Merchandisers’ Role as Intermediaries in Apparel Supply Chains;

Multinational Retailers’ owned vs. Independent Buying Offices

Sunil Sharma, Professor, Faculty of Management Studies,

University of Delhi, DELHI-110007

Archana Gandhi, Associate Professot,

National Institute of Fashion Technology (NIFT),

Hauz Khas, New Delhi-110016.

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1.The Global Transition of Apparel Manufacturing

Clothing manufacture is labor-intensive and can be found in almost all developing countries,

particularly least-developed countries (Kerry McNamara 2008). Since the 1950s, the industry

has seen several migrations, all involving Asia and at each stage involving a shift to a country

where labor costs were initially lower. In the 1950s and early 1960s, the move was from

North America and Western Europe to Japan, as western textile and clothing production was

largely displaced by Japanese imports. The second shift was from Japan to Hong Kong,

Taiwan and South Korea, which together dominated global clothing exports in the 1970s and

early 1980s. By the late 1980s and the 1990s, a third migration set in, away from Hong Kong,

Taiwan and South Korea to other lower-cost, developing countries. This included a big shift

of production to mainland China, where economic reforms prompted an up-surge in export-

oriented industrial growth. A number of South-east Asian countries including India,

Indonesia, Thailand, Malaysia and the Philippines, as well as Sri Lanka, also benefited from

the migration. In 1990s, other new suppliers emerged in South Asia and Latin America. The

impact of these dramatic geographic shifts on importing countries was severe. In 1992, about

49% of all retail apparel sold in the US was made domestically; by 1999 that proportion had

fallen to 12%. The reasons for the migrations were various. In Hong Kong, Taiwan and South

Korea, the industry was forced to adjust to rising wages, labor shortages, and higher land

prices as well as external factors such as stronger currencies and, as always, tariffs and

quotas. By the end of eighties, manufacturers in these countries needed to find lower-cost

production bases and ways around quota restrictions. In this division of labor, skill-intensive

activities, which provided relatively high gross margins such as product design, sample

making, quality control, packing, warehousing, transport, quota transactions and local

financing in the apparel industry, stayed in East Asia and labor-intensive activities were

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relocated. Thus countries in Africa, such as Mauritius and Lesotho, enjoyed a surge in inward

investment for garment manufacturing, but usually only took over the lower-margin parts of

the supply chain. While lower wage costs were often the initial reason for shifting location,

other factor also played a significant part. The goal of shorter lead-times could be achieved

by situating production nearer the final markets. Mexico, the Caribbean Basin (Dominican

Republic, Guatemala, Honduras, etc) and Central America are particularly attractive because

of their proximity to the US. Most of this production has traditionally been basic assembly

work—called “outward processing” or “production sharing”—the sewing together of cut

pieces and trim provided by US companies. Turkey, North Africa (Tunisia and Morocco) and

various former Eastern European countries (Romania, Poland and Hungary) offer quicker

access to the EU markets.

Each country has it’s own strength and garment producing nations could source several items

from other countries to meet the buyers price, quality and lead time requirements.

2. A Typical Apparel Supply Chain

Supply Chain Management is a seen as a critical factor in managing contemporary fashion

businesses (Hines 2001).Traditional supply chains view flow of goods/services from upstream

raw material suppliers though manufacturing processes and on to the customers. In contrast

the modern supply chain concepts begin and end with customer. Modern supply chains are

described as flexible, responsive, agile, lean, value adding networks and value streams.

Supply chains are more than what the term suggests. They are value creation mechanisms for

customers. They are not simply ‘supply’ focussed nor are they necessarily ‘chains’. Supply

chains are dynamic, efficient, effective response networks delivering customer requirements

flexibly and on time. These high performance networks consist of customers, suppliers and

information travelling through organizational ‘arterial systems’. These arterial systems cut

across functional, organisations and geographical boundaries.

Most product categories can be segmented under two different types of international

economic network (Singhal et. al 2004)-

_ producer-driven supply chains; and

_ buyer-driven supply chains.

Producer-driven: In producer-driven supply chains, large transnational manufacturers play

the central roles in coordinating production networks. Industries characterised by producer-

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driven supply chains are typically capital- and technology-intensive sectors such as

automobiles, aircraft, and computers.

Buyer-driven: In buyer-driven supply chains, large retailers, marketers and manufacturers of

branded goods play a pivotal role in setting up decentralised production units in various

exporting countries. Consumer goods industries such as garments, footwear, toys, consumer

electronics and handicrafts follow this pattern. Retailers such as Wal-Mart and Sears,

footwear companies such as Nike and Reebok, and brands such as GAP and Liz Claiborne

source their products from labour intensive factories in developing countries.

The characteristics of buyer-driven supply chains are as follows.

i.Buyer-driven supply chains tend to be labour intensive. Thus manufacturing

tends to shift to countries with a lower cost base.

ii.Buyer-driven supply chains are global in nature and in most countries

decentralised.

iii,The decentralised nature of buyer-driven supply chains makes them highly

competitive.

Most buyer-driven supply chains have low entry barriers. Unlike producer-driven supply

chains—which have large manufacturers such as IBM, Airbus Industries, General Motors,

and Intel controlling the chain—the main leverage in buyer-driven supply chains is exercised

by marketers and merchandisers.

The textile and apparel supply chain is a classic example of a buyer driven supply chain.

Although the chain spans several stages, the “clout” is entirely in the hands of the “front end”

i.e. the stage of the supply chain which is closest to the consumer.

Two management skills are critical in today’s marketplace: managing the product cost and

speed to market. In the apparel industry, speed and flexibility are required to satisfy customers

who expect increasingly good value and more fashion content. There are a number of critical

issues apparel companies need to address when it comes to applying the marketing concepts

towards fashion:

i.Fragmented markets hence difficulty in targeting and segmentation

ii.Increasingly more demanding customers make it difficult to spot a sustainable

winning formula

iii.Individualism is breaking down traditional fashion trend prediction influences

iv.Fashion cycles are shorter , leading to a more volatile marketplace

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Apart from the final customer ,the three key entities of the apparel supply chain are:

The Apparel Importer/Buyer-The apparel export industry is a buyer driven industry, hence

comprehending the expectations of the buyers is of utmost importance. The buyer could be a

retailer, a brand owner or a wholesaler based in the country of selling.

The Buying House-Being a mediator between the buyer and the seller, the buying house plays

a vital role in offering the kind of service levels which their principal(s) expect and ensuring

that they upgrade the vendors.

The Apparel Manufacturer/Exporter-Also referred to as vendor/seller/exporter, it is the most

important link in the supply chain. The merchandiser here is a kind of pointer which balances

tasks between buyer/buying house on one side and the factory on the other.

Sustained revenue growth in any industry requires a steady stream of innovative products.

This is particularly true for short-life products, like apparel or computers, where product

lifecycles have shrunk dramatically, driving the need for more and more innovative products.

However, developing and bringing new products to market is becoming increasingly

complex. With the driving forces of outsourcing and globalization, apparel supply chains have

been rapidly disintegrating. Product designers, marketers, and manufacturers are no longer in

the same organization. More likely, they are spread over several continents in organizations

with different cultures, languages, and business objectives. For example, brands like Levi’s

used ‘do it all’ - operating their own US production plants along with their core design and

marketing activities. Now, Levi Strauss & Company have shuttered the production plants in

US and outsourced much of their production including design. Under pressure from buyers,

the international garment industry is now moving towards as a service industry, and what

buyer/retail companies used to do till now, the garment manufacturers are doing it today.

While such outsourcing has had many positive effects on product cost structure and asset

management, it has dramatically increased supply chain complexity. Most apparel makers’

supply chains now span the globe with many hands touching the garment before it reaches the

consumer. Coupled with shrinking product lifecycles, the resulting increased supply chain

complexity has strained every player in the industry. When this happens, products fail to meet

customer expectations or arrive too late for the intended season, requiring deep markdowns to

liquidate the inventory before the next season of products arrives.

The apparel supply chain is indeed complex (Figure 1). Even simple garments like T-shirts

undergo many hands in several countries before ending up in the target markets of Europe or

the US. A more complex product, like a winter parka, often sports components from all over

the world: snaps from Germany, zippers from Japan, insulation from China and Thailand, and

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the outer shell from Taiwan. Getting the right information to the right people at the right time

is the biggest challenge. Equally important is visibility to the entire product and sourcing team

with a documented history of product changes. All too often, a change made by one member

of the design team would be unseen by others creating confusion and finger pointing .

Figure 1-The Structure of Apparel Supply Chain

(Source- Action Research on Garment Industry Supply Chains- Women Working Worldwide,

www.cleanclothes.org/ftp/03-www-action_Research.pdf)

In another situation, design may take place in London or New York, fabric is sourced from

China, trim and other inputs are made in India, and assembly takes place in Mauritius. In

some cases, even the assembly of the same or related items can take place in several

countries. For example, large buyers often contract producers in different countries to make

identical shirts. It is also not unusual to find a matching skirt and blouse where the blouse was

made in one country and the skirt in another. Obviously such globally dispersed production

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requires very careful planning and coordination. The various activities undertaken in an

apparel production and distribution company are as indicated in Table 1.

PRE -PRODUCTION

Product Development &

Sampling

Costing & Negotiation

Fits & Pre-Production

Approvals

Color / Fabric approval

Fit approval

Plan Factory Capacity &

Allocations

PRODUCTION

Production & Line Planning

Fabric & Trim Sourcing

Maintaining Records

Fabric Booking

Trim Confirmations

Testing

Product Safety

Production Follow up

Quality Audits

POST -PRODUCTION

Shipment Status

Vessel / Flight

Planning

Documentation

Payment Follow up

Table 1- Jobs of a Merchandiser in an apparel manufacturing company

(Source: Quality Improvement for Merchandisers, Paper Presented by co-author at ICAHT Sept 2008)

In a study done by IBM Institute of Business Values, following were the problems

highlighted in apparel sourcing:

(i) Non-tailored customer offering

(ii) Poor new product development processes

(iii) Ineffective global and local sourcing

(iv) Out of stocks and sub optimal inventory levels

The study suggested that merchandising and supply chain operations can become a strategic

lever for growth and differentiation, by ensuring well coordinated activities between buyer

and supplier, goods could reach the final consumer on time, in the ratio required. Schmitz

(2005) researched on value chain analysis for policy makers and practitioners .Women

Working Worldwide , based in UK, carried out an action research on garment industry supply

chains (2003).

While, being first to market is important, the real returns go to companies that are able to

exploit their products by being first to spread the product round the globe (Hines 2001). The

primary goal is therefore to drive a new product or marketing concept around the globe as

quickly as possible, the critical success factors being ‘access to channels of distribution’ and

to have developed ‘an internal capacity to propagate new product innovation’. Hence the core

capability lies in competence in managing global supply chains. Managing relationships is an

important competence too.

Three critical lead times identified in the supply chain are:

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i. Time to market i.e. the time taken by a company to translate a market opportunity into

a product or service

ii. Time to serve i.e. the time taken to capture a customer order and deliver goods to the

satisfaction of customers

iii. Time to react i.e. the time it takes to respond to demand volatility by turning on or off

the production.

Paradoxically in the fashion industry, lead-times have if anything but lengthened over the last

two decades or so. This is primarily the result of global sourcing as retailers have sought out

low cost sources of supply. The risk that is incurred through lengthened lead-times can be

quite considerable.

Meeting a buyer’s priorities is crucial for any developing country garment manufacturer

seeking new business (Kerry McNamara 2008). These requirements will depend on the

specific product in question, but will include quality, price, reliability, ‘speed-to-market’ and

the ability of the supplier to extend its capabilities beyond the actual making of the garments

(the so called ‘full-package’ service). The demands of the modern retailer imply that any

garment production line increasingly needs to be well-integrated into the value chain as a

whole. In an effort to boost sales, producers and retailers have done away with the traditional

spring, summer, fall, and winter seasons with six or eight distinct selling periods.

3. Intermediaries in Apparel Supply Chain

Intermediaries are not a new phenomenon. In nineteenth century, cotton textile mills of

Lancashire used a dense network of merchants, brokers and distributors to ensure their reach

to the markets of the world (Popp, 2000). In many instances since then, intermediaries have

been blamed for decreasing transparency and adding an additional step in the complex supply

chain and hence increasing costs.

With globalization of industries and fragmentation of production worldwide, trading service

operators take on more sophisticated organizational forms to include international buying

offices owned by multinational manufacturing and retailing groups, as well as independent

buying agents who perform sourcing and logistics management functions for their customers.

The apparel intermediary is a domestic apparel service firm that links domestic

wholesalers/retailers and foreign distributors/manufacturers to facilitate import transactions in

the global apparel supply chain. Typical international trade intermediaries (ITIs) are buying

offices/sourcing offices/agents/liaison offices serving large retailers or brand-name

merchandisers in developed countries through sourcing of products in developing countries.

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The contemporary apparel business would thus encompass a wide range of market

intermediaries involved in indirect export of products between suppliers and buyers located in

separate countries.

Making sourcing decisions in the global apparel market is no less than a daunting task. Due to

factors including language and custom barriers, cultural and communications barriers, and the

sheer number of producers scattered across the world, U.S. retailers have had to change the

way they approach the world market. Some large retailers have established their own buying

offices overseas to administer the outsourcing of their private label products. Others work

with large and sophisticated independent sourcing agents to handle this intricate task

(Abernathy, 2005).

In a global business environment of apparel industry characterized by product

proliferation, cycle time compression and mass customization, intermediaries play a

significant role in effecting a competitive global supply chain that meets end customers’

needs. Their role and tasks, however, are constantly adjusted according to the supply chain

environments as well as the functions performed by their upstream and downstream supply

chain members. Any individual intermediary has to enhance its value-adding services to

customers in order to sustain its competitive position in the industry. Intermediaries in the

apparel supply chain include international buying offices fully owned by multinational

corporations, buying agents with contractual or alliance relationships with principals overseas,

as well as independent importers or exporters serving retailers and manufacturers in different

countries.

The intermediaries are expected to effectively manage its operational tasks and strategic

relationships with upstream suppliers and downstream customers simultaneously. Their

performance is determined by the customer value it can create by enabling win-win

transactions between various parties in the supply chain. To be customer focused, the trade

intermediaries have to perform a wide range of operational and managerial functions to finally

add value to end customers.

Different trade intermediaries may take on different roles and business scopes along the

supply chain, adjusted to those of their upstream and downstream members. This includes, for

example, procurement of raw materials and other forms of technical and financial support to

manufacturers / suppliers. The companies must manage the competing claims of a multiplicity

of customers and suppliers. Further, they have to strategically evaluate internal structure and

operations to decide how to keep their organizations lean, and to allocate and balance scarce

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resources and investment in different supplier-customer portfolios in order to achieve

maximum effectiveness and profitability.

International apparel buyers base their sourcing decisions on the capabilities of their

suppliers to offer ‘full package services’. Buyers today demand a flexible mix of value-adding

services which either the intermediaries can directly offer themselves or indirectly through

their alliances with further upstream suppliers. Capabilities of intermediaries in providing

such value-adding services determine their being preferred by customers and hence their

competitive position in the industry.

3.1 The Competitive Advantage of Using a Sourcing Agent in Apparel Industry

Beyond bridging barriers and responding to consumer and retailer demands, sourcing agents

provide a competitive advantage because they negotiate contracts and identify the factory

with the best cost and appropriate equipment capabilities (Cook, 2004). Sourcing agents,

through their close relationships with factories, can better ensure efficiency in production.

Sourcing agents are critical to the success of complex designs in off -shore production

facilities. The sourcing agent’s technical knowledge and network of contacts allow them to

identify the best factories for specific designs and production volume requests of the

manufacturers and retailers.

Cook’s research has shown that the added cost of royalty fees for sourcing agents was

indicated to be less expensive than identifying factories and working directly with those

factories independently. On time delivery and communication with factories is more effective

when a sourcing agent is utilized.When apparel retailers use factories that are off- shore, they

rely on sourcing agents to solve geographic and cultural barriers.

The intermediary agents then become the ‘eyes and ears’ of the retailers by communicating

with the factories directly and monitoring the quality and timing of apparel orders placed by

the retailers.

Sourcing agents also solve the problem of limited resources for smaller apparel firms.

Sourcing agents can identify factories that are willing to produce smaller volumes, and can

ensure quality for an apparel firm that might not have the funding to research production

options and/or visit the factory often enough to monitor quality when production is off -shore.

If the apparel design is complex, finding a factory with the appropriate equipment becomes

more difficult because fewer factories have the ability to produce complex designs. They help

to solve problems within the global apparel supply chain, through their ability to

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communicate and network with local factories and their awareness of factory capabilities for

the regions they represent around the world.

Sourcing agents play a critical role in supporting the global apparel supply chain. They

organize the various partners within the supply chain that would otherwise be difficult to

connect due to geographic and cultural barriers. The sourcing agent’s role in the global

apparel supply chain is to facilitate the relationships among key players who seek to produce

apparel goods efficiently, meeting quality and timing standards.As mentioned earlier, there

are primarily two models of buying agents, the first which are fully owned subsidiaries of the

retailers abroad or liaison office of the international retailer and the second are independent

buying offices.

The liaison office is an extended sourcing arm of the retailer’s parent office. This office works

in sync with the retailer’s policies and is also guided by the overall management philosophy

of the retailer. In many cases the top positions in the sourcing office could be headed by some

one from the parent company abroad especially when the office is newly setup or when the

work is expanding time and again. For example H&M’s office in India was headed for a long

time by a Swede from H&M’s parent office in Sweden. Even now some of the key positions

like head of quality assurance is from their office in Sweden. Needless to say that these

sourcing offices are associated only with only one retailer. The responsibility of training and

development of the human resource in the sourcing office rests with the retailer. The sourcing

office is normally structured on lines of the principal office. The divisions and teams are

similar to what the retailer has in their head office.

There are many examples of retailers sourcing offices now in India e.g. GAP Inc, H&M, JC

Penney, Carrefour, ZARA, The Children’s Place and Nike.

Lets discuss a few caselets.

3.1.A. H&M -It has 21 production offices: 10 in Europe, 10 in Asia and 1 in Africa. Around

700 people work at the production offices, by far the majority of whom are drawn from the

local population. They are responsible for contacts with the approximately 750 suppliers

(primarily in Bangladesh, China, Turkey) that manufacture H&M’s products. The production

offices ensure that the buyer places his order with the right supplier, that the goods are

produced at the right price and are of good quality, and controls that production takes place

under good working conditions. Ensuring the safety and quality of the goods largely takes

place at the production offices and is the result of extensive testing, including checking for

shrinkage, twisting, colourfastness and dry rubbing.

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3.2.B. GAP –It has world headquarters in the San Francisco Bay Area, product development

offices in New York City and distribution operations and offices coordinating sourcing

activities around the globe. Design and merchandising teams are working more closely right

from the beginning of the product development cycle, resulting in a more efficient process

and, over time, faster speed to market. GAP would be building more strategic relationships

with vendors, including sharing more planning and forecasting information, to further

leverage sourcing capabilities.

Located around the globe, employees in GAP’s sourcing and logistics group, along with

buying agents, draw up production schedules and place orders with approved third-party

factories in the more than 50 countries that produce goods. Third-party manufacturers ship

merchandise to GAP distribution centers (DCs) which sort and redistribute it to the stores.

Strategically placed throughout the United States and in Canada, the UK, Netherlands and

Japan, distribution centers are the backbone of GAP’s worldwide operations. Gap has a list of

countries approved for product sourcing, located in five main areas namely,

Africa/MiddleEast, Europe/Mediterranean, Southeast Asia, East Asia and the Americas.

GAP has a sourcing office in Delhi, India alongwith local sourcing offices in other apparel

manufacturing centres of the country. The Delhi office not only manages India sourcing but

also sourcing of apparel from Middle East and a few other South East Asian countries. India

being a large apparel sourcing base, it is used a hub from where sourcing from other

countries in the region (spokes) could also be managed.

The other model which exists is independent buying agency model. Here, an

independent company helps international apparel retailer(s) source .The buying agency is

based in country where apparel is manufactured. The agency could be privately owned or be a

partnership firm. The buying agency has the freedom to work with multiple retailers at the

same time. Some retailers ensure that the buying agency they work for does not work with

their closest or most fierce competitor. Working with many retailers at the same time, gives

buying agency a huge advantage in terms of supplier network, experience of working with

various kinds of retailers and hence overall a better understanding and more exposure of

buyer as well as supplier side of business. In terms of organisation structure, depending on the

size of the buying agency, each retailer/buyer has a dedicated team of people who service the

needs of the retailer from the word ‘go’. Working with different buyers also introduces the

buying agencies to various best practices of international retailers which are then adopted by

the company to enhance its service to all its customers.

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There are many buying agencies in India like Triburg, Impulse, Li& Fung, Francis

Wacziarg etc. To extend their realm of sourcing, the buying agencies have their own offices in

other countries. For example, Li & Fung is based in Hong Kong but has an office in India as

well. While Triburg is based in India but till a few years ago also had offices in Sri Lanka and

Dubai. Within India Triburg has offices in Delhi, Bangalore, Chennai and even USA.

Retailer’s Liaison Office Independent Buying Agency

Owned/Controlled by Retailer Owned independently by individual(s)

Works only for one apparel buyer Works for various apparel buyers

Training and development of staff

taken care of by principal company.

Training and development of staff taken care

of by buying agency.

Services offered:

-Fashion forecasting

-Design influencing service

-Vendor identification

-Pre production management

-Production planning

-Bulk production

-Quality assurance

-Shipping and logistics

Table 2 Formats of Apparel Intermediary organisations

3.2.C. Li & Fung Ltd-

Founded in Guangzhou, China in 1906 and with headquarters in Hong Kong, Li & Fung is an

international company for high-volume, time-sensitive consumer goods that include garments

and fashion accessories, gifts, toys, handcrafts, etc. (Fung & Chen). Throughout the years, Li

& Fung has successfully transformed itself from a regional sourcing agent to a worldwide

supply chain management enabler. It now coordinates supply chains for their customers

through a network of 65 buying offices in 38 countries across the globe. The supply chain

coordination tasks of Li & Fung can be illustrated as follows:

Li & Fung receives orders from individual European clothing retailers who need a few

thousand garments within six months. Using its expertise, the yarn which is made in South

Korea is dyed and woven in Taiwan. The zipper in each product is made in a factory in China

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owned by a Japanese firm. Since China’s textile quota has already been used up under some

country’s import rules, all work-in-progress is shipped to Thailand for final assembly. As no

single factory can handle all work-in-progress for this single order, several factories in

Thailand share this order. What Li & Fung does is to assure the quality of the whole garment

and manage the whole process starting from supplier selection, sourcing, manufacturing

selection and assessment, logistics and documentation arrangement etc. Six months later, that

European retailer would receive the whole order at the specified time, specified place with

conformance to specified quality and specified quantity. Manufacturers simply must have an

optimal value-adding supply chain. The supply chain management tasks and capabilities

described earlier can be customer-focused, supplier-focused, and business process-focused.

Stabilizing and broadening customer base, sometimes through investment with venture capital

is an essential feature of customer relationship management (CRM) of the company. The

company, in general, can provide tailor-made service to customers in sourcing, logistics and

financing. In short, the value chain integration between Li & Fung with its customers is

flexible yet effective.

Suppliers of the company have a wide geographical spread. Rather than taking complete

control over about 7500 suppliers in more than 26 countries, Li & Fung leaves the

management challenge to its contractors in order to gain flexibility in coordination and quality

control.

Further, it takes up between 30% - 70% of the production of each factory to make certain

that it gets substantial leverage and induces suppliers’ dependence on them. The company

provides regular feedback to suppliers to improve their performance. It rewards performing

suppliers with more substantial and steady business. As a back-office hub of Li & Fung, an

Operations Support Group (OSG) is backed by an IT system that keeps a database of 6000

factories around the world. It contains not just the profiles of each factory in terms of products

and capacity; it is also a hub where customers can easily check the progress of their orders,

from production to shipping. Aside from IT, the group also acts as an in-house human

resource provider, offering recruitment services, internal matching of staff and training. All

divisions of Li & Fung could take loans from the OSG as all divisional revenues finally go to

the OSG .

Intermediary (like Li & Fung), must provide customer value based on its supply chain

management capabilities. The capabilities serve to perform complex coordinated tasks that

meet customers’ changing needs, utilizing company-based and supplier-based resources for

the results. In order to qualify as sources of sustainable competitive advantages, resources and

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capabilities have to be distinctive and costly and time-consuming if replicated by competitors

or new entrants. For this reason, ITIs must protect these capabilities and stay ahead by

endlessly improving their performance.

4. Merchandisers as Intermediaries

To co ordinate various activities of the buyer, buying house and apparel exporter, each one of

them has merchandisers. A merchandiser in each organization then ensures that the

succeeding /preceding supply chain entity is linked with all other functions/departments in

their organization through them.

Merchandising is defined as activities undertaken to ensure that the right product reaches at

the right price in right quantity and at the right time to the final destination. (Gowrek, 2004).

While merchandisers are individuals who work and belong to an organisation, their role

however is not very different from that of theoretical ‘trade intermediary’. It is also worth to

mention here that the three types of organisation involved in buying/supplying/sourcing

garments i.e. apparel buyers, apparel buying agencies and apparel manufacturers have

merchandisers to co ordinate various internal and external functions of the organisation.

Merchandisers of each organisation co ordinate with each other to achieve the objective of

reaching the right product at the right place at the right time at the right price.

Apparel Retailer Apparel Buying /Liaison office Apparel Manufacturer

Buyer

Designer

Merchandiser

Quality Assurance

Designer

Merchandiser

Quality Assurance

Designer

Merchandiser

Production

Quality Assurance

Figure 2- Merchandiser- linking entities of apparel supply chain

The merchandiser in each organisation mirrors the expectations of the buying organisation to

the supplying organisation and implements and controls functions to ‘make it happen’.While

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the role of a merchandisers is often described as the ‘link’, it must also be understood that this

link can have varied and vast functions to perform depending on the type of organisation.

For example in small manufacturing organizations, the role of the merchandiser could that be

of a receiver of information who ensures right information reaches the right person at the right

time. In other larger organisation the responsibilities could be right from the inception of the

product till the product reaches the customer.

4.1 Responsibilities of the Merchandiser

The following are the key responsibilities of merchandisers in apparel firms-

a. Market Knowledge-A merchandiser must have an intimate and comprehensive

knowledge of his or her company’s target market (Roseneau & Wilson,2006).

b. Planning and Control-These actions encompass all departments of an apparel

company and a schedule is made for all activities by a merchandiser.

c. Product Development-Many apparel and retail companies offer new styles

every month. The number of increased offerings creates an almost continuous styling

mode in most design departments. Merchandising must provide rigorous controls

of the product development process.

d. Costing-Developing accurate cost estimates for new products is a critical

merchandising function. This cannot be done without a thorough understanding of

manufacturing process and a command over computational and measurement skills.

e. Interfacing with Sales and Marketing-Line planning, style selection and line

presentation require a close working relationship among merchandising, sales and

marketing. Throughout the product development process, merchandising should be

obtaining valuable inputs from sales and marketing as to how current styles are selling

at retail and trend projections for retail buyers.

f. Production Authorization-Many apparel companies commit to production before

meaningful sales have been generated. In many companies merchandiser is directly

responsible for production authorization with the help of tools like-past sales histories,

current market research, advance sales advice and sales forecasting models.

g. Interfacing with Manufacturing-Since in many companies the merchandiser authorizes

production, it is important for the merchandiser to maintain close links with

manufacturing.

h. Materials Management-Raw materials including fabrics, trims etc can represent from

one third to one half the total cost of a garment. The purchasing and scheduling of

these raw materials must be programmed for delivery as close to their required usage

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as possible. In many organizations, merchandisers select all raw materials. The

planning, ordering, and follow up of delivery and utilization of material enables

merchandisers to gain valuable knowledge of the operations of merchandising

department.

i. Sourcing-Depending upon the size and departmentalized structure of the organization,

sourcing may be the sole responsibility of merchandising; it may be an independent,

senior level management function; or it may be a shared responsibility. Whichever the

case, the merchandiser must understand the complexities of domestic and international

sourcing.

In today’s high tech, competitive, global apparel industry, a merchandiser must possess a rare

blend of traits, skills and experience (Roseneau & Wilson, 2006). A successful merchandiser

is expected to be :

o An independent thinker with the ability to maintain a steady course toward long

term company objectives while under pressure from various departments

o An entrepreneur by being assertive in leading the company in new directions while

taking risks based on an innate feel for market.

o Flexible with the ability to adjust to the changing demands and timetables of the

marketplace

o A leader demonstrating the ability to gain respect and cooperation of other

members of the management team while making critical decisions needed to keep

the company ahead of the competition.

o A communicator with the ability to express new ideas and concepts clearly and

persuasively. Ensuring effective communication with own staff as well as that of

vendors and suppliers all over the world.

o Organized, exhibiting the ability to maintain a disciplined business atmosphere

while managing many functions simultaneously and meeting critical deadlines.

o Have an understanding of production methods, quality assurance, styling and

design functions, costing criteria and also be a meticulous planner.

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Figure 3-Capabilities required in Apparel Intermediaries

(Source-Adapted from Patrick Fung and Chen Ivy, ‘Value-adding service capabilities- A

study of supply chain management of international trade intermediaries’)

5. A Critique of Success of Apparel Intermediaries

In an research carried out by Dyer and Brookshire on apparel import intermediaries (Dyer and

Brookshire, 2006), the following were established as the reasons of success of apparel

intermediaries:

a. Immersion knowledge management- Knowledge of the marketplace is unique to the hyper-

dynamic apparel market environment. Moreover, the knowledge needed is acquired through

years of personal experience and immersion on the floor, either on retailers’ store floors or

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manufacturers’ production floors. This led to the understanding that success of apparel

intermediaries appeared is tied to personnel management. Literally, your firm personnel ‘can

make you or break you.’

b. Simultaneous dual relationship management- Intermediaries have two equally critical

business channel members, retailers and manufacturers, both of whom have the power to

impact their very existence.

And hence, they have faced a distinctive challenge to establish and maintain two equally

important types of business-to-business (B2B) relationships simultaneously. That is why they

must have capability to manage a B2B relationship with their domestic clients/people within

their organisation and a B2B relationship with foreign suppliers, exercising a multiple

personality approach of being both buyer and seller at the same time while managing two

vastly unequal power positions.

c. Flexibility saturation- The flexibility was expressed as free movement from country to

country to meet demands –or what might be called ‘market choices without boundaries’. This

flexibility may well be associated with the apparel industry having become one of the most

globally dispersed industries. The intermediary’s flexibility is described as proactive, i.e.

taking full initiative to convert market uncertainties into market opportunities, rather than

reactive, i.e. adapting to environmental uncertainty. Secondly as versatility, suggesting that

these firms leveraged a wide range of resources to carry out firm actions – to the extent that

“if you can imagine it, you can make it happen”

None of the above factors would be possible without the integration and co- ordination of

merchandisers in the key three types of intermediary organizations in apparel industry. In

fact , the three success factors of knowledge management, dual relationship management and

flexibility saturation are first practiced and implemented by the merchandisers and then

slowly permeate into each of the organisation’s overall philosophy.

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