Industry Highlights

January 2008

Apparel Sourcing — The Newest Frontier?

by Bob Zane

About the Author

Bob Zane is chairman of the United States Association of Importers of Textiles and Apparel (USA–ITA), an industry-wide association of manufacturers and retailers.

He recently retired from Liz Claiborne Inc., where he was senior vice president for sourcing, manufacturing, distribution, and logistics from 1995 through 2006. During his tenure, the company expanded from $2 billion to over $5 billion in annual sales, while the number of divisions grew from 4 to 40.

Zane was a founding member of the board of directors of the Fair Labor Association (FLA), whose mission is to protect workers’ rights and improve working conditions worldwide by promoting adherence to international labor standards.

He also is on the advisory board of Columbia University's School of International and Public Affairs and the University of Delaware's Department of Fashion & Apparel Studies.

A native New Yorker, Zane was educated at Brooklyn College and the Fashion Institute of Technology.

Up until a few years ago, if a sourcing executive were asked to name the most important skill necessary to perform his or her job, the answer probably would have been quota management.

After all, virtually all Asian countries were subject to quota (which meant that each of these countries could export a finite quantity of specific products to the United States, with anything over and above those limitations subject to embargo), quota costs were often high and always unpredictable, and production programs had to be consigned to many factories in many countries in order to ensure that adequate and cost-effective quota was available. No wonder that entire staffs devoted no less than 40% of their time and effort to managing this very elusive and often incomprehensible attribute.

And then, at the end of 2005, quota ceased to exist. While we all expected profound changes to occur within the supply chain — factory and country consolidation, lower costs, and more meaningful relationships with fewer suppliers — the changes have been far greater than most executives anticipated.

Perhaps because of quota elimination, perhaps in conjunction with it, or perhaps due to pure happenstance, the landscape has changed immeasurably in the last two years, especially for the established brands and wholesalers:

Retail consolidation has impacted most wholesalers. There are simply fewer department stores to purchase the major brands in the quantities previously experienced.
Private label aspirations and capabilities have increased due, in no small measure, to the relative ease with which goods can be sourced in a quota free world.
Product differentiation has become a mantra for the surviving department stores. No longer are they willing to have the same goods in stores located in different parts of the country; now they want product specifically designed for their targeted consumer.
Stores have discovered the importance of inventory control. They want what they want, when they want it, and are unwilling to make long-term commitments.
Sourcing executives have realized that support and ancillary services normally supplied by U.S.-based offices can be provided more quickly and less expensively at factories, provided that investments were made in training and technology. This logical offshoot of factory and country consolidation, however, carries with it considerable execution risk.
Trade politics have become uglier than ever as politicians and protectionists seek to reign in China, the source of 25 to 33 percent of U.S.-consumed apparel.
Purchasers insist that factories act responsibly in consigning production to facilities that respect human rights and environmental concerns.
Costs remain as important as ever, if not more so, as competition intensifies at all levels.

These are the new realities now confronting sourcing executives. While they may no longer have to contend with all the ramifications of quota, there remains much for them to do: source better product at better factories providing more services at greater speed and for lower costs. This challenge promises to make the management of quota a cakewalk.