关于中小企业（SME）管理的留学生dissertation

中小企业（SME）一直被视为重要的世界主要经济体。商业观察家认为中小企业在发展知识经济中扮演着重要的角色。侯赛因等。中小型企业是创新的源泉、创业精神、竞争的驱动力和创造就业的机制。根据研究在20世纪80年代和20世纪90年代，得出的结论是小公司在很大程度上促成了英国和美国创造工作。英国纺织服装业充满了中小企业，多数是家族企业

在国际上，有各种各样的定义为中小企业。没有一个简单的定义可以构成一个小企业。通过麦克伯顿报告提供定义。麦克伯顿（1971）提出了一个定性或经济的方法，试图捕捉的多样性和范围较小的企业相比较大的企业。1996欧盟想出了更统一的定义是2004进一步更新由于通货膨胀和生产率的变化。欧盟认为有三种类型的小企业。微、中小型、各有不同的员工，营业额和资产门槛。这三组大小非附属企业组成了被称为小型和中小型企业。

 

The small and medium-sized enterprise (SME) sector has always been seen as important to the major world's economies (Burns, 2007). Business observers consider SMEs play an important role in developing knowledge-based economy (Deakins et al., 2000). Hussain et al. (2006) states SMEs are source of innovation, entrepreneurship, a driver of competition and a mechanism for creating jobs which was also supported by Burns (2007). As per research in 1980s and 1990s, it was concluded that small firms has largely contributed to UK and US for creating job (Carter and Jones-Evans, 2006). UK's textile and clothing sector is full of SMEs, and majority are family businesses (Keynote, 2007)

 

Internationally, there is a wide variety of definitions for SMEs (Carter and Jones-Evans, 2006). There is no single and simple definition which can constitutes a small enterprise. Bolton (1971) tried to provide definition by Bolton report. Bolton (1971) suggested a qualitative or economic approach that tried to capture the diversity and range of the smaller enterprise compared with the larger enterprise (Carter and Jones-Evans, 2006). In 1996 EU came up with more uniform definition which was further updated in 2004 because of inflation and productivity changes (Deakins and Freel, 2006). EU believes there are three types of smaller enterprises (see Table 2.1). Micros, small and medium sized and each of these has different employees, turnover and asset thresholds. These three-size groups of non-subsidiary businesses make up what are termed small and medium - sized enterprises(Deakins and Freel, 2006).

 

In 2000 the European council has said for small Enterprises as the "backbone of European economy", through which the environment for small business may be improved (Deakins and Freel, 2006). Now even the small business has the potential to trade in global market. This has placed them on an equal footing to their large competitors, who are already established in the international marketplace, and this is only possible because of competitive progress, strategic opportunities and commercial relationship of small firms (Ritchie and Brindley, 2000). On the other hand, because of increasing competition, SMEs will find it difficult to avoid risk from increasing global competition in local and international market (Ritchie and Brindley, 2000). Glaister and Buckley (1996) see cooperation between firms primarily as a means of gaining significant presence in a new market, enabling faster entry to the market and achieving greater international market penetration. With the recent competition of Asian and Northern African firms, European textile and clothing SME's are forced to find new ways of doing business or alternatively they will die. There are number of other factor which leave SMEs to limit themselves as compare to other large companies for example SMEs can not raise capital in the same way as the large organisation can, as a result they can not adopt expensive advertising and promotion campaigns (Burns, 2007). Slack et al. (2001) has also described 'decision making' as problem in SMEs. Further Gilmore et al. (2001) argue that, all these characters vary as per potential of entrepreneur or owner/manager; and they may be decided by the potential size and stage of development of the enterprise or such limitation can be truncation as limited resources, lack of specialist expertise and limited impact in the marketplace. Gilmore et al. (2001) also considers SME's marketing as informal, haphazard, loose, spontaneous, and unstructured, built upon, reactive and conforming to industry norms. SMEs do not believe on conventional marketing characteristics of marketing theories because they run as per owner, where a decision making is haphazard and according to business and personal needs (Gilmore et al., 2001).#p#分页标题#e#

 

In the UK the department of trade and industry has set itself to help SMEs (Deakins and Freel, 2006). Department of trade and industry is targeted to build an enterprise society, in which small firm of all kind can grow and can achieve their potential, for Wales and England they are having one support agency and Scotland is having different support agencies (Deakins and Freel, 2006). Which help peoples in provide start up advice, support to entrepreneurs and small firm and to show relative funding links between different agencies Figure 2.1 and 2.2 explain the how support agencies work in England , Wales and in Scotland (Deakins and Freel, 2006)

 

Department of Trade and Industry

Small Business services

(National Service)

Chambers of commerce

British Trade International

Business Links

Local authorities:

Economic development

Enterprise agencies

Entrepreneurs and small firms

Funding

 

72.8 percent of all small firms in UK had no employees (three point one million) these firms embrace sole proprietors, partnerships with only self- employed partners and companies with only an employee who is director. As per survey these firms generated no employment but still they contribute seven point one percent of UK turnover (£190 billion).

 

99.3 percent of all firms in the UK were classified as small (0-49 employees).These contributes 46.8 percent of employment (ten point three million) and 37 percent of UK turnover (£888 billion).

 

99.9 percent of all firms in the UK wear classified as SMEs (0-249 employees). These contribute 58.5percentage of employment ( twelve point nine million) and 51.3 percent of UK turns over (£1231 billion)

 

(Source:-Burns, 2007, p.18)

 

On other hand in 2004, the DTI estimated that of the 4.3 million business enterprises in the UK, 99.9% were small to medium sized. At the start of 2004, SMEs accounted for: more than half (58%) of all UK employment (small enterprises accounting for 46.8%; medium-sized enterprises accounting for 11.7%); more than half (51.3%) of the UK's estimated business turnover of £2,400billion (small enterprises accounting for 37%; medium-sized enterprises accounting for 14.3%) (Graduate Prospects Ltd, 2008). Table 2.2 shows that the breakups of SMEs in the UK.

 

Table 2.4:- UK regions

England

88% of all business enterprises in the UK are based in England, with 33% concentrated in London and the South East.

 

London, however, has the smallest SME base in the UK, accounting for just 45% of employment.

 

The South West has the highest SME base in England, accounting for just over 70% of employment.#p#分页标题#e#

 

Wales

Wales has the second highest SME base in the UK (over 70%).

 

The majority (94%) of the estimated 170,000 business enterprises are micro enterprises, employing 31% of all employees.

 

The majority of Welsh SME businesses are in the services sector (including retail, hospitality, transport, and financial and business services) and in the construction industry.

 

Scotland

SMEs provide 53% of all jobs and make up 99% of all business enterprises.

 

In 2004, the turnover of small and medium-sized enterprises was over £70million.

 

The highest numbers of Scottish SMEs are engaged in the financial and business services sector.

 

Northern Ireland

Northern Ireland has the highest SME base in the UK, accounting for nearly 80% of employment.

 

The majority of businesses enterprises are micros, which account for 50% of all businesses.

 

Small businesses account for 9.5% of all businesses and 9% of employment.

 

(Source: Graduate Prospects Ltd, 2008)

 

Therefore, it can be seen that SMEs play an import role on UK's economy.

2.2 Outsourcing

Many large, medium and small global companies consider outsourcing, as initiative to reduce over head and to grow revenues (Trent and Monczka, 2003). Outsourcing is described as procurement of product or service from outside to the organisation with changing business practices organisations no longer assumes that all organisational services must be provided or managed internally, only those services which allow to deal with organisations customer should be kept in house (William and Faramarz, 1999). Trent and Monczka (2003) and William and Faramarz (1999) describe outsourcing as commercial transaction between a buyer and a supplier located in different countries which is more complex then domestic purchase and is lengthy in logistical pipelines, lots of rules and regulations, currency fluctuations, customs requirements, language and time differences, but organisation can gain advantage when products or services are produced more effectively and efficiently by outside suppliers. Outsourcing can be with operational advantage which usually provide for short-term trouble avoidance or with strategic advantage which offer long-term contributions or can be both (operational and Strategic) (William and Faramarz, 1999). Globalisation in term of outsourcing for any firm means to establishing relationships with often unfamiliar and unproven foreign suppliers, because of this factor international supplier selection is risky and complicated.(MIN, 1994). On other hand while showing benefits, Trent and Monczka (2003) describe the companies that successfully implement global sourcing can save fifteen percent to thirty present material cost compare to regional sourcing practices and can also achieve improvement in the area of quality, responsiveness and technology contribution. However, MIN (1994) argues that low price of purchased material from certain foreign suppliers can be of low quality standards, or because of financial instability or advance technology of suppliers can give high purchasing costs and excessive tariffs. Zhu et al. (2001) indicate that outsourcing is intense in nature and further insist that a successful outsourcing process on good contracts.#p#分页标题#e#

 

During the late 1980s and early 1990s, the International purchase was the primary research topic; lots of researches have been done on this topic during this time (Deakins and Freel, 2006). Reason for growth in this topic was directly related to decline competitiveness of many western firms (Trent and Monczka, 2003). Most researchers have concluded that unit price reduction, although not necessarily mean total cost reduction (Trent and Monczka, 2003).

 

There is a difference between Global sourcing and international purchase in term of scope and complexity, involvement creativeness integrating, materials, processes, coordinating, designs, technologies, engineering and operating locations (William and Faramarz, 1999). Global sourcing requires horizontal integration between product design and development groups and also between supply chain and demand planning activities (Trent and Monczka, 2003). Frear et al. (1992) define global sourcing as integration and coordination of procurement (including production) across worldwide business units. Global sourcing is also a critical component in achieving competitive advantage (Frear et al., 1992). The garment industry is one of the first and largest industries actively sourcing from all over world (Jin, 2004). The garment firms source globally without owning any manufacturing unit (Jin, 2004). For example Liz Claiborne Inc source garments from 240 manufacturing units in 31 countries (Jin, 2004). Most apparel firms with brand name do the same without taking part in manufacturing they go for global sourcing which allows them to focus on design, retailing and marketing (Jin, 2004).

 

2.2.1 Outsourcing as a competitive tool

There are several reasons that firms consider outsourcing as it allows them to focus on their core business, let them re-examine their benefit plans, make them more efficient and save time and money (William and Faramarz, 1999; Lonsdale and Cox, 2000). Companies also do outsourcing in order to give the service level to their employees by making the information more consistent and more available (William and Faramarz, 1999). Past research has also described outsourcing as a quick way to achieve short term cost advantages without regard to maintain competitive advantages that can give long term benefits (Trent and Monczka, 2003). William and Faramarz (1999) describe outsourcing as vision, function, and economics that drive the need for outsourcing.

 

Intensive competition and revolution in technology have forced companies to expand globally (Zeng, 2000). Most successful European and USA companies get their products form Asia and Latin America and sell them globally (Burnson, 1999). This trend has increased outsourcing in all sectors and made sourcing an integral and coordination of procurement across the world where firms are target same products, process, technology and suppliers (Monczka and Trent, 1991). Some firms even consider outsourcing as 'Silver bullet' as it helps them to resolve problems (Zhu et al., 2001). As more and more developed countries are shifting from manufacture to service providers, companies are trying to work in close relationships with their trading partners (Lonsdale and Cox, 2000). Increasing pressure from offshore, short life cycle and increasing technology change consider being reason behind this change in relationship (Zeng, 2000). Trent and Monczka (2003) suggest that identifying potential suppliers is very important, especially in an emerging sourcing region, like China can be more challenging. William and Faramarz (1999) emphasise over the cooperation between the partner organisations and conclude that cooperation aimed to utilise mutual resources is the best way to survive in this competitive environment. According to Klein Woolthuis (1996), textile firms can adopt a cooperation strategy because cooperative relationships enable them to get the necessary resources and know how and to exploit market opportunities which they cannot achieve alone.#p#分页标题#e#

 

William and Faramarz (1999) explain outsourcing from viewpoints of senior management. As middle management hires staff for 40 thousand pounds per year to look at one task to get work done cheaper but senior management knows that they will pay $100 per hour to outsource and the job will be done on time and prescribed manner (William and Faramarz, 1999). An American textile worker costs a company an average of $15.50 an hour, while the same person in India costs an average of 57 cents and China's average wage costs range from 40 cents (mainland labour) to 70 cents on the coast (Ilari, 2004). The lowest-cost offshore producer is Bangladesh with 26 cents-per-hour average wages for textile workers (Ostroff, 1996). Figure 2.2.1 shows that during 1994 to 2003, China, Hong Kong, Taiwan and South Korea were the leading counties in term of exports. China was always leading in export (Shelton and Wachter, 2005)

 

Figure 2.3 US offshore sourcing of textiles and apparel (data in US million dollars) (Shelton and Wachter, 2005, p320)

 

2.2.2 Vendor criteria for fashion businesses

Vendor selection is the most important role for buyers as marked by industrial marketing literature (Weber et al., 1991). Buyers are always encountering uncertainty and consequence of action, which together make 'Risk' (Ilari, 2004). The work gets more complex when they have to deal with overseas vendors (Fiorito, 1990). Searching for overseas vendor is very expensive and cognitively overwhelming compared to a local vendor search Liang and Parkhe (1997). It is difficult for buyers to search vendor on global scale (Ilari, 2004). Moreover, buyers are likely to adopt a practice which makes it easy to source vendors (Park et al., 1997). Buyers consider certain methods to evaluate vendors (Ilari, 2004). Bossert (1998) indicates that buyers try to investigate overseas vendor's background, supplier visit, supplier audit, stability of the company and country, economic stability in the supplier's country, as well as the supplier's financial reputation and apropos from trade associations. Goodman (1998) and Bossert (1998) also put stress on quality criteria as important and want to make quality chain more reliable and further suggest the common accepted standard for quality is ISO 9000. Thaver and Wilcock (2006) suggest that ISO 9000 should be used to evaluate potential suppliers or if vendor is using any other similar standard for controlling quality. When vendor is registered with ISO 9000 it reduces the needs to evaluate vendor on quality criteria and on operation control (ISO 9000 News, 1996a). ISO 9000 is having trade linked benefit with it registration (ISO 9000 News, 1996a). Firms seek marketing benefits and competitiveness benefits from ISO 9000 registration and claim that they have increased product image and have increased exports after ISO 9000 registration (ISO 9000 News, 1996a, 1998; Sohrab, 1997). Withers and Ebrahimpour (2000) have also confirmed that ISO 9000 registration provide reliability, conformance, serviceability and perceived quality. ISO 9000 is also having an impact upon quality improvements and quality management practices, which can further business improvement opportunities (Rao et al., 1997; ISO 9000 News, 1996b). Pacheco (1997) and Goodman (1998) also agree that buyers react to IS0 9000 in their product valuation, because buyers always appreciate quality system in their vendors. As per Canadian apparel sector literature survey for vendor selection, buyers also consider quality of the first sample, short lead time, prompt reply, electronic data interchange (EDI), technical expertise and strong communication skills which also include "fluent communication in English" (Thaver and Wilcock, 2006; Thorelli and Glowacka, 1995).#p#分页标题#e#

 

2.3 Information sharing

Information sharing is process in which parties freely, completely, reliably, timely and actively provide useful information to each other (Tian et al., 2008). Without information sharing it is hard to source successfully (Trent and Monczka, 2003). Information sharing is the medium to build trust between organisations and can create effective and efficient management relationships (Tian et al., 2008). Timely shared information allows parties to response promptly and effectively (Trent and Monczka, 2003). Examples of information which can be shared properly includes existing contracts, reports on supplier performance and capabilities, projected worldwide demand and volumes by category or commodity, information about potential new suppliers (including their global performance capabilities), internal customer requirements and common requirements across buying units (Trent and Monczka, 2003). Information asymmetry can be reduced by proper information sharing which will improve decision transparency, regular shared information can reduce parties uncertain behavioural, will improve decision transparency, enhance confidence and credibility among parties and can generate integrity and honesty (Tian et al., 2008). Information sharing can also be taken as "good Faith" (Tian et al., 2008). While sharing sensitive information, required for coordination with in logistics partners can put parties into complex position (Tian et al., 2008).

 

Buyer's Company should clearly inform expectations for quality and service levels and medium for measuring performance (Kweku-Muata and Sullivan, 2003). On the other hand the vendor there should not just perform the functions which are informed by the customer but also technical mastery as an important prerequisite to take business advantage (Kweku-Muata and Sullivan, 2003). Buyer's Company should be informed after achieving minimum standards (Sadler, 2002). Companies can placed various global sourcing documents on company's website (Trent and Monczka, 2003). Most of the fashion companies are now more open in their approach and they put all the relevant documents over their websites (Mintel, 2008) That can includes an on-line manual that defines what the company expects to achieve through global sourcing, a strategy development template, a contract terms and conditions checklist, a global status report (which reports on the status of completed, in-process, authorized, and future global opportunities), a request for proposal (RFP) template and currency risk management guidelines in order to provide ready to access information for global participants (Trent and Monczka, 2003).

 

Buyers and suppliers should create effective communication infrastructure that creates the direction of communications and channels of communications, lists methods of communications, and details appropriate subjects and information to be communicated between staff and companies (Platz and Temponi, 2007). Supply Chain companies mainly use Bullwhip effect, which is the magnification of demand fluctuations, for information sharing in order to break down level of communication that create discrepancies within vendor's information and distorts the forecast as per customer demand (Platz and Temponi, 2007).#p#分页标题#e#

 

In mid 1980s, the UK government's supported information service was mainly focused on small firms, as small firms often have low level of marketing power and fail to supply required information on time (Carter and Jones-Evans, 2006). Tian et al. (2008) also highlights willingness to share information for good give long-term benefits. Even some fashion companies are using global data warehouses and purchase commodity coding schemes to over come information sharing problems (Trent and Monczka, 2003).

 

2.4 Trust

Doney and Cannon (1997) define trust as the perceived credibility and benevolence of a target of trust. Mayer et al. (1995) define trust as the willingness of a party (trustor) to be vulnerable to the actions of another party (trustee) based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party. Dyer and Chu (2000, p. 58) define trust as, "one party's confidence that the other party in the exchange relationship will not exploit its vulnerability". All definitions are having dependency and risk, each one perceive characteristics of trustee in determining the trustor's trust level (Tian et al., 2008). Mayer et al. (1995) suggest ability, integrity and benevolence are trustee characteristics. Morgan and Hunt (1994) describe trust as important in forming, developing and maintaining marketing relations. Trust encourages a long term aim towards a relationship (Ganesan, 1994), and creates greater openness between relationship partners, help each other to gather greater knowledge, make them appreciate each other and dependency on each other which in return contribute to strengthen their intention to continue the relationship (Corsten and Kumar, 2005).

 

Ross et al. (2007) state that trust involves all members of outsourcing with even the supply chain as part of trust building. Trust relies on trustor's expectation, motives and behaviours of a trustee (Ross et al., 2007). Doney and Cannon (1997) suggest calculative process, prediction, capability, intentionality, and transference processes are five things which can help in developing trust in business relationship. Dyer and Chu (2000) also suggest Social perspective, process-based perspective and Economic (hostage-based) perspective as determinants of trust. Doney and Cannon (1997) and Dyer and Chu (2000) suggest reputation, information sharing, relationship length, satisfaction, and relationship-specific investment as five determinants of trust framework. Arnulf et al. (2005) believe trust also improves creativity and inter organisational learning, and build organisation capabilities. Dyer and Chu (2000) compare trust with governance mechanisms (contracts, financial hostages, etc.); trust has unique capacity to create value beyond transaction cost reductions and can be source of substantial competitive advantage. Most of the fashion companies that are rigorously involved in out sourcing are highly dependent on the level of trust. In order to achieve high level of trust, textile and fashion organisations develop long term relationships (Attarran and Attarran, 2007)#p#分页标题#e#

 

2.4.1 Commitment and loyalty behaviour

Kwon and Suh, (2004) suggest commitment and loyalty behaviour as important for building trust and also stress that without commitment between trustors and trustees relationship become fragile and vulnerable. Commitments are defined as trustor and trustee's intention to continue relationship (Gruen, 1995). The principle of commitment is similar to the principle of long term relationship with supplier, once long term relation are establish they are also known as relationship commitment (Gruen, 1995; Morgan and Hunt, 1994). Morgan and Hunt (1994) further discuss that no commitment should be consummated unless the trustor and the trustee feel that unbroken trust has been established.

 

Ideally loyalty is also similar to commitment so some argue that they are one and the same (Tian et al., 2008). If commitment is purely psychological construct or there is intention of commitment then loyalty will automatically come as loyalty is blend of brand attitude and behaviour (Pritchard et al., 1999, p. 334). Commitment is also considered a precursor to loyalty (Tian et al., 2008). Further connecting trust with commitment Sirdeshmukh et al. (2002) address its reciprocity argument. Dyer, (1996) describe trust is required for commitment and relate trust as empirical linked to the level of trust and degree of commitment (Sohn, 1994). Loyalty is believed to be path for long term financial performance (Jones and Sasser, 1995; Reichheld, 1996). Loyalty indicates behaviour desire by trustor which is signal to motivation, to maintain relation, positive world of mouth which leads to repeated purchases (Zeithaml et al., 1996). Doney and Cannon (1997) also describe if buyer is having higher trust in seller, this will lead to choose same seller for future purchase. Tian et al. (2008) also describe with stronger commitment buyer can over come obstacle which can come in buyer supplier relationship, which will increase loyalty.

 

2.4.2 Relationship-specific investment

Tian et al. (2008) describe relationship-specific investment in relationship and if used in an alternate relationship it is of lower value. Close partnerships between partners often develop to safeguard relationship-specific investment (Tian et al., 2008). Anderson and Weitz (1992) indicate that idiosyncratic investments change a firm's incentive structure, and if relationship is not continued idiosyncratic assets can lose substantial value. Textile firms who are using relationship-specific investment are not engaged in opportunistic and untrustworthy behaviours as these types of behaviours leads to relationship end (Dyer, 1996). Larger investment by one partner on relationship-specific assets leads to high degree partner degree lock (Gruen, 1995). Relationship-specific investment can also be taken as indication of seriousness of maintaining relation with long term and willingness to cooperate and buyer can take it as evidence of trust (Tian et al., 2008). Cheng (2001), Kwon and Suh (2004, 2005) and Suh and Kwon (2006) give strong and positive link of scale of investment for relationship affect the level of trust of buyers have in suppliers. Committed partners also tend to invest more heavily in their relationship (Suh and Kwon, 2006).#p#分页标题#e#

 

2.4.3 Relationship length

Trust can be developed with textile business partners with regular and predictable behaviour of each other with relationship length (Sohn, 1994). Initially time spent nurturing and building relations seems a peculiar investment for both parties, but the longer a relationship continues it reflects as a perceived investment and with sharing history it helps in making the relationship more predictable(Selnes, 1998). Doney and Cannon (1997, p. 40) explain that "when exchange relationships have a history, the outcomes of previous business episodes provide a framework for subsequent interaction". A longer shared history can also be taken as meaning that the relationship has successfully overcome the most critical stage of development and give space to partners to understand each other's idiosyncrasies and can predicts future behaviour of each other's (Doney and Cannon, 1997). Barney and Hansen, (1994) emphasised long term relation give insights of partners moral character which allow to screen partners more accurately for honest partners. Dyer and Chu (2000) found relationship length has a positive impact on trust of partners. Carter and Jones-Evans (2006) report that relationship length is related to trust and customer's trust may increase as the age of relation increase. Chung et al. (2008) describe Japanese retailer trust in suppliers give them positive influence on retailer perception of functionality. The level of trust between customer and vendor, and the level of mutuality within the relationship depends upon the willingness of company to give control (Platz and Temponi, 2007). William and Faramarz (1999) suggest despite sound financial appeal, outsourcing is a topic full of emotional overtones. The fear of loosing control is major emotional block of outsourcing that's why; outsourcing can be more partnership then a vendor/ supplier relationship (Suh and Kwon, 2006).

 

2.5 Cost

William and Faramarz (1999) suggest outsourcing should be ponder when firm believe that certain support function can be completed faster, cheap or better by an outsider firm or tasks that are not core competencies of the organization. Cost saving is always considered as an outsourcing benefit; this can also lead to disappointment some time. Further research by Freight Transport Association aimed to show that contracting out does not necessarily save money (William and Faramarz, 1999). Outsourcing works best when it is an outcome of reengineering (Min, 1994). Re-engineering is a process of stepping back to take a fresh look at a whole process with an aim to discovering how it can be reconceived and rebuilt (Min, 1994). When re-engineering looks at all option available and come up with suitable one for performing particular task. Where they consider who can do this task more effectively, accurately and with highest quality and then decide that it is to be outsource, truly re-engineering companies get maximum benefits as they had made crucial process (Suh and Kwon, 2006).#p#分页标题#e#

 

Worthington (1992) describe contracts as important part of outsourcing and should be designed to handle most cost accounting system, the major obstacles in making costing portion of outsourcing contract is to establish which cost are direct and which will are indirect, with direct costs being charged directly to the contract and indirect cost put in to cost pools to be allocated in the future. Initial training, initial rearrangement depends upon outsourcing relationship between partners, modifications, production planning, and new purchases must also be clearly mention with sufficient estimated cost (Min, 1994). By efficiently allocated costs, partners can more accurately determine the price of product when manufacturing has been outsourced. Price of product should be decided according to the basic costing principles (Lowson, 2003).

 

Pricing is most effectively established when both the parties acknowledge profit as key function of both the groups. Compensation and profit based pricing can be used to help to assure product quality (Steele and Shannon, 2005). Min (1994) argue on the cost as profit maximisation can not be achieve without cost reduction therefore firm need to purchase low price supply so that it can minimise its purchasing price, import duties, documentation cost, transport cost, communication cost and cost of investigating the potential supplier's past performances and financial background (Min, 1994). Steele and Shannon (2005) also suggest that cost can be reduced by long-term logistic strategies. The costs of operational inflexibility, the hidden costs of apparel importing are relatively easy to identify and compute (Steele and Shannon, 2005). Less apparent are the costs of inflexibility (Min, 1994). Also involve issues such as longer lead-times and a general lack of flexibility and or response to demand changes (Lowson, 2003). Offshore sourcing is due to combinations of domestic supply constraints (labour shortages, high wages, and high land prices) and external pressures (currency revaluation, tariffs and quotas) (Jin, 2004). Many Asian firms have result their capacity for meeting changing demand volumes, for fast and timely delivery, and for prompt and precise commercialization of new styles (Min, 1994). Since apparel production requires timely delivery of supplies in response to demand uncertainty, the cost advantages can be gained in dispersing production by global sourcing (Min, 1994). This is why more and more firms are sourcing in nearby low-cost producers in each area: East Asia usually sources in South Asia and Vietnam (Jin, 2004)

 

2.6 Conclusion

The main aim of the research is to investigate the relationship between UK's fashion SMEs and Asian manufactures from a sourcing prospective. Companies adopt outsourcing but the outsourcing process is not easy, as vendor selection and trust play a big role (Mayer et al., 1995). Companies adopt outsourcing for cost benefit; however, it is not always the case they will cost benefit because they have to check hidden costs, import duty and contracts. Trust, which is important in whole process, develops with time (Tian et al., 2008). Relationship length, which can leads to relationship specific investments, is where both manufacture and SMEs can take benefits from those investments (Doney and Cannon, 1997; Dyer and Chu, 2000). Outsourcing gives more time to companies in order to think about their core areas like design, retailing and marketing.#p#分页标题#e#