Product Sourcing & Manufacturing

To ensure that we are always working with audited and compliant factory partners, we established a Factory Audit Program, which consists of the following types of audits:

Quality Management System Audit (QMS): To assess the strength and consistency of the QMS.

Social Compliance Audits (SCA): To assess the extent of social compliance programs, both governmental and voluntary.

Security Audits (CTPAT): To assess a facility’s level of security.

Environmental Audits: To assess compliance with environmental protection laws, mandates, and voluntary standards.

Other Audits: As mandated by our customers and by their customers for brand protection and compliance.

We follow a thorough process of qualifying our new factory resources with on-site audits, remote audits, and documentation certification. Our language skills and knowledge of local business customs and norms guide our efforts. We audit ethical concerns, working conditions, and environmental compliance standards for improved transparency and sustainability.

Core Factory Partners, New Factories Each Year, Commodities tracked.

Smart KPI Goals

• Specific
• Measurable
• Attainable
• Relevant
• Timely

One important element of our strategic sourcing program is our benchmarking program that tracks the variables that drive the cost of manufacturing in the local area. Source International does extensive research and publishes a quarterly Asia Manufacturing Cost Drive Report, which tracks the cost trends in manufacturing.  These include such variables as:

• Raw Material Base Cost
• Cost of Labor
• Machine Time Costs
• Overhead Costs
• Exchange Rate
• Transportation Costs
• Key Indexes
• Any Other variable That Drives Cost

We always use a “Zero-Based” costing system to build all costs up from a zero base.  With the availability of information through the internet and the many Asia sourcing platforms, many Asia factories will use a “market-based” costing program whereby they are familiar with the costs that are commonly used and price their products accordingly to maximize their revenues, often without regard to their actual costs through their open direct marketing departments. By contrast, we use a zero-based cost system, whereby costs are built up by adding material costs, labor costs, overhead costs, current exchange rate and other factors of manufacturing to ensure the factory cost is both reasonable and sustainable and not “market-based.”

By benchmarking factory quotation breakdowns by the date that they are issued and using our benchmarking cost driver trends when there is a request for a price increase or an opportunity for a price reduction, we have the data to support a rational supply management decision for both our customers and the factories. There is no more guessing or smoke and mirrors. We use facts and the old adjudge, “Trust but verify”!

Another important management technique is our Factory Score Cards, which benchmark and measure factory performance against a set of pre-determined Key Performance Indicators (KPIs), such as on-time shipping, price stability, quality defects, returns, and others. We work with our customers to establish specific KPIs that are most important to them based on “SMART” principles. This provides measurable supplier performance metrics data that can lead to better supply management decisions, and we advocate awarding new orders based on performance.