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The effect speed and replenishment flexibility has on overall costs of sourcing apparel products

This research investigates the sourcing of basic and seasonal garments as a function of lead time as well as the ability that providing in-season replenishment orders has on overall costs. Most sourcing decisions are made on the basis of the first cost of the garment with little regard to the potential impact of large hidden costs (i.e. lost sales, inventory costs, markdowns, etc.). A small survey administered to apparel manufacturers and retailers is used to gather perspectives on sourcing from various regions of the world. However, its primary purpose is to gather information and data to drive a variety of case studies. The Sourcing Simulator™ is used to determine the effect that lead times, forecasting error, product drift and seasonality have on retail performance (i.e. service levels, gross margins and inventory levels) for these case studies. Analysis is performed to attempt to quantify some of these hidden costs. Results show that choosing suppliers with shorter lead times provides significant advantages for basic goods as well as seasonal goods, which in some instances justify using more expensive suppliers in terms of first cost. These advantages take on the form of smaller inventory levels for achieving the same service, as well as minimizing the impact of errors in forecast and product mix for basic goods while increasing margins by using in-season replenishments for seasonal products.