Advantages And Disadvantages Of Outsourcing in Fashion Industry

Question: Discuss about the Advantages And Disadvantages Of Outsourcing Business Functions In Fashion Industry. Answer: Overview of the Fashion Industry The value of fashion in our daily lives cannot be underestimated. The fashion industry has provided employment opportunities to millions of people around the world. It is a profession and a source of self-interest (d'Avolio, Bandinelli, and Rinaldi, 2015). Additionally, for individuals who are outside the fashion industry, it still plays a crucial role. The fashion industry is, therefore, important in the human society. In this regarding, critical analysis and evaluation of the industry are important in its development. As noted by Tselon (2016), fashion is diverse and is often influenced by different cultures that define who are. In the business environment today, outsourcing is playing a critical role in the operations in the fashion industry. Many companies have opted for manufacturing their products overseas (Andrade, Sousa, and Alves, 2015). The fashion industry is fast growing. Consumer demand is on the rise hence the need to produce goods and services efficiently and promptly. The advent of new technology is also impacting on the fashion as it has influenced consumer taste and preferences (Macchion, Moretto, Caniato, Caridi, Danese, and Vinelli, 2015). Is worth noting that globalization is one of the factors that have played a central role in influencing outsourcing (Bonetti, and Schiavone, 2014). With the increased interconnectivity, companies in the fashion industry are capable of collaborating in one way or another. Advantages of Outsourcing in the Fashion Industry Cost reduction is an important reason that compels companies to consider outsourcing. In this case, tasks that will cost a company much should be outsourced to other service providers who can provide the services reduced prices (Caniato, Crippa, Pero, Sianesi, and Spina, 2015). Companies are also in a position to hire experts who can complete tasks effectively, faster, efficiently, and cheaply. Hiring experts through outsourcing enable companies to gain opportunities for exploring new possibilities. Additionally, businesses can venture into various work specialization that will allow them to prosper in this period of high competition. Many studies have revealed that outsourcing has enabled the fashion industry to lower its cost of production (Ceccagno, 2016; d'Avolio, Bandinelli, and Rinaldi, 2015; Macchion et al., 2015). Many companies are seeking to outsource their production function to those countries where the overall cost of production is low. Countries with cheaper and readily available raw materials are in most cases preferred. Numerous studies indicate that through outsourcing, companies are in a position to pay fewer salaries and wages (Lin, Piercy, and Campbell, 2013). In the fashion industry, salaries are central in determining the overall cost of production. With outsourcing, companies can reduce their expenditures on salaries and wages. Further, outsourcing is critical in leveraging fashion companies from paying hefty taxes in their respective home countries (Cortez, Tu, Van Anh, Ng, and Vegafria, 2014). Most businesses are affected by high taxation because it reduces the profit margin. Evidence has shown that companies which engage in outsourcing can easily circumvent the strict and onerous regulations in their countries. Doing business in some countries appear to be expensive as a result of several regulations that affect business operations in the long run (Choi, Wallace, and Wang, 2016). According to Macchion et al. (2015; Tselon, 2016), limited regulation is crucial to the fashion industry because manufacturers can lower their retail prices while still maintaining a considerable profit margin. It is imperative to note that outsourcing fosters competitive advantage in the fashion industry. This competitive advantage is achieved through strategic partnerships and alliances (d'Avolio, Bandinelli, and Rinaldi, 2015 ). Outsourcing enhances competitive strategies that are required in the current global market. This argument is supported by Lin, Piercy, and Campbell (2013) who notes that through outsourcing, companies within the fashion industry can get quality products and raise the productivity of the company. It is paramount to note that companies can enhance their supply chain management so as to reach greater markets for prosperity (Lueg, Pedersen, and Clemmensen, 2015). It is worth noting that outsourcing helps in increasing the economies of scale as a result of the greater investment. The rate of return on investment is equally high. With outsourcing, companies enjoy enhanced operational flexibility that is presented in numerous ways. For example, companies have greater access to a broad and diverse workforce at their disposal, and therefore, they are relieved from maintaining the workforce on a permanent basis. In this regard, companies are able to benefit from the contact personnel without the stress of idle workforce or layoffs (Izquierdo-Yusta, Labajo, Jimnez-Zarco, and Martnez-Ruiz, 2016; Tselon, 2016). As such, this flexibility allows companies to adjust production capacity and workforce capacity according to the market trends and the changing requirements. It is imperative to note that with outsourcing, companies have the capacity to handle unforeseen risks and events such as work errors, changes in management, and changes in production plans, and unanticipated delays. Additionally, flexibility enables companies in the fashion industry to deliver products and services to their customers without delays (Tse lon, 2016; Izquierdo-Yusta et al., 2016). Flexibility promotes customer satisfaction. Proponents of outsourcing argue that it helps companies to free up limited time and capital funds to entirely focus on core activities of the business (Lin, Piercy, and Campbell, 2013). Consequently, ancillary duties or jobs can be done by contracted organizations, companies, or individuals. Fashion industry businesses especially those that are engaged in manufacturing can find the latest production technology with relative ease. Mahmood and Kess (2016) have noted that companies can also acquire equipment without necessarily buying them. Furthermore, the cost of maintaining such equipment is small. It suffices to point out that a good outsourcing relationship enables companies to attain new business networks with other partners (Lueg, Pedersen, and Clemmensen, 2015). For example, Zara which is a fashion company has formed a partnership with like-minded companies in order to expand its retail chains across the world. The fashion industry is very competitive. Only companies that produce customized accessories and products remain relevant in the market. Through outsourcing, companies can efficiently locate good suppliers who can supply quality raw materials for better production (Manuel and Herrero, 2014). Other than quality raw materials, there is the benefit of quick delivery as companies have several suppliers to choose from. For instance, a fashion company that deals in precious metals will be in a position to outsource the supply to a competent mining company. Having a broad database of suppliers enhances production and promoted efficiency (Andrade, Sousa, and Alves, 2015 d'Avolio, Bandinelli, and Rinaldi, 2015; Bonetti, and Schiavone, 2014). On the other, companies dealing in textiles can acquire raw materials such as cotton much easier. Outsourcing widens the scope of producer-supplier relationships. Outsourcing provides a unique source of leverage as far as the value chain is concerned (Radlo, 2016; Shen, and Li, 2015; Ceccagno, 2016). In respect to this, fashion companies ought to develop effective strategies that are aimed at seeking out knowledge gaps and imperfect markets that they uniquely qualified to fill. Further, with outsourcing, companies can identify opportunities where there are potential investments so as to leverage their intellectual resources (Tselon, 2016; Lueg, Pedersen, and Clemmensen, 2015). Zara, a fashion company that has heavily invested in high-end street fashion, is concentrating in designing new products to meet the demand of their consumer as their appointed service providers avail these products in time to the various markets worldwide. Further, Zara conducts some specialized test-feedback mechanisms that support carefully chosen knowledge-based products for the fashion industry. In this sense, outsourcing is critical in enhancing value chain in comp anies that produce fashion items and services (Nenni, Giustiniano, and Pirolo, 2013; Izquierdo-Yusta et al., 2016). With outsourcing, companies in the fashion industry can easily access raw materials required by the business. Countries are endowed differently regarding raw materials (Mahmood, and Kess, 2016). As such, companies, through outsourcing can be able to acquire the necessary raw materials. In addition to this, these companies have the opportunity to forego transportation costs of raw material as they are only used in countries where the outsourcing has been done (Nagurney, and Li, 2015). Some of the raw materials that are used in the fashion industry are perishable. This means that transporting them over long distances is not feasible and can lead to irreparable losses to the companies. In this case, it is only prudent for these companies to outsource their operations and services (Manuel and Herrero, 2014). The fashion industry can derive a lot of benefits from outsourcing regarding cultural relativity and cultural competence. By outsourcing products and services, companies in this industry can address the specific needs of customers all over the world. Studies have shown that managing the rapid changes in the fashion industry requires specificity of activities and innovative approaches (Lueg, Pedersen, and Clemmensen, 2015). Therefore, through outsourcing, the fashion industry is likely to expand spontaneously (Nenni, Giustiniano, and Pirolo, 2013; Ceccagno, 2016). Indeed, through outsourcing, these can companies can derive specific ideas to will inform their future fashion trends. Disadvantages of Outsourcing in the Fashion Industry Several studies have shown that outsourcing has devastating effects on the domestic fashion industry (Bonetti, and Schiavone, 2014). For instance, the total number of employees in the United States of America who work in the fashion industry is estimated to be over three million (Radlo, 2016; Tselon, 2016). The textile mill employed more than five thousand people. Today, many people are being laid off because companies have decided to outsource their operations (Shen, and Li, 2015). In this regard, outsourcing contributes to the exportation of jobs. This is a negative impact as many people are laid off in order to pave the way for huge profit margins from outsourcing. One of the main concerns with outsourcing work in the fashion industry is the lack of oversight for businesses. In several instances where companies decide to outsource their production, they may lack the capacity to offer effective manufacturing process (Izquierdo-Yusta et al., 2016; Radhakrishnan, 2015). Companies may end up getting substandard textiles as a result of the unskilled workforce and even poor working conditions. The fact that the face value of outsourcing portends a lot for companies, it is prone to abuse. The company may decide to outsource operations to countries where wages are low, yet such low wages demoralizes employees (Sardar, Lee, and Memon, 2016; Shen, and Li, 2015). In the end, the company may have to contend with low-quality products that will be rejected in the markets. In overall, when outsourcing is not down properly, it results in low-quality products and services. This arises in the event that there are weakmanagement and poor coordination of the outso urced operations. It is vital to point out that the fashion industry is culture conscious. In this respect, outsourcing operations may affect the perceptions of customers from different regions (d'Avolio, Bandinelli, and Rinaldi, 2015; Shen, and Li, 2015). As much as reducing cost is facilitated by outsourcing, it impedes particular tastes and preferences. Another risk that is associated with outsourcing in the fashion industry is the likelihood of running out of business. Radhakrishnan (2015) notes that it is a fact that outsourcing has led to the loss of business to many companies. For example, a company the outsource operations such as the production of make-ups can lose the business in the long run if the partner decided to take away the technology (Shen, and Li, 2015; Ceccagno, 2016; Lueg, Pedersen, and Clemmensen, 2015). Outsourcing creates high vulnerability chance to companies hence leading to massive losses. Similarly, in case a business partner that has been given the authority to carry out production becomes bankrupt, the outsourcing company incurs huge loses. The outsourcing company may be forced to search for another service provider with strict timelines (Shen, and Li, 2015; Izquierdo-Yusta et al., 2016). This scenario leads to huge financial loss and disorientation of the company operations. Outsourcing may be more expensive even if cost reduction is its basis (Izquierdo-Yusta et al., 2016). Some studies have argued that it is much more feasible to keep some operations of the company in-house. For example, a fashion designing company may find it cheaper to hire a designer instead of outsourcing the service to another company (d'Avolio, Bandinelli, and Rinaldi, 2015). Cortez et al. (2014) argue that due diligence should be made to ensure that decisions relating to outsourcing are economically viable. Failing to consider all the principal factors may result in higher costs than it was contemplated before. In this respect, fashion companies should conduct thorough and extensive market research so as to be aware of all factors before making outsourcing decisions (Manuel and Herrero, 2014). Another danger that is associated with outsourcing in the fashion industry is data security. In the globalized economy, there is the race to gain the competitive edge. Outsourcing operations mean that a company has to give much information to the service provider (Shen, and Li, 2015). The transfer of the information compromises its security. In some instances, these pieces information have there are times when designs are leaked to competitors. Such competitors often struggle to produce goods and services based on the leaked information (Lueg, Pedersen, and Clemmensen, 2015). Ideally, in the fashion industry, counterfeiting and imitations are common. When this occurs, the companies in this industry will ultimately run out of business. Additionally, the fashion business requires efficient coordination of operations because fashion is dynamic. The decision to embrace outsourcing may result in a slow response to customer concerns (Nenni, Giustiniano, and Pirolo, 2013; Bonetti, and Schia vone, 2014). This is mostly evident in circumstances where there is not proper coordination and communication between the outsourcing company and the service provider. In this case, it becomes difficult to keep the pace with the ever-changing face of the fashion industry (Shen, and Li, 2015). In conclusion, the fashion industry is rapidly growing. The level of competition is equally high. Companies are striving to gain the competitive advantage so as to remain relevant. There are also significant changes in consumer taste and preferences that must be appropriately addressed. Globalization which is the biggest force in the business realm has resulted in several impacts. There is a plethora of literature that indicates that companies in the fashion industry are adopting outsourcing as a business strategy. The practice of outsourcing has both advantages and disadvantages in the fashion industry. However, the benefits outweigh the drawbacks. In this regard, companies can engage in outsourcing only after a proper analysis of the prevailing circumstances. Business is required to conduct thorough and extensive market research in order to understand the prevailing conditions before making decisions that pertain to outsourcing. In a nutshell, outsourcing is a business strategy tha t enhances growth through widened markets and revenues. References Andrade, S., Sousa, P. and Alves, M.R., 2015. International Outsourcing: a process approach to the apparel industry. Revista Brasileira de Gesto de Negcios, octubre-diciembre, pp.1444-1463. 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