The footwear industry has become highly competitive and profit margins are difficult to sustain. The dilemma in front of footwear manufacturers is to whether outsource the manufacturing process or have in-house manufacturing. There are certain important points that must be kept in mind while making this important decision.
There are both pros and cons to outsourcing your manufacturing process. If you have an in-house manufacturing then you can easily monitor the quality of produced shoes, have better application of labor laws or environmental laws, and get good control over logistics. However, the high wages may act as a big deterrent to this decision.
1. Core competencies enhancement: Most of the big players in the footwear industry are more concerned with the marketing and logistics aspects and do not possess manufacturing as their core competency. Outsourcing the manufacturing process to the shoes factories abroad help in several ways such as risk-shifting, appreciably lower wages, less capital expenditure on infrastructure, and increased focus on the core competencies.
2. Increased Know-How: The reason behind the outsourcing manufacturing process to places like China, Vietnam and Cambodia is due to their increased know-how and technical efficiency, which has translated into their core competency now. They are well-equipped with high level of technological advancements so that the mass production can be achieved efficiently. In recent past, many footwear giants have reduced their over-dependence on China and started to explore other Asian countries for outsourcing the manufacturing work.
3. Mutual Profit: Not only the footwear companies are gaining profits from outsourcing but countries like China are quickly progressing because of the huge influx of capital in these countries. Hence, both parties are acquiring considerable profits out of this process.
4. Reduced Operational Cost: Most of the international brands in footwear industry are now outsourcing to different parts of the Asia in search of finding new suppliers that can provide excellent know-how at minimum cost. The reduced wages helps in minimizing the operational expenditures. It’s prudent to select a supplier who has a long and proven record of delivering quality products at minimum amount of time. All the documentation required for outsourcing must be discussed and finalized in advance.
5. Increased Competitiveness: One of the major advantages of outsourcing is that it increases the competitiveness of a brand.
6. Less financial Risks: Outsourcing helps footwear companies to evade financial risks as they no longer have to deal with tax laws of their own country. Also, the shift of risk allows these companies to transfer the risk liability to the shoes factory such as of insurance to the workers.