Outsourcing strategies for apparel manufacture: a case study

Purpose - The redesign of a product supply chain, in terms of production, cost and delivery capabilities can be effectively accomplished by mapping, analyzing and simulating the changes in the supply chain prior to implementation. The case being discussed pertains to the apparel industry in the USA. The beginning of 2005 marked the end of a 30-year old quota on the apparel market in the USA. This has led many western apparel manufacturers to outsource their production to low-labor cost countries. This in-turn has led to increased customer lead-times. This paper aims to discuss how the implementation of proper IT systems and supply chain measures can reduce lead-times and also reduce total cost. Design/methodology/approach - An integrated approach is utilized to model the impact of apparel outsourcing added to a US apparel producer supply chain by studying the process map, data analysis, and simulation of the supply chain using Visio, Excel and @ Risk simulation software. Using Monte Carlo simulation, the hypotheses on responsiveness and relative costs were tested with and without the outsourcing feature in the US apparel producer supply chain. Findings - The cost savings through outsourcing in the low-cost labor countries in Asia for the US apparel producer supply chain can be huge and the lead-time is quite substantial. Thus, outsourcing is not a viable solution for meeting short-term market demands. However, for large seasonal orders, outsourcing could be an enormous cost-saver. The lead-time of the US apparel producer supply chain could be improved if certain controllable factors such as order processing could be made more efficient. Practical implications - Recent studies by Acaccia, Conte, Maina and Michelini as well as the Leadership for European Apparel Production From Research along Original Guidelines (LEAPFROG, www. leapfrog-eu.org/), were reviewed. However, no recent study that uses Monte Carlo simulation to measure the supply chain in the apparel market for the USA was traceable in the existing literature except one done by Naylor, Burdick and Sasser at Duke University in 1967. The process modeling of the US apparel producer supply chain with the outsourcing feature will be a useful decision analysis tool. With more data and better understanding of the industry, this simulation model can be easily expanded to obtain a more in depth understanding of any US apparel producer supply chain with an outsourcing capability. Even with making some realistic assumptions in the model, one can easily see the potential benefits of outsourcing. The study found that the customer lead-time was averaging around 57 days at three-fourths of the original cost with the minimum customer lead-time being 41 days. Improved IT and logistics capabilities can minimize the variability recognized in major components of customer lead-time, such as ocean freight transportation time, order processing time and manufacturing time. Originality/value - The contribution of the research results from the apparel industry application, where simulation studies of this kind have recently not been executed for a US apparel manufacturer. It also showcases an innovative approach in analyzing outsourcing strategies for a US apparel producer supply chain. The study makes a business case that process improvement can be effectively accomplished with an integrated approach of using widely available inexpensive and user-friendly computer-based tools.