Custom «Sourcing Strategy and Conclusion» Essay Paper Sample
I am introducing a new design of dress with lace on sleeves and front yoke .The dress has heat transfer rhinestones along the yoke line. Based on the research I have done for domestic and international sourcing, I would like to produce my product overseas. I found that it is better to produce a garment with less cost to increase profit margins of my company while still maintaining good quality of the garments. From many observations, it is apparent that fabrics from foreign countries are cheaper. Sourcing garment production to other countries also trims the labor costs and other production expenses.
All indications point out that it is better to manufacture the garment in China. After comparing both domestic and international location of garment production plant, it would be better to outsource everything to China. First, after comparing domestic and import cost sheets, I noticed for Rachel Lace, Interlock and the trim of Rhinestones are more than a dollar cheaper in China. It would make great differences in retail prices.
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Secondly, raw materials in China are easier to find than in the US since the materials in many markets are mostly produced in China. (Gerreffi, 2) To save the import fee, I would rather choose to make produce everything in China. This strongly supports my decision to make my garment in China than in the US.
Many garment manufacturers are outsourcing their production to China because of the availability of cheap, skilled labor that makes the garments manufactured in from China a bit cheaper. The labor inflation costs in the United States have been increasing on an average twenty to fifty percent in a year compared to an average of lowly 500 dollar a month in China (Ting, 14).
This difference in labor costs between the United States and China makes a huge difference in the prices of garment manufactured in the United States and China. China is also more effective in controlling labor inflation than the United States. There are also many policies by the government of China to make garments manufactured there more competitive. Ordering garment products from China is faster compared to other countries because of a faster turnaround times and product delivery times than that of the United States (Chen, 1).
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The variety of garment manufacturing products available from China is also very large. China’s garment industry has enormous design capabilities and manufacturing capabilities than that of the United States. There are over 20,000 garment manufacturing and related products manufacturing industries in China offering varied raw materials at competitive prices (Ting 23).
Another factor that can add to the profit margins of outsourcing garment production to China is the low vale of the Chinese currency. The value of the Yuan has been for many years been kept on an artificial low in value. This makes products manufactured in China competitive in the international market and makes imports to China more expensive. This means that there is a fair advantage of outsourcing garment manufacturing to China. The low value of the Chinese Yuan makes garments manufactured in China to be cheaper in the international market compared to those from other countries (Cheng, 1).
The Chinese government uses currency manipulation to maintain the Yuan at an artificial low level. There is a consensus among many economists in the world that the value of the Yuan is maintained at an undervalued level of 25 percent to other currencies and 40 percent relative to the United States dollar. This makes Chinese goods have an advantage in the international markets (Ting 34).
Many luxury garment brands around the world outsource their garment production to China. The low cost of doing business in China, the low transportation costs of sourcing products from China and ease of importing products to China makes sourcing garment manufacturing to China very attractive.
Outsourcing garment manufacturing business to China is however not a simple thing. In making, the new garment, different parts of this garment will have to be sourced from different manufacturers located in different regions of China. However, the China National Garment Association has over 20,000 enterprises. The large associations of garment makers in China mean that the supply chain in China is well developed for obtaining raw materials from these manufacturers.
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There are also fewer requirements and regulations for outsourcing business to China than there are in other countries like the United States (Ting 65). The Chinese government policy of promoting outsourcing to the country mean there are fewer requirements of outsourcing production to China.
Fewer requirements of establishing business in China mean that the cost of conforming to business regulations and laws are lower in China than in the United States. Such difference in costs of conforming to business regulations can have a huge impact on pricing and the profitability of the garment. The entire attractive features of outsourcing production to China mean that it is more feasible to source production of new garments in China than in the United States.