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Experts Reveal the Secrets of Sourcing for Startups

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Starting up sourcing can prove a daunting task: a nascent brand may know what it wants to make, how it wants a line to look and even where it wants to manufacture—but what’s the first step?

In an effort to start the conversation for start-ups looking to learn how to get their goods made, Texworld USA held a seminar Thursday titled, “Sourcing FAQs.”

Jeffrey Kreindel, director of sales and marketing for apparel manufacturing company Pearl Global, and Sylvia Reyes, apparel and textiles director for ProColombia, which promotes the country’s exports, sat on the panel moderated by Edward Hertzman, founder and publisher of Sourcing Journal.

Here’s a look at the business basics for starting a brand.

If you’re starting a brand, what would be the best strategy for having it manufactured and produced?

Naturally, the answer here depends on the size of your company and the product you’re manufacturing. The type of product, the quality you seek and the speed to market you expect will also factor in—and of course, so will pricing.

“Keeping in mind those ingredients,” Kreindel explained, “It seems like speed to market is the most important ingredient in establishing your relationship with brands and retailers.”

Ideally, Kreindel said, you’re looking to source fabric and garments from the same country. On average, you’re looking at anywhere between 30-50 days to source fabric, 30 days to wash, print, cut fabrics, and from India to the U.S., for example, 30 days on the water compared to 17-20 days to send it on the boat from China. Paying more to air goods can get them from Asia to the U.S. in seven to 10 days.

And different countries have different levels of skills and varied specialties. India, for example, produces more handcrafted products with details and embellishments that can’t be done in China.

Countries like Vietnam, Kreindel explained, are starting to build their own fabric base. “People are looking to source fabrics and source garments from the same country so they’re not having to buy fabric and ship it from one country to the next,” he said.

Bangladesh and Vietnam will be less expensive than China, but won’t have as broad a product range.

The key when you’re beginning a line, Reyes added, is to control your production and know your business and your uniqueness.

“Near shoring is a solution that more companies are looking to to make products,” Reyes said.

In Colombia, where more American manufacturers are turning for back-up in producing high quality goods at a quick pace, products can be delivered by plane in 3-5 hours, according to Reyes. “Fast fashion is also a key for your lines.”

Hertzman chimed in that agents are a wise option for brands coming blindly into the business.

“Agents are going to use their infrastructure and their economies of scale to negotiate on your behalf,” he said. “You may pay a little bit more, but that 5 or 6 percent you’re going to pay them will give you more piece of mind.”

Are input costs still rising?

Costs have been rising for several years and they will continue to rise, according to Kreindel.

And, he said, “People are becoming more and more and more demanding and asking manufacturers, like myself, to test the fabric to test the yarn, buttons, fabrics, zippers,” which also factors into cost.

Labor costs are increasing, compliance costs are increasing, companies require water treatment facilities, energy costs are rising—and all of this adds to the cost of goods and taps into margins, Hertzman said.

How do you make sure you are following corporate social responsibility for your business?

With the Rana Plaza building collapse in Bangladesh looming large as one of the garment industry’s worst tragedies, compliance and corporate social responsibility (CSR) have been foremost concerns for businesses.

Before Rana Plaza fell in 2013, companies weren’t checking the building itself, Kreindel said, they were just checking the infrastructure, the placement of fire extinguishers and the like.

The lack of structural oversight is what led the Rana Plaza building to fall.

Nothing beats visiting a factory yourself, Hertzman said. If you can’t, he added, testing and verification companies like SGS and Bureau Veritas inspect facilities and can provide necessary insight.

Being informed before you sit with a factory or an investor is vital, according to Hertzman. A brand should know how much fabric and trims cost, where they are getting the fabric and trims, what the testing requirements are for everything that goes into the garment, how they’re going to package the goods and how many will go into a box, among other things.

“You can’t just go to an agent and expect miracles,” Hertzman said.

What if I want to source domestically?

“If you’re talking about domestic production and you’re making a higher end, contemporary product, it can be done,” Kreindel said. “It’s a big movement. I’d love to see it grow like crazy, but the problem is the end consumer is so used to paying inexpensive prices, it’s hard to get the big U.S. movement going.”

The reality is, for the vast majority, is it’s not a reality, Hertzman added.

“If people walk into Walmart tomorrow and want to pay $200 for a jean, we’ll move all the manufacturing back to North Carolina,” he said. “But if we can’t afford to pay someone in Bangladesh making $68 a month, how are we going to pay someone to do it here?”

For small companies, Made in USA, could be a real positive despite the higher cost as doing proof of concept is much simpler close to home. And if a company gives you an at-once order and wants your product in one month, you can’t do that in Asia, Hertzman said. “The DHL box alone would cost more than you made.”

How can I work around duties?

There are advantages to making in the U.S., one among them saving on duty rates, which can reach as high as 30 percent for a synthetic garment, making a $10 product cost $13 before even factoring in packing and shipping and any of the other inescapable supply chain costs.

But one advantage other countries have over the U.S. is the availability of skilled labor for making garments.

“Bangladesh could open a large factory half a million to 1 million square feet and have half a million people start on day one, whereas in the U.S., to find a factory to make the units that you’re looking for, it’s challenging to find skilled workforce,” Kreindel said.

Even if domestic wages are higher, Hertzman said, you may still save on your product because of potential duties.

What does a beginning manufacture need to know about shipping?

In short, outsource it.

“There are departments that specialize in logistics,” Hertzman said. “You have to find a good freight forwarder.”

There are also back office solutions that do all of your invoicing, help you pay the duty, help you pay the factory and help you with all of the logistics.

Hertzman said he suggests using a third party to execute logistics for a line.

“Maybe you don’t want to staff up and have a whole team of people doing that,” he said. “It’s cheaper to outsource it.”

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