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Keywords Information research Clothing, Sourcing
Abstract In a earlier debate, it was suggested that for many reasons, the decision by a retailer to source low-cost clothing offshore from low-wage suppliers may be ill-advised We were able to show that using lower priced textiles and apparel manufactured by foreign sources could be sub-optimal operations strategy. In numerous cases, those relying upon this form of procurement failed to consider all the relevant information. Despite the obvious attraction of low cost, there were serious trade-offs and disadvantages. We classified the latter as the hidden costs of importing (for example, delays, use of airfreight, administrative and quality costs, etc.) and the inflexibility costs. When properly attributed and quantified, these disadvantages often outweighed the benefits of low cost foreign supply. It was at this point that we proposed the need for an objective, axiomatic framework (widely accepted across the textile industry) to demonstrate the full implications of domestic versus offshore purchasing - a total acquisition cost model Here, we expand this thinking, and begin to explore how such a model can be developed using the data obtained from a sample of international textile and clothing retailers and their suppliers.
The costs of operational inflexibility
The hidden costs of apparel importing are relatively easy to identify and compute. Less apparent are the costs of inflexibility. We know that these involve issues such as longer lead-times and a general lack of flexibility and or response to demand changes (both before and during a sale season). Our aim was to better understand these factors as a first step to their quantification [1].
LISP interactions
We wished to discover how factors such as lead-time, inventory, supplier performance and customer service level might be used to assess certain elements of an operations strategy such as sourcing. To appreciate the underlying impact of these elements, Figure 1 displays the relationships involved in what we termed as the LISP interactions.
There are four fundamental quantities in any supply system.
(1) Lead-time for supply;
(2) Inventory at a particular supply pipeline stage;
(3) Customer Service level; and
(4) Supplier Performance, this involves two factors: supplier service level and supplier process time (in this retail example, to convert raw materials or components into finished goods).
These components...