The Critical Success Factors of Sourcing Production for Small and Medium-sized Clothing Firms in Hong Kong

Transcription

1 Volume 4, Issue 3, Sprng2005 The Crtcal Success Factors of Sourcng Producton for Small and Medum-szed Clothng Frms n Hong Kong Fung-y Tam, Ka-leung Moon, Sau-fun Ng, Ch-leung Hu Insttute of Textles and Clothng, the Hong Kong Polytechnc Unversty, Hung Hom Kowloon Hong Kong E-mal: temmytam@hotmal.com or temmy.tam@polyu.edu.hk ABSTRACT The man purpose of ths paper s to dentfy the crtcal success factors (CSFs) of sourcng producton, and to study the mpacts of producton sourcng strateges, buyer suppler relatonshps and frm-related characterstcs on the level of satsfacton wth sourcng performance. Usng a multple case methodology to study ten frms and a two-phase data collecton approach, n-depth ntervews and mal questonnares, we found that the ndustral sector s the only frm-related characterstc that has an nfluence on sourcng performance satsfacton. Also, the frms that have adopted nsourcng were more satsfed wth ther sourcng performance than those that adopted outsourcng. Based on the level of satsfacton wth a frm s sourcng performance, we dentfed three man CSFs for producton sourcng: () to buld relatonshps wth producton provder personnel at all levels, (2) to develop a comprehensve communcaton plan wth producton provders; and (3) to choose the producton provders carefully. Keywords: Small and medum-szed enterprses (SMEs); producton sourcng strategy; crtcal success factors (CSFs); performance satsfacton; buyer-suppler relatonshp Introducton In the clothng ndustry, no smple formula can predct wnners and losers from a partcular envronment. Rather than tryng to guess the wnners and losers, t s mportant to dentfy the crtcal success factors (CSFs) that determne performance satsfacton []. The Hong Kong clothng ndustry conssts of a large number of small and medumszed manufacturng and tradng frms. In 200, there were approxmately 290,000 small and medum enterprses (SMEs) n Hong Kong; over 98% of the companes that were engaged n the manufacturng and servcng sectors were SMEs [2]. Accordng to the Hong Kong Government, SMEs n Hong Kong are defned as manufacturng frms that employ fewer than 00 people and non-manufacturng frms that employ fewer than 50 persons. The exstence of these frms has contrbuted sgnfcantly to the ndustry s development and prosperty n the last four decades. The textles, clothng and footwear ndustres generated domestc exports of HK$65 bllon, whch represented 67% of total domestc exports n 2002 [3]. In dollar terms, Hong Kong s the second largest exporter of textles and clothng n the world [4]. Hong Kong has been wdely recognzed for ts role as a global sourcng centre for textle

2 and clothng products [5]. Adoptng proper producton sourcng strategy has been regarded as a strategc approach by whch frms can mantan ther comparatve and compettve advantages [6-9]. Sourcng costeffectve producton s not only confned to large frms. A large number of SMEs also actvely pursue ths strategy [9]. Management must make the most of the strengths of producton sourcng, whch can provde compettve advantages for companes. In the long term, the success of a clothng frm requres that ts compettve advantage be sustanable. The concentraton of resources and effort upon the CSFs are very mportant for sustanng the compettve advantage of frms. Rochart [0] defned CSF as the lmted number of areas whch produce satsfactory results, thereby ensurng successful compettve performance for the organzaton. He ndcated that dentfyng CSFs s a useful approach for understandng management nformaton requrements because t can focus a frm s attenton on areas n whch thngs must go rght. Ths approach also helps future corporate strategc plannng; n subsequent, controllable actons can be taken by the management n order to enhance the potental for success. More recently, research has explored CSFs n the areas of materal requrements plannng (MRP) [] and total qualty management (TQM) [2]. However, CSFs relatng to producton sourcng n the clothng ndustry have not yet been researched. Hence, t s the am of ths paper to focus on ths area. Objectves of the research The ultmate purpose of ths paper s to dentfy the crtcal success factors (CSFs) for Hong Kong clothng frms n sourcng producton. The specfc objectves of ths study are as follows: ) To revew the lterature on the characterstcs of SMEs, producton sourcng strateges and buyer-suppler relatonshp 2 2) To study the mpact of varous producton sourcng strateges and buyersuppler relatonshps on the level of sourcng performance satsfacton 3) To nvestgate the mpact of the frm-related characterstcs of SMEs on the level of sourcng performance satsfacton 4) To dentfy the CSFs of producton sourcng for small and medum-szed clothng frms n Hong Kong Lterature revew The major objectve of ths lterature revew s to examne prevous studes on the general characterstcs of SMEs, dfferent types of producton sourcng strateges and buyersuppler relatonshps, and hence to formulate a research framework for ths study. General characterstcs of SMEs. Several studes have shown that SMEs are very dfferent from large enterprses [9]. SMEs enjoy the advantages of greater flexblty and hgher levels of effcency. They can be very nnovatve, yet need not be bound by a complcated organsatonal structure. However, SMEs are severely constraned by ther lack of funds and physcal human resources. Because of ther sze, they may have less power n ther dealngs wth large organzatons. Compared wth large frms, SMEs are less able to undertake research and development, beneft less from economes of scale, have nsuffcent producton capacty, and have lmted resources for supportng sellng and marketng. Storey [3] postulates that the characterstcs of a frm (such as frm age, locaton, sze, market and sector) and the adopton of corporate strategy are the key factors regardng the growth of small frms. Therefore, ths study focuses n partcular on how these two categores of characterstcs nfluence the level of sourcng performance satsfacton of companes. Sourcng strategy. Tradtonally, sourcng refers to the phlosophy of selectng vendors n a manner that makes them an ntegral part of the buyng frm for a partcular component or part of a product [4]. These

3 decsons should be ncorporated nto the operatng strateges of buyng frms to support or even mprove compettve advantages. The characterstcs of producton sourcng strateges that are specfed n ths study are based on the decson to nsource or outsource and the number of supplers. Insourcng smply means that the enterprse performs the functon nternally [5]. sourcng refers to a strategc perspectve on external resources; t s an abbrevaton of outsde resource usng [6]. sde means creatng value by transferrng the responsblty of a specfc busness functon from an employee group to a non-employee group [7]. Sngle sourcng nvolves the dea of reducng the number of supplers wth whch a frm does busness, and hence the buyers source from a sole source [8]. Multple sourcng refers to a company that has busness relatonshps wth a number of supplers. Each suppler responds to the demands and specfcatons of a partcular quotaton from the buyng company [8]. Buyer-suppler relatonshp. The buyersuppler relatonshp has been recognzed as a type of strategy and a powerful tactc for strengthenng a frm s sourcng actvtes [6, 8]. The lterature revew dentfes four types of buyer-suppler relatonshps n terms of dfferent lengths of contractual and/or non-contractual agreements. Longterm contractual vendor relatonshps nvolve the selecton of, and contnuous nvolvement wth, supplers through longterm contracts, n whch exceptonal performance or unque technologcal expertse s expected. Non-contractual strategc partnershps work on a long-term but not contractual bass. Dscrete contractual vendor relatonshps are shortterm contractual relatonshps wth no longterm commtment between buyer and suppler. Arm s-length suppler relatonshps nvolve a one-off relatonshp on a noncontractual bass, agan wth no long-term commtment between both partes. Framework for dentfyng the CSFs for producton sourcng. To dentfy the CSFs of producton sourcng for small and medum-szed clothng frms n Hong Kong, and to nvestgate the mpact of the frmrelated characterstcs of SMEs, producton sourcng strateges and the buyer suppler relatonshps on the level of sourcng performance satsfacton, a research framework was developed (see Fgure I). Fgure I: A Model for Identfyng the CSFs for Producton Sourcng Based on the lterature revew, frm-related characterstcs of SMEs, sourcng strateges and buyer-suppler relatonshps were dentfed. The varables of performance satsfacton and CSFs for producton sourcng are based on n-depth ntervews 3 wthn small and medum-szed clothng frms n Hong Kong. In developng ths research study, fve propostons (P, P2, P3, P4 and P5) have been formulated to express the nterrelatonshps amongst the key varables.

4 P: The frm-related characterstcs of SMEs have an mpact on the level of satsfacton wth sourcng performance. P2: The sourcng strateges adopted have an mpact on the level of satsfacton wth sourcng performance. P3: The buyer-suppler relatonshps adopted have an mpact on the level of satsfacton wth sourcng performance. P4: The producton sourcng strateges adopted have an mpact on the perceved mportance of CSFs for producton sourcng. P5: The buyer-suppler relatonshps adopted have an mpact on the perceved mportance of CSFs for producton sourcng. Methodology A multple-case methodology was adopted for ths study. Ths methodology s seen as an exploratory devce for usng more than a sngle case n the same study [9]. Exploratory study s concerned wth dscoverng the general nature of the problem and the varables that relate to the research. It s characterzed by a hgh degree of flexblty, convenence or judgment samples, small-scale surveys, cases analyses, and subjectve evaluaton of the results. A two-phase approach was, therefore, used to collect relevant nformaton for ths study. Frst, n-depth ntervews were carred out wth ten SMEs to study ther frm-related characterstcs, to nvestgate the sourcng strateges and buyer-suppler relatonshps that they had adopted, to dentfy the ndcators of sourcng performance satsfacton, and to fnd out the CSFs for producton sourcng. Second, a mal questonnare was sent to the same group of frms to evaluate the mportance of each dentfed CSF and the level of performance satsfacton for producton sourcng. Wth a focus on clothng frms n Hong Kong, the companes selected for study were requred to fulfl the crtera for SMEs as descrbed above. Accordng to Yn [9], sx to ten cases can provde compellng support for the ntal set of propostons. Smlarly, Perry [20] suggested that the number of cases to be examned n an exploratory study should be a mnmum of two to four and a maxmum of ten to ffteen. Therefore, fve manufacturng and fve tradng frms n Hong Kong were selected for ths study. Fndngs Phase I - Personal ntervew. A total of ten representatves, one from each of the selected small and medum-szed tradng and manufacturng frms, were ntervewed. All the companes were local-owned, wth szes rangng from 3 to 93 employees (see Table I). Sx of the companes have been establshed for more than 0 years, whle the other four have been establshed for less than 0 years. Four companes have focused 00% on western markets, such as the US, the UK or Europe. One company has concentrated 00% on the local market, whle the other fve companes have developed ther markets both n western countres and n Chna, Asa or Hong Kong. Three companes undertake sngle nsourcng and seven multple outsourcng. For those who adopted outsourcng, four companes have selected non-contractual strategc partnershps, and three have adopted dscrete contractual vendor relatonshps. However, none of them preferred the long-term contractual vendor or the arm s-length suppler relatonshp. 4

5 Table I: Background of the Small and Medum-szed Tradng and Manufacturng Frms Frm Frm-related characterstcs of SMEs No. of factores Sourcng strategy Buyer-suppler relatonshp Sector Frm sze (employee) Market (%) Frm age (year) Domestc producton Offshore producton D C L C N S A L F J C F J C V V P S M M 25 50W, 5 / / / / Sngle, / / / / 30CA, 20HK Insourcng M2 M 40 00W 8 / / / / Sngle, / / / / Inso urcng M3 M 93 00HK 9 / / / / 3 Multple, / / A / sourcng M4 M 60 99W, 4 / / / / Sngle, / / / / CA M5 M 28 30W, 40CA, 30HK Insourcng 5 / / 3 / / Multple, sourcng T T 23 95W, 5CA 0 / / / 2 / Multple, sourcn g T2 T 4 00W / / / / 0 Multple, sourcng T3 T 8 00W 8 / / / / 2 Multple, sourcng T4 T 3 00W 3 / / / / / 4 Multple, sourcng T5 T 6 95W, 8 / / / / 2 3 Multple, 4CA, sourcng HK REMARKS: ) Sector: M=Manufacturng frm, T=Tradng frm; 2) Market: W=Western, CA=Chna and Asa, HK=Hong Kong 3) Ownershp: F=Fully owned, J=Jont venture, C=Contract 4) Buyer-suppler relatonshp: DCV=Dscrete contractual vendor relatonshp, LCV=Long-term contractual vendor relatonshp, NSP=Non-contractual strategc partnershp, ALS=Arm s-length suppler relatonshp 5) A=adopted A / / / / / A / A / / / / / A / / / A / A / / / Durng the n-depth ntervews, the ntervewees were also asked to lst the ndcators for measurng performance satsfacton and the CSFs for sourcng producton. Subsequently, seven performance ndcators and eleven CSFs for producton sourcng were obtaned (see Tables II and III). Table II: Indcators for Performance Satsfacton wth Producton Sourcng The varables for performance satsfacton of producton sourcng No. of frms* M T Total. Proftablty On-tme delvery 0 3. Control of costs Increase compettveness Better qualty Access to worldwde technology 0 7. Improved relatonshp wth customers 0 Remarks: () *=no. of frms that regard the varable as most mportant; (2) M=Manufacturng frms; T=Tradng frms 5

6 CSFs for producton sourcng Table III: CSFs for producton sourcng No. of frms* M T Total. Top management s commtment to pursue producton sourcng Select and tran rght personnel to plan and mplement sourcng programme Establsh comprehensve logstcs competency 0 4. Thorough analyss of the envronment of host countres Choose your producton provders carefully Buld trust and openness wth your producton provders Buld relatonshps wth personnel at all levels of your producton provders Develop a comprehensve communcaton plan wth your producton provders Share rsks and opportuntes wth your producton provders Sustan long-term relatonshps wth your producton provders. 0. Adaptablty and flexblty to envronmental changes n global busness. 0 Remarks: () *=no. of frms that regard the factors are crtcal; (2) M=Manufacturng frms; T=Tradng frms Phase II - Mal questonnare. Followng the analyss of the n-depth ntervews and revew of lterature, a questonnare was desgned to measure the level of performance satsfacton and evaluate the mportance of the CSFs for producton sourcng. The questonnare was sent by post to the ten companes prevously ntervewed. The level of performance satsfacton and the mportance of each success factor relatng to producton sourcng were measured on a fve-pont Lkert scale (from =extremely satsfed/crtcal to 5=not at all satsfed/crtcal). Examnaton of P. Proposton consders whether the frm-related characterstcs of SMEs have an mpact on the level of satsfacton wth sourcng performance. The results show that the frm-related characterstcs of SMEs have an mpact on the level of satsfacton towards sourcng performance, was not entrely confrmed. The frm-related characterstcs of SMEs such as frm sze, frm age, and market nvolved were all nsgnfcant to the satsfacton of sourcng performance. Only the factor of ndustral sector was revealed to have an nfluence (see Table IV). Table IV: Satsfacton Scores for Producton Sourcng Performance Frm M M2 M3 T T2 M4 M5 T3 T4 T5 Satsfacton level S S2 S3 S4 S5 S6 S7 S8 S9 S0 Adopted sourcng strategy S & In S & In M & M & M & S & In M & M & M & M & Adopted buyersuppler relatonshp / / NSP NSP DCV / DCV NSP NSP DCV Satsfacton score Remarks: Sector: M=Manufacturng frm, T=Tradng frm Sourcng strategy: S=Sngle sourcng, M=Multple sourcng; In=Insourcng, =sourcng Buyer-suppler relatonshp: DCV=Dscrete contractual vendor relatonshp, LCV=Long-term contractual vendor Satsfacton score of producton sourcng s obtaned by calculatng the average score of the seven performance ndcators. Satsfacton score: = extremely satsfed to 5= not at all satsfed Table IV shows the results of the level of performance satsfacton regardng producton sourcng by calculatng the average score of the seven performance ndcators gven by each frm. Ths score reflects the companes composte feelng of 6 satsfacton on certan ssues, such as proftablty, on-tme delvery, control of costs, ncreased compettveness, better qualty, access to worldwde technology, and mproved relatonshps wth customers. Frm M, wth the satsfacton score of

7 .375 (S), was sad to be the most satsfed frm, whle frm T5, wth score of 3.3 (S0), the least satsfed frm. The results n ths study show that the level of satsfacton s not related to the frm sze, market nvolved, or frm age of the companes. The largest company (93 employees) and the smallest company (3 employees) ranked 3 and 9 respectvely, whle the companes wth 25 and 6 employees scored the hghest (ranked st ) and lowest (ranked 0 th ) level of satsfacton respectvely (see table I and IV). The companes that focus 00% on western markets ranked 2 nd, 5 th, 8 th and 9 th ; the companes that concentrated 00% on local markets ranked 3 rd. Companes that dssemnated ther markets n dfferent countres ranked st, 4 th, 6 th, 7 th and 0 th. The companes of oldest (8 years) and youngest (4 years) n terms of year of establshment ranked 2 nd and 6 th respectvely, whereas the most and least satsfed companes have 5 and 8 years of age respectvely. Nonetheless, the factor of ndustral sector was revealed to have an nfluence (see Table IV). The results show that the most satsfed frms were all manufacturng frms (ranked st and 2 nd ). Ths s probably because the manufacturers have ther own establshments and close afflates locally, whch allows them to retan some control over producton, so that on-tme delvery s more easly acheved and the qualty more closely controlled. Furthermore, because manufacturers have ther own factores, they do not need to share ther profts and benefts wth ther afflates; therefore, costs and profts can be easly controlled. Examnaton of P2. Proposton 2 consders whether the adopton of sourcng strategy has an mpact on the level of performance satsfacton. The results show that the companes adopted sngle sourcng and nsourcng strateges were more satsfed wth ther performance than those adopted multple sourcng and outsourcng strateges (see Table IV). Proposton 2 was, therefore, confrmed. In contrast to the majorty of opnons n the academc lterature 7 emphasze the benefts of outsourcng [6-8, 4, 7], ths study reveals that the adopton of producton outsourcng strategy does not acheve the hghest level of satsfacton wth performance. Instead, an nsourcng strategy could lead to hgher satsfacton levels. An explanaton of ths may be due to mproper mplementaton of the outsourcng strateges. Accordng to the study of Elmut and Kathawala [7], about 3% of organsatons reported that ther outsourcng programmes had faled. The man complants are ether that the wrong sourcng strateges have been used, or that the buyer suppler relatonshps have been ll-defned [2]. Moreover, explorng the satsfacton of sourcng has to be learnt from experence. The reasons leadng to dssatsfacton wth outsourcng practce are stll unclear and therefore requre further nvestgaton. Examnaton of P3. Proposton 3 consders whether the adopton of buyer-suppler relatonshp has an mpact on the level of satsfacton wth sourcng performance. The results ndcate that buyer suppler relatonshps adopted ndeed had an mpact on the level of satsfacton towards sourcng performance. The results show that companes (M3 and T) that adopted noncontractual strategc partnershps were more satsfed wth ther performance (ranked 3 rd and 4 th ) when compared wth companes (T5) who selected dscrete contractual vendor relatonshps (ranked 0 th ). Partnershp relatonshps allow SMEs to overcome problems relatng to ther sze by lnkng up wth a resourceful player(s). Hence, f these strateges are correctly mplemented, small and medum-szed clothng frms n Hong Kong can become hghly effectve. Crtcal success factors (CSFs) and level of satsfacton. Pror to the examnatons of P4 and P5, the mportance of each CSF as perceved by the frms was nvestgated. The level of mportance of each CSF was calculated accordng to the level of the frms performance satsfacton for producton sourcng, whch ranged from S (most satsfed) to S0 (least satsfed). The

8 frms wth the hghest score for performance satsfacton for producton sourcng could provde a reference for the mportance of each successful factor. Hence, the hgher the satsfacton the company has, the heaver the weghng of the sgnfcance for the calculaton of the CSF score wll be. The followng formula represented the weght of score by frms performance satsfacton on Where: Total score of each CSF by the degree of satsfacton = producton sourcng, e., S scored 0, whch s W ; S2 scored 9, whch s W 2 and so on. To evaluate the total score of each crtcal success factor, we assume S = means frm beleves that CSF s crtcal, whle S = 0 not crtcal at all. 0 ( S W ) = 0 W = weght of satsfacton score obtaned by the company wth satsfacton rankng S = mportance of the CSF (=crtcal; 0=not crtcal) perceved by company wth satsfacton rankng = Varable representng the satsfacton rankng of the companes = Table V: Scores for CSFs by the Degree of Satsfacton Frm M M2 M3 T T2 M4 M5 T3 T4 T5 Satsfacton level S S2 S3 S4 S5 S6 S7 S8 S9 S0 Weght of satsfacton score ( W ). Top management s commtment to pursue producton sourcng. 2. Select and tran rght personnel to plan and mplement sourcng programme W Total score / /55 3. Establsh comprehensve logstcs competency /55 4. Thorough analyss of the envronment of host countres /55 5. Choose your producton provders carefully /55 6. Buld trust and openness wth your producton provders /55 7. Buld relatonshps wth personnel at all levels of your producton provders. 8. Develop a comprehensve communcaton plan wth your producton provders. 9. Share rsks and opportuntes wth your producton provders. 0. Sustan long-term relatonshps wth your producton provders.. Adaptablty and flexblty to envronmental changes n global busness. 0 49/ / / / /55 REMARKS: Total score of each CSF by the degree of satsfacton = 0 ( S W ) = 0 = W As shown n Table V, the three most mportant success factors were related to the 8 development of the relatonshp between buyer and suppler: () buldng the

9 relatonshp wth personnel at all levels (49/55); (2) developng a comprehensve communcaton plan wth producton provders (43/55); (3) choosng the producton provders carefully (40/55). Amongst these three factors, nne out of ten companes found that establshng relatonshps wth producton provders personnel at all levels was the most crtcal success factor for producton sourcng. Examnaton of P4 and P5. The results show that the producton sourcng strateges and buyer-suppler relatonshps adopted had an mpact on the perceved mportance of CSFs for producton sourcng were confrmed. The results ndcate that the perceved mportance of the CSFs for producton sourcng may change accordng to dfferent sourcng strateges used and the buyer suppler relatonshps adopted. The scores for CSFs by sourcng strateges and buyersuppler relatonshps were summarzed n Table VI. CSFs. Top management s commtment to pursue producton sourcng. 2. Select and tran rght personnel to plan and mplement sourcng programme. Table VI: Scores for CSFs by Sourcng Strategy Insource (n=3) Non-contractual strategc partnershps (n=4) source Dscrete contractual vendor relatonshps (n=3) Total scores (n=0) /3 2/4 0/3 3/0 2/3 3/4 /3 6/0 3. Establsh comprehensve logstcs competency 3/3 3/4 0/3 6/0 4. Thorough analyss of the envronment of host countres. 2/3 2/4 0/3 4/0 5. Choose your producton provders carefully. 2/3 4/4 2/3 8/0 6. Buld trust and openness wth your producton provders. 7. Buld relatonshps wth personnel at all levels of your producton provders. 8. Develop a comprehensve communcaton plan wth your producton provders. 9. Share rsks and opportuntes wth your producton provders. 0. Sustan long-term relatonshps wth your producton provders.. Adaptablty and flexblty to envronmental changes n global busness. 0/3 2/4 /3 3/0 3/3 4/4 2/3 9/0 2/3 3/4 3/3 8/0 0/3 2/4 0/3 2/0 2/3 2/4 2/3 6/0 2/3 4/4 0/3 6/0 REMARKS: Total score of each CSF by sourcng strategy s the sum of the number of frms whch adopted ether nsource, outsouce wth non-contractual strategc partnershps or outsource wth dscrete contractual vendor relatonshps. Table VI shows the wdely perceved CSFs by frms usng nsourcng strategy are buldng relatonshps wth producton provder personnel at all levels (3/3) and establshng comprehensve logstcs competency (3/3). Insourced frms are expected to use nternal resources of the busness to develop long-term establshments for producton actvtes. If relatonshps wth personnel at all levels regardng producton actvtes are not 9 properly establshed, then the effcency of ts n-house producton actvtes would also be affected. Furthermore, nsourced frms are requred to arrange logstcs of producton actvtes nternally by themselves, so establshng a comprehensve logstcs competency s very mportant as perceved by these frms. Choosng the rght producton provder (4/4), buldng relatonshps wth personnel

10 at all levels (4/4) and beng adaptablty and flexblty to envronmental change (4/4) are crucal for frms who have adopted outsourcng strategy wth strategc partner relatonshps. Once a strategc partner has been selected, a long-term relatonshp s expected. It s therefore mportant to buld relatonshps wth personnel at all levels of the producton provder. Indeed, the concept of strategc partner relatonshp nvolves a jont product development relatonshp wth share development costs and ntellectual property; both partes are therefore requred to be adaptable and flexble to changes under ths relatonshp. Developng a comprehensve communcaton plan wth producton provders (3/3) s the only CSF hghlghted by frms who have adopted outsourcng strategy wth dscrete contractual vendor relatonshps. Ths s because they are expectng a short-term relatonshp wth ther producton provders. The only concern they have s delverng goods to the rght place, at the rght tme, of the rght qualty and quantty, and wthout any errors. Ths requres a good communcaton system. Other factors concernng long-term development, such as buldng relatonshps wth producton provder personnel at all levels, may not be very crtcal to them. In reference to the perceved mportance of CSFs n conjuncton wth the adopton of sourcng strateges and buyer-suppler relatonshps, three most crtcal success factors of producton sourcng perceved by the small and medum-szed clothng tradng and manufacturng frms n Hong Kong were dentfed, as follows: () to buld relatonshps wth personnel at all levels of the producton provders (9/0); (2) to choose producton provders carefully (8/0); and (3) to develop a comprehensve communcaton plan wth producton provders (8/0). All these are rela ted to the development of a cooperatve relatonshp between buyer and suppler. Conclusons The crtcal success factors for producton sourcng are mportant because they represent necessary condtons for sourcng success. Overall, among all respondng frms, the three most crtcal success factors of producton sourcng perceved by the small and medum-szed clothng tradng and manufacturng frms n Hong Kong were dentfed: () to buld relatonshps wth producton provder personnel at all levels; (2) to choose producton provders carefully; and (3) to develop a comprehensve communcaton plan wth producton provders. All these are related to the development of a cooperatve relatonshp between buyer and suppler. The management of SMEs should therefore pay attenton on the development of a collaboratve buyer-suppler relatonshp. Once a suppler has been selected carefully, a long-term relatonshp should establsh wth suppler personnel at all levels. SMEs should have a structure n place that fosters frequent communcaton between buyers and supplers. Two partes should determne the type of nformaton that s useful and establsh formal and nformal channels for exchangng t. Based on the results of ths study, t can be concluded that the adoptons of buyersuppler relatonshps and producton sourcng strateges may have an mpact on the perceved mportance of CSFs. However, the frms n ths study have adopted only non-contractual strategc partnershp and dscrete contractual vendor relatonshp; long-term contractual vendor relatonshp and arm s-length suppler relatonshp have not been adopted by any frms. Thus, relatonshps between CSFs and these two buyer-suppler relatonshps could not be explored further. It s mportant to nvestgate whether these two buyer-suppler relatonshps could be adopted by small and medum-szed clothng frms n Hong Kong and whether the adopton of these relatonshps may have an mpact on CSFs for producton sourcng. Further research n these areas s, therefore, requred. 0

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