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  1. #1
    RTS
    Guest

    Default Risks & Benefits of Offshore Sourcing?

    Hi,

    I have just moved into a fashion company that sources most of it's product from China. I can understand that this was done to reduce manufacturing costs, but I can't help but feel that there are a whole range of risks as well as benefits in such a strategy. For example, leadtimes are extended and supplier reliability is not that good.

    I would be keen to exchange ideas with others involved in offshore sourcing to hear about some of the issues you have faced and how you dealt with them.

  2. #2
    Russell
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    I think most companies that have adopted offshore sourcing will have done so initially because of the reduced manufacturing costs. But there are hidden costs involved in my experience.

    • Supplier management becomes more complicated and you may need local agents or 3PLs to assist in this.
    • Supplier reliabilty can become an issue.
    • Longer lead times may push up inventory, and if coupled with poor supplier performance this wil be pushed up even more.


    In the fashion sector this can be a real headache, depending on quickly you introduce new lines, how many seasons you have etc.

  3. #3
    Retailer
    Guest

    Cool Re: Risks & Benefits of Offshore Sourcing?

    Hi RTS,

    Russell is right regarding supplier management being more complicated. Most of the successful companies have their own dedicated sourcing & procurement teams based in country in order to work very closely with the factories, particularly regarding production quality against approved samples.

    Do you have many suppliers currently? Trying to maintain a relationship with multiple suppliers can be a major issue, particularly if they are in different regions.

  4. #4
    RTS
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    Retailer,

    We probably have 20 suppliers in China, and we deal with all of them directly. We don't have any procurement teams ín China, but tend to rely on our freight forwarders for the local co ordination.

    How would having our own procureent team in China work? Do you guys do that? What sort of size are you (Turnover), how many staff in China etc?

    Thanks for your help, it's great to be able to share experiences like this.

  5. #5
    Fat Cat
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    RTS,

    Fashion is particularly difficult, becuase due to the demands of seasons and the short shelf life of many garments, you need very reliable supply and short lead times.

  6. #6
    Retailer
    Guest

    Cool Re: Risks & Benefits of Offshore Sourcing?

    Hi RTS,

    I take it that sourcintg from China is an integral part of your strategy because setting up an office in country is a big step and needs to be fully supported by senior management.

    You will need to decide strategically where to set up the office to allow best access to all your major suppliers. You also need to decide whether it will just
    be a sourcing office or whether some of your design team should be there too.

    In my experience you ideally want to limit the number of suppliers to 1 - 2 per product category and have a supplier database that records their performance. This enables you to build a base to monitor their performance and eventually rank them.

    There is a huge amount of planning involved but it should be beneficial in the long term. I am happy to offer any advice I can.

  7. #7
    RTS
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    Retailer,

    Thanks, this is a big help. I am sure I'll have lots of questions soon :-)

  8. #8
    Simple
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    If you do not have procurement staff in China, you can make use of third party agency as an extension of your domestic team. They can be good watch dogs.

  9. #9
    RTS
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    Retailer,

    Thanks for all your advice. What is the mix of staff that you have in the China office? Do you hire locally? And in terms of the size of that office, staff numbers etc. How many staff do you have to handle what number of suppliers and what level of spend?

  10. #10
    Roger
    Guest

    Default Re: Risks & Benefits of Offshore Sourcing?

    One of the biggest issues for the fashion industry is agility and lead time management. Zara have gone the other way.... locally source (from Spain).

    Useful readings perhaps...

    http://www.3isite.com/articles/Image...ara_Part_I.pdf

    http://www.3isite.com/articles/Image...ra_Part_II.pdf

    http://www.martin-christopher.info/d...20INDUSTRY.pdf

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