Factories Are Preferred

At the outset, it should be pointed out that choice of set of factories is severely limited by constraints of quota availability fabric accessibility and compliance. For example, if one wants to buy washed twill shorts for ShopKo Stores, one is limited to factories that have quota for category 347/8 available in a big quantity and there are only few who have much quota. And as twill fabric in India is exorbitantly priced and not reliable in terms of delivery. One’s choice is further limited to factories, which are in an EPZ or EOU and can import cheap twill from China. Therefore at the end you have probably only a couple of factories left to choose from. And of these, if only one is compliant to ShopKo Stores requirements, it leaves you finally with only one factory you could work with.

The above example is to illustrate that there is not exactly a choice set of factories to short list and choose from. A factory may be disorganized. Poor in follow up and expensive, and you would not place an order with them normally. But in a case like above you would have no choice but to do the same.

Price is another such constraining factor when we bid for programs of a few thousand dozen garments from stores like JC Penney, Wal-mart, Sams Club. Price Costco or shopko (vide importers) it is just a price game. If the programme relates to say a poly/nylon/spandex fabric which entails, around 28% import duty or a rayon crayon printed one which entails the same: we would look for sourcing in Kenya or Madagascar which is duty-free for export to US. If it is a T/C Plaid shirt program, we would look for Bangladesh using Chinese or Kenyan fabric: but Bangladesh with duty may still be cheaper. If the program is of cotton shorts for Marmaxx we would again not even think of India or Bangladesh with their prohibitive quota prices: we would look straight to Kenya or Vietnam. Hence the current scenario calls for keen eye on landed pricing, not just f.o.b. We have to mentally add f.o.b. and duty and freight and then offers received from different sources are compared. The Competition cannot beat Kenya or Madagascar for the US and Bangladesh or Nepal for Canada because of duty-free status.

Product ability is of course what determines the choice matrix. If we are looking for dresses. Pants or blazers or polyamide briefs, there would only be 2-3 factories in India having this capacity. Let us take a product category like ladies woven blouses or men’s knit golf shirts where you can indeed exercise choice from a set of factories. What are the factors that would determine my company’s decision in placing an order? I would list them as follows.

Compliance Whether our customer has a program of social accountability and compliance or not, we would need certain basic parameters to be followed: no child labor, no forced labor, sufficient safety measures for workers, basic levels of sanitation, no over-crowing and basic levels of equipment maintenance factory.

Price - In the current price war, which is raging, every cent is crucial.

Least Correspondence Factor - Assuming pricing and compliance are in place we look for factories, which represent the “least correspondence factor”. This basically represents the factories, which book the order, and next we know they ship it on time. There is no correspondence from them on fit issues, fabric problems, quality issues, extension and so on. They are competent people who know how to get fits right in the first place, how to get correct fabric, how to follow procedures of lab testing bulk and pre production approvals on time.

Integration - A factory with backward integration like yarn spinning + yarn dyeing + automatic stripe knitting + pricing + stitching facilities (in knits) would always be preferred, Actually, such a factory is most likely to meet the “least correspondence / least headache” criterion.

Developments and Turn Around - This is a crucial factor in determining choice of factory. Assuming we have to choose from a group of compliant factories within the ball park price range and qualifying to “least correspondence status” we would place the program under bidding with one who feds us consistently with updated developments.

Finance Factor - This is an increasingly important factor in considering placement. Factories are nowadays accepting 30 or 60 days garment L/C (as against L/C at sight which has been mandatory requirement) or accepting shipping on D/A or D/P without any L/C at all.