International Purchasing & Supply Management

Modular Learning System

Specific to Garment Sector

Module 2
Specifying Requirements
& Planning Supply

Unit 1
Introduction

This module covers how to determine and specify all the different dimensions relating to the
goods and services that a garment enterprise needs to purchase.

What to purchase?
 T-shirt, Shirt, Trousers, Dress etc.

How much to purchase?

 50, 500, 50,000, 500+500+500

Where and when delivery should be made?

 At Delhi Airport/Delhi Dryport (Patparganj), Dadri (Noida)
 15th January 2010, 31st December 2009

What support & services are required of supplier?

 24x7 communication
 Allocation of one merchant for the client account.

What information the supplier will need in order to perform effectively?

 Purchase Order/Letter of Credit
 Fit Approval
 Print Approval
Unit 2
What Needs to be Specified

What needs to be specified?

 Operational, capital, production & non-production

Specifying the product or service.

 In terms of performance, functionality, design, colour, durability.

Specifying quantity, delivery & service.

 Where, when, how the product or service should be delivered
 What service is expected from the supplier

The process of specifying requirements and planning supply

 How the process of specifying purchases and planning supplies should be
conducted?
 How supply targets are established?
 How supply targets serve as a basis for developing & prioritising purchase
specifications?

WHAT NEEDS TO BE SPECIFIED

The suppliers needs complete information in order to reliably meet the buyer’s expectation.

If the information is not complete and correct, there is disruption in production plan, delays
in supply (clarification, correcting errors with supplier)

WHO SPECIFIES?

Merchant along with the help of Purchase Department specify. Purchase department brings
supply market knowledge/commercial awareness.

Types of requirements

a. Operational requirement – Maintenance suppliers, stationery etc.

b. Capital requirement – Building, photocopier etc.
c. Production requirement – Fabric, trims
d. Non-production requirement – Spare parts, tools, fuel, machine oil.

WHAT CAN BE SPECIFIED

A. Specifying the required product/service.

In case of a garment, the key components are fabric and accessories. When ordering, for
example, a men’s T-shirt, one needs to specify the quality of fabric (cotton, polyester,
viscose, blend etc.) and the quality of accessories (button, zipper, thread etc.).

Information like specification sheet, measurement chart etc. also need to provided to the
supplier to ensure correct fit of the garment. The accompanying details should include the
cutting, stitching, finishing and packing instructions.
B. Specifying the performance requirement
If we take the case of proactive and stringent buyers, the performance parameters of a
garment are informed to the supplier at the time of order booking. The parameters include
factors like colour fastness to rubbing and washing(colour bleeding etc.), tear strength (the
amount of stress a garment can sustain), dimensional stability (shrinkage due to washing). In
some countries, the law prohibits import of garments which have been dyed using azo
chemicals or which have a more that prescribed nickel content.

C. Specifying Inspection requirements

The supplier should be aware of the level of inspection. Generally AQL 4.0 or AQL 2.5 is
used in garment manufacturing. AQL means Acceptable Quality Levels. Simply put, AQL is
defined as the maximum no. of defects per 100 units that, for the purpose of sampling
inspection, can be considered satisfactory as a process average. An AQL 2.5 is more
stringent that AQL 4.0.

Inspections are required in various areas and at various stages. They are specified by the
buyer whenever they initiate business with any new factory. The method of inspection of
fabric and accessories is specified. All types of fit approvals and final approvals required to
go ahead with production is informed to the supplier. The buyers also specify at the outset
the inspections that will be required during various stages of production (pre-production
inspection, initial inspection, mid-inspection, final inspection etc.)

D. Specifying Quality Assurance documents

In order to closely monitor the quality control systems in a factory, the buyer prescribes an
inspection format which has to be diligently filled by the quality inspector and the report sent
to the buyer as well as the quality control department of the factory. This may be generated
daily or as prescribed by the buyer.

E. Specifying packing requirements

For any garment order it is very important to issue the packing instructions.
For an order of men’s T-shirt in 3 colours viz. red, yellow and blue and sizes small, medium
and large, it could be solid packing (one carton can have only one colour and one size eg.
few cartons will have only red colour in small size, few other cartons will have only red
colour in medium size and likewise for other colours). In case assortment packing is advised,
colours and sizes can be mixed as per assortment instruction.
In the packing instructions one also needs to specify whether each garment needs to be put in
individual polybag or one set of garments should be put in a blister (blister is a large
polybag).
Another option in packing is that the garment can be folded and put in the carton (Flat pack)
or they can be put on hangers (GOH = garments-on-hanger).

F. Specifying Transport requirements

When giving an order to a factory the buyer should discuss the method of transportation
whether the goods need to be sent by train or by sea or by aero plane depending on the
fragility of the product as well as urgency to receive the goods. It can also be a combination
of modes of transportation. For eg. The goods can be sent from the factory in Gurgaon to the
New Delhi Railway Station by truck. The goods can be loaded on train and sent to Mumbai.
In Mumbai, the goods can be stuffed in the container and sent to New York by sea.

G. Specifying quantity and delivery

The purchase order for one style of garment should clearly specify the quantity. For
example, an order of men’s T-shirt style XYZ in colour Red, Blue and Green in sizes Extra
Small, Small, Medium and Large, the order quantity table would look like this:

STYLE XYZ : MEN’S SHORT SLEEVE T-SHIRT

SIZE EXTRA SMALL MEDIUM LARGE
COLOUR SMALL
RED 100 200 250 50
BLUE 200 400 500 100
GREEN 100 200 250 50

Sometimes when the buyer has limited space in the warehouse, instead of taking the delivery
of entire quantity, they split the quantity and instruct the supplier likewise.

Total quantity – 50,000 pcs.

25000 pcs – delivery
Delivery schedule for STYLE XYZ : MEN’S SHORT SLEEVE
T-SHIRT. Total quantity – 50,000 pcs.
Quantity Delivery
25000 pcs Jan 11, 2009
15000 pcs Jan 25, 2009
10000 pcs Feb 8, 2009

Since garment manufacturing is labour intensive, there is always a variation in quality levels
of each garment. The quality of the garment can be controlled, but only to an extent. The
efforts are made to avoid the rejections but they can’t be eliminated totally. At the outset of
an order it can’t be determined how many correct pcs. of garments the factory will be able to
deliver. As an international norm, a factory should deliver the order qty with a variation of
±5%. For an order quantity of 100 units, the factory can deliver a maximum quantity up to
100 + 5% =105 (in case the rejections are very less) and a minimum quantity of 100 – 5% =
95 (in case of substantial rejections). This clause is mentioned in the documents given by the
buyer to the factory while booking the order.

H. Specifying Point of Delivery

When the price and delivery dates are being negotiated, it is important for both buyer as well
as supplier to finalise the point of delivery as well. For example, if the price of men’s T-shirt
is agreed upon as $5.00 ex-Mumbai F.O.B., it clearly means that for $5.00 the supplier based
in Gurgaon will manufacture the T-shirt, bear the cost of transportation to Mumbai and also
bear the documentation charges over handing over to customs. Beyond that point, the sea
freight, insurance etc. and all other charges will accrue to the buyer.
Some examples of points of delivery are – ex- Gurgaon, ex-Delhi railway station, ex-Delhi
India Gandhi International Airport, ex-Mumbai, ex-Rotterdam port, ex-buyer’s warehouse.

I. Specifying supplier service and responsiveness

As a buyer, one needs to explain the level of responsiveness expected from the supplier eg. a
merchandising team allocated to handle the buyer’s orders. Reply to all e-mails within 24
hours is highly desirable. A credit of 3-6 months would be an added advantage. Today every
buyer also requires the supplier to create new ranges every season, make range presentation,
offer new fabric qualities and most important of all - Develop samples within specified time
frame!!
J. Other information
Specify what is and what is not included in the purchase
 E.g in exports, specify whether supplier will pay for transport from Delhi to Mumbai,
insurance charges and custom charges, sea freight, air freight. (These issues are
generally covered by use of INCOTERMS)
 Information like Contact Person & details, Company Profile etc.
 What purpose is the product being purchased for, eg. Sporting activity, promotional
event, special discount offering, casual wear or active sports
 Any legislative policies? Eg. No azo dyes, No child labour, No nickel/no palladium,
Needle detection machine mandatory.
 Company’s buying policies for example
- L/c at site, DEPB, T/T payment
- Discount / cancellation in case of delays
- Buying at specified price points
- Seasonal bookings
SPECIFYING THE PRODUCT OR SERVICE

Product/service specifications serve to define factors such as design, performance, and

functionality. Size, colour, safety requirements, labeling are other issues to be included.

Over as well as under specifying are equally bad.

Under specifying: may leave room for error- leaving supplier to establish the best method to
achieve them. The resultant product may or may not perform as required.

Over specifying: specifying something to a point that it will be impossible to source. In this
case the buyer must bear the risk if the product doesn’t perform.

PRODUCT SPECIFICATIONS

There are different types of product specifications.

a. Brand or trade names. Eg. Lycra, Tencel, poplin by Century.

b. supplier/industry codes – industrial catalogues. Thread shade card by
‘Telephone’, Pantone book.
c. Samples – fit samples, button or trim samples to be followed for production.
d. Technical specifications
- Physical characteristics (count, construction, gsm)
- Design details – (specification sheet, measurement chart, flat sketch, colour
standard, print artwork, checks/stripe details)
- Tolerances (+ 0.5 cm tolerance in measurement, AQL 2.5 or 4.0)
- Materials used (Cotton, Polyester, Viscose)
- Process/methods involved in production (1 way cutting, fabric to relax for 24
hours before cutting, embroidery process, enzyme wash etc.)
- Maintenance requirements (wash separately, iron reverse)
- Operational requirements (shrinkage, stretch, colour fading)
e. Composition specification – [eg. (i)45% viscose/40% cotton/15% linen (ii)120
gsm, 100% cotton, single jersey, bio-polished, mercerized (iii) trims – 100%
wool.] Third party verification is often required by the buyer.
f. Functional & performance specification: active sports wear – breathability,
stretch, resistance to sweat, colour fastness – 3 to 4, seam slippage – 25 lbs,
shrinkage – 1 to 2%, Dimensional stability and appearance after laundering –
Maximum -5 % length x width

FIGURE 3.2-1 WHEN TO USE DIFFERENT PRODUCT SPECIFICATION TYPES

spec type where appropriate

Information on product specifications

Can be obtained form sources like
a. specialized industry journals, directories, technical handbooks
b. business contacts (suppliers & other buyers)
c. fairs, exhibitions
 d. nift, aepc, nitra etc.

specifying testing & inspection requirements

a. review and approval at design stage (fit/size set approvals)

b. pre-production, inline, final inspections
c. f.p.t/g.p.t prior to shipment
d. o.k. to ship report required while sending the shipment.

internal standardisation

it means reducing the numbers of different spec to the extent possible. internal
standardization has many benefits:

a. reduces time and effort needed to develop specs.

b. allows a firm to buy larger quantities of fewer items and negotiate better prices.
c. large volumes with fewer vendors results in better understanding and
communication.
d. fewer items need to be stocks, cost of inventory less.

lack of internal standardization often results in increased costs.

vaule analysis/value engineering (vlaue)

valve is a structured problem solving approach that is used to develop ne design and improve
upon existing designs. simply put value seeks to increase the value of something.

value = function/cost

value can be increased by :

1. providing the same function at a lower cost e.g?

2. increasing the quality/scope of the function at the same cost e.g?
3. increasing the function proportionately more than the cost e.g.?

the value approach

the preparation phase – define the scope of analysis and select a team. a cross – functional
team (merchant, designer, fabric and trims purchases, production coordinator) should carry
out the exercise. it may be useful to involve a supplier representative. the marketing
department and customers may be involved depending on what is being value – engineered.
the team should frame the objectives of the study.

the information phase – collect info about the product (men’s t-shirt) being analyzed,
including what its’s intended to do (covers the body), its performance levels (should be
stylish, different, should retain its physical and visual attributes even after 15-20 washes),
what components are used (single jersey, pique, rib, buttons, stitching thread, packing
material, mode of shipping) and what the costs are (including cost of inventory, manpower
employed to control warehouse etc.)
the functions analysis phase : the team must establish the functions that the product is
expected to perform – primary as well as secondary functions.

e.g. men’s t-shirt : primary function – to provide cover

secondary function serves as a style statement, status symbol.

having established the functions, allocates the costs amongst the functions. it is radically
different way of looking at cost (i.e looking at the cost of functions rather that cost of
components)

speculation phase.
the team must now review the functions in order of cost – highest first. it should discuss
questions like.

it should discuss questions like

• is the functions necessary?
• does it add value?
• is its cost proportional to its usefulness?
• what else achieves the same function?
• is there anything better for the intended use?
• can it be sourced for less?
• can it be made in a different way?
• can standard product do the same job?

once all the ideas have been captured, they should be refining and combined into a small no
of potentially workable solutions.

• the development phase

different groups within the team may be set up to develop each alternative potential
solution.
• the evaluation phase.
such potential solution should be reviewed by the full team to zero in on which
solution is to be taken forward based on how well are the objectives, costs and risk
levels met.

• the implementation phase.

an implementation team should be formed which will prepare the specs for the
chosen design solution against which the suppliers would quote their prices.

when to undertake value studies

even when standard items(men’s t-shirts) are available, a value study needs to be undertaken
when competition forces prices down, and the firm needs to cut costs to maintain profits
(reliance selling denim pints for rs. 199.00)

specifying quantity, delivery and service

when planning the quantities to be purchased, a buyer needs to be able to determine the
likely demand over a given period of time.
it is important since

1. demand changes over a period of time

2. quantities purchased should not be substantially deviate from actual.
3. it’s required when negotiating long term contracts with suppliers.
4. stock replenishment systems require the estimates to calculate requirement in the
supply lead time, determine safety stocks & order quantities.

a continuing demand generally reflects four characteristics:

a.

past future

b.

past future

• trend – demand follows continuous progression

• cyclical fluctuations – demand increase or decrease our expended period of time
(economic recession)
• seasonality – demand is often predictably above or below average due to weather,
holidays, festivals etc.
• random variations – accessional random events that affect demand in ways that are
not generally repeated.

forecasting demand
• expert opinion
• market testing
• quantitative analysis
• using computer based materials planning system.

Expert opinion involves consulting experts for their opinion.

a. scenario analysis – experts determine the likely demand scenario based on certain
assumptions. involves identifying best and worst care scenario and then settle for the
most likely scenario.
b. deplane technique – group of experts make predication anonymously &
independently. such prediction is compared/debated and a consumed is arrived at.
Expert opinion is sought when there is no historical data or when fashion is evolving rapidly.

• market testing- conduct trial sales for limited period to a sample of target population
• quantitative analysis – forecasts based on q.a are of two types 1. time series analysis
b. causal methods.

A. time-series analysis.

- involves use of past demand data to generate a forecast.

- appropriate where conditions are relatively stable,
- historical data is a reasonable quality
- assumes that past patterns of demand will continue in the future.

Examples of t.s.a techniques include

- drawing the “best fit” trend line
- moving straight averages
- moving weighted averages
- moving exponentially weighted averages.
- trend and seasonality – adjusted forecasts.

b causal methods: forecasting by establishing a cause-effect relationship between

independent variables and demand for a product e.g. reduction in priced leads to increase
in sales:
The method used is linear regression (simple and multiple)

quantitative analysis techniques for forecasting demand

1. drawing the ‘best fit’ trend line.

Draw a trend line that ‘best fits’ the past data and extend it into the future.
Can be calculated mathematically.
Ensure that roughly half of data points are above the line and rest below and their distance
from the line is balanced.
ii. Moving straight averages (m.s.a)
This method works well only when demand pattern is stable.
It’s an average of specified no of data points e.g. demand over past 12 months.
Demand forecast for 13th month = demand in 12 month/12.
iii. moving weighted averages (mwa)
Same as msa except that each demand figure is multiplied by a weighting factor.
Greatest weight is applied to the most recent data.
Weighting factor is chosen arbitrarily
The total weighting factor should add up to 1
 -----------------------------
period demand quantities quantities x weighted quantities
weighting factor
-4 10 10 x 0.05 =0.50
-3 25 25 x 0.10 =2.50
-2 30 30 x 0.175 =5.25
-1 35 35 x 0.275 =9.625
0 50 50 x 0.40 =20
straight 30 total weight = 1.0 =37.875
average

mwa is better than msa, but, again it is only suited to relatively stable demand pattern.

• moving exponentially weighted forecast

same as mwa except weights are taken from an exponential series.
recalculating projection for each period is easier than mwa.

new forecast = past forecast – ‹ (past forecast error)

= past forecast = ‹ (actual demand – past forecast)

the value of ‘‹’ is normally between 0.1 and 0.4.

higher ‘‹’ means more notice is taken o recent demand.
by computers we can find value of ‘‹’ that minimizes the errors.

bias – persisted under – or over forecasting is know as bias computers use tracking
formula that detects and alert when there is a bias.

example
period(t) 1
past forecast ft 50
actual demand dt 60
forecast error (dt +10
- ft )
<=0.2
new forecast ft+1 52
given < =0.2
actual demand=60
past forecast =50

formula
ft+1 = ft + < (dt - ft )
period(t) 1 2
past forecast ft 50 52
actual demand 60 72
dt
forecast error +10 +20
(dt - ft )
<=0.2
new forecast 52 56
 ft+1
given < =0.2
actual demand=72
past forecast as calculated for period 1=52

trend and seasonality adjusted forecasts

requires a computer based forecasting system
• refer to page 4p – 51 for solved example

simple linear regression

applicable when one independent variable influences the demand of a product and the
relationship is linear.

d = a – { bx p}

d = the forecasted demand for men’s t- shirts

a = a constant which expresses the value of demand when the independent variable p is set
to zero.

b = the slope ( or regression coefficient ) which expresses the causal relationship between
independent ‘p’ and dependent ‘d’ variable

p = the price of men’s t-shirts

the values of ‘a’ and ‘ b ‘ are developed from past experience i.e. by analyzing past data.

multiple linear regression

applicable when 2 or more independent variables influence the dependent variable in a

linear relationship.

d= a – { b,x p} –{ b2 x t}
d= forecasted demand for t-shirts
a = maximum production capacity of the firm
p= price of t-shirt
t=temperature
b1 = quantity of t-shirts by which demand increases or decreases
when price ‘p’ decreased as increases by rs.10.00
b2 = quantity of t-shirt by which demand increases or decreases when temperature ‘t’
increases or decreases by 10c

today there are computer- bases methods which normally provided a wide choice of trend
line forecasting techniques , with the ability to test each technique in order to decide which is
best suited to the available data.
process of forecasting demand

collection and analysis of past data

adding deterministic overrides
management review and action

• collection and analysis of data

take the historical demand data
cleaner it for nay analysis (eg. stock outs etc when demand for those period appear to be
zero)

select the best ‘fit’ technique to forecast

• adding deterministic overrides

new conditions arise (change in fashion, production tech logy, govt. policies, used
preferences, prices etc)

the above may comes the past demand patterns to require adjustment or in some cases set
aside altogether |

statistical forecasts based on post data is like driving a car using only rear view mirror. the
determinative over rides are road sinus up ahead warming the car driver, for example to slow
down.

• management action

regularly check actual demand agist forcasts.

understand the reasons for variances
take required actions e.g. reduce costs, better designing, more realistic pricing, better
promotions.

determining the quantity to order.

the main issues to consider are

• the conomic order quantity
this approach seeks to balcne two dimensions that affect costs.
a. inventory holding costs (tied up capital and costs of physically holding stocks) which
increase with order size.
b. ordering costs (admin costs of placing orders) which decrease as order size increase.
• stock replenishment systems
it takes eoq as starting point, along with demand forecasts and desired levels of safety
stocks.

two approaches can be adopted to determine the quantities and timings of orders:
a. re-order level replenishment systems – this type of system triggers orders whenever
inventory drops to a pre-determined level.
b. periodic review replenishment systems – in this case, the time interval between
orders is fixed instead of order quantity. at each fixed interval the order quantity is set
to cover demand over the next period.
just – in – time : deliveries are made by suppliers directly t the company’s production line.

call –off, framework or blanket contracts – buyer specified the total amount to be purchased
in a season as per forecasted demand (+ certain margin to account for forecast error) and
then take specific deliveries as and when needed. this reduces admin & stock holding costs.

specifying delivery
includes specifying delivery times and schedules, the point (s) of delivery , transport and
packing. the type of stock replenishment system and the constrict type influences the timing
or orders and deliveries. e.g. men’s t-shirt with embroidery on contrast collar pillar is in
different women fabric and body is single jersey 100% cotton)

the leas time available to a supplier depends on when certain infor is received form the
buyer,
the most critical longest lead time component is the fabric – at the time of order, the buyer
has to specify the fabric detail or specify the data by which the fabric details will be
confirmed. based on this data (and if fabric is regular) the supplier can quote the del date. the
other design details via. emb designs, thread colour, m’ment chart many come at a later date
which also need to be specified by buyer.

if the buyer wants to approve the fit sampled etc. colour of fabric and emb. design @ office
in eu or usa it’ll affect the del. data.

lab testing and inspections prior to shipment affect the lead time.

to ensure on time delivery, buyer should demand time & action

calendar from supplier and later take progress reports against the plan buyer may have to
visit the supplier to ensure that the supplier has sufficient spare capacity.

liquidated damages clause may be specified in the contract (which is signed by supplier)
which further reinforce the importance of on-time delivery.

for availability of supplies for the long term, the buyer should enter into long – term
contractual arrangement with more than one supplier.

specifying the delivery point

the lead time depends on the point of delivery
if ex-factory date is 1st june then
ex-delhi airport will be 2nd june
ex-mumbai sea port will be 7th to 10th june
ex-rotterdam port will be 28th to 30th june.
goods shall be released form customer in 3-5 working days
goods can reach the mother warehouse in 2-3 days.

specifying the method of transport and packing

method of transport – by sea
- by air
method of packing - flat pack or stand up pack
- individual packing/blister packing
- hanger packing + flat pack
- hanger packing + hanging in container
- poly bag quality (peld, pp)
- carton quality (3 ply, 5 ply, 7 ply)
- carton marking
- packing list/packing criterion

specifying supplier service and responsiveness

a. supplier responsiveness.
• specific merchant allocated for the account
• new designs + costing to be given within 3-5 days.
• daily production & finishing reports to be sent.
• e-mail replies within 24 hours.

b. technical support & training

in case of special stitching machines, computer embroidery machines or new software for
merchandising & production, following must be specified.

• no. of work days of technical supervision or assistance during commissioning and

start –up
• training requirements
• provisions for a minimum no of hours of technical support.

c. maintenance and repair

e.g. repair technician to be on –site within 48 hours of notification

e.g. critical spare parts to be delivered within 24 hours.

d. other information

• contact information – technical, purchasing and finance contact person and contact
details
• background inform – the supplier should be educated about buyers organization in
terms of – what products & services the firm offers, which markets it caters, its
position in key markets, its turnover, no of employees, total purchase budget.
• statement of intent what occasion is the t-shirt being bought for, how important is it –
high/low, whether it’s a part of new launch or a discount campaign.
• basic for evaluating the offers
buyer should specify – approximate quantity-high, very high, low very low, target price
+ quality level, very near deliveries or late deliveries.

e. applicable legal requirements

buyers should communicate the legislative requirements to the supplier

e.g. azo testing is mandatory.
needle detection m/c is a must for anyone manufacturing kid wear
no child labour

application legislations such as health and safety, environmental protection, import

regulations/restrictions
Relevant company policies.