Current and future sourcing strategies – the 1998 Apparel and Footwear Industries Survey

Theimportance of combining flexibility and cost competitiveness is highlighted by the factthat the majority of respondents retain domestic manufacturing while having offshoresources of supply. The nature of the majority of these operations – joint ventures withoverseas partners – provides the ability to benefit from local expertise and managementwhile retaining an element of flexibility, with the ability to move to new sourcinglocations as circumstances change.

Manufacturing within own country
Overall, 68% of respondents manufacture within their own country. This figureis obviously higher among manufacturers than among distributors, with 78% of clothingmanufacturers and 81% of footwear manufacturers (47% and 40% for clothing and footweardistributors respectively). The figure of 54% for French suppliers is surprisingly low,and it is also surprising that Spain has a lower proportion of domestic manufacturing thanItaly or the UK.

Table 3: Manufacturing within country

Sourcing from overseas
Across all the surveyed countries, 73% currently source from abroad. Variationby country is not generally significant, as only half of the Spanish respondents statedthat they source anything from overseas. For the vast majority of suppliers surveyed(64%), the nature of the sourcing is a joint venture with an overseas company. Again theSpanish model differs from the rest. Nearly 80% of Spanish companies that sourced overseasdid so from their own factory (the average being 36%).

Variation by supplier category is negligible, althoughthere is an interesting split by size of company. In the smallest turnover group fewercompanies are currently sourcing from overseas (68%) than is the case with the medium andlarge turnover suppliers (80% and 84% respectively). This shows that smaller companies aremore likely to be domestically focused, both in their sourcing and customer base, relyingon their proximity to market and product quality as competitive advantages. However, formany this is not likely to remain a viable strategy. As quality levels improve fromlow-cost sources and as retail structures change, it encourages larger, more aggressiveretailers to take increasing market share. It is significant that, as companies grow, sothe proportion undertaking sourcing increases. While focus and specialization candifferentiate and protect some market areas, a niche strategy of this type is by itsnature not viable for a large number of companies. The British shoe industry demonstratesthis well, with a small “hard core” of domestic manufacturers remaining.

Of the small proportion of suppliers who are not currentlysourcing from abroad, 11% are actually planning to do it in the future – a threat to manyof the 89% who have no sourcing plans.

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