Minimum ordering cost of custom designed shirts

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Reference no: EM13662654

Problem Statement

The minimum ordering cost of custom designed shirts produced in the United States is three times the cost in India, making outsourcing a profitable alternative

Exploratory Research

United States manufacturers are forced to pay workers government regulated minimum wages. These wages, due to the high cost of living, add on to the manufacturing cost and are passed onto the consumer in the form of higher prices to produce a revenue that marks an acceptable profit. Offshore manufacturers, such as those in India, offer a lower manufacturing cost due, in part, to lower minimum wages, lower hiring cost, and a lower cost of manufacturing plants than the United States manufacturers.

It appears that the total production cost in India is lower than that in the United States. However, offshore manufacturers are placing minimums on an order to create larger revenue for their business despite a lower product quality than custom designed shirts produced in the United States.

An in-depth interview will be utilized to collect exploratory data in order to gain insight into how offshore manufacturing can benefit the fashion retail industry. The exploratory research dummy table (see Table 1) records the possible reasons for the high cost of custom designed shirts produced in the United States and in India.

Exploratory data analysis indicates that the ordering cost, based on the minimum order quantity, has a direct bearing on the low production cost of offshore manufacturers. Marketing, however, has to ensure high demand to offset the inventory cost that might result from the high minimum order quantities imposed by offshore manufacturers.

Reason for high cost	United States	India
Cost of living	High due to	Low due to
Regulated wages	High due to	Low due to
Cost of hiring	High due to
Production cost	High in part due to fixed costs	Fixed costs are low
Minimum order quantity	Low provided supplier agreement	High due to lower production costs
Cost of inventory	Low due to lower order quantities	High due to higher order quantities

Descriptive Research ??

Preliminary Causal Research ??

Detailed Causal Research ??

Reference no: EM13662654

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