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Global Sourcing and International Trade Sample Answer
Introduction
With changing global fashion trends, the clothing and textile industry has undoubtedly become one of the most dynamic, competitive, and rapidly changing sectors.
This has prompted many fashion retailers across the world to embark on regular product offering and global sourcing to achieve competitive advantage in the international market for them to remain relevant (Akhil, 2015). The aims of this report are to research and analyze a current product offering for a fashion retailer that has a UK store presence and make recommendations on how the product could be progressed further to the following season with the purpose of penetrating (Spring/summer ‘17) an international market.
This is done with an emphasis on produce Illustrator designs for the following season (Spring/summer ‘17) within an allocated budget of £600K, which is appropriate for an international market. In addition, an assortment plan is produced in an Excel spreadsheet to indicate the budget spent. Through this approach, it is possible to present the buy per garment that includes a number of aspects with regards to the designed garment including volume (ranking), the amount spent, distribution as well as a sourcing country. Finally, the report will provide an analysis of sourcing criteria with recommendations including a valid critical path.
Overview of a current offer
The fashion retail to be considered in this report is the H&M, which has grown from a single women’s wear shop in Vasteras, Sweden to an extensively large store, which has expanded its operations across the world such that its presence is felt across the international market through its six different brands and 4,000 fashion retail stores in different parts the world. Six independent brands are the main outlets through which H & M runs its day-to-day operations in the marketing and sale of fashion product. The six main outlets are H&M, COS, Cheap Monday, Monki, Weekday, and Other Stories (H&M, 2016).
The team which has been mandated with the function of innovating and developing H&M’s fashion designs has been playing an imperative role in creating sustainable fashion for all and sundry. At the same time, the team ought to ensure that the fashions designs are always offered for sale at the best price and quality. The collection of fashion designs that are developed by H&M designers includes everything from quintessential functional and basics sportswear for children, teenagers, women, and men, to dazzling party collections for every occasion or season (H&M, 2016). In addition to shoes, bags, clothes, jewelry, underwear, makeup, and fashionable interiors for children and adults; the variety and width of the H&M collections is an indication that customers are always able to find something to suit their wardrobe as well as their style. The fashion house has tremendously expanded its operations globally and, nowadays it has a presence across many parts of the world through the H&M stores in 61 markets. In addition, the fashion retailer has an extensive online presence through which it makes a significant proportion of merchandise mainly because it provides the option of online shopping in 32 countries (H&M, 2016).
Global Sourcing and International Trade forAnalysis on Current Garments
The current garments on offer and which are under consideration are the special ladies’ dresses fashion collections for the Conscious Exclusive 2016 in the month of May.
The description of the current garment under consideration is as follows:
Title: Conscious Exclusive 2016
Price: £499
Description: A sleeveless round neck wedding or ready to wear the dress made from two layers, whereby the outside layer is made from organic silk while the inner layer is made from Tencel. The dress has been subjected to further decoration through embellishment with Art Deco-inspired embroidery of glass beads that have been made from recycled glass. The dress was offered for sale on April 7, 2016, and the offer is still ongoing (H&M, 2016).
An illustration is shown in the picture below:
Global Sourcing and International Trade for Product Development
This part of the report will cover the Illustrator proposals for the fashion designs envisaged to be developed next season (Spring/summer ‘17) for an international market. As a result, this part will be covered in two sections. The first section will discuss the proposal of the Illustrator proposals as well as the fashion design specifications for the garment in question. The second part will cover the assortment or range plan.
Illustrator proposals
With the help of the proposals by the illustrator, designs are produced within the allocated budget of £600K for SS’17 season of an international market. This will include CAD drawings for each design showing two views (front & back) including color ways or prints. Furthermore, specifications for each selected design will be provided starting with thumbnail sketches and using the mood boards as inspiration (Mayer, 2014).
Assortment plan
The assortment range plan in this report was included for the purpose of compiling a collection of garments that were commercially acceptable within the design and financial parameters before the mass production can commence. However, there are some procedures that need to be included and stringently followed in the assortment plan for the purpose of making sure that the buyer can have a glimpse or insight into the anticipated or planned collection offering. For instance, the assortment plan has to incorporate several factors of production including the number of garments to be included in the collection range. In addition, there must also be an inclusion of different types of garments or collection (fashion to classic, tops to bottom styles) as well as specific styles which are to be included such as color and fabrics used to make the garment. Furthermore, the assortment plan should also include the price of each garment, the cost price of producing each garment, sizes et cetera (Miller, 2008; Mayer, 2014).
Recommendations on how the product could be progressed for the following season for an International market (Spring/Summer ‘17)
In order to ensure that the most appropriate recommendations on how the product can be progressed to the following season in an International market are adhered to (Spring/Summer ‘17), there is need to undertake an assortment fashion forecasting based on the prevailing fashion trends. This can be attributed to the fact that fashion forecasting plays an important role in determining future fashion trends by focusing on upcoming fashion and lifestyle trends (Mayer, 2014). For instance, the H&M must be in a position to specifically focus on fashion trends and predict the styles, fabrics, colors that have a high likelihood of presentation on the runaway, and in the stores for the sake of fashion events that are to take place in the near future. This concept of fashion forecasting applies across the entire fashion industry including mass market, ready-to-wear, haute couture, and streetwear (Miller, 2008).
Therefore, the product can be progressed to the following season for an International market through an appropriate and perfect merchandise mix by ensuring that the colors of leather and those of the used fabric are perfectly matched with a consideration of trending colors for the international market (Mayer, 2014). In addition, the product can be progressed by accessorizing it to make it more appealing. However, the accessories to be used must be carefully selected bearing in mind the prevailing fashion style and social trends. For example, the product can be progressed by decorating it through embellishment with Art Deco-inspired by embroidery of glass beads that have been made from recycled glass. Furthermore, variations of the bound cuff seams, necklines and hems can also be differentially used to give the dress distinctive appearances depending on the fashion trends. Moreover, the inclusion of a side and/or arm mesh, as well as invisible zip, is the other way through which this product can be progressed (NPR, 2011).
Global Sourcing and International Trade Sourcing summary
Global Sourcing and International Trade
Global sourcing has become an important aspect of the fashion industry in the international trade, and it involves the selection of a supplier of either a product or the raw material components and services used in the makeup and delivery of the products. As a result, true global sourcing is when a business manufactures and sells a consistent product globally, and sourcing some or the entire product from third parties to pave way for cost-effective and efficient sourcing that is coordinated globally.
Global sourcing in contemporary international business is not solely concerned about the reduction of production costs, but it focuses on improving the supply and demand chains of finished products as well as raw materials. However, as observed in illustrations provided in the diagrams shown below, it is important to note that previous global sourcing concept was all about cost. As a result, the objective was to source product or components from a country with low labor costs with the ultimate goal of gaining cost advantage.
There have been changing trends in global sourcing whereby according to Kurt Salmon (2012) book acting as a global sourcing reference; the largest manufacturers of clothing and textiles are shown in the table shown below. The ranking is done based on the value of apparel exportation in terms of millions of U.S. Dollars expressed as percentages.
Source: Kurt Salmon Global Sourcing Reference, 11th Edition
In contrast, despite the fact that top apparel exporters are located in Asia most retailers are either found in Europe or the U.S. For instance, according to Salmon (2012), 88 percent of clothing retailers are located within Europe and China, which are ranked as their number one sourcing destination. However, there has been an increasing trend in production costs over the recent past whereby production costs have increased by 160 percent since 2005.
A comparison of production costs across the world reveals sharp variations, which is an important determinant of the choices of sourcing countries for fashion retailers in Europe and the U.S. For example, Bangladesh and Vietnam have the lowest PCI’s of all sourcing countries. On the other hand, Southern China records greater costs than Central USA meaning that specific locations or regions within a country ought to be considered, but not generally considered the country as a whole. The emerging markets are also playing a significant role where Ethiopia could be the one to look out for since many fashion retailers have expressed interest (i.e. H&M, Tesco & Primark are all running pilots) in the country whose attraction to fashion retailers is attributed to its lower social living costs as well as established transportation infrastructure. The table below ranks countries based on their PCI
Source: Kurt Salmon Global Sourcing Reference, 11th Edition
Moreover, with regards to cost, there have been significant changes in the global sourcing trends. For instance, according to fashion price tracker figures by RetailWeek Analytics, it shows that there has been significantly changing production on markdown expressed in percentage among the leading fashion retailers with the online presence.
Source: Retail Week Analytics
Global sourcing also involves the issues of quality, ethics, and social responsibility as well as supply chain management as discussed in the sections below.
Quality
- No longer disposable fashion attitude
- Ensures competitive advantage
As our business has become more fashion-centric, we have been able to source products from Asia that are not just low cost, but also fit the needs of the customer. However, perceived quality continues to be a factor of consideration since globally sourced goods are seen by consumers to be inferior when tagged with “Made in China” when in fact the quality is higher than comparable goods sourced in the UK.
Ethical & Social Responsibility
- Not just human rights and community development issues.
- Concerns for security, carbon footprint, bribery, corruption, and money laundering.
- Media has placed this trend at the top of both retailers and consumers concerns.
Supply Chain Management
Supply Chain Management (SCM) is a network of connected and inter-dependent organizations mutually and cooperatively working together in order to control, manage and improve the flow of materials and information from suppliers to end users. Key Supply Chain Management (SCM) ensures that the supply chain process starts and finishes with the consumer by making sure that each interface in the supply chain represents: 1) movement of goods; 2) information flow; and 3) purchase and sales. As a result, strategic SCM consists of developing smarter ways to choose who to buy from and sell to your business partners.
Importance of the Supply Chain Management
It aims to achieve the following benefits for the company:
- Competitive Advantage
Supply chain management is now well established as a key source of competitive advantage, and the competitiveness achieved in International market is without any doubt the most imperative gain attributable to global sourcing. However, this is usually based on consumers’ perceptions of the added value aspects of the retailer’s overall offering (Mayer, 2014).
For major success, businesses need to achieve a clear performance differential over the competition on factors that are important to target customers. The most successful methods are built upon some combination of 3 advantages namely: 1) being better in providing superior quality or service; 2) being faster in responding to customers’ needs; and 3) being closer to establishing closer relationships with customers (Miller, 2008).
- Improving Financial Performance (Sales & Profits)
This determines the overall performance of a company and it can subsequently be measured through a number of methods including 1) Financial Review; 2) Quality performance and practice; 3) Delivery and physical flow of stock; and 4) Information sharing and extended relationships.
- Consumer & Supplier Loyalty
The “value” may either take the form of selling undifferentiated products below the competitors’ prices or unique benefits that justify premium pricing. The value chain may be used to identify and understand the sources of competitive advantage and how they relate to creating added value for customers
As a result, Porter’s 5 Forces Model should be used by fashion retailers prior to choosing companies or partners to collaborate within their global sourcing strategy in order to determine the extent of factors that directly influence business including:
- Threat new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Degree of rivalry
Proposed sourcing strategy
This part focuses on a discussion providing an analysis of sourcing criteria as well as recommendations on how the product could be progressed to the following season for an International market (Spring/Summer ‘17) including a valid critical path. The proposed sourcing strategy will mainly emphasize the supply base analysis and the appropriate and valid critical path as discussed in sections below:
Supply Base Analysis
- Current sourcing
- A brief overview of the current product
The current product is usually made of a mixture of fabrics whereby the shell of the garment is made from 60 % leather (which has been ethically sourced from Nepal) and 34% of Bamboo Viscose (Mesh) as well as 4 % of Elastane. In addition, the lining of the current product consists of 100% Bamboo Viscose. The current product is a leather paneled dress, and the assortment consists of sleeveless, short-sleeved and one-sleeved leather paneled dresses.
- Proposed sourcing
- Sourcing analysis for each garment, consider components
The proposed sourcing including H&M and Nepal will involve ethical sourcing of leather in Nepal through a partner based in the country. In addition, the processing of the bamboo viscose will continue in Nepal and Bangladesh. However, the subsequent tanning or processing of the leather and the bamboo viscose will be shifted to Bangladesh which has the lowest Production Cost Index (PCI) of all sourcing countries across the world. Furthermore, the production of the garments upon approval of the designs will continue in Bangladesh, and the finished products subsequently shipped to Europe.
- PEST analysis for sourcing countries
The political situation in both Nepal and Bangladesh poses a risk to the sourcing activities undertaken considering that both countries are not politically stable meaning that political upheavals may arise at any time and hinder production. Also, there is a technology risk since both countries have not significantly adopted technology in the production processes meaning that the rate of production cannot reach the level of the countries where technology has been significantly embraced.
- A rationale for sourcing choice
A comparison of production costs across the world reveals sharp variations which are an important determinant of the choices of sourcing countries for fashion retailers in Europe and the U.S. For example, many Asian countries have low Production Cost Index (PCI) with Bangladesh having the lowest Production Cost Index (PCI) of all sourcing countries across the world. Therefore, these emerging markets are playing a significant role for many fashion retailers by acting as sourcing countries, which is attributed to its lower social living costs and well-established transportation infrastructure. As a result, there will be reduced production costs.
Critical Path
The validated and appropriate critical path will be provided in the template shown below:
Global Sourcing and International Trade Conclusion
In conclusion, it can be observed that it is possible for a fashion product been offered by fashion retailers to be adequately analyzed such that Illustrator proposals and assortment plans are designed leading to the development of new garments which have improved significantly in terms of quality than those offered. However, in order for this to take place successfully, the fashion retailer must establish an appropriate fashion forecasting trend mechanism as well as an effective global sourcing and supply chain management system.
Global Sourcing and International Trade References
Akhil J. K. (2015). Fashion Forecasting. Retrieved from http://libraries.uc.edu/libraries/daap/resources/researchguides/design/forecasting.html
Birnbaum, D. (2000). Global Guide to Winning the Great Garment War.
Handfield, R. & Nichols, E. (1999). Introduction to Supply Chain Management.
H&M (2016). Conscious Exclusive 2016. Retrieved from http://about.hm.com/en/ImageGallery/fashion.html
Keiser, S. J. & Garner, M. B. (2008). Beyond Design: The Synergy of Apparel Product Development. New York, NY: Fairchild Publications.
Kerkhoff, G. et al. (2006). Global Sourcing: Opportunities for the Future. Weinheim Düsseldorf: Wiley-VCH.
Kim, E., Fiore, A. M., & Kim, H. (2013). Fashion Trends: Analysis and Forecasting. Berg. ISBN 9780857853158.
Mayer, L. (2014) “Q&A with the Founder of SHIPSHOW”. Retrieved April 21, 2014.
Miller, C. C. (2008). Designers of High Fashion Enter the Age of High Tech: New York Times . 8 Sept. 2008. <http://www.nytimes.com/2008/09/08/technology/08trend.html?pagewanted=print&_r=0>.
Monczka, T. & Handfield, T. (2005). Purchasing and Supply Management, 3rd edition. New York, NY: Thomson South-Western.
NPR (2011) Forecasting Fashion Trends: NPR. NPR: National Public Radio: News & Analysis, World, US, Music & Arts: NPR. Web. 10 Apr. 2011. <http://www.npr.org/templates/story/story.php?storyId=1432978>.
Roth, T. & Pullman, G. (2008). Unraveling the Food Supply Chain: Strategic Insights from China and the 2007 Pet Food Recalls. Journal of Supply Chain Management, Vol. 44 Issue 1, pp. 22-39
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