This week’s Ask the Expert is answered by Flora Davidson is the co-founder of Supplycompass, a tech-enabled end-to-end production management platform for brands that seeking international manufacturers.
Ask the Expert: How can you choose the right manufacturer to streamline your supply chain and save money?
Whether you are in the fashion, accessories or furniture business, deciding between working with a Cut Make Trim (CMT) partner or scaling up production and opting for a fully-factored partner abroad, is a key strategic decision you’ll have to make at some point.
Optimising your supply chain is not something that can be done overnight, plus making the wrong decision can cost your business time, money and possibly even your reputation.
Exactly who and what you choose will depend on many factors; the size and complexity of your order, cash flow, the amount of control you wish to have over the order, and how much traceability and transparency you want to have within your supply chain.
Fully Factored (FF) Manufacturing
Fully-factored partners look after your entire order from design through to delivery to Freight on Board (FOB) point. They do everything from design assistance, pattern making, grading, sourcing materials and components, sampling, bulk production, packing and freight forwarding.
Advantages of FF Manufacturing
Everything in one place. All procurement and production is looked after by the factory, which means there is no need to source anything extra, no need to manage your supply chain and no need to make lots of additional payments. You can also have flexibility over materials and tell your manufacturer if you have a nominated supplier.
Lower unit costs. If you can reach the minimums dictated by these factories, this option is the best value.
Fixing delays and mistakes. They have departments specifically dedicated to sourcing materials, sampling, looking after imports and exports and logistics. It is the factory’s responsibility to fix any mistakes or delays that arise.
Local knowledge. Managing an order with a CMT abroad can be challenging; you might not have relationships with local suppliers and you’ll likely be less familiar with local laws and taxes. With fully-factored manufacturers, they know who to go to for what.
Smaller CO2 footprint. FF manufacturers tend to source materials and components locally, which reduces your carbon emissions within your supply chain.
Disadvantages of fully-factored
High minimum order quantities. Fully-factored producers will almost always require high order quantities, which if you are a small brand can tie up your cash in unsold stock.
Less control and flexibility. The benefit of them looking after everything also means you have less flexibility overproduction.
Check their transparency. It can be more difficult to find out exactly where every part of your product comes from. Though, if this is important to you, there are plenty of fully-factored manufacturers who pride themselves on having traceable, transparent supply chains themselves.
Cut Make Trim [CMT] units cut the material, make the garment and add the trims. It’s is a good option for designers starting out and brands in their first few years, because they can cater for much smaller order runs. Strong tech packs, pre-made patterns and experience procuring fabrics and managing supply chains all help make this option more efficient and successful.
Advantages of CMT
Small minimum order quantities. Larger factories demand higher quantities because of high fabric minimums dictated by mills. With CMT units you are not restricted by minimums because you source the fabric yourself, which means you have more options, greater flexibility over quantities and save money.
Visibility and transparency. It’s ideal for brands looking to have total control and visibility over their entire supply chain. You know exactly where every component and bolt of material comes from and can communicate this to your customers.
Control and flexibility. Sourcing your own fabric and components means that you can find exactly what you are looking for, and there is less need to compromise. With fully-factored manufacturers, their network of mills and suppliers is often more limited and made up of pre-existing relationships. This can mean they may not be able to find exactly what you are looking for or that the quality of fabric or components might not always meet expectations.
Less waste. CMT can be seen as a more responsible option as there is more control over wastage and the use of sustainable resources.
Disadvantages of CMT
Higher unit costs. Producing with a CMT unit usually ends up being the more expensive option. Once you have paid for the fabric, patterns, grading, postage costs and import duties and taxes – it all really adds up. If you want fabric printing, embroidery, embossing and or custom labels, CMT will have to outsource this at additional cost and delay. Plus, minimum order quantities (MOQs) on custom trims are often very high, so you may have to buy the surplus yourself.
Delays and other issues. You can’t always anticipate delays in garment production. Materials stuck in customs, labels made incorrectly, or zips delivered to the wrong address are common problems. Fully-factored manufacturers will be able to source materials and components faster and have the ability to fix problems quicker.
Resources. CMT units are usually small outfits, which means they can’t necessarily keep up with the demands of your business as it grows. They might not be able to manufacturer the entirety of your collection for example. They might have issues with cash flow or they might not be able to offer more advantageous payment terms.
The final decision is going to come down to what scale you are producing at and what degree of involvement and order management you want. At Supplycompass we work with some small sampling and CMT units, but our focus is helping SMEs work with larger, fully-factored factories. We have handpicked those who work with lower minimums and who have experience working with brands of all sizes. Generally, we recommend fully-factored partners for growing brands, as it enables them to make better margins, reduces the time they spend managing their supply chain, and improves efficiency. For brands launching their first collection, for those who simply can’t afford to increase their quantities, then the best and most cost-effective option is to work with a CMT unit until they are ready to grow and scale up production.