Global Sourcing in the Textile and Apparel Industry by Jung E. Ha-Brookshire

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Global Sourcing in the Textile and Apparel Industry
by Jung E. Ha-Brookshire
Global Sourcing in the Textile and Apparel Industry

Contents
Preface | vii
1 Introduction to Global Sourcing | 3
Global Sourcing 4
Historical Background
Current Status of Global Sourcing
Pros and Cons of Global Sourcing
Definition of Global Sourcing 6
Sourcing, Global Sourcing, and Outsourcing
Sourcing and Supply Chain
Global Sourcing in the Textile and Apparel Supply Chain 9
Goals of Global Sourcing and Sustainability 12
The Goal of Businesses’ Economic Improvement
The Goal of Social Responsibility
The Goal of Environmental Responsibility
Job Requirements and Responsibilities for Sourcing Personnel in
Today’s Marketplace 17
2 Theroretical Perspective of Global Sourcing 23
International Trade Theories for Global Sourcing | 24
Law of Supply and Demand
Comparative Advantage Theory
Porter’s Competitive Advantage of Nations
Fragmentation Theory
Industry Life Cycle Theory
Strategic Sourcing Theories 37
Resource-based View of the Firm
Resource Dependence Theory
Strategic Choice Theory
Sociocognitive Theory
Critical Theory
3 Global Trends, Business Types, and Global Sourcing | 45
Global Sourcing and the Changed Market Environment 46
Business Types 48
Textile Complex Versus Softgoods Industry
North American Industry Classification System
Global Sourcing by Different Business Types
4 Global Sourcing Options | 61
Make or Buy? 62
Cost Minimization Criterion
Profit Maximization Criterion
Capabilities Criterion
Risk Reduction Criterion
Sourcing Options 65
Direct Sourcing
CMT Contracting
Full-package Sourcing
Joint Venture Sourcing
Factors for Evaluating Sourcing Options 72
Cost
Quality
Lead Time
Social and Environmental Compliance Issues
The Place
Consistency
5 Global Sourcing Step 1: New Product Development | 79
Seven Core Steps of Global Sourcing 80
Step 1: New Product Development 80
Global Sourcing and New Product Development
Global Sourcing and Line Reviews
Global Sourcing and Product Classifications
6 Global Sourcing Step 2: Macro Environmental Analysis for Supplier
Selection | 97
Step 2: Macro Environmental Analysis for Supplier Selection 98
Macro Environmental Factors 98
PEST Analysis
Enforcement of Intellectual Property Rights
Trade Barriers and Trade Agreements
Trade Barriers
Trade Agreements
Trade Preference Programs
7 Global Sourcing Step 3: Micro-Level Analysis for Supplier Selection | 117
Step 3: Micro-Level Analysis for Supplier Selection 118
Analyses of Suppliers at a Micro Level 118
Right Conditions
Right Products
Right Quality
Right Time
Right Price
8 Global Sourcing Step 4: Purchase Order and Methods of Payment | 135
Step 4: Purchase Order and Methods of Payment 136
Purchase Order Issuance 136
Product Identification Number
Product Descriptions
Contract Quantity
Price per Unit, Total Contractual Amount, and Terms of the Price
Delivery Date and Method
Other Terms and Conditions
Payment Method Negotiation 143
Consignment Sales
Open Account
Documentary Collection (documentary draft)
Letter of Credit
Cash in Advance
Evaluation of Payment Terms
9 Global Sourcing Step 5: Preproduction, Production, and Quality
Assurance | 155
Step 5: Preproduction, Production, and Quality Assurance 156
Preproduction, Production, and Quality Monitoring 156
Preproduction Approval
Label Preparation and Approvals
Production Monitoring through a Time & Action Calendar
Quality Assurance 166
Apparel Quality Regulations
Final Goods Inspection
Application of Quality Assurance Policies
10 Global Sourcing Step 6: Logistics and Importing Processes |185
Step 6: Logistics and Importing Processes 186
Logistics 186
Materials Management and Physical Distribution
Approaches to Logistics Decisions
Logistics Functions
Transportation Modes
Freight Forwarders
Importing Procedures 196
Entry Documents
Entry Process
Special Duties
Special Notes for Textile and Apparel Importers
11 Global Sourcing Step 7: Sourcing Performance Evaluation | 211
Step 7: Sourcing Performance Evaluation 212
Sourcing Performance Evaluation 212
Metrics of Economic Performance of Global Sourcing
Social and Environmental Performance of Global Sourcing
Wise Balance Between Economic, Social, and Environmental
Performance
12 Current and Future Global Sourcing | 223
Major Changes in Global Sourcing from 2007 to 2011 224
Key Trends in Current Global Sourcing 225
Unstable Commodity Prices
Significant Risks to Global Sourcing Strategy
Key Factors for Choosing Suppliers
Technology Utilization
The Future of Global Sourcing 230
INDEX 235

Preface
U.S. textile and apparel businesses have engaged in global sourcing for more than six decades. I have been fortunate to be involved in global sourcing both directly and indirectly. I was born and raised in Daegu, South Korea. During my early childhood in the 1970s, the town of Daegu experienced rapid growth through its thriving textile mills and apparel manufacturing plants. DuPont, a U.S. textile manufacturing company, set up one of the largest textile and apparel manufacturing plants in my town. It was the first company where one of my aunts was able to get her very first job. Back then, women were less likely to have education or a career in my country. The fact that she woke up every morning, wore a uniform, went to work, and studied at DuPont’s after-work school programs was so novel that the whole town was concerned about my brave aunt’s future. She was too modern! I loved watching her going to work and school, and every year on Children’s Day, May 5 (to most of us Korean children this national holiday celebrating children was more exciting than Christmas), she took me to the DuPont campus where I saw green grass for the first time. I thought DuPont was the best thing ever to happen to us and our town.

Since then I have wanted to be involved in global sourcing. At that time I had no concept of global sourcing. However, I knew what I wanted to do when I grew up. I wanted to travel all over the world, establish a factory (or find one), then throw annual Children’s Day parties in lots of different countries. Twenty years later, after earning a bachelor’s degree in clothing and textiles from Seoul National University, I flew to New York City looking for an opportunity to start accomplishing my childhood dream. Within a few months, I found my very first job as a production assistant at Popsicle Playwear, a division of Adjmi Apparel Group, on 33rd Street near Macy’s. I was quickly promoted and became fully engaged in global sourcing. All of my company’s product portfolios were sourced from foreign countries such as China, Taiwan, Hong Kong, Indonesia, Turkey, United Arab Emirates, Pakistan, and even South Korea. By 2000, my team was sourcing and importing over $100 million worth of goods from all over the world.

The success of my career at Adjmi Apparel Group helped me land a job at Richard Leeds International, Inc., whose specialty was sleepwear. From 2001 to 2004, I was responsible for Central American production, sourcing and importing up to $10 million at wholesale value. Sourcing from the Central American region had whole new sets of challenges and questions. I had to learn everything from the ground up by doing the job. While working at these jobs, I somehow managed to throw several birthday parties for factory workers, played with their children, and participated in their night school activities. Indeed, my childhood dream came true. People whom I worked with all over the world were extremely motivated, eager to learn and wanting to be an active part of the global economy.

Although my colleagues in these developing countries were eager to learn, at home in New York City I had become more and more frustrated with the lack of basic knowledge and skill sets from college graduates whom I interviewed for one of my staff positions. I found it extremely difficult to find college graduates with a decent level of understanding of international business, global trades, and global sourcing. Both then and today I question why college graduates do not have an adequate understanding of global sourcing when the majority of U.S. businesses are engaged in global sourcing. When I returned to academics, I found that there were no comprehensive, viable, upto- date instructional materials available for global sourcing. Rather, global sourcing was deemed to be mysterious and too difficult to learn about in a classroom.

The ideas for this book were conceived in 2007, when I took an assistant professor position at the University of Missouri. I wanted to produce a textbook that had real-life implications while maintaining theoretical perspectives. I searched and gathered all the reference materials and information through personal contacts, library search, and literature from governments, laws, trades, and businesses. For the first class that I taught on global sourcing in 2008, I compiled all these materials into a reference book. Then I personalized the lectures with many of my business experiences so that students could better understand the concepts in the textile and apparel industry. My students loved the class. By 2009 my lectures were translated into PowerPoint slides and by 2010 they were audio-recorded. In 2011 and 2012 I began writing this textbook—the result of eight years of experience working in global sourcing and researching the subject, and six years of teaching experience related to global sourcing.

Throughout this book I have tried to cite sources as much as possible. However, some examples, such as the rubrics on financial sourcing performance in Chapter 11 , stem from my experiences while working as a global sourcer. They worked for me and my team. The hypothetical company Amazing Jeans, used throughout this textbook, is very similar to the companies for which I worked. Many of the questions asked and issues dealt with in the learning activities at the end of each chapter relate to questions and issues that I encountered in my work. Some of the learning activities are actual activities I asked my staff members to complete to train them in the basic concepts of global sourcing.

Since this book is written from the U.S. sourcer’s perspective and is somewhat biased toward U.S. businesses that target mass and midtier consumer segments, some might see this as negative. However, I believe this U.S. perspective could help many foreign suppliers better understand U.S. buyers and sourcers: By knowing the other, one could better prepare himself or herself. Similarly, by understanding mass and midtier business practices, students could apply these concepts to other consumer segment businesses. Therefore, this book will be useful for careers in many different industries. First and foremost, textile and apparel educators will find this book useful to help better prepare today’s college students with clothing- and textile-related careers. Many of the terms and concepts will be extremely useful when they are trying to seek sourcing-related jobs. Students who seek jobs as product developers, designers, salespeople, and merchandisers in the United States will find this book beneficial because they will gain a more comprehensive view of the global textile and apparel industry through global sourcing. Students in other countries could also apply these concepts to better prepare their career either as sourcers or suppliers.

Throughout this process, I have received much help from many different people. I would like to thank staff members at Pearson for all the help they have provided me in completing this project, as well as the following reviewers: Elena Karpova, Iowa State University; Kathleen Colussy, The Art Institute; Leslie Simpson, Morgan State University; and Crystal Green, The Art Institute. I also would like to extend my gratitude to my advisor, Dr. Barbara Dyer, who was the first person to tell me that I, too, could write a textbook. I thank my graduate research assistants and my fellow colleagues at the University of Missouri for their extremely positive support and encouragement. Without all of their help and input, this book would not have been possible. Finally, I would like to express my deepest appreciation to my husband, Richard Brookshire, for his unselfish support throughout this process.

Jung E. Ha-Brookshire


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