Garment sourcing: past, present, and future
The apparel industry has moved from the full package sourcing system to the Standard Garment Sourcing Model. Next in line is the Full Value Sourcing Model says David Birnbaum, and this requires a set of skills far in advance of full package and very different from SGSM.
'In less than ten months, the Chinese menace will be upon us and we will all be crushed.'
We in the garment industry have this seemingly infinite ability to live our lives in total denial. For over nine years we have been aware that on 1 January 2005 quotas will be phased out and that for the first time in 42 years our customers will be free to go wherever they want and buy from whomever they want.
Most of us factory people have used these past 110 months as an opportunity to do nothing. And our solution, now the crisis is upon us once again is to do nothing. In almost ten years our entire progress has been to move from 'There is no problem' to 'There is no solution.'
For those of you who belong to the 'It is too late I can do nothing' club, I apologise for waking you up and suggest you stop reading now and go back to sleep.
For the rest, we go back to basics. The Chinese enjoy two advantages over the rest of us.
- They are committed.
- They understand the system.
These two advantages, taken together, have allowed Chinese garment factories to dominate the international garment industry.
Standard Garment Sourcing Model
For 50 years the international garment industry has operated under the Standard Garment Sourcing Model (SGSM).
SGSM is the basic system where the garment manufacturing process is broken down into about 101 steps, starting with step 1: designer attends fabric show; and ending with step 101: stock garments shipped. The first 86 steps occur before the factory begins to produce the stock order.
Most factories look only at the last 15 steps - the stock order production. They neglect the pre-production period which in fact consumes over 80 per cent of the effort as well as over 80 per cent of the overhead expenses. These factories expect the customer or his local agent to be responsible for the first 86 steps.
If the customer fails to provide information on time, or fails to approve the factory's duplicates, lab dips, or trim sheets on schedule, this is the customer's problem, the customer's failure, and the customer must expect his shipments to be delayed. In practice, many of these steps are inevitably late and as a result the factory begins production late, and of course must ship the stock late - all of which is the customer's fault.
Chinese factories do not think this way. To the Chinese factory, the customer has but one obligation - to pay on time. Provided the customer meets this one obligation, everything else becomes the factory's responsibility. There are no excuses. If the customer fails to approve duplicates, lab-dips or trim-sheets, the factory is responsible. If there is a shipping strike, a typhoon, an earthquake or a war, this too is the factory's responsibility. Armageddon is the only valid excuse for late shipment and then only because the factory can rightfully assume that should the world come to an end during production, the customer would not pay on time.
If you think this is some form of obsessive-compulsive insanity, then you are in the wrong business. I know more than a few Chinese factories that would continue working during Armageddon on the off-chance that they would be paid in the world-to-come.
The greatest Chinese advantage is their ability and commitment to work these 86 steps efficiently and accurately.
With this degree of commitment, and knowledge of SGSM, one would think the Chinese would be unbeatable and that the rest of us should pack up our tents and go home. However, the 2005 quota phase out will bring unforeseen insights which industry professionals have just begun to grapple with.
The greatest of these is the ultimate revelation: SGSM sucks.
In the past 50 years we have built this monster where hundreds of professionals in both the buyer and supplier countries are employed to ensure that mistakes do not happen. In pursuit of guaranteed mistake-free garments, SGSM may specify that four different people working at three different locations and resident in two countries are needed to approve a zipper.
The factory trim department first checks the zipper, and then passes it upstairs to the factory merchandiser, who is currently out on an inspection but who on return after careful consideration will eventually pass the zipper to the local agent, who unfortunately is not available until tomorrow but who the next morning will look at the zipper, and then Fedex the zipper to the private label importer where the zipper will sit in the in-tray until the zipper expert can find time to okay the sample zipper. The zipper is finally approved, provided that none of the people involved saw fit to reject the zipper thus starting the entire procedure anew.
The net result is that zipper approvals may require 7+ days, provided nothing goes wrong. Multiply this by 10 trim products in four colours, combine that with 60 separate operations and we arrive at our total. The normal SGSM cycle is about 24-26 weeks - somewhat longer than the time required to build a 747 jet - but which is remarkably efficient given the involute system we are forced to operate under. Actually, I think it remarkable that anything gets shipped.
2005 will change this; not because of the quota phase-out but rather because of the freedom which will result from the quota phase out. For the first time in 42 years, our customers will be free to go wherever they want and buy from whomever they want.
In a world where 50 per cent of garment production capacity is excess to demand, our customers will find themselves in the greatest buyers' market in the history of the industry. They can make any demands they want, safe in the knowledge that if half the garment factories in the world disappeared, there would still be enough machines out there to produce all the garments required.
This will bring a revolution where factories will have to provide virtually all the facilities in the garment making process and where those factories unable to meet customers' demands will disappear, along with buyers' overseas agents, and private label importers. The supply chain will be reduced to two links: the retailer (or labelled importer) and the factory.
Full Value Sourcing Model
The present Standard Garment Sourcing Model (SGSM) will disappear to be replaced by the Full Value Sourcing Model (FVSM). First to go will be the zipper inspectors. Let's face it, if a factory cannot match a zipper to the top-goods, that factory has no right to be in business. Zero-service factories exist because they are located in quota-free countries. Take away the quota system and the zero-service factory falls down.
To illustrate the change, look at the first steps in the garment making process. Garment manufacturing with the fabric - Step 1: designer attends fabric show.
Our industry has three sourcing models:
- Full Package: The past system
- SGSM: The present system
- FVSM: The future system
Each deals with fabric purchase in its own way:
Full Package: The factory plays no role in the fabric sourcing process. The customer locates the sample fabric, works directly with the mill to ensure that lab dips are correct, orders salesman sample fabric, calculates stock fabric requirements, and places the stock fabric order with mill. The full package factory does not become involved until step 81 when it is called upon to pay for the stock fabric.
The only advantage to the customer over the CMT factory is that with the full-package factory if the garment quality is poor or garment delivery is late, the customer is not trapped by his investment in the fabric. Of course in the event of late fabric delivery or poor quality fabric, the factory takes no responsibility. Altogether not a good deal for the customer.
SGSM: The factory enters the garment sourcing process immediately the customer selects the fabric (step 6). The customer sends a swatch to the factory which locates a mill capable of producing the fabric to the customer's standards. The factory must provide lab dips for customer's approval, ensure fabric in the customer's colours for salesmen samples, calculate stock fabric requirements based on the customer's line plan, order the fabric and pay for it.
Working with the SGSM factory places responsibility clearly on the factory. If the fabric arrives late or is of poor quality, the factory must overcome these problems and ensure on time garment delivery. However, there is downside: very often the fabric is not precisely like the swatch. Sometimes, the factory does not know the best mill. Sometimes the customer's designer will send a swatch of a nice fabric from Italy which costs $85 a metre and will become upset where the $2copy does not have the same feel as cashmere-silk.
In any case only the best full-service factories can provide SGSM fabric sourcing. Compared to full value fabric buying, SGSM sourcing is not only located in a different world but also in a different century.
FVSM: The factory enters the garment sourcing process at step 1. The factory becomes the designer's assistant. The factory contributes ideas for new fabrics which it locates from mills where it has good relationships. This not only speeds up the process, it avoids most of the problems associated with SGSM fabric sourcing.
- The factory need not worry about salesman sample fabric because it will be working only with those mills which can provide salesman sample yardage.
- The factory need not worry about its fabric having the same feel as the designer's swatch because the designer's swatch is its fabric.
- Problems of quality and reliable delivery are minimised because the factory need not source at the mill capable of duplicating the designer's fabric. It is free to source at the most reliable factories.
- Most importantly, FVCM does away with the entire garment negotiation process. The confrontational buyer/seller relationship is replaced by a strategic relationship. The correct price is achieved because the garment is engineered to fit into the correct price.
Like everything else, there is a downside. Operating within a FVSM requires a set of skills far in advance of full package and very different than SGSM. The FVSM factory must understand fashion, fabric, and have relationships with a large number of mills located in many countries.
Fabric sourcing is only the first step in the FVSM garment manufacturing process. The FVSM factory is run by professionals - specialists in every part, not only of the garment manufacturing process but also in the post production processes as well.
In the new world of the Full Value Sourcing Model everyone starts out equal, because everyone is starting fresh. China will lose its present advantage; however, China will surely regain that advantage unless its competitors understand the new FVSM system and are 100 per cent committed to that system.
By David Birnbaum.
- Global supply chain trends at Sourcing at MAGIC
- Why voters don’t want more global supply chains
- Denim and athleisure top picks for back-to-school
- What's 3D-printing doing for apparel and footwear?
- Labelling – The importance of the fine print
- H&M takes action over Myanmar child labour breach
- Vietnam garment industry calls for strategy update
- Nike and Apollo create supply chain partnership
- US Q2 in brief - Express, The Buckle, Stein Mart
- Li & Fung joins FTA in sustainable sourcing pledge
- Too Many Standards
- Southeast Asia strategic sourcing review – a focus on Cambodia, Vietnam and Myanmar
- Under Armour, Inc. (UA) - Financial and Strategic SWOT Analysis Review
- Central America strategic sourcing review - a focus on Guatemala, El Salvador and Honduras
- THE GAP, INC.: Retailing - Company Profile, SWOT & Financial Analysis