Working With Off Shore Manufacturing and Why Near Shore Proximity Sourcing Is So Important

Expert advice from Fashion-Enter Ltd / FashionCapital Founder and CEO Jenny Holloway...

My career started off in buying, and whilst I loved this time during my 20’s up to early 30’s I personally knew I didn’t want a career in buying for multinational retailers. I really couldn’t take, or understand, the politics, plus the enormity of time to make decisions by committee. 

However, I learnt so much from which I am incredibly grateful. Buying overseas means you must understand how to correctly price garments and be prepared to negotiate hard with the factories or agents. 

Here is what you need to consider…

At a macro level:

What is the geopolitical situation of the country you want to work in and what are the risks? Consider the recent developments in the  Red Sea and how many extra £000s retailers have spent flying goods in! 

What’s is happening with regimes? Wars are regrettably part of the world we live in today – what risks are there for your business? 

This affects the stability of the currency remember, and do you really want to open a US dollar account and forward buy currency? 

At a micro level let’s start with: 

Product Description: This must include wording that means something to you and the supplier e.g. Long sleeve silk blouse with collar, two pocket front with box pleat back, double yoke, etc. 

Style Name: A unique reference for the garment that means something to you and the supplier. Normally has a sequential numbering system e.g. FCB/AW/25/205  This would mean FashionCapital Blouse for AW25 and its number 205.

Size Range: The specific sizes included in the order and this normally includes the ratio pack, perhaps the range would be for the FC Blouse sizes 10, 12, 14, 16, 18, 20, and the ratio for each blouse 1, 2, 2, 1, 1, 1, i.e. for each pack of blouses you are going to make a pack of 8 blouses. 

Do say how many packs? For a retainer may be 300 packs so the total quantity is 2400.  The 2,400 is the total quantity required and this would go on the contract.

These areas are now VERY important…  

Fabric Specification: You need to know the type of fabric, composition, weight, width and colour and washing details.

Then the fabric / garment construction details: Technical specifications, including stitching, trims, such as zips (type, colour and finished length) and embellishments.

Artwork and Graphics: Any prints, embroidery, or other embellishments.

Cost Breakdown: You are not always going to get this but try to get a CMT breakdown – cutting, making and finishing times.

Raw Materials: Cost of fabric, plus the utilisation of the fabric, trims, and accessories. 

Labour Costs: It’s always a good idea to find out minimum wage per hour of the country before you go. Ask for that CMT timeline and start to work out what the costs are. Are there other labour intensive processes too? E.g. Special steaming for coats? All needs to be reconciled on costs.

It’s unlikely you will be given these costs unless the factory knows you have an open costings requirement but try to secure the overhead costs: factory rent, utilities, and other operational expenses such as direct and indirect labour payments.

Then there’s the Net Profit Margin: What does the factory aim to achieve – they must make something remember, so don’t screw the factory to the lowest price! 

Pricing Terms are plentiful with off shore so read this carefully 

FOB (Free on Board): The buyer is responsible for shipping costs from the port of origin.

CIF (Cost, Insurance, and Freight): The seller covers the cost of shipping, insurance, and freight to the buyer’s destination. 

C&F (Cost and Freight): The seller covers the cost of shipping and freight, but the buyer is responsible for insurance.

Let’s note to consider the factories.

Payment Terms, and there are a few terms you need to know here…

Advance Payment: A percentage paid upfront to secure the order.

Progress Payments: Payments made at specific stages of production. 

Final Payment: The remaining balance paid upon shipment or delivery to port or to your premises.

Determine which one carefully.

Delivery Schedule…

Estimated Delivery Date: The expected date of shipment or delivery. Are you putting in penalties for late delivery? Yes!!! 

Lead Time: The time required for production and delivery. Sometimes this lead time can be months so be aware of reasons why the garment price may go up such as:-

Fabric Costs: Fluctuations in raw material prices are common which can then significantly impact the final cost. I go on the assumption that fabric is approximately a third of the total garment cost.

Labour Costs: Changes in minimum wages can occur annually but there is an added complication overseas such as labour which then affect production costs. Particularly important is Chinese New Year.

Exchange Rates: this is a biggie! Currency fluctuations can impact the overall cost which is why factories want a deposit.

Order Quantity: Larger orders often result in economies of scale, leading to lower unit costs but smaller quantities are now generally being more accepted. 

Urgency of Delivery: Shorter lead times may require expedited production, increasing costs.

Lots to consider but if you want to achieve the best price and delivery then undertake deep research and conduct thorough market research of the country, region, and factory to understand competitive pricing.

Understand how to price before you go! Use simple but detailed costing sheets to ensure accurate calculations and work our formulas for gross and net profits.

The most important part of all is to have strong communication skills and constant open communication channels with the factory to address any questions or concerns and ensure your critical path is on track. 

Regularly review and update delivery and pricing strategies to adapt to market changes.  

Are you going to travel to review the quality of your order – if so this is huge cost and add it on to your costings. These hidden costs will affect your exit margin – what you have left after discounting takes place. 

With all these considerations, and invariably with the small orders designers and new start-up brands place then the UK really is a far more attractive proposition. 

Proximity sourcing is also incredibly kind to the planet – think of all those carbon emissions you are creating with fabric and trims being transported around the globe plus all those shipping costs. 

There is no language barrier either! You can have unannounced visits to check your quality and to also to ensure that there’s no subcontracting taking place.  

Near shore proximity sourcing is a win win all round for the planet, the local economy and for sustainability in the long term, I strongly advise small fashion businesses to consider all the options and to not rule out manufacturing in the UK.

For all production enquiries please contact – thefactory@fashion-enter.com