Movin’ on Out: Local Co. Clothing
Practice this intermediate offshoring case interview question in the Clothing sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.
This case tests candidates' ability to evaluate a strategic offshoring decision by analyzing quantitative cost-benefit data (Exhibit 1), qualitative customer preferences (Exhibit 2), and infrastructure investment requirements (Exhibit 3). The key challenge is recognizing that while the financials support offshoring ($6M annual savings with 4-year breakeven), significant execution risks and potential quality/brand implications could undermine the decision.
Local Co. is a clothing company based in Los Angeles, California. Known for beachy chic sandals, t-shirts, and beach accessories, Local Co. management prides itself on its American roots. In fact, all products are designed and made in America with the softest fabrics sourced from all over the world.
However, Local Co. is experiencing some headwinds. Commodity prices are rising which can put pressure on margins and profitability. While Local Co. could raise prices, they want to keep Local Co. prices attainable for their average customer. Thus, Local Co is considering ways to decrease manufacturing costs.
Local Co. is currently considering off-shoring clothing manufacturing to South America, should they? In addition, what factors should they consider as they make this decision?
Clarifying Information
- Does Local Co. sell clothing outside of the U.S.? No, Local Co. distributes its products through upscale, large retailers and boutiques. Local Co. does not currently have any plans for international expansion.
- What are competitors doing in response? Competitors have exhibited a variety of responses. Some have off-shored, others have raised prices, some have changed the quality of their fabrics, while others have combined a number of these strategies.
- Outside of the U.S., where are similar products manufactured? Many international locations – South America, China, and India are just a few popular locations.
- What other options has Local Co. explored? Local Co. will not compromise on the quality of the clothing or the softness of the fabrics. They have also determined that a price increase is not feasible.
- What is the payback period on new infrastructure investment? Local Co. has a 4 year investment horizon.