Post quota regime-wake up call

Order in question is 50,000 pcs of a basic men's pant in cotton twill fabric. Our factory in Bangladesh quoted $7.00 per pc as their best price. Next day you hear from buyer that order placed with a vendor in China at $6.75 per pc. Our factory in Bangladesh agreed to do the same order at 6.70 after they heard the news. Response from buyer- too late! Too bad!! Order already placed in China.

Moral of the story is that in post quota regime, the winners are going to be suppliers like this one in China. They go for big orders with all their might and quote their best price in first shot. Nobody has time to waste in going back and forth on negotiations in the new regime.

The fact that China is poised to be the biggest shareholder in global apparel sourcing market is quite obvious. They have a strong fabric base, high productivity-higher than most other countries, cheap and abundant labor, highly developed infrastructure, vertical set ups and conducive government policies. And they are going for it - all out. They deserve to get the share they are going to get post MFA.

But is China the answer to all sourcing questions?? Apparently not. Take for example a cotton voile women's top with heavy embroidery and hand sequin work, and rest assured that China still can't beat the likes of India in terms of prices/ quality/ output. Its true that to beat the Chinese for basic styles and big quantities is difficult, but not impossible. Global sourcing market is big enough to accommodate China and few more performers.

Second to China, quite interestingly, India is being now deemed as the 'next best' sourcing destination. The reasoning given is something like this. Big retailers like Wal-Mart/ J C Penney or for that matter any buyer with significant sourcing needs, would not like to put all their eggs in the same basket. Diversification of sourcing options is the need of the hour. India traditionally is known to have a rich textile base, has abundant and cheap and skilled labor. Having strong fabric base within the same geographical locations can cut down on fabric transit lead times etc.

However, this reasoning needs to be taken with a pinch of salt. Just to point out a few instances-prices of Indian fabrics are much higher as compared to Chinese fabrics. Even the lead times of Indian mills on fabrics are much longer than Chinese counterparts, even if you include the fabric transit time. Talk to any garment exporter who purchase fabrics from Indian mills as well as Chinese sources and they will tell you the service quality/ reliability/ delivery commitments of Chinese fabric suppliers are rated as much better than Indian counterparts. Majority of Indian fabric sector still remains under unorganized power loom sector with little or no global marketing and servicing skills.

Most of the fabric suppliers in India are still dependent for their business on garment exporters, and are not directly marketing their fabrics to the end customers- American/ European labels/ buyers. Very few mills in the composite mill sector are directly getting fabric nominations from buyers, to supply fabrics to garment makers in turn. On the other hand most of the Chinese fabric mills/ agents-NDP, Winnitex to name a few are directly getting in touch with the end customer and getting into nominated fabric sources.

How this works is that fabric supplier partners with the end customer/ buyer to maintain international required quality levels, keep to committed delivery schedules etc. and are willing to even pay penalty if these are not met for some reasons. This kind of arrangement ensures that fabric suppliers get assured business, and the buyer is in turn assured of quality product and on time delivery.

In a true FOB fabric sourcing, the garment manufacturer is responsible for sourcing fabric. Garment exporters get in touch with their fabric sources, negotiate prices, and the buyer need not know the actual negotiated fabric price b/w the garment factory and the fabric mill. This allows for some buffers to be kept with the garment exporters, so it benefits them. On the other end the buyers also benefit because, they are able to get a much better garment fob price as compared to garment fob based on nominated fabric source.