Importance of stocking raw materials to keep prices stable

Groupe Beaumanoir, France's leading fashion brand underscores the importance of purchasing materials in advance and keeping finished goods in stock.

One of the leading women's ready-to-wear fashion brands in France, Groupe Beaumanoir has a number of strategies to deal with fluctuations in the yuan. Operations manager Umesh Mirchandani discusses some of these measures, as well as the pros and cons of sourcing from China's inland provinces.

How do you approach the appreciating yuan?

In a lot of cases, we just buy the fabrics and the yarn. We take that gamble. We know we are going to use the material, so we buy and store it. This helps keep the raw material price stable.

In many cases, we involve suppliers. They buy the raw materials for us because they know we are going to use it. If we do not use it this season, we will use it in the following season. Or some of them have connections with fabric factories, so they have their own little way to get it for us without affecting the cost too much.

We have our own logistics warehouse in France, and we are getting our buyers to come in and decide earlier. Using the low seasons, especially in China, to get our products made and kept in storage in France until they are ready to be sent to the stores. So we can keep stock ready.

It is very difficult for a buyer, especially in the fashion business, to predict what is going to work. But you have to do it. There is no other choice. There is more pressure on the buyer to be more proactive in this. There must be stuff ready in storage. We are spending money expanding our storage units just for that.

Will you consider moving to inland provinces or out of China?

Moving inland, you get a cheaper labor force, but the more inland you go, the transport infrastructure is not that set-up yet. You might be getting your product made really cheap in Yunnan or Jiangxi now - try to get it to the port on time. That involves a lot of planning because anything could happen. You could lose a very tight shipment schedule, and then whatever you saved making there, it is on your air costs now because you are late on your delivery.

It is also a very touchy subject. As buyers we want to get a better price, so when we find a factory in the middle of China that is giving me a better price, I will go there. I do not think about how long it is going to take for my product to get to the nearest seaport. I do not realize that until later. We have had instances where we have had heavy snow and highways are shut. Then we have to air this stuff to get it in time. So whatever savings I made making it at that supplier, is gone now.

What are the advantages of going inland?

Some of our big suppliers here in Ningbo and Hangzhou have opened their factories in Anhui and Henan, and we follow them in to see what they have done. And we realize that it is the same workers they had at their factories in Ningbo. Apparently these people are from these little towns in Anhui, so they have gone and followed them in.

They have a couple of advantages there. The government in those areas is very happy with the investment, so they are giving them a lot of incentives. And the workers are happy to come to work every morning because they are living 20 minutes away from the factory. It is an added incentive. And they do not mind a lesser wage because their standard of living is not as high over there as it is when they come out here.

If you had to make a predication, are buyers going to shift more to inland China or more out of China?

I think, inland. There a couple of very big European apparel companies that are already well established inland. They own part of the factories. I have even seen one in Inner Mongolia turning out millions of pieces a year. And it is working. I do not see any problem.

About the company  
Founded in 1981, Groupe Beaumanoir is the second-highest grossing women's ready-to-wear fashion brands in France with 2010 sales of over US$1.35 billion. The company works across complementary professions including sales, distribution, logistics, consulting and e-business.

The company's five main brands Cache-Cache, Patrice Bréal, Scottage, Morgan and Bonobo reach over 50,000 customers a day through 2,040 points of sales across 40 countries in Europe, Asia, Middle East and Africa. It has 6,100 employees.

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