Steve & Barry arm, Bombay Rayon form JV

In order to leverage the cost advantage in India, 4004 Incorporated India, the procurement affiliate of American retail chain Steve and Barry's and textile firm Bombay Rayon will enter into a JV soon for sourcing of apparels.

4004 Incorporated will source 2.5 lakh to 3 lakh pieces of shirts every month from Bombay Rayon. The manufacturing facility will soon be set up in South India.

"We are tying up for a vertical integration facility for garments. We have almost finalised the deal," said Avi Sonpal, MD, 4004 Inc.

The sourcing firm will also set up a manufacturing facility in joint venture with Wagon Wheel, a local firm in Vishakpatnam in Andhra Pradesh. 4004, however, claims that it will not invest any capital in the joint-ventures.

However it will procure the entire production from the facilities apart from providing technical expertise, quality guidance, supervision and so on, he said.

"Sourcing in metros like Mumbai, Bangalore, Delhi is turning very expensive. Hence we are moving to smaller cities like Varanasi, Tirupur and so on," he said.

To have better sourcing, the company is planning to set up 16 offices in India in 2007 including those in Bangalore, Ludhiana and Tirupur.

"With the local staff, local office we can able to source efficiently and we liaise between raw material and semi-finished goods suppliers and the final manufacturers to save costs and quality," he says.

Sonpal believes strategic sourcing holds the key for global retailers. "It is wiser to spread out the risks and sourcing due to political uncertainties and calamities. We balance our sourcing between India and China for this reason. We avoid sourcing more than 20 to 30 per cent in a particular country," he says.

4004, which is headquartered in India, sources 25 per cent of its products from China, nearly 30 per cent from India and the rest from

South Eastern and African countries. The firm buys more winter products from China and plans to increase its sourcing in India in summer. "US market is stagnated. With the entry of Walmart and Tesco the sourcing space will certainly hot up in India," he said.

The firm sources the products across the world for Steve and Barry's and has seven offices in Pakistan, China, Bangladesh, Egypt, Thailand etc and wants to set up offices in Jordan, Thailand, South Africa in another two months and 7 to 8 offices by 2007 end including those in Vietnam, Cambodia, Indonesia, Central America.

Sonpal said the company was exploring the sourcing of new products. "Our sourcing of footwear has trippled compared to 2005. Nearly 70 per cent of the firm's sourcing portfolio is apparel and 20 per cent comes from footwear and accessories. We will look at sourcing suits, home furnishing, accessories also," he said.

Sonpal believes that outsourcing of procurement and sourcing of products is hotting up with the likes of Hong Kong-based Li & Fung tying up with German retailer KarstadtQuelle AG for international sourcing.