4 things to know to achieve the maximum productivity in the Italian supply chain

“Made in Italy” is a certification of luxury and quality universally recognized label and that’s why more and more fashion brands are trying to subcontract their production to Italian suppliers.

It is often not easy to reach the most reliable partners and identify the appropriate supplier for a product, supervise the advancement of the process.

There are rather complex administrative procedures in Italy that could overburden budget if not correctly handled.

The necessary elements needed to succeed are finding partners that will not increase costing, that grant autonomy in handling manufacturing, shipping, taxation, and effectively translating the need of the customer.

To achieve this it is necessary to build a shellproof networking that could take years to establish.

In my experience there are 4 main questions to answer, to be aware of cost efficiency, optimize efforts and get the most from the Italian chain.

People that deal with this should have the right knowledge of the Italian Network, since several of the most renowned manufacturer of luxury clothings production are effectively artisans.

It is therefore essential that the professional that coordinates them is fully trained with the process and understands the production needs, being able to match the process to the brand request and getting the parties to meet achieving the perfect result.

Above all, the objective is to start an efficient Italian chain, are the followings:

1)   MATERIALS: Who will be in charge of purchasing materials, placing orders and paying for them? Cost affective purchasing to reduce leftovers and wastage.

Placing the materials order at the right time is the first step to properly begin a correct flow of the production process.

Consideration should be taken when processing an order for fabric, for instance it could take between 3 to 4 weeks of production. That’s why it could be useful initially assessing a raw materials pre-buy, during sell campaign, according to the trend shown by clients.

To do this it is crucial to have clear ideas on the composition of garments, through duly completed technical sheets with grading optimized consumption.

A competent professional can estimate a raw materials pre-buy to re-allocate per color after the final quantity sold is confirmed.

In order to avoid wastage and high unused leftovers this evaluation should be taken responsibly as mismanagement can compromise the whole collections budget.

In addition responsibility should be agreed so as the conditions of the payments, since (except for uncommon cases) before shipping goods suppliers ask an advanced payment.

Any administrative delays can result in jeopardizing all the scheduling.

2)   PRODUCTION PLANNING: What is the agreed timing for production process that a company can offer?

First of all it is essential that the timing of the production process of the selected subcontractor needs to be clear and approved.

As soon as the production order has been confirmed, the brand it is supposed to receive a production planning according to its specific characteristics of each style.

It is customary to agree on 6/7 weeks for simple styles and add 2 weeks in case of special working (plissé, embroidery, washing). A weekly update from the company to keep on track in case of problems that can occur in artisanal manufacturing. It is necessary to be fully aware of the technical timing of processing requests, to avoid unrealistic expectation that cannot be achieved. 

3)  CONSTING AND PRICES: Who will negotiate contracts, conditions, costs, in the sub-contractors and suppliers?

Both parties (brand and factory) should determine the conditions of timing, costing and shipping prior to production insuring that the terms and conditions are agreed in writing.

This can avoid administrative misunderstanding, quality issues and tasks pending.

Furthermore the prices communicated by the company must be clear and give visibility to all the costs of the process from the prototype to the final garment.

4)  ADMINISTRATION: Who will have the responsibility to move goods accordingly to the declarations requested by customs and taxation authorities? How can you handle VAT burden?

The process can also be influenced by the arrivals of materials from foreign suppliers, for the costing as for the timings.

What if your entire Japanese silk order is blocked at customs because of documentation missing?

What if the customs charges due to a careless billing exceed the margin of wholesale price?

You need someone who can deal with it.

Nevertheless, it is increasingly common to ship goods directly to the final destination which are often all over the world. What if the applied articles of VAT exemption are not the right ones?

Handling goods in Italy means that you will be facing a VAT bill of 22% and a foreign company, is supposed to face a VAT burden to import goods or to manage them on the Italian soil, but a way to avoid this negative impact on cash flow by relying a fiscal representative to be able to clear these increases and that means your VAT and customs clearance obligations will be met on your behalf and moreover your VAT payment can be deferred or avoided altogether depending on the circumstances.

The services you can enjoy can be:

·      Take advantage of VAT exemption

·      Take advantage of VAT deferral through VAT deposit

·     To tackle the European market without having to pay the expenses of opening a subsidiary or a branch and without sharing a margin with a distributor

·      Easier trading in the EU: no need to have a company in Europe because the VAT number of a 3rd party can be used

·      Easier administration: the fiscal rep. will check the VAT number of the customers and will file the VAT returns and EU sales listings.

Are you ready to "made in Italy"?