Purchasing Variables

Purchasing variables should be considered in addition to the material specifications. These include: volume requirements; cost, payment terms, shipping options and costs, and lead time considerations based on location and production capacity.

For small businesses, it is important to start with a small number of SKU's. For example, minimums are usually required by color, so the more colors you order, the higher your minimums. Production logistics and costs will also increase as you increase style and size SKU's.

Volume Requirements
Mills sometimes require minimum orders of 5,000 yards or more for specification orders and have up to a six-month lead time. Converters often require a smaller minimum order and shorter lead time. Wholesale retailers and Internet distributors, exchanges, and auctions can offer some relative cost advantages with smaller yardage requirements. If you want custom ordered colors or prints, your cost, minimums, and lead time will increase.

A second consideration is how much material inventory you need to keep on hand. Think of inventory as an investment. It costs money to keep material on hand. If you are making products based on orders, it is easier to keep a smaller amount of fabric inventory and order the fabric as the orders come in, depending upon lead time requirements. If you make products for stock, you will need to purchase fabric before you know your sales volume so you will need to forecast how much fabric you will need. Most companies use the past year's orders for similar products to forecast future sales.

More accurate and progressive forecasting models use

• information from buyers that bought your products before
• current consumer point-of-sale information direct from the stores during the season.

Generally, it is a good financial decision to keep only a small inventory of fabric. Basic fabric that will be used year after year could be bought ahead if the quantity discounts offset the carrying costs.

"You don't want to sink your money into too much fabric." Carol Young gives some helpful advice about purchasing small amounts of unique materials.

If you are interested in considering off-shore production, the materials and labor are often purchased together as a full-package. Therefore, the decision to purchase off-shore production in a particular country might be influenced by the quality and type of materials available in that particular country.

Cost
The cost of materials often depends on the quantity that you buy and the payment terms. If you are willing to purchase more fabric at one time, you may be able negotiate a lower price. You need to follow your business plan's value proposition in making this decision. If you are competing on price, low materials cost is especially important. If your value proposition is unique design, material costs may be a higher percentage of the total cost of the product.

It is easy to get caught up in all of the beautiful fabrics--Carol Young calls trade shows playgrounds for designers. But remember, it doesn't matter how much you love the fabric if you don't sell any of your products because they are too expensive.

Payment Terms
Always ask about payment terms before you make a materials order.
Payment terms are negotiated at the time of material purchase. A new business without a credit record may be required to pay by personal credit card or cash on delivery (COD). As the business establishes a good credit record with specific vendors, credit terms are more likely. Cash discounts for quick payment, longer deadlines for payments, and installment pricing could be possible negotiating points. Terms are often discussed in terms of discounts and "dating," such as "2/10 net 30" which means 2% discount when paying within ten days of invoice date or full payment is due 30 days after the invoice date.