This was the beginning of the move away from location towards supplier as the key factor. This was the era governed by the statement, "I would rather work with a first-class factory in a second- class country than with a second-class factory in first-class country."

This was also the era of the emergence of the transnational supplier with multiple branches located all over the world. Importing customers wanted to take advantage of countries with duty-free access or proximity to the United States, such as Central America and Mexico. They just did not want to work with local factories in those places. Enter the Korean, Taiwanese or Hong Kong factory. You could still work in Asia, receiving Asian reliability, but the machines would be located in Guatemala or Nicaragua.

This was the period when Li & Fung came to the forefront. With branches literally everywhere and expertise in literally everything, Li & Fung could provide whatever the customer needed from wherever the customer wanted. If what you wanted was a decent product, shipped on time, at a reasonable price, you could not do better than Li & Fung.

However, the current supplier model is no longer sufficient to meet the new challenges. And as suppliers move to meet those challenges, the factory location must shift once again. This time they are moving to a place called "Nowhere". This is how it works.

Suppliers are now changing their shipping terms from FOB to DDP, and their payment terms from L/C to open account plus 30 days credit. They are selling their goods FOB New York (or London or Tokyo). They are opening design and sales office in every market where they ship. This trend will shift the entire sourcing process.

Imagine a situation a decade from now, when three customers-one from the U.K., another from Japan and a third from the U.S.-all working with the same supplier, meet accidentally at an airport. They start talking about suppliers. They realize that all three work with the same supplier-Brandix. One of the customer asks, "Do you know that Brandix is located in Sri Lanka and India?"

The others reply, "No! How would I know that? If I want to speak to Brandix, I pick up the phone and their merchandiser, or designer, or technician, takes a taxi to my office. They ship directly to my warehouse. I have no interest where they have their machines. As far as I am concerned, they are a local supplier. This is the future where each customer believes their supplier to be located somewhere else and all are wrong (or right-depending on how you look at these things).

About the Author:

David Birnbaum is the author of The Birnbaum Report, a monthly newsletter for garment industry professionals. Each issue analyses in-depth US garment imports of four major products from 21 countries, as well as ancillary data such as currency fluctuations, China quota premiums and clearance rates.

Click here to read The New Garment Supplier: Where-Who-What: Part II

This article is reprinted with due permission from Fashiondex.com

Refer the newsletter of: The Birnbaum Report/Strategic Sourcing for Garment Importers