Global Sourcing Scenario - Apparel Industry

Topics: International trade, Southeast Asia, Industrial Revolution Pages: 8 (1684 words) Published: May 17, 2012
Global Sourcing Scenario

In Indian Apparel Trade , 90% of Buyers are from US and EU . These two giants had started sourcing from other developing Nations only from post 1970s . Till then they were sourcing domestically . Due to soaring domestic prices and demand for varied sewing skills , buyers at US and UK started shifting to developing Nations.

Evolution of Global Sourcing (Till Mid 1990s)

Till First Half of Twntieth Century - US Retailers procured garments from their owned Factories. During this period of time , Only highly fashionable and Expensive Garments were imported . Linen from Ireland ; Silk and Prints from Italy ; Hi Coutore Fashion from Paris and Milan.Gradually ,Retail Buying Passion took over the Country . This change in the Fashion Scene pushed the focus of the retailers towards advanced production technology and sewing skills . Apparel corporates were formed clubbing the Men’s , Women’s and Kid’s Fashion together under one management. Mass production Facilities were formed at South of US where Rawmaterials were available closer .

In 1960s – Japan grew as an Economic Power and Apparel Production Shifted towards Japan from US / EU . Till that period , US and European Nations were dominating the Apparel production .Brands evolved - Espirit , Liz Claiborne , Calvin Klein and Ralph Lauren Emerged .These Companies required High Production skills at competitive prices .Due to development of They started looking for low cost manufacturing options in other countries .

In early 1970s , Japan experienced Labour shortages and high Domestic Production cost. Japan started looking for investing in Newly Industrialised Economies like :

• Korea
• Hongkong
• Taiwan

The Above countries were famously called as “ BIG THREE” Apparel Exporters Hence Sourcing Shifted from Japan to Big Three.
Factors which attracted US Apparel Companies towards the above countries were:

• Very Low Production cost - US wages / hr at this period was $3.80 / Hr while it was $0.22 at Korea ; $0.29 at Taiwan ; $ 0.75 at HongKong . • English speaking population
• Developing Infra structure
• Favourable Political ties
• Encouraging Govt Policies

From this point of time , US Apparel companies continued searching low cost production centers across the World

1980s – Hongkong , Taiwan and South Korea witness economic growth and labour rates increased . Sourcing shifted towards China , Malaysia , Philipines , Central and South America .

Main reason for the above Expansion was due to MFA ( Multi Fibre Arrangement ) which impelled Quota restrictions to adjust competition from developing Nations and also to balance the Domestic Market of US .

1994 to 2004 ( ATC Regime)

WTO was formed in 1995 . It replaced MFA with ATC- Agreement on Textiles and Clothing . ATC formulated removal of quota restriction in frur phases over a period of 10 Yrs .

Mid 1990s - Sourcing Expanded to India , Pakistan , Bangladesh , Indonesia and Srilanka .

By mid of 1990s US Apparel Importers had developed their Global Low cost source so efficiently that , the value of imports matched the domestic apparel Production . In 1996 the value of Apparel imports was almost $ 40 Billion

Many Trade Agreements came into being in this period of time which enhanced Apparel trade . One among them is NAFTA which saw sourcing shift to Mexico and the Caribbean .

Other Trade Agreements were :


During the ATC Regime , East Asia and South East Asia evolved as Major Hubs for Apparel Sourcing .

Key Factors for Sourcing in this period are :

▪ Availability of Quota
▪ Availability of Rawmaterials
▪ Low Labour Cost

During this period , US , EU and Japan were the major Consumption bases . Major Production Clusters formed were South America , Euro Med ,...
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