Production Sourcing Strategies in the U.S. Apparel Industry: A Modified Transaction Cost Approach

Abstract

Choices regarding where and how a company's production will take place can significantly impact that company's market performance. To determine significant influences on sourcing strategies in the U.S. apparel industry, a modified transaction cost approach was used, including predictors such as production costs in addition to transaction cost measures. Survey data from 82 U.S. apparel manufacturers were analyzed using logistic regression. Significant predictors of a company's decision to engage in domestic production only versus domestic and offshore production were (a) the size of the company and (b) perceived flexibility of U.S. production. Significant predictors of the proportion of a company's offshore production were (a) the company's foreign business experience, (b) the perception that the company's products are sensitive to fashion change, and (c) perceived flexibility of offshore production. The only significant predictor of decisions to make (use inside production), buy (use outside production), or both was the perceived fashionability of the products.