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Outsourcing the Manufacturing Operations to Low-Cost Countries

by Suleman

The production manager

Couture, the clothing company

404 West Pico Blvd

Los Angeles

Dear Manager:

I am pleased to inform you that I have chosen your business to explore new opportunities/trends that will help your enterprise maximise its potential growth ability. As a university ____ student, I have carried out studies on your organization’s market model and sent this business letter to share my in-depth analysis with you.

In 1933, the designer Carlo Gholami created Couture, a clothing company. For men and women, Couture crafts garments and accessories. Their tailored styles often render a personal style statement. The customised styles and incredible fabric collections by Couture are directed at people who want to wear clothing. The apparel line is still in style and tailored to the changing patterns. In addition, clothing and accessories are 100% manufactured in the US and are not outsourced to other countries for their production and processing.

Outsourcing the Manufacturing Operations to Low-Cost Countries

Their product line is divided into three categories:

  1. Couture Classic: The primary stream of sales for the firm is the Couture Classic. It is directed at individuals who enjoy distinctive fabrics. The garments are tailored by hand and contain tailored suits, trousers, skirts and leather jackets.
  2. Belfast Tees: it covers hand-made ultra comfortable t-shirts. These are tailored fit self expressed t-shirts with some drawings or written statements.
  3. Republic Of Courure (R.O.C): it is the casual line of the company. This section covers denim jeans and jackets.

According to the company’s sales agent, the range is meant for elevated stitching and high sewing. The clothes are custom-made and crafted according to the specifications of private clients. Taking into account the product range of the company, the competition in the Los Angeles fashion industry is very intense. Whether in California or New York, the largest groups of fashion designers operate. As a global fashion centre, Los Angeles ranks (industry information of fashion designers). In the western U.S., it is the largest manufacturing area and the home of many top designers. A brief look at the clothing company Couture’s competitors is given below:

  1. Domestic Competitors: Juicy couture, Oscar de la Renta, Cherokee jeans, 1921 Denim, Butterfly dropout, Affliction clothes, Antic denim, Davinci clothing, Capture a fire clothing, Salvage, Smet clothing and so on are the nearby couture rivals. These designers cover the “breadth of clothing lines” under their roofs (Los Angeles fashion industry profile 12)
  2. International Cometitors: The international labels competing in the fashion industry of LA, California are Nike, Crossroads, Armani, Levis, Adidas, Diesel, Dolce and Gabbana, Gucci, Armani, Versace, Fendi, Prada, Copula, Ebba etc.

In addition to this the LA fashion district’s discount and wholesale outlets have made the apparel business even more sustainable. Therefore to distinguish between goods and others, Couture needs to use forward-looking tactics.

The biggest weakness of Couture is that currently it is manufacturing clothes and accessories only. It should expand its product line and produce shoes, bags, hats, socks, shorts, perfumes, shades, swimsuits etc. Also, variety in designs should also be added. But overcoming this weakness needs expertise and capital investment. Therefore, it is recommended that couture should outsource its production to other countries so that it can produce clothes at low cost with no capital expenditure.

Outsource the Manufacturing to Low Cost Countries: couture is currently producing 100 % US made clothes and accessories. Their designing and manufacturing is not outsourced. If they outsource the manufacturing operations to low cost countries there will be a considerable reduction in cost. Moreover, company can increase its market segments and target the people in these countries.  

Currently many national and international fashion labels have outsourced the manufacturing operations to low cost countries like China, India, Pakistan, Iran, Korea, Bangladesh etc. Companies like Armani, Zara, Nike, Adidas, Levis, Reebok, and Converse have successfully contracted their operations to third parties to achieve the economies of scale. Moreover, this trend has become a source of competitive advantage especially in the fashion industry of LA. Outsourcing will help couture to achieve following benefits:

  1. Cost savings: the fixed and variable costs of manufacturing are considerably low in developing countries. Also, the wage gap between industrialized and developing countries has made it possible to produce goods at lower cost by cost restructuring.
  2. Improve quality: it is very economical to produce high quality products at lowest possible price in these low cost countries. Couture should have to define its quality standards before entering into these markets (Wikipedia).
  3. Capacity management: couture is currently producing clothes and accessories only. Its clothing line has limited variety and options. Therefore, outsourcing its manufacturing will help couture to increase its product line with no investment.
  4. Focus on core business: outsourcing will help Couture to foresee the upcoming trends and direct the resources towards designing high quality differentiated clothes and accessories.

Overall, this current trend of outsourcing will result in reducing the cost. Therefore, the profits of the company will increase which can be used to expand the product line of the company. Since the competition in the fashion industry is very intense, outsourcing is the most effective method to achieve the economic excellence.

However, Couture has to develop a comprehensive game plan before bringing this structural change. Company should follow the following step by step recommendations before restructuring its manufacturing operations:

  1. Couture should do through research on the operational excellence of the low cost countries. It should investigate and collect data to analyze the effectiveness of the manufacturing operations in these countries.
  2. Next, it will select the countries which best meets the requirements of the company. This selection will be made on the economic conditions, quality standards, wage rates, price, and cost in the respected countries.
  3. After selecting these countries Couture will develop a tender notice for the selected countries to attract the suppliers. Suppliers will do bidding on the orders and company will select the potential suppliers who meet the basic requirements.
  4. Couture will select a team to negotiate with the potential suppliers and communicate the quality standards, pricing, technology and other issues. Then suppliers will be selected on cost, quality and timely delivery.
  5. Couture will send a sample to the selected suppliers to copy. The suppliers will have to meet all the design and quality requirements and send it to the company on time.
  6. The quality inspection team will inspect the copy of sample given by the suppliers. Final qualification of suppliers will be done on comparison between the sample and its copy.
  7. Orders will be given to the qualified suppliers.
  8. Payment will be done after the completion and acceptance of order.

However, Couture has to take some precautionary steps to overcome the threats that can affect the logistic of the orders.

  1. Delays in delivery: it takes time for the shipment of order to reach its destination. Moreover, external factors like load shedding, strikes, and labor supply affects the manufacturing operations in developing countries. Therefore, Couture should keep some extra time in back up to manage the delays.
  2. Copyrights: Couture must purchase copyrights in the outsourcing countries to protect its designs from illegal production. As a precaution, suppliers will sign terms of agreement. In case of violation of these terms, the supplier will be disqualified.

The above game plan will help Couture in successfully implementing the opportunity. Since Los Angeles ranks among the top global fashion centers, designers are focusing to penetrate the industry. Therefore, it is high time for Couture to control costs. Garment manufacturers in US are very expensive in comparison to countries like China, India, Pakistan, Korea, Thailand, Bangladesh and other Asian countries. Hence, outsourcing will help in significant cost reductions. Furthermore, Couture will be able to manage its supply chain more effectively by contracting with different suppliers. In this way, it can focus on designing exclusive variety for customers without concerns of manufacturing operations. Also inventory control will be easier by ordering the right amount. Overall, the fashion industry of Los Angeles is rapidly changing. Customer demands are continuously changing. Outsourcing will help Couture to foresee the latest trends and focus on delivering latest designs and clothing.

Best regards,

Student’s full name

Cc: Instructor’s name

Works Cited:
  • Couture, the clothing company: Nyboer Creative. 2010. Web. 12 July 2010.
  • The Los Angeles fashion industry profile: LA county economic development corporation. 2003. Web. 12 July 2010
  • Industry information on fashion design careers: All-star directories, inc. 2002-2010. Web. 13 July 2010.
  • Outsourcing: Wikipedia. 2010. Web. 13 July 2010
  • What are the global outsourcing benefits? Bizbrim.com: 2008. Web. 13 July 2010
  • Los Angeles: LA fashion district. Trip Advisor LLC: 2010. Web. 15 July 2010

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