CTE 4829 Global Sourcing Exam 1 Introduction to Sourcing Global Perspective Industry provides more employment than any other business segment Example 37 million in India Trade occurs from production to consumption Textile complex incorporates textile manufacturing apparel manufacturing retailing and consumption around world Production Distribution Chain Until mid 20th century goods were produced within the domestic economy Textile and apparel production now involves numerous countries Globalization Levels of Trade Domestic trade Exchange of goods services within a nation International trade Exchange of goods services between two countries Global trade many groups cultures and nations involved in production and distribution of products services Controlling Trade Trade Agreements Established by Governments to encourage regulate or restrict trade between countries Trade Barriers Regulate or restrict trade Import limits tariffs quotas Measuring Levels of Trade Trade is based on imports and exports Trade balance exports imports Trade surplus means value of exports exceeds value of imports Trade deficit means value of imports exceeds value of exports Positive trade balance Negative trade balance Measuring Levels of Development of Countries Based on country s economic development World Trade Organization WTO Least developed greatest level of poverty Newly Developing poor Developing Transitioning from developing to developed status less Developed richest poor Development described by Unemployment rate Population below poverty line Literacy male female Infant mortality Life expectancy As well as GNP or GDP Economics of Development Gross National Product GNP Gross Domestic Product GDP Gross Domestic Product per capita Average output per domestic worker in a nation within that nation Market value of outputs of products services within country in a year GDP divided by the number of people in the population Adjusted GDP in each country from Consumer Price Index CPI Purchasing Power Parity PPP determines relative buying power of each currency Firm a business corporation proprietorship or partnership Manufacturer contractor supplier retailer Changing patterns of trade Past 20th Century firms small family owned Today s 21st Century firms large transnational multinational Mergers and acquisitions Vertical integration Changes in Textile Firms Mergers Acquisitions Merger is a consolidation of two companies to form a new company Acquisition is the purchase of one company by another with no new company being formed VF Corp Lee s bought out Vans Inc Reebok Int l bought out Hockey Company Holdings Firms in Textile Complex Level 1 Textile Findings Manufacturers Level 2 Apparel Manufacturer Contractors and Retail Product Developer Level 3 Retailing Level 4 Customers Level 1 Textile Findings Manufacturers All production of fibers yarns fabrics fabric finishing and production of findings Findings apparel materials added to face fabric Many firms are vertically integrated in yarns weaves and finishes Many fabric mills are horizontally integrated Level 2 Apparel Manufacturer Contractors and Retail Product Developer Apparel manufacturers merchandising apparel production and wholesale marketing Retail Product Dev Private brands sourced from contractors Less local production sourcing development by contractors Both in house and outside product development Either cut make trim CMT or full package contractors Apparel contractors produce or arrange production of specific garment Factors Facilitating Level 2 Just in time JIT manufacturing Quick Response Inventory control system of components finished goods Products produced as needed less inventory Less markdowns Electronic transmission of data between retailer and producer Shortens production cycle time Shortened delivery times offers other incentives Wholesale Marketing Apparel manufacturers sell product lines either at 1 Wholesale markets e g pr t porter in Europe or 2 A buyer s office Retails place orders and may request changes Level 3 Retailing Sale of merchandise services to customer Overstoring growth of brick and mortars Multiple channels Specialty stores increased Direct marketing catalog television and e tailing Private labels Department stores Mass merchandisers Off Price retailers Overlap of Levels of Firms 1 3 Global export trading and sourcing companies Same activities as 1st three levels on a global scale Sourcing shifts to outsourcing overseas Outward processing lower wage rate regions Country of origin becomes complex Demand might exceed supply Level 4 Customer Ultimate goal of apparel business Shifts in consumer demographics Satellite TV and Internet Growth of Hispanic Asian and Muslim populations Globalization of fashion Educated consumers demand variety Both utilitarian and hedonic shopping Experiential retailing Definitions Textile complex is the combination of related industries from fiber to fabric through end uses of apparel interiors and industrial products It does not include distribution Exports Goods leaving one country that are shipped to another country in exchange for revenue Imports Goods entering into a country for domestic use or consumption Protectionism measures that some countries adopt in order to protect their domestic markets from imports Economic integration removal of trade barriers between particular nations for mutual benefit Trading bloc groups of countries in special trade relationship that facilitates trade within a region in preference to outside nations Vertical Integration occurs when a single firm operates at more than one stage of production Horizontal integration firm expands to produce more than one product in same stage of production New products compete with old products created by same firm Trade balance difference between exports and imports Trade surplus value of exports exceeds value of imports Trade deficit value of imports exceeds value of exports There are many perspectives central to global textile and apparel trade Economic Political Technological Social Environmental Chapter 1 2 Goals Theories of Global Sourcing Goals of Global Sourcing The goal of businesses economic improvement Productivity growth by Focusing on its core competencies while sourcing special products from others Value acquisition such as New novel one of a kind products Personnel skills knowledge or know hows and or Social or environmental values Quick response and flexible product supply by Analyzing market demands and or