The Clothing Market In The United States Research Paper Examples

Type of paper: Research Paper

Topic: Business, Outsourcing, Company, Clothing, Clothes, Production, Industry, Development

Pages: 6

Words: 1650

Published: 2020/12/19

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BUSINESS: OUTSOURCING IN THE CLOTHING MARKET

Executive Summary
Outsourcing is the process by which a company moves part or all of a business process to a third party. In the clothing industry, outsourcing can be done in a number of ways. It can include the movement of production to a third-party company that is well-equipped to handle the production of clothing or specialized textiles, or it can involve the transfer of design or engineering of clothing to a third party. This business process is sometimes conflated with offshoring, which is a different process, and will also be discussed in depth in this paper; offshoring is a type of outsourcing, which takes place in another, often developing, nation. In the case of the textile and garment industry, the production process is often outsourced to developing nations.
Competition within the clothing industry is incredibly fierce, and it is difficult to make a profit in the clothing industry without choosing to outsource—or offshore—some of the business process. While there are many companies who do fill specific niches and are capable of subverting the traditional business plan of moving business production overseas, there are very few companies in the clothing industry that choose not to outsource any of their production. Even companies that do not utilize overseas outsourcing often utilize domestic outsourcing, and engage domestic producers in their production processes.
Some firms still practice vertical integration in the business process, the process in which these individual firms buy up the entire business process—however, in today’s world, it is much more efficient and cost-effective to outsource parts of a business to other third-party professionals. These professionals will often specialize in one specific part of the business or production process, and therefore can do a better, more complete job at a lower price than a business would normally have paid for the development and vertical integration of the same process.
Although vertical integration is not dead, vertical integration in the clothing industry—particularly in smaller clothing lines—is becoming less and less economically feasible for most companies. The barrier to entry into the market is low, and there are a plethora of low-cost options available in the developing world for production; these places specialize in production, and remove the necessity for a business to invest huge amounts of capital in the development and oversight of the production process, as well as the development of new talent for oversight of the production process in the textile and clothing industry.
There are significant benefits to outsourcing, and these benefits outweigh the cost of outsourcing significantly. Understanding the costs and benefits of outsourcing in the garment and textile industry is important for the overall health and success of a company, particularly a small-scale operation with a small profit margin to manipulate. Developing relationships with service providers that can cut costs in the production process is extremely important to the overall health and success of a business.

Introduction

Outsourcing is used in a wide variety of different ways in different business sectors. It is important to note that outsourcing is a process that allows a business to control its various sectors by meting out tasks to different companies, individuals, or even industries that can do these tasks more effectively and more cheaply than the original company can.
Outsourcing can be the process of sending employees, assets, or business processes to another location to ensure that the business is utilizing all its assets and processes as effectively as possible (Liu & Aron, 2014). There are also other ways of outsourcing information and services; for instance, sometimes governments will outsource their public institutions to private, for-profit businesses; this is sometimes the case in American prisons, for instance, because the government does not have the money to maintain the facilities to the level that they need to be maintained (Liu & Aron, 2014).
Outsourcing is often conflated and confused with offshoring, although the two concepts are not necessarily linked. A business can outsource without ever offshoring its processes; offshoring is the process by which a business function is moved overseas to another country (Liu & Aron, 2014). This is often done to ensure that the business continues to make a profit in the market, and to give the business a competitive advantage over other businesses in the same market (Liu & Aron, 2014). Offshoring and outsourcing will be addressed in more detail in this discussion, particularly insofar as their relation to the clothing market in the United States is concerned.

The clothing market in the United States varies widely based on the type of clothing that is being discussed. For the purposes of discussion here, the discussion will center around clothing that is not defined as high fashion clothing. Clothing that comes from stores in the malls and department stores, as well as stores like Walmart, Kmart, and Target are the targets for this particular discussion. This is because the vast majority of American consumers consume items of clothing from these types of stores, not from high fashion designers (Tsai, 2014).
According to Tsai (2014), the American clothing market is massive; in 2012, the clothing market in America was worth more than $20 billion US dollars; the women’s clothing market alone during this time was worth approximately $110 million US dollars (Tsai, 2014). This is an incredibly large sum of money, and the entire clothing market in the United States is balanced on the ideas of outsourcing and offshoring (Tsai, 2014).
Without offshoring and outsourcing, the United States would not have the infrastructure needed to produce the quantities of relatively cheap clothing that are currently available in the market. Most clothing is produced in Asia and Mexico, with Indonesia, China, Mexico, and Taiwan making up the vast majority of the United States’ clothing imports. The market in the United States is almost entirely dependent upon imports and outsourcing for cheap, marketable, consumable goods in the clothing market. Without a good understanding of how to properly outsource, a clothing company can easily lose money in the clothing market due to competitors and their ability to outstrip a company in the race to the bottom with prices.

Offshoring and Outsourcing

Outsourcing
Outsourcing is the process by which a company moves part or all of a business process to a third party. In the clothing industry, outsourcing can be done in a number of ways. It can include the movement of production to a third-party company that is well-equipped to handle the production of clothing or specialized textiles, or it can involve the transfer of design or engineering of clothing to a third party. Although outsourcing is often thought of in terms of the movement of the production line from a westernized country to a developing country, this is only one type of outsourcing, and it is a very involved, difficult type of outsourcing. Even the movement of information technology professionals from in-house to third-party sources is a form of outsourcing; essentially everything within a company can be outsourced to a third party for a certain fee (Rehme et al., 2013).

Offshoring

Offshoring is a type of outsourcing in which the company moves part of its business overseas to another country. There may be a plethora of reasons for a company to move overseas; taxation reasons are often the most-cited reasons, but there are many (Rehme et al., 2013). Companies may move entire portions of their company overseas in the hope of increasing their bottom lines and boosting revenue and, by extension, profit (Rehme et al., 2013). The economic idea with offshoring is to reduce the overall cost of production, and to help the company increase revenue by cutting costs. Sometimes production costs are successfully cut to increase corporate profit; in terms of the clothing industry, this is often the case with United States and other western-based countries where the infrastructure for large-scale textile work and manufacturing is not as available as it is in developing nations (Tsai, 2014).

Benefits of Outsourcing

There are a number of important benefits to outsourcing. Each of these benefits is specific within business niches, but they all apply to varying extents throughout the business world. When a company decides to outsource, offshore, or a combination of the two, there are a number of benefits that the company will then reap. The first and most commonly cited of these benefits is the benefit of cost advantages. In the clothing industry, cost advantages are particularly important, as the average cost of a clothing item for women is only $19—this is very different than the average cost of a smartphone or a computer, and thus a low production cost is particularly important (Tsai, 2014).
When a company chooses to outsource and offshore product handling procedures in the clothing world, they will incur certain costs—particularly transport costs—but the lower per-unit cost of production and the lower cost of labor per-unit are both worth the increased transport costs (Rehme et al., 2013). Cost advantages include the low cost of labor in other countries, which is one of the highest costs of production in a place like the United States (Rehme et al., 2013).
Increased efficiency is also another benefit that is commonly associated with outsourcing work. When a company like a clothing company outsources the production of a piece of clothing to a place like China, the company is no longer responsible for a significant section of the production process (Rehme et al., 2013). The production process is quite involved, and can be quite difficult for specialized pieces; the company is easily able to shift the cost and problems of production over to another company and allow that company to specialize in the process (Rehme et al., 2013). This frees the overarching company to focus on other aspects of production, like marketing, distribution, and so on (Rehme et al., 2013). It contributes significantly to the bottom-line of the company, because the company does not need to pick up additional costs like those associated with production (Rehme et al., 2013).
Outsourcing and offshoring are also important in terms of allocation of skill. Like the allocation of resources, allocating talent within a company is extremely important to the overall function of the company. Clothing designers and clothing manufacturers are professionals in what they do, and a company that takes pride in its work is able to better serve its customers and its bottom line by hiring professionals who specialize in a certain part of the process, rather than developing new talent to “remake the wheel,” so to speak (Rehme et al., 2013).
Finally, outsourcing and offshoring provide operational control to businesses that are interested in finding ways to control systems within the business (Jones, 2009). There are many operations within a clothing company, and production is one of the most complex operations; there are companies available that specialize in the development and the building of clothing production operations, and companies who are organizationally out of control are only going to benefit from implementing outsourcing and offshoring capabilities within a business.
Outsourcing and offshoring in the clothing industry is not limited to the removal of low-skilled labor, although that is common within the industry. Textile engineering can also be outsourced; there are many different aspects of the industry that can be controlled through operations management and oversight of the most important business processes.

Problems Associated with Outsourcing

It goes without saying that there are also problems associated with outsourcing and offshoring in the business world, particularly in the clothing world. The clothing industry is one that is incredibly powerful in the United States and the western world as a whole; the industry produces items that are both necessary and desired by individuals, and customers want clothing that is available at a good price. Meeting all of these demands can be difficult for businesses, and sometimes corners are cut to ensure that the company makes a profit. However, there are a number of important problems that are associated uniquely with outsourcing and offshoring; these are the issues that will be addressed in detail here.

Economic Problems

There are many problems that are specifically associated with the economics of outsourcing and offshoring. Outsourcing and offshoring come with specific risks, as the company no longer has complete control over the production process or whatever business process that they have decided to offshore or outsource. Quality control is a particularly large issue in the clothing world; customers expect quality for their money, and the quality of textiles and production is becoming lower by the year (Tsai, 2014). When production quality is low, companies cannot ask for as much money for a product, and the bottom line suffers; customers are particularly interested in pushing back against companies that they see have outsourced and offshored, because they see these companies as immoral in some way (Tsai, 2014).
Customer engagement in the production process can be difficult, because companies do need to keep costs low, and outsourcing is one key way to keep production costs low. Often these low costs also come at the risk of low quality, something that the business cannot control and then must account for later in the process (Tsai, 2014). Low quality can lead to economic loss in both the short and the long run, as customers are less willing to purchase from companies that they perceive or believe to be low in quality (Notar, 2006).

Practical Problems

There are also practical problems that are commonly associated with outsourcing and, especially, offshoring. Offshoring requires that a company move part of its production line to another part of the world—this means that managers and executives can no longer physically oversee the process of production (Notar, 2006). There is no way to ensure that the quality that will result from the production process will be what the factories initially promised with the samples that they sent; there will be, essentially, no recourse if there is a time crunch (Notar, 2006). This means that companies who offshore parts of their production line have to be very certain to leave enough time for transport and for mistakes in the production process—if the time between an order and shipment is too short, there may be significant operational problems within the organization (Notar, 2006).
Another problem may be unforeseen costs associated with offshoring and outsourcing products. Although transportation may be included in initial calculations, delay due to weather or other unforeseen circumstances should also be considered by businesses (Notar, 2006). There is also the fact that many consumers have begun to look down upon products that are produced overseas, particularly textiles; this will be discussed in more depth in the following subsection.

Moral Problems

Outsourcing and offshoring have become contentious issues in the world today, in no small part due to the fact that there have been many problems with the textile industry and their relationship with the developing world. In the developing world, especially Asia, the textile industry makes up a large part of the production processes; many individuals are employed in sweatshops and factories where the working conditions are extremely poor (Notar, 2006).
Sweatshops and other factories are notorious for having poor working conditions for the people who are working in these environments. These individuals work very long hours for very little pay, and often suffer injuries and illness as a result of their working conditions. Increasing customer awareness of the plights of these individuals has caused a push back against the idea of outsourcing and offshoring production in the clothing industry (Notar, 2006). There has been a small but determined movement to bring production back into the United States, and, barring that, to ensure that working conditions are humane in other countries. While all companies should ensure that working conditions for their workers are humane, it can be very difficult for a company to control what a third-party company does in a place that is geographically very far away (Notar, 2006).
Outsourcing and offshoring, even when responsibly done, is always fighting against the “sweatshop image.” Even a company that is responsible about choosing good third party outsourcing locations can suffer from the poor image that outsourcing has in American culture (Notar, 2006).

Onshore and Offshore Business Capabilities

Onshore business capabilities are equally important for most businesses. Onshore or domestic outsourcing is the process by which a company uses domestic third-party clients to run certain parts of their business. Offshore outsourcing, on the other hand, is the process by which business processes are moved to another country for third-party development (Baldwin &Gu, 2013). Whitaker et al. (2010) write, “We find differential relationships of organizational learning and capabilities with onshore BPO and offshore BPO. For example, we find that onshore ITO has a larger effect on onshore BPO than on offshore BPO. This suggests that there may be significant common elements in onshore coordination across ITO and BPO, and that the learning and capabilities developed in onshore outsourcing are more applicable to the onshore context than to the offshore context. We also find that IT coordination applications have a larger effect on onshore BPO than on offshore BPO” (Whitaker et al., 2010). While the Whitaker et al. (2010) study discusses the impact of offshore outsourcing on information technology services, the results can be extrapolated to other areas of business, but not necessarily to the production process.
The Whitaker et al. (2010) study suggests that in many cases, domestic outsourcing is more efficient and effective than other sorts of outsourcing, perhaps because of the potential pitfalls of outsourcing that have been discussed here. For clothing companies, the production part of the process is the only part that really stands out as being important to offshore; the clothing company may find it more effective and efficient to domestically outsource many of its processes rather than offshore outsource them (Whitaker et al., 2010).

Performance and Production

Developing a plan for the forward movement of a company insofar as domestic or offshore outsourcing is concerned is one of the most important steps for a business to take. Without a plan for business process oversight, it is likely that the business process will go awry. Companies have to look at their production processes and determine where costs can be cut from the process, and where they require their third-party producer to maintain quality (Tsai, 2014).
Maintaining quality control is one of the most difficult parts of the production process. Quality control has become increasingly difficult as companies have moved away from business plans that put all the emphasis on overall quality management; today, businesses recognize that there are multiple issues that are at play when it comes to business processes, and that each of these issues must be addressed in turn. However, this means that quality control has suffered, especially in the clothing industry. Rising costs and falling profits have meant that the garment industry has tried to cut corners with certain quality control processes that have led to shoddily produced goods in recent years (Tsai, 2014).

Service Providers and Clientele

Ikerionwu et al. (2014) write that the business process and the client-service provide relationship is particularly important to consider. Ikerionwu et al. (2014) write, “Organisations that wish to outsource their business services must set performance measurement standard in the form of quantitative information that quantifies input, output, and performance dimensions. Service quality provided by the service provider forms the bases of a client achieving its business objectivesAlthough the onus of performance lays on service providers and clients, Chakrabarty et al, (2007) opined that the provider has always been inadvertently blamed for failures in the relationship” (Ikerionwu et al., 2014). When determining the best way to mobilize business overseas, it is common to choose the cheapest option for offshoring, especially if the client does not have a lot of experience with third-party offshoring; however, this client will often bear the brunt of the consumer frustration if the product is not up to par. This is why determination of the best fit within the business process and existing business model of the company is so fundamentally important.

Discussion and Conclusions

Competition within the clothing industry is incredibly fierce, and it is difficult to make a profit in the clothing industry without choosing to outsource—or offshore—some of the business process. While there are many companies who do fill specific niches and are capable of subverting the traditional business plan of moving business production overseas, there are very few companies in the clothing industry that choose not to outsource any of their production. Even companies that do not utilize overseas outsourcing often utilize domestic outsourcing, and engage domestic producers in their production processes.
Some firms still practice vertical integration in the business process, the process in which these individual firms buy up the entire business process—however, in today’s world, it is much more efficient and cost-effective to outsource parts of a business to other third-party professionals. These professionals will often specialize in one specific part of the business or production process, and therefore can do a better, more complete job at a lower price than a business would normally have paid for the development and vertical integration of the same process.
Although vertical integration is not dead, vertical integration in the clothing industry—particularly in smaller clothing lines—is becoming less and less economically feasible for most companies. The barrier to entry into the market is low, and there are a plethora of low-cost options available in the developing world for production; these places specialize in production, and remove the necessity for a business to invest huge amounts of capital in the development and oversight of the production process, as well as the development of new talent for oversight of the production process in the textile and clothing industry.

References

Baldwin, J., & Gu, W. (2013). Outsourcing and Offshoring in Canada. SSRN Journal. doi:10.2139/ssrn.1369254
Ikerionwu, C. R. Foley, E. Gray, D. Edgar. (2014). Business process outsourcing service providers’ perception of performance and performance measurement. Journal of Economics and Engineering 2014; 5(2), 5-10. DOI: 10.7813/jee.2014/5-2/1
Jones, W. (2009). Outsourcing in China: opportunities, challenges and lessons learned. Strat Outs, 2(2), 187-203. doi:10.1108/17538290910973385
Liu, Y., & Aron, R. (2014). Organizational Control, Incentive Contracts, and Knowledge Transfer in Offshore Business Process Outsourcing. Information Systems Research, 141218113026009. doi:10.1287/isre.2014.0550
Notar, B. (2006). Authenticity Anxiety and Counterfeit Confidence: Outsourcing Souvenirs, Changing Money, and Narrating Value in Reform-Era China. Modern China, 32(1), 64-98. doi:10.1177/0097700405282348
Rehme, J., Nordigården, D., Brege, S., & Chicksand, D. (2013). Outsourcing to a non-developed supplier market: The importance of operational aspects in outsourcing. Journal Of Purchasing And Supply Management, 19(4), 227-237. doi:10.1016/j.pursup.2013.06.003
Tsai, J. (2014). Face-to-Face's Pretty Side: Arguing for Co-Location and Against Offshore Outsourcing for Maintaining Innovation in the United States. SSRN Journal. doi:10.2139/ssrn.1348826
Whitaker, J., Mithas, S., & Krishnan, M. (2010). Organizational Learning and Capabilities for Onshore and Offshore Business Process Outsourcing. Journal Of Management Information Systems, 27(3), 11-42. doi:10.2753/mis0742-1222270302

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