This article was written by Armando Varela for AIMS360.
Producing goods close to home is often an expedient option for start-up or smaller apparel brands. There are a variety of reasons as to why on-shore domestic manufacturing is so appealing to these companies, not the least of which is the apparent convenience of it. More significant reasons may include:
- New brands often innovate with new product constructions, fabrics, and components. Domestic sources are more capable of developing these concepts and are much more responsive than far-shore sources during the critical development and sampling process.
- Apparel companies can more readily oversee the work and inspect their product “in-line” on a day-to-day basis at the production facility, and in many cases, fix issues “on-the-spot.”
- Production lead times are relatively short when compared to off-shore production sources, which accelerates speed-to-market.
- Shorter lead times also enhance the manufacturer’s ability to chase in-season hot sellers.
- Minimum order quantities (MOQ) are considerably lower than off-shore production sources; this lessens inventory risk and frees up working capital.
When compared to offshore manufacturing, these benefits are offset by one hard to ignore factor—the prohibitively higher cost of domestic production. Premium brands that are commanding a handsome margin on their goods can more readily absorb this cost disparity in the interest of better servicing their customer and enriching their brand equity. But this model does not work quite the same for newer brands or smaller companies, especially those that are selling to low or moderate price retail markets. To fund the growth of their brands, or to simply remain financially viable, most companies eventually turn to offshore production to reduce their cost-of-goods and to maintain a “workable” profit margin.
The push for brands to become more responsive in today’s omni-channel environment has stirred interest, and some movement, towards on-shore manufacturing, but not enough to reverse the steady decline in apparel manufacturing jobs here in the U.S. over the last ten years.
[Note that the current geo-political discussion regarding stiffer Asian trade tariffs may have an impact on this trend going forward, but much of this is still uncertain and somewhat fuzzy].What this reveals, at least for now, is that the push for more expedient and responsive supply chains has not resulted in a shift of apparel manufacturing jobs back on-shore to local U.S. production markets. Cost, in other words, still makes for a compelling argument as to why brands continue to source their production offshore.
At first glance, there are two opposing forces at play for the importer—the pressure to fulfill market demand almost instantly, and the intrinsically cumbersome “extended” offshore supply chain (the eternal struggle between demand and supply). In real terms, importers must find strategies and tools to ship the right product at the right time from the right place to the right customer, while simultaneously minimizing inventory investment (and risk) across the supply chain. More than ever, brands must acutely manage the way they do business if they are to thrive as an importer in today’s fast fashion marketplace.
A few of the things that an importer must do exceedingly well include:
- More accurately forecast sales demand.
- Adopt more coherent merchandise and assortment plans that align with forecast sales demand.
- Develop precise and complete product specifications and costing and streamline the product development and approval cycle.
- Construct and commit to realistic time-and-action calendars, with milestones beginning at the initial line concept and ending at final customer delivery.
- Intelligently shop and vet production sources, evaluating all aspects of the supplier, not just costs.
- Identify effective logistics strategies and partnerships.
- Implement intelligent business software solutions that can provide real-time visibility, rich analytics, and contemporary integration capabilities with other internal and external systems (e.g. ERP, WMS, eCom, PLM, etc.).
Furthermore, to be truly in command of their supply chains, companies must adopt collaborative relationships with all constituents of the supply chain, including factories, freight forwarders, carriers, customshouse brokers, 3PL’s, and, of course, the retail customers. The traditional two-dimensional, buyer-seller, model is no longer viable.
Importing goods from offshore sources will continue to be the most cost-effective model of apparel manufacturing. But more than ever, there are behaviors and forces in the market that compel importers to be ever-vigilant in upping their game if they are to remain competitive and successful. Apparel importers must evolve their strategies, processes, and systems to succeed in today’s fast-fashion, omni-channel marketplace. Fortunately, there are resources and talent that can help the companies that choose to seek them.
See the original article on Fashion Manuscript.