The Main Idea

Todays manufacturers face demand uncertainty and new retailing practices, such as filling frequent, small replenishment orders, agility has become an important competitive tool. By sourcing globally, manufacturing firms can reduce production costs, but may not be agile enough to meet retailers needs on a timely basis. To minimize the cost/agility trade-off, many firms are combining global and domestic sourcing. However, factors to be considered for mixed strategies have not been suggested. Based on Bucklins concepts of postponement and speculation, this study tried to find the ideal point, I, at which the optimal amount of global and domestic sourcing can be formulated considering the total cost and delivery time simultaneously. In mixing domestic and global sourcing to reach the optimum profit, this study provided four conditions under which the larger portion of domestic sourcing can be formulated: greater level of demand uncertainly, information and manufacturing technology, local subcontractor clusters, and long-term relationship with a subcontractor.

Now we would like to break-down the main Idea and we would go to

EXPLANATIONS..

Sourcing Globally
Global sourcing has become an increasingly important part of a firms competitive strategy and is considered a critical tool of firms seeking to achieve competitive advantages. While the purposes of global sourcing go beyond cost savings, such as better quality, this study focuses on the firms using global sourcing primarily for cost advantage. There are also question of agility for the Global Sourcing strategies. But the matter of agility could be adjusted with New competitive advantage of global production under lean retailing system.

Domestic sourcing
Delay in product differentiation, in this case in the form of products, happens nearer to the retailers selling time. Domestic sourcing can lower inventory costs and increase customer service, but it can incur high production costs. To minimize the risk of holding inventory, many retailers are beginning to request frequent, small replenish shipments based on real-time sales information provided by the information technologies in Lean Retailing System.

Optimum Combined Effect

Cost and agility: the combined effect Agility should be achieved within the relevant cost structure. Therefore, the optimal balance is explained with two axes, cost and agility Cost denotes total costs incurred from production to delivery of goods to retailers, such as unit production cost, inventory handling, storage, transportation, interest, etc. Agility is explained by delivery time from manufacturers to retailers. Principles of postponement and speculation The global sourcing practice of apparel manufacturers, which is close to the speculation concept, which secures the products at the earliest possible time and holds the inventories until the products are sold to retailers. In a similar context, domestic sourcing is related to the postponement principle.

Optimum Combined Effect

To achieve benefits of both global and domestic sourcing methods, successful apparel companies tend to combine global sourcing with domestic or regional sourcing to optimize profitability. The ideal point, I, needs to be reached, where optimal cost and agility can be achieved through simultaneous use of global and domestic sourcing. In a mixed sourcing strategies environment, understanding the conditions under which I can be reached is important. Next are the propositions that explain the conditions.

Conclusion
In mixing domestic and global sourcing to reach maximum profit it is clear that: four conditions under which a larger portion of domestic sourcing can be formulated: greater level of demand uncertainly, information and manufacturing technology, local subcontractor clusters, and long-term relationship with a subcontractor. While these conditions are individually explained, it is apparent that they are not mutually exclusive. For example, when a firm produces basic items, if it has a higher level of information and manufacturing technology, a long-term relationship with subcontractors, and is located near high subcontractor clusters, a firm can efficiently source most of its production domestically.