Final Exam Study Guide 4829Chapter 5 (PowerPoint notes/Lexicon) – Going GlobalExploration of supply chain components and expanded global sourcing options supporting production and delivery of finished products today, include:• Design• Product Development• Vendor Compliance• Materials and factory sourcing• Manufacturing control• LogisticsSourcing: determining the most cost-efficient vendor(s) of services, materials, production, or finished goods, or a combination of these, at a specified quality and service level for delivery within an identified time frame. One entity desires some material, product, or service (the customer), while the other provides it (the vendor). Customer: In the sourcing world, the sourcing company that contracts for delivery of services, materials, product development, or finished goods. Vendor: a company that supplies services or products to other companies commonly known as customers. Sourcing Options for ApparelInformed decisions must be made regarding whether to: • Develop and produce materials and garments in-house• Purchase finished garments• Contract a vendor to develop and produce the garments Two basic factory direct models used for contracting production of finished garments: • CMT: Original sourcing company (customer), bears all the costs, does development, sources the fabric, delivers the fabric to the vendor, and pays duties and transportation costs. Production contractor (vendor) provides the expertise and equipment for the actual production of the garments. • Full package: In full-package sourcing, the vendor must contribute to and finance most of the manufacturing process, including product development and sourcing. o Efficient full-package production requires:  Higher levels of management expertise Latest technology Fully developed infrastructure Financial resources to assume the majority of manufacturing expensesPrivate Brand ImporterMany retailers have expanded their merchandising activities to include development of their own productsPrivate brand reflects the ownership of an exclusive label by a brand manager or retailer. If the retailer contracts production of these products offshore, it becomes a private brand importer (a brand manager or retailer who sources private brand products in foreign countries for import into the domestic economy). Brand ImporterToday, many traditional manufacturers practice the process of outsourcing much of their production to offshore facilities that they either own wholly or operate as joint ventures.Additional Sourcing VenuesMethods of sourcing include:• Trade shows and trade fairs• Joint ventures: shared ownership of a business or facility by two or more firms. • Licensing agreements: A licensing contract is a means of transferring intellectual property rights; extending the value of a brand without having to produce the product; putting a brand name on a product produced by someone else for a contracted percentage of the sales. • Hiring of sourcing agents: firms or entities that provide services necessary to procure and deliver products and services to wholesale customers. Factors Impacting Sourcing DecisionsDetermining which sourcing option is best for a business is influenced by numerous factors and dependent on:• Type and quantity of products needed• Monetary costs of acquisition • Time required to produce and deliver • Customs requirements in different countries• Manufacturing philosophies• Manufacturing control• Sourcing calendars• Product development systemsManufacturing Philosophies2 different philosophies: 1. Agile manufacturing methods, as a part of quick response, were at first promoted as tools contributing to flexibility and speed on the production floor. Definition: An operational strategy focused on inducing velocity and flexibility in a make-to-order production process with minimal changeover time and interruptions. 2. Lean manufacturing emphasizes efficiency and strives to eliminate waste of time and materials throughout the entire process, while also improving qualitySourcing CalendarsA sourcing calendar is based on the merchandising calendar that sets the classifications of merchandise and the retail selling periods and that provides a time line related to thesequences of merchandise development (design, product development, production, and delivery to the retail sales floor). Product Development SystemsCurrent EDI (electronic data interchange) and integrated product development systems are essential for controlling the sourcing time line. EDI is a means of passing document information between companies. Creation of styles directly on three-dimensional avatars draped on the computer, revised and altered on the computer, and translated directly into two-dimensional patterns without the need of developing actual samples.Manufacturing Control and Vendor Compliance The customer’s established set of rules provides manufacturing control (a process in which expected performance is compared with planned performance) and defines standards for vendor compliance (performance standards or rules established by the customer that a vendor must follow in order to do business with that customer). Customs IssuesThe duty levied by customs must be paid before the importer can take possession of the goods, so it is critical to know what the rate on the products will be prior to their arrival at port.For novice importers, it is recommended that a customs broker be selected.Paperwork must be handled properly to avoid having merchandise held offshore.Quality Assurance and StandardsQuality assurance is a commitment to product quality that utilizes error prevention as integral to the entire product development process.Standards are the basic characteristics used to determine acceptability of the quality and resulting performance and appearance of products and services.• Voluntary standards developed by American Association of Textile Chemists and Colorists (AATCC) • Government restrictions stemming from application of the Consumer Product Safety Improvement Act (CPSIA) • Government–mandated standards related to flammability and product safety, overseen by the Consumer Product Safety Commission (CPSC)Country of Origin LabelingToday COO labeling rules are still sorely needed, because they continue to be used to help establish the tariff rate for duties charged on imported products.Complexity of international sourcing increases the difficulty