“International Apparel Planning and Sourcing”

Stacy Smith

Introduction to Material Handling

There are several phases to completing the logistic cycle of international planning and sourcing in the apparel industry. Organizations have a better chance of succeeding when they develop a relationship with a freight forwarder, establish manufacturing facilities, create a design cycle, and maintain a level of customer service. It’s a very complicated process and the company is always forecasting what they want to be doing next year at this time. The first step in logistic planning is to develop a relationship with a freight forwarding company like Ceva, Expeditor’s, or UPS. It is a very important decision choosing which company one should partner with to move your freight. We’re talking international freight from the Eastern Hemisphere which is where most of the manufacturing is being done. An organization can set it up for any hemisphere, but that is where most goods are manufactured. This is the Asian block – China, India, Vietnam, Korea and Japan. Different freight forwarders will have shipping lanes they manage and where they’ve partnered with airlines, like Korean or British Airways, American Airlines rates are set based on the current cost of fuel surcharges, generally charged by weight and box size. Organizations have to determine an optimal box size to use when going to the air. Freight forwarders exist because they bring many customers together; shipping freight from the same location of departure to the same location of arrival. They split the freight out to the different customers once it arrives in the United States.

Next, is to determine where manufacturing facilities are and how you want to move the freight to the port of departure. These would include Shanhigh, Hong Kong, Hoochiman City, wherever is the point of departure. Then work with that freight forwarder which will have a local office at the port of departure. They coordinate the shipments coming from the different vendors/ factories in the area that ship to that port. When the factory is ready to ship product, they contact the freight forwarder, informing them it’s coming, and they work through the specifics of moving it through China customs, through the port and onto an airplane or through China customs into the port to be put on a container that will be shipped to the United States. If shipments are large enough to fill the containers at the factories, a full 20 or 40 footer, that is a significant cost savings over sending less than a container load, which is referred to as LCL freight. The rates fluctuate depending on market demand. Certain times of the year freight cost more than at other times of the year. Generally, freight moving October through December cost less than freight moved January through March. Reason – Chinese New Year; the country of China close down for three to four weeks in mid January end of February. All organizations are looking to get their freight out the end of December early January. Organizations in the United States moving freight has to move two months worth of freight in one month all of which is leaving China at the same time. Freight lines get bogged down, ports of departure get bogged down, ocean liners get filled up and it’s first come, first serve or who wants to pay the most to ship freight. During this time of the year, the company with the most money gets the freight moved. September through November, it’s calmed down; it’s been a steady flow for about nine months, so the rates generally drop because the demand is no longer.

LCL freight is where you take freight and put it in a container with other organizations freight that’s coming to your final destination. That could mean clearing customs in Los Angeles, Dallas, or New York. They’ll consolidate their freight to bring it in and then to break it out at their distribution center at the port of arrival, which is generally where it clears customs. Most of the freight brought into Texas is brought in through Los Angeles because it is faster than from all the China and India companies.
In addition, organizations can bring some of India’s freight into the east coast, but generally will experience an extra week of travel time to get from the eastern coast ports of arrival. Organizations then lose another five to 10 days in shipping getting it out of the east coast. It turns out that it’s almost always better to bring it through Los Angeles. At Los Angeles it preliminarily clears customs through Los Angles, it gets loaded onto a train, and the train comes to Dallas to a receiving yard. The ocean liner generally still owns the freight at that point. It is handed off to the freight forwarders in Dallas. If you clear it in Los Angeles they hand it off to the freight forwarders in Los Angeles and then brought into Dallas to be delivered to the customer. The total time it takes to get freight from the Asian continent to Dallas is anywhere from 21-30 days, usually averaging around 24-25 days.
Next, is to plan when to ship to the customer and everything works backwards from there. If you’re to ship to the customer on January 1, the goods need to leave port of departure by December 1 (usually 30 days). In order to get it ready to leave in 30 days, say for instance in apparel, it’s generally a 120 day manufacturing cycle and that includes 30 days of freight. It generally takes 90 days from the time a company issues a purchase order to a factory to the time they get the piece goods finished and ready to go. That’s to get the piece goods made, to put the product in line for the factory to sew; in order to get inspected, loaded and shipped to the freight forwarder. That takes 90 days and 30 days on the water. The whole logistics cycle is 120 days.
If goods are coming out of India, that transit time is longer and organizations needs to plan 150 days. Mostly, that is because it takes another seven to 10 days to get to from India to Dallas than it does from China to Dallas. A company needs to place their order with the factory 120 days before they want to ship it to their customer. To do that, an apparel company has to have the sales samples in, get them out to their sales team and give them time to go out and sale the product, which generally means that selling time for the salesman, is about 30 days. Now the company is backing up from a 120 day cycle from China to about 150 days when a company needs their sale samples in house for their sales team. This gives a team, three to four weeks selling the product, and times to place the order with a 120 cycle time. For India, you back it up another 10 days. Instead of 150 days, a company is looking at 190 days from when the sales samples arrive. They set up and put out an entire design year calendar. If they are currently, working on Fall-1, 2015, and Fall-2, 2015 is due right behind it. They have to design their product, for which the whole design cycle usually takes about 12 weeks. This entails 120 days for manufacturing, 30 days for selling and another 12 weeks in front of that for design (84-90 days). Literally they have to be designing virtually 240 days ahead of when they want the product to actually ship to the customer.
On the design side of the cycle, they are working nine months ahead of when they want it to ship to the customer. They put out a whole year’s design schedule that says “I need it designed by this date in order for it to arrive for our sales meeting in order for our salesmen to have four weeks on the road selling it in order for us to give the projections to have it here 120 days later”. It’s a very complicated process and the company is always forecasting what they want to be doing next year at this time. That is how logistics in apparel is set up– organizations have planning calendars with due dates and when things have to be finished in order for a company to hit shipping deadlines. Shipping to the customer is planned according to the season - spring is shipped January through March; summer is shipped April through June; Fall-1 is shipped July through September; and Fall Holiday (fall two) is shipped October through December. These deadlines and calendars are set-up to reflect the different seasons for shipping and seasons can vary, give or take a month.
Next, in order to maximize warehouse space, shipments are staggered into monthly or every 15 day deliveries. They plan their business to flow a month at a time, as they don’t have enough warehouse space to handle an entire season arriving at the start of a season as that’s shipping for the next three months. It is a lot less expensive to set up a run of 50,000 units in a factory than it is to set up a run of 150, 300 or 1,500 pieces. A factory can load their lines up and sew efficiently if they are able to order an entire three months worth of product at one time. Most companies that run product year round plan it month to month, but they are buying it in chunks of three to four months at a time. They can store it in their warehouse and ship it out as the customer orders it for an on time delivery. Most of the time, it comes down to warehouse capacity and space. Most companies define world class inventory turns, which is how many dollars they turnover in a quarter to a year. They define turning over their total dollar inventory, if they can turn it over six times a year, they consider themselves world class. It depends on the type of business you’re in as to what you would define as world class inventory terms. Small apparel companies, on the other hand, turn their inventory 12 times a year. They turn it every month because they are in the fashion business. Inventory comes in, it ships out this month, they are not rerunning a style, and they are not carrying a style forward, not doing it on an ongoing basis. They bring it in one month and it’s all shipped out that month, they are not running a year round product.
In summary, a company needs to be looking today at what they are planning to ship to the customer a year from now. All planning processes worked on currently depend on what’s going to ship to the consumer nine to 12 months from now. Everything works off a timeline and a calendar with deadlines. What they’re working on today is a year from now; what you are working on a month from now is what’s due a year and a month from now. You set up your calendars and your deadlines for your designers. They make their purchase orders to the factory as to have the time frame needed to get piece goods made. Trim ordered, and the product sewn, inspected and ready to be delivered to the logistics companies, for the goods to arrive on time and ship to the customer.

http://www2.miq.com/cms/apparel-retailer/index.html http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/labour-woes-in-asia-the-latest-snag-for-lululemon/article12762550/ Personal Interview: Ross Morgan-Operations Manager for Jerell Clothing INC.