Apparel Research Study & Analysis
FIGURE 7 – Cost Components Captured (% respondents) Fabric
67%
Trim
66%
Packaging & Labeling
64%
Duties & Taxes
52%
Factory Overhead/Markup
47%
Washing & Finishing
44%
Packing Charge
41%
Inland Transport to DC
39%
Transport to Import Port
39%
Insurance
38%
Landing charges
36%
Belt & Embroidery
36%
Vendor Overhead/Agent Commission
34%
Entry Customs Clearance Charges
34%
Hanger Cost
31%
Yarn
31% 30%
Freight to Export Port
28%
Finance Charge
17%
Deconsolidation
14%
Hanger Duty Other
5%
an average sourcing cost savings of 3 percent to 6 percent. Their challenge will be to sustain the momentum gained in cost reduction — with the remaining sourcing resources having the requisite cost management expertise — without sacrificing product quality and lead time. These companies are addressing the importance placed on cost management by supplementing their current capabilities with additional deeper costing, quality and product capabilities. As expected, the majority of companies surveyed are capturing fabric, trim, packaging and labeling along with duties and taxes during their costing process (see Figure 7). However, companies looking beyond today’s costs are also capturing factory overhead and mark-up, washing and finishing and packing charges. Once cost components have been captured, sourcing organizations are sharing results with other functions within the organization (e.g. design, product development, merchandising) to educate and collaborate on cost tradeoffs and using the cost components to negotiate top-line costs with vendors. These cost components are critical to ensure that decisions on product design meet margin expectations prior to line approval — for example, identifying the cost implications for selected trim and 10 EXCELLENCE IN GLOBAL SOURCING
fabric. In addition, having a cross-functional discussion on cost components will help improve vendor efficiency by reducing reworks and improving approvals to product specifications. The majority of the survey respondents are capturing costing components via a PDM/PLM system or an integrated template with other forms/templates. This is a key opportunity to improve costing capabilities given almost one in five respondents indicated they capture cost components manually. Conclusion This year has proven to be an exciting yet challenging one — especially for those who forecast the economy and attempt to predict the future. For apparel sourcing executives, attention and focus is best placed not on the various economic reports and whether housing starts have recovered to prior levels but in keeping an eye on how flexible their sourcing strategy is and how sound their sourcing execution is to accommodate such uncertainty. As first century Roman philosopher Seneca, said, “Luck is when OPPORTUNITY meets PREPARATION.” These words still ring true today, with sourcing using its preparation to help organizations seize future opportunities.