A basic decision in sourcing either materials or production is to whether to make or buy the desired product. In this paper the importance of sourcing types and its various dimensions are discussed and the relationships of key business functions to material sourcing are also discussed.
Making involves manufacturing their own raw materials and/or finished products in the firms own production facilities and buying involves sourcing from vendors. So the decision to make a product involves the capacity available in-house of the manufacturer and desire to reduce costs, availability of technology and unsatisfactory supplier or vendor performance. The decision to buy a product from the vendors arise when there is availability of a product at a cheaper cost, non availability of latest technology and inability to manufacture such volumes in in-house facility.
Whether to make or buy a product is based on the four important parameters like
- production capacity
- quality and
The below chart gives the relationship of key business
function to material and production sourcing. Merchandise plan determines the
number of styles, sizes and colors that are appropriate according to sales
forecasts and other data. Production capacity planning are translations of
merchandise plans into numbers and types of plants, machines and operators
required to produce the line. The combination of sales forecast, merchandise
plans, production specifications and production capacity estimates provided a
basis for developing an effective materials and production sourcing network.
Material Sourcing Responsibilities
The people responsible for acquisition or procurement of materials may include buyers, designers, merchandisers, sourcing specialists or purchasing agents. The responsibilities of persons responsible for sourcing are given below.
- Provide an uninterrupted flow of materials and services necessary for maximizing the efficiency of the manufacturing process.
- Source the materials that are suitable to the purpose at the best possible prices.
- Minimize inventory investment.
- Minimize inventory shrinkage and loses caused by theft, damaged and obsolete materials.
- Develop good vendor relationship.
- Develop reliable alternate source of supply.
- Develop personnel and execute policies and procedures that provide materials at the lowest possible prices.
Retail Buyers versus Material Buyers
Retail buyers are usually involved in consumer goods wholesale markets. The chief responsibility of the retail buyer is to form a select assortment of finished goods to offer the stores customers. Fashion shows help the retail buyers to understand fashion trends, silhouettes and color systems.
Material buyers are usually involved in purchasing producer goods in primary markets at the mill level. They tend to purchase in high volumes from few suppliers than retail buyers.
Both the retail and material buyer are limited by budgets, contract terms and inventory space.
The materials to be sourced are checked for the following criteria:
- Samples: The materials intended for purchase are assessed by the samples received from the vendors. The samples should be accompanied with its specifications
- Certifications: Some vendors provide certification of product
quality. It is intended to provide assurance to the buyer of the quality
of goods shipped and eliminate the need for receiving inspection. The
certification may include the following,
- Documentation of flaws and their locations.
- Test reports
- Date of testing and the laboratory details
- Order minimum: The decision to source a material from a particular vendor is decided on the order minimum which is nothing but the minimum or smallest quantity a vendor shall supply on a single purchase order. Import goods may require longer lead time but often have low minimums when compared to domestic suppliers. Minimums also relate to availability, order processing, packaging and shipping costs.
- Mode of Packing: The mode of packing is also important when a material is sourced from the vendor. If for example a firm wish to purchase woven fabrics it will be supplied in rolled full width on a cardboard tube. The buyer should source goods based on the mode of packing so that the goods are not damaged in transit.
- Delivery and Payment Terms: The buyer should clearly define the mode of payment and the delivery conditions so that there is no misunderstanding between the vendor and the buyer.
- Professional Credibility of the Vendors: A vendors reputation in the trade is often a strong factor in determining whether the materials can be sourced from him. The buyer may check with the vendors client list and enquire about his quality of service and timing of delivery.
From the above discussions the material sourcing person should try to assess all the parameters that are necessary to select a proper vendor because time is the essence of contract between the garment exporter and the overseas buyer.
The author is Senior Lecturer at NIFT TEA College of Knitwear Fashion, Tirupur.