SOURCING: NEW STRATEGIES
Byline: Kristi Ellis, Los Angeles, and Neal Turnage, Sarasota, Fla.
LOS ANGELES — Faced with an extremely difficult retail environment and a demand for cheaper merchandise, sportswear resources are shifting their sourcing strategies to stay competitive.
Some are expanding their international network, while others are moving to domestic sourcing.
“The moderate area is being driven to sell the product cheaper, so you have to find ways to produce the product cheaper,” said Marc Abramson, vice president and part owner of Requirements, a division of New York-based Item-Eyes Inc., which markets a traditional line of sportswear separates under the Requirements label that is aimed at the misses’, plus-size and petite customer.
“Because of the deinflationary trend in moderate, we’ve been forced to reevaluate our sourcing strategies,” he said.
“We’re now doing business all over the world and have in turn devoted an entire section of the company to global sourcing,” he said. Sixty-five percent of its production is now sourced internationally, and 35 percent domestically. The company sources both piece goods and packaged items primarily in India, Hong Kong and Mexico. About two years ago, eighty percent of the line was sourced domestically, with the remainder internationally.
Abramson said it was a strategy based not on boosting profit, but rather on survival in the marketplace, and added that he’s aware domestic sources have been hurt. Changes in the market, he said, necessitated the move.
He also noted that the retail environment has become laden with promotions. “More stores are carrying the same items, which are causing these items to be more promotional,” he continued, pointing out styles such as roll-sleeve unlined jackets, drawstring challis pants and lined flannel jackets. “Once again, in order to compete and price competitively, we have to source the goods cheaper. That means going overseas.”
The shift toward more global sourcing has also affected the way the company does business with its various accounts, which include Belk Stores, May Co. and Mercantile Stores. “We have to allow much more of a lead time with overseas sourcing,” noted Abramson.
Consequently, retailers have been affected. “We’re planning and producing garments and anticipating sales before we even place the product, as opposed to after,” noted Abramson.
Retailers are therefore being asked to buy earlier than they would be if the goods were sourced domestically. For instance, the company is currently selling its 1996 wool merchandise — a process that is occurring approximately four to six weeks earlier than normal, since it is being sourced overseas.
While Requirements is shifting its emphasis on the international arena, it is hardly ignoring its domestic network.
“We still do a lot of domestic sourcing,” he said. “Part of being successful in the business is getting feedback from the stores and acting accordingly.”
The Teddi Apparel Group, based here, changed its sourcing strategies three years ago, when the traditional moderate sportswear market was strong.
“At that time, we decided to take the opportunity to rethink our strategies and source internationally,” said Stuart Weiser, chief executive officer of The Teddi Apparel Group, which markets Teddi, a traditional sportswear line. “And so when business started getting tough, we had our sourcing strategy already in place.”
Weiser noted that about 80 percent of the company’s sourcing is now done internationally, primarily in Mexico, with some in the Orient. Five years ago, the company sourced all of its goods domestically.
Weiser said that increased demands from retailers for gross margins and higher quality made it necessary to source overseas.
Weiser noted that Mexico’s close proximity to the U.S. has helped him reduce the longer lead times most often associated with sourcing internationally. “I add five days onto the top and five onto the end,” he said, noting that it’s a vast improvement over the 90-plus days generally accepted as the standard add-on time for other international sourcing.
And it has helped him plan more efficiently. “When you source in the Orient, you have to plan out six to seven months in advance,” he said. “Now we’ve been able to reduce that time considerably, which is much better.”
The change in strategy, he believes, has enabled his product mix to be more closely aligned with changes in the marketplace. He pointed out that even though it’s possible to plan six months out, most often changes have occurred in the market and the original plan ends up being off.
Teddi turns to domestic sourcing for goods that demand a quicker turnaround time.
“Most often the things I source here are basics such as a pull-on pant,” he said. Still, the bottom line is value. “The only things we really source here anymore are items that are not too labor-intensive.”
Taking a different approach is Harkham Industries here, maker of the Jonathan Martin label, which moved its production back to the U.S. last January to regain control of quality and deliveries, according to Uri Harkham, owner.
The company expects to increase its volume by 20 to 25 percent to $100 million this year, and Harkham attributes the increase solely to the shift to domestic production.
Harkham claimed that he moved production to India about two years ago to avoid the risk of contractor violations in California and heavy fines by the state and federal labor officials. But the plan backfired when many shipments from India were either late or lost and the quality suffered, according to Harkham.
The company currently does all of its cutting in-house and 25 percent of its sewing in-house. Harkham, who owns a 150,000-square-foot manufacturing facility, plans to add another 45,000 square feet in the next 10 months and install 800 sewing machines, bringing the total to 1,000 sewing machines. It still sources sweaters in China, which accounts for about 10 percent of the business.
“We make lines 10 times a year, so we have to react or else we will lose space shelf,” said Harkham, adding that his production costs are not much higher. “In the end, it all balances out.”
Harkham also exports to Spain, Central America and the rest of Europe, which has a high demand for American-made fashions — another reason for producing domestically, he added. Los Angeles-based Krystal K. International Inc., maker of the Jumping Joy and Metamorphosis labels, currently does 10 to 15 percent of its production in the United States and sources the rest to Asia. But the company has plans to move 65 to 70 percent of its production back on shore in the next five years, according to Crystal Ku, president.
Ku claimed that the damage rates on garments have been higher when using domestic contractors, which was one reason they started to source overseas eight years ago. Another was stricter regulation of labor laws in California.
“If the contractors in Asia have a question, they ask it, and they also pick out damaged cut pieces…but those here tell you that it is your problem,” Ku said.
But she acknowledged that the advantages to offshore sourcing — price and quality — have been outweighed by the demand for Quick Response, which requires producing domestically. (Sourcing in Asia translates into lead times ranging from 60 to 120 days.)
“Retailers are working so close to season, and that is one reason to move back,” said Ku. “The costs are also rising there.”
She added, “I strongly believe that time is everything.”
As for New York-based Ordinary Mary, sourcing for this company’s line of dresses and knit and woven tops and bottoms is primarily done in India, where the company owns several factories, said company president Kanuj Malhotra. The firm has plans to expand its sourcing network to China and Hong Kong as part of its growth plans.
Malhotra said that while saving money was certainly a factor in sourcing internationally, the company is only a year old and therefore international sourcing is crucial to business. “We have really tried to define ourselves as a niche-oriented line, as opposed to a dress product,” he said.
Much of the company’s handknit tops, some with hand patchwork, are too labor-intensive to be done domestically, he reported. “That said, there simply are things that we can do there that we can’t do here.” He cited the detail work and “complicated fabric” as examples.
“Basically, our reason to exist is novelty and fashion,” he added. “And it just so happens that because that’s what we do, our best sourcing is in India.”
Orders for spring have been up 30 percent over last year, said Malhotra. He credits this to both fine-tuning its marketing strategies and efficient sourcing. The holiday season, by contrast, has been “abysmal.”
“Some of it also has to do with the type of clothing we produce,” said Malhotra. “The specialty knits that we do in India, I believe, play better for spring.”
Malhotra said he’s looking at sourcing more domestically in the future, with plans to have it account for 50 percent of its production in the next three to five years. In the meantime, he’s using domestic sourcing for merchandise that needs to be turned quickly.
“If I get a call that a $130 dress is blowing out of the store, I’m going to have to source that dress domestically,” Malhotra said. “That way, I can be back in the store with it within two to six weeks. If I’m sourcing internationally, it will take me two to three months. By that time, I’ve lost the reorder.”