Many in the clothing industry have outsourced some or all of their production operations overseas in order to save on direct labor costs. While that may be a money-saver, outsourcing isn’t as easy to do well as it may seem. Particularly for small businesses, there are negative effects of outsourcing that can make it more trouble than the savings are worth.
Outsourcing adds to the hurdles you or your designated manager face. Given common outsourcing partners in the clothing industry, it means managing resources in other countries where language, cultural barriers and even a time difference can make communication difficult. If you have to coordinate activities in different countries for the same deadline -- such as counting on holiday season products from three different overseas factories to be ready in time to start the summer camp marketing campaign on schedule -- outsourcing can increase the risk of slippage and cause you to spend more time dealing with those logistics and less focusing on day-to-day operations.
Outsourcing saves money on direct labor expenses, but that might not mean as much to your bottom line as you may expect. Management expenses might increase, thanks to more hours spent dealing with overseas operations and additional travel involved. A longer supply chain can add costs and delays, and quality control issues can lead to significant hidden cost. Don’t forget to include the cost of oversight in your projections, as those will increase even as money you are paying each worker goes down.
If your business needs to bring in product quickly by chasing current trends, outsourcing might not be effective. The lead time from design to receipt of product is substantial, typically ranging from six to nine months. Although outsourcing saves money on production, it also can result in getting the goods too late to take advantage, meaning the clothes wind up in the discount bins instead of having customers eager to purchase them at full price.
Outsourcing associates your brand with the work of others, which can have negative effects if the company you choose mistreats its workers or otherwise gets mired in scandal. While an outsourcing company may have many other clients and your business may have nothing to do with a particular bit of bad news, few consumers will make that distinction if that company is accused of maintaining sweatshop conditions and you’re listed as one of its clients. You also have less control over factors such as quality. You can provide specifications and demand testing, but the distance involved and the difficulty of oversight may mean you don't find out about problems until it is too late.
