CUTTING LABOR COSTS WITH OFFSHORE SOURCING
UK labor costs tend to be relatively high, leading many manufacturers to turn to overseas sourcing for a majority of their products. Companies can establish overseas production in three ways. They can buy or build a plant, establish agents that have ties with factories in the foreign country, or contract directly with the owners of foreign factories. Typically, major UK apparel companies establish overseas production in all of these ways. They also use domestic sources other than their own plants.
Using overseas manufacturers and/or outside domestic contractors has several benefits for apparel companies. Overseas sourcing allows them to compete with less expensive imports. Domestic sourcing allows companies to respond quickly to fashion changes and to retailers’ needs for automatic inventory replenishment. (Kumar, 2006)
For production of more complicated apparel items, UK companies generally go to Southeast Asia, where many countries have large pools of skilled laborers who can create high-quality products. Products that are simpler to make are outsourced to less-developed countries, where labor rates are lower than in Southeast Asia.