The complexities of off-shore sourcing in the apparel industry of the 90's has brought a new set of issues which call for prompt action and durable solutions. Despite obvious labor cost advantages and unique trade agreements, sourcing product from suppliers in Latin America expose the supply chain to risks which must be controlled. To overcome these difficulties successful suppliers in Latin America will enact effective controls to manage problems which affect their reliability and costs. Latin American apparel producers have done an excellent job of selecting competitive machinery and building effective facilities to position themselves for competition in the world apparel markets. They employ people with extensive production skills.
Most factories employ ample overhead personnel to manage and support their production facilities.
In fact, the ratio of overhead cost to direct labor cost is usually much higher in Latin American plants than in their US counterparts. When production schedules are not met and production falls short of established goals, Latin American production facilities often look to adding more machines and operators which may raise output, but also raises overhead cost. Adding machinery increases capital cost, utilities, facilities requirements, mechanics, parts usage, etc. It also generates the need for more supervisory, engineering and administrative personnel. This all adds to increased overhead cost, and often doesn't solve the production problems.