These two shifts led to the need for new forms of coordination and management in the apparel supply chain. Two groups emerged to provide the key links between producers and retailers: East Asian transnational manufacturers with established buyer relationships who set up and managed global production networks, and traders (import-export companies) and agents who emerged as intermediaries between established buyers and sellers in the apparel value chain.

The traditional agent-sourcing model is most popular with buyers that require smaller volumes or larger buyers that need small quantities of certain items. Benefits of using a thirdparty sourcing agent include scale of operations, buying power, flexibility, and ability to spread risk among suppliers. Li & Fung has been the pioneer in the agent-sourcing model and is continuing to expand its roles into areas such as product development, marketing, and branding. Recently, Li & Fung has adopted a more prominent role as the primary purchasing agent for giant retailers such as Walmart, and well known apparel brands like Liz Claiborne.

Alternatively, as buyers developed expertise in assessing local capabilities, they started to establish direct sourcing relationships. To reduce cost and mitigate risk, many buyers established overseas sourcing offices in their main producing countries. Over the years retailers shifted more responsibilities to these overseas sourcing offices, driven by cost and the skills of the staff based there. Many are also moving product development and design offices closer to the manufacturing process. Direct sourcing requires manufacturers to provide faster reaction times and better factory understanding of a retailer’s particular needs. Sourcing agents charge clients 4- 8% of the wholesale price as commission, representing an area to realize savings if this step is eliminated.

Tables A-6, A-7, and A-8 describe the sourcing channels and destinations used by several categories of lead firms in the global apparel value chain. Most retailers use a range of different channels depending on their levels of expertise and volumes (just-style.com, 2009c).

# **E. New Roles and Relationships in the Apparel Value Chain**

The roles and relationships among national and global lead firms, apparel manufacturers, and intermediaries have become increasingly blurry in recent years. The following trends are closely tied to buyers’ strategies and long-term objectives. These shifts began before the economic crisis and will likely persist after the crisis is over.

- **Brand Owners Becoming Specialty Retailers:** Brand manufacturers and marketers are increasingly opening their own stores. In addition, brands with existing retail operations are likely to focus more on their own stores rather than meeting the needs of their external customers (Euromonitor, 2009).

- **Full-Package ‘Manufacturers’ Becoming Intermediaries:** Rather than manufacture, they establish a network of global suppliers. Essentially, these suppliers are doing what brand marketers and manufacturers did 10 to 20 years ago. There are a host of firms in countries around the world that make products for multiple brands, based on the buyers’ requirements. They provide full-package services along with production capabilities.

17