When an apparel company decides to do the sourcing off-shore, it is important to know the advantages and disadvantages.
ADVANTAGES
The advantages for foreign sourcing are lower cost of materials and labor, raw material availability, and multiple sourcing options and supplier choices. The labor cost in foreign countries is much cheaper than the labor cost in the United States. There is also an abundance of different raw materials available in foreign countries. For example, silk is found in China, Sri Lanka has hemp, Italy is known for its leathers, and wool and trim suppliers are also available in foreign countries. There are many sourcing and suppliers to choose from when sourcing in a foreign country, also.
DISADVANTAGES
The disadvantages for sourcing off-shore are lead times are longer, logistics, and control. There can be logistics problems and other costs. When working with an off-shore company, there are duties, brokerage, quotas, and transportation costs. Duties are taxes on imported goods, like a tariff. Brokerage fees are the licensed agents who import products in the U.S. customs. The quota is how much of the product is allowed to come in the country at a time.
It is tougher to control product quality, deliveries, Intellectual Property Rights, and Social Compliance Concerns. It is difficult to control how the quality of the product will be since it is in a foreign country. It is hard to control deliveries because it is unknown whether or not they will arrive on time due to the weather or transportation problems.
Intellectual Property Rights are legal protections for exclusive use by owners of copyright, trademarks, and patents. There are problems with counterfeiting. A counterfeit is a look-alike with a fake trademark or misleading identification. This is illegal, so the business has to make sure that the off-shore manufacturer does not make counterfeit products.
Social Responsibility and Social Compliance is the obligations to a group or the general population for their well-being. The business needs to make sure that the off-shore manufacturer is not mistreating its employees and are recognizing their rights and giving them fair pay. But, that is difficult for them to know what is really going on in the workplace since they are not physically there to watch them.
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