2015 and All That

THE CUSTOMER SIDE

A Russian billionaire, driving his Ferrari in Moscow

hits an oncoming Russia made Lada

The billionaire starts screaming at the Lada driver.

My Ferrari!  My Ferrari!

Do you know how much I paid for my Ferrari?

The Lada driver is stunned. He points to the gutter,

where the Billionaire’s severed arm is laying.

The billionaire looks down at his severed arm

and starts screaming.

My Rolex watch!  My Rolex watch!

Do you know how much I paid for my Rolex watch?

 Welcome to the world of status where all is not well either with our Russian billionaire, or with his suppliers.

Here is the problem:

Three factors determine consumer garment demand:

  • Function:  How well does the garment perform?  Goretex skiwear.
  • Aesthetics:  How much do you like the design?  Vivian Westwood.
  • Status:  How do others perceive you?  A&F and Nike

Both function and aesthetics are all about the product.

A customer looking for a ski jacket can choose a Goretex model or another ski jacket model. That customer will not choose between a Goretex ski jacket and a Genesis Equilibrium Ti bicycle, even though both function extremely well.

Likewise a woman looking for a dress might More...

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Posted in Global Garment Industry, Global Issues | Leave a comment

THE ISRAEL ELECTION

Once again, Israel faces an existential threat. This time the threat does not come from the Palestinians, the Iranians, or the Arab states.  This time the threat comes from within Israel itself; and frankly just about everybody in Israel knows this

Over the past 20 years, Israel has become increasingly isolated.  Where once it was seen as a model democracy, fighting for survival against its neighboring states, which were seen as corrupt, vicious and fanatic, the situation has now reversed. Democratic states in Western Europe and elsewhere now side with the Palestinians who are seen as victims of Israel. More and more Israel is being pushed into the same category as Apartheid South Africa. We may not believe these criticisms to be valid. We may honestly believe that this anti-Israel propaganda is the work of malign anti-Semites and/or Islamic fanatics.  However only someone living in total denial would deny the existence of these criticism and the growing intolerance for Israel’s domestic policies

Against this Israel has but one unconditional friend:  The United States.  For the past 66 years, the United States has steadfastly supported the Israeli government.  This support has been bi-partisan.  Whichever party was in control — the party of the president or the party holding a majority in Congress — support for Israel remained unqualified.

U.S. support for Israel has been a key element in its very survival.

That support is now in More...

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Posted in Israel | Leave a comment

Defending the New Model Buying Office

The next few years will bring the fight between government tax authorities and customers’ wholly owned buying offices to a new and higher level.  Government’s policy can be summed up as follows:  If you are a major garment importer and your buying office commission exceeds 4%-7%, you are over-charging to avoid taxes and we want our money back.

Government is taking steps to win:

  • The IRS has retained garment industry specialists to advise them;
  • The IRS is no longer rushing to compromise.

On the other side of the coin, in recent years, the role of the buying office has undergone radical change. Where once buying offices carried out a small number of discrete tasks, the responsibilities of the new model buying offices have expanded exponentially.

At the very moment when government is pushing importers to reduce buying office commissions, the new model buying office has an even stronger case to increase those commissions.

Government’s problem begins with the fundamental assumptions at the core of their argument:

  1. Every customer requires the same services from their agents or buying offices;
  2. Every agent and buying office provides the same services;
  3. All agents and buying offices perform equally well.

These assumptions have long dictated government’s strategy

Typically, the IRS provides data of independent agent commissions.  On the one hand they More...

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Posted in Transfer Pricing | 2 Comments

The New Holitistic Supply Chain: Where is it:?

A request from John

Thanks for your investment in writing the blog.  I would like to see an address of why sourcing is a strategic area for the buyer.  Often there is such a laser-like focus on “who can make this widget” rather than the holistic view that an existing supplier partner could possibly make the widget and thus be more significant in the buyer’s overall supply chain.  Any experience you could share or decision-making methods for this type of scenario would be welcome.

For the past twenty years, I have been struggling with this problem.

I still have no answer, but I am getting close.

The answer clearly lies with costs.  The customer wants to buy the right garment at the lowest cost.

The problem is that most customers are unable to add-up the numbers

Let me start at the beginning.  Part I

The industry began with garment buying: The customer’s buyer came to the factory with a sample.  The job of the factory was to supply the materials and labor.

About 20 years ago customers shifted to garment sourcing.  The customer’s sourcing-specialist, broke the garment down to its constituent materials and processes.  The sourcing specialist sourced the material; selected the material and trim suppliers, negotiated prices, and instructed the factory who to buy from and how much to pay.  In the new garment sourcing world, the factory still shipped FOB; however, all factory profit was More...

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Posted in Customer Strategies, Factory Strategies, Garment Costs, Garment Prices, Internet | Tagged , , , | 1 Comment