Final Exam Flashcards
What are the three major elements of a sourcing strategy?
Product/marketing strategy, a sourcing strategy to obtain the product and to meet market needs, financial plan to facilitate the two other elements of the strategy
Sourcing
Activities performed to acquire materials, finished goods, or both; selecting a country or vendor to do business with; the basic process of procuring merchandise to meet an organization’s marketing requirements
Synonyms of sourcing
Outsourcing, offshoring, or offshore outsourcing
Why is sourcing needed? (3)
Technological advances; costs of labor, materials, and overhead; rapid growth of imports
What factors are used to evaluate sourcing options? (6)
Product cost (the value of one currency relative to another is key), quality desired, control over entire process desired, investment requirements in facility and overhead, response capabilities relative to time, overall risks involved
The Big Mac Index
Used to compare the international market; based on a product that is produced in about 120 countries; indicates overvalued/devalued currencies; explores relative buying power of multiple currencies
CMT sourcing
Cut-Make-Trim; sourcing company bears all costs except production; product development, fabric sourcing, delivery to producer, duties, and transportation costs
Full Package sourcing
Production contractor finances most of the manufacturing processes including product development and materials
When selecting products to source what types of considerations about each product should be made? (10)
Labor content, product complexity, line diversity, length of production runs, availability and cost of materials and trim, relative predictability of production scheduling, duty, quotas, bulk of the garment (size and weight), technology required
Complete Sourcing Options by Comparison chart
See PDF
What customs regulations must you comply with if you are importing textile and apparel products into the U.S.? (6)
Quota must be available, labeling must show COO, applicable products must show certification (CPSC/flammability), applicable products must meet wool product labeling, TFPIA compliance for labeling, care instructions
What are some of the reasons or “hidden costs” to retailers that might offset the advantages of direct importing? (9)
Lower inventory turns at retail; interest costs of money tied up longer/currency fluctuations; inflexible OTB positions; inability to reorder or cancel orders; long lead times; administrative or procurement costs increased; higher markdowns; delivery delays and uncertainties; absence of cooperative advertising funds or promotional packages
Government subsidy
Includes grants and low interest loans, finance expansion and modernization to cover operating losses; may be granted to unproductive producers if industry is considered important to economic growth
Capitalism
Encourages private individual to create their own business
Adam Smith
Wrote “Wealth of Nations,” British, proposed absolute advantage
Absolute advantage
Adam Smith; if one country does something better, use the product from that country; each country should do what they do best; international division of labor; country can produce more; higher quality; able to sell at a lower price
Comparative advantage
David Riccardo; value of any commodity is determined by labor cost
Competitive advantage
Michael Corder; enables a firm to beat its competition in the world marketplace; example: Toyota and its factories in the US
Free trade agreement
Removal of tariffs
Customs union
Removal of tariffs; all set a concise, external, common tariff for any country that is not part of the agreement
Common market
Removal of tariffs; all set a concise, external, common tariff for any country that is not part of the agreement; eliminate restrictions on resources used to produce goods; people and resources can move back and forth freely
Economic union
Removal of tariffs; all set a concise, external, common tariff for any country that is not part of the agreement; eliminate restrictions on resources used to produce goods; people and resources can move back and forth freely; harmonized national economic policy
Complete economic integration
Removal of tariffs; all set a concise, external, common tariff for any country that is not part of the agreement; eliminate restrictions on resources used to produce goods; people and resources can move back and forth freely; harmonized national economic policy; standard monetary system
Mercantilism
Maximize exports
