would not contract such talent? How about my friend with the ability
to make dresses no differently than she made for Neiman Marcus?

Apparel networks between contractors and retailers are the creation of one vast, enormous talent pool. It is a direct model which allows retailers to market their own
label or simply Made in USA.

Don't let another year go by without the income potential of your resources; your Knowledge, Skills and Experience in apparel.

The benefits of a personal Independent Contractor Network

What do you say when your place of employment shuts down?
What do you say when your job is exported overseas?
What is your answer to a payraise which does not reflect fuel, food, rent costs?
How do you feel when your company CEO's salary numbers in the millions?

What Working Mannequin has heard and observed from people affected by these questions is that too many people just accept it all. Others take on a bitter view of the situation. These may choose to take action either by withdrawing, taking on another job, launching their sideline business. Still, others increase their "investment" in the lottery.

The consequences of the above questions affect us in very real ways: emotionally, physically, spiritually and economically. They affect our children, too.

Note the placement of "economically" as last in the list. Everyone of us can vote and cheer for an individual or a political party, but none of these can take the place of a personal resposibility on our part to change our emotional, physical, spiritual and economic situation.

As long as we look either to continue to delude ourselves with the "security" of a job or deceive ourselves that "being my own man/woman" will alter our family's livelihood, not much of any substance will really happen.

Working Mannequin is commited to calling individuals to create their own Independent Contractor Network in apparel. If you possess the Knowledge, Skills and Experience (see KSE post) why would you continue to belittle that treasure as a means to alter your family's life?

Among the benefits of a personal Independent Contractor Network (ICN) are the following:

• You use what you've all ready got: Your KSE
• You create apparel, not as an employee, but as an IC.
• You can, like corporations, leverage tax law to your advantage
• You choose, draw and select others with like skills and passions for your own projects
• You determine what apparel items you wish to create
• You set your own pace
• You control your own quality
• You decide whether to create your own or another IC's designs
• You determine which Apparel Retailers make up your business circle
• You determine if you want to grow your network
• You create the time for your family
• You determine how, where and how rapidly you grow your network
• You determine the price of your work
• You set your economic goals in terms of revenue you want to create for your family
• You determine whether workshop investments are right for your business
• You choose to take action, not just talk or act out in bitterness

Networks bring you into an association with others. A network is not a guarantee of the people who are its makeup, but you share common goals, desires which speak to each others emotional, physical, spiritual and economic pursuits. You can determine what you will do for yourself, but not by yourself; that is, you are not alone.

Working Mannequin has a vision to show people the benefits of a personal Independent Contractor Network for themselves. We begin with apparel, but their are other fields which lend themselves very well to independent contracting. Look for future Working Mannequin business presentations on our blog.

We welcome your reply to all our posts.

Thank you and may the God of Heaven and Earth enlighten and bless you and yours. WM

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