Steps in making sourcing decisions

This step looks at the various sequential steps fashion companies take to make responsible and profitable sourcing decisions. Faced with the complexities of making sourcing decisions and the range of options worldwide, how do fashion brand companies find the right textile mills for materials and the right factory/contractor to manufacture their finished goods?

Fashion companies typically use a systematic approach to making sourcing decisions, starting with their overall sourcing philosophy and then prioritizing criteria accordingly.

In general, they follow this process:

1. Determine the company or corporate philosophy regarding sourcing. For example, Patagonia takes a “4-Fold” approach to sourcing decisions across their supply chain—for fabrics, other materials, trim suppliers, and finished goods factories, and any subcontractors (Patagonia 2019). This approach focuses on (1) sourcing standards associated with capabilities of the suppliers/ factories, (2) quality standards materials and finished goods, (3) social standards associated with CSR, and (4) environmental standards associated with products and operations. Their “4-fold team” meets weekly to make sourcing decisions across their supply chain.
2. Design the product line and determine the requirements for fabrics/materials and finished goods manufacturing.
3. Identify sourcing options for fabrics/materials and finished goods manufacturing. Some very large companies may have their own design and material libraries, which provide services to designers and sourcing analysts for the company. For example, Nike has an extensive materials library where Nike designers, product engineers, and sourcing analysts can explore the newest materials available. However, most companies are not large enough to have an in-house materials library. Therefore, most design teams will connect with material suppliers and finished goods contractors by attending textile trade shows and/or using online resources for materials and textiles. Material and textile forecasting, and resources used in the process, are discussed in week 1 of the Introduction to Fashion Marketing and Research course. Similarly, fashion companies often rely on sourcing fairs and trade shows to connect with contractors for finished goods manufacturing.
4. Evaluate sourcing options. This step is carried out either by the company or by independent sourcing agents/analysts. Criteria for evaluation include trade and investment incentives and/or barriers, human relations and cultural challenges/ benefits, product development capability and capacity, and labor compliance.
5. Inspect and evaluate factories according to the company’s or auditing firm’s codes of conduct; see the previous discussion in this week 2 of the Business Law and the Fashion Industry course. Conduct negotiations between the fashion brand and the suppliers.