Liz Claiborne has a five-point checking list in choosing the local garment companies it has done business with in 31 countries worldwide. Aside from superior price value, it looks for consistent work quality, speed to marketplace, completeness of orders and human rights compliance.
"Although we understand it is a working process, we stand tall with our human rights record," said Ross. "We insist on our vendors paying their workers the local minimum wage. We insist that they provide a decent working environment for their workers."
The Philippines is one of eight Asian countries which aggregately account for between 65% and 68% of the 225 million units sourced by Liz Claiborne last year. Following a multiple location or triangular strategy common among multinational companies, some of the Liz Claiborne products made in the Philippines, mostly woven and cotton garments as well as knitwear, are also made or are interchangeable with those made in Thailand and in Indonesia.
An additional hike of 15% in orders has been confirmed by Ross, significantly higher than the historical 4% to 5% annual increase in the past six years.
The 15% increase, however, depends on demand in the United States, which accounts for 95% of Liz Claiborne sales worldwide. "There’s a pessimistic sentiment in the US," said Ross. "There’s talk the economy will rebound in the fourth quarter but I’m not a firm believer of that."
Because of such pessimism, many US-based multinationals have reversed this year the ordering mix, starting with early orders equivalent to 20% of total orders. The balance 80% of orders chase after the first 20%, depending on the sales performances of the first two quarters.
For the Philippines, the 15% increase in confirmed orders indicates the growing sophistication of local garment manufacturers, which can make garments of consistent high quality and bring these quickly to the marketplace. At Liz Claiborne, the average turnaround time is between 75 days and 100 days.
"We have to be on our toes and reorder what’s hot and cancel what’s not. It’s a form of mass customization where we give the particular market what it wants. We, however, remain vulnerable to private labels which can quickly knock down our designs and sell these at a lower price," said Ross.
"On the one hand, we have, unfortunately, trained the American shopper to buy things on sale. On the other hand, we have American shoppers who see clothes as commodities rather than as added-value fashion. For these people, there’s no difference between a low-priced pair of pants and a high-priced pair of pants except the price."
"The goal of our vendors should be to become an FOB business dealing with everything from material sourcing to product and product presentation to distribution to customer service. We want our role to be limited to two things–one, to issue the specs; and two, to issue the check," said Ross.
With production and distribution out of the way, Liz Claiborne can concentrate on driving sales for its 23 brands which generated net sales of $3.1 billion last year.
To become closer to the market, speed or the ability to move supplies quickly is crucial. This means pieces which make up a set, such as a blouse and skirt combination, which are made in different countries must reach the sales points at the same time so they can be sold together at a premium. Described as "the most traveled collection in the world," Liz Claiborne must send its clothes to wherever the demand is high. Excess products in the company’s New Jersey central warehouse means products are not moving and are, therefore, do not creating value. "Too much clothes hanging in the warehouse in like watching dollars hanging out to dry," Ross said.
In his last visit to the country early this month, Ross expressed satisfaction with his local vendors. "Loyalty is earned on both sides. Our suppliers know what we need and we know what they need. For both of us to make a fair profit, we have to reach a common ground. And we have." – MJGrey