The optimal quantity of quick response manufacturing for an onshore and offshore sourcing model

Abstract

Consumer demand for innovative and fashion products is highly unpredictable, but could be fulfilled through quick response manufacturing (QRM). However, the extra cost is usually considered to be a barrier to such an approach. The newsvendor algorithm is applied to demonstrate that a strategic combination of onshore and offshore manufacturing can be more profitable than a 100% offshore approach, highlighting the growing importance of a cost versus response trade-off. The optimal split between onshore and offshore manufacturing is calculated. We discuss the successful application of the QRM model in two practical cases: quick response manufacturing for athletic wear; and onshore garment dyeing versus offshore yarn dyeing. In the right context, QRM is a viable and profitable option. Issues in the practical application of the model are discussed.

Keywords:

• Quick response
• Newsvendor algorithm
• Forecasts
• Delayed differentiation

Acknowledgements

This work was supported in part by Griffin Manufacturing and a grant from the US National Textile Center through the University of Massachusetts, Dartmouth. We also wish to express our thanks to the two anonymous referees for their corrections and advice that led to significant improvement in the paper.