Introduction

Several years ago, many global companies believed the smartest manufacturing strategy was simple: produce goods wherever labor was cheapest. China became the center of that global movement, especially for labor-intensive industries such as apparel manufacturing. But over time, businesses discovered that low costs alone could not guarantee survival. Markets changed quickly, customer demands became unpredictable, and global disruptions—from trade tensions to the COVID-19 pandemic—revealed how fragile supply chains could be.

A recent research paper titled “Understanding the Offshore Mixed Sourcing Strategy: A Case Study of a Japanese Affiliated Apparel Factory in China” explores how one Japanese apparel company responded to these challenges. Instead of choosing between producing clothes in its own factories or outsourcing everything to external suppliers, the company adopted a “mixed sourcing strategy.” In simple terms, it combined both approaches.

What makes this study especially interesting is that it moves beyond abstract business theory and shows how these decisions work in real factory environments. Through interviews, production data, and operational analysis, the researchers uncovered how different factories played different strategic roles within the company’s supply chain.

The result is a fascinating look into modern manufacturing strategy—one that explains why flexibility, trust, and collaboration may now matter more than simply cutting costs.

Discussion of the Study

A Closer Look at the Research

The researchers focused on a Japanese apparel company operating in China. The company managed one affiliated factory—called Factory A—and worked with six subcontracted Chinese factories labeled B through G.

At first glance, this arrangement may sound ordinary. Many companies outsource production overseas. However, the researchers discovered something more sophisticated happening beneath the surface.

Factory A was not just another production facility. It functioned as a strategic “mother factory,” handling complex production tasks while also guiding and supporting subcontractors. Meanwhile, the outsourced factories specialized in different types of manufacturing depending on their capabilities.

To understand how this system worked, the researchers used a single-case study approach. They collected monthly factory data from 2015 to 2018 and combined it with interviews conducted directly with factory managers.

The data included:

• Production volume
• Number of product types
• Defect rates
• Repair rates
• Operational flexibility

By combining numbers with real-world interviews, the researchers were able to connect statistical findings with practical management decisions.

The Meaning of “Mixed Sourcing”

One of the most valuable contributions of this study is how clearly it explains the idea of mixed sourcing.

Traditionally, companies were thought to face a binary choice:

• Produce internally (“make”)
• Outsource externally (“buy”)

But modern global supply chains are far more complicated.

This Japanese apparel company used both methods simultaneously. More importantly, it assigned different tasks to different factories depending on their strengths.

The affiliated factory focused on:

• High-mix, low-volume (HMLV) production
• Complicated products
• Flexible response to changing demand
• Quality-sensitive operations

The subcontractors focused on:

• High-volume production
• Standardized items
• Cost efficiency
• Overflow production during busy periods

This division of labor allowed the company to balance flexibility and efficiency at the same time.

Key Findings

1. The In-House Factory Was Built for Flexibility

Factory A handled the most complicated manufacturing tasks. It produced many product varieties in smaller quantities, which required highly skilled workers and fast operational adjustments.

This approach is known as HMLV production.

While HMLV manufacturing may appear less efficient than mass production, it gives companies an enormous advantage when consumer demand changes rapidly. Fashion trends, seasonal products, and unpredictable orders require exactly this kind of flexibility.

The study shows that the affiliated factory acted as a stabilizing force whenever market uncertainty increased.

2. Outsourcing Was Not Just About Saving Money

One of the study’s most important discoveries is that outsourcing partners were not treated as interchangeable suppliers.

Instead, the company carefully categorized subcontractors based on their abilities.

Some factories specialized in mass production. Others handled emergency orders. A few focused on smaller and more flexible production runs.

This idea—called “heterogeneous outsourcing”—is central to the paper.

The researchers argue that successful global sourcing depends not only on finding cheap suppliers but also on understanding the different strengths of each manufacturing partner.

This insight challenges older business theories that viewed outsourcing primarily as a cost-cutting exercise.

3. Quality Differences Were Surprisingly Small

One might expect outsourced factories to produce lower-quality goods than the company’s own factory. Surprisingly, the study found no major statistical difference in defect rates or repair rates.

This result initially puzzled the researchers.

However, interviews revealed the reason: Factory A actively trained and supported its subcontractors. The company shared technical knowledge, management practices, and even financial support with some partner factories.

In other words, quality consistency was not accidental—it was carefully engineered through long-term relationships.

This finding highlights how trust and knowledge-sharing can strengthen international supply chains.

4. Relationships Became a Form of Insurance

Some subcontractors were only used occasionally. At first, this seemed inefficient.

Why maintain relationships with factories that receive irregular orders?

The answer lies in resilience.

The company kept these backup suppliers available in case demand suddenly increased or delivery schedules became tight. During periods of uncertainty, these extra factories acted like emergency support systems.

The study suggests that maintaining multiple supplier relationships—even imperfect ones—can protect firms from operational shocks.

This lesson became especially relevant after the COVID-19 pandemic exposed weaknesses in highly concentrated supply chains worldwide.

Why This Study Matters

The real-world significance of this research goes far beyond the apparel industry.

Today, multinational companies face growing uncertainty from:

• Rising labor costs
• Geopolitical tensions
• Tariffs and trade restrictions
• Supply chain disruptions
• Rapidly changing consumer preferences

This study demonstrates that successful companies no longer compete solely through low costs. Instead, they compete through adaptability.

The Japanese company examined in this research created a manufacturing ecosystem where different factories complemented one another. Some offered flexibility, others offered scale, and together they created a more resilient supply chain.

For managers, the message is clear:

A smart sourcing strategy is not about choosing between outsourcing and in-house production. It is about designing the right balance between the two.

Limitations of the Study

Although the research offers valuable insights, the authors acknowledge several limitations.

Single Case Study

The study focused on only one Japanese apparel company. Because of this, the findings may not apply equally to all industries or countries.

Different sectors—such as electronics or automotive manufacturing—may require different sourcing strategies.

Limited Post-Pandemic Data

Most production data came from the years before COVID-19. While follow-up interviews were conducted later, the study could not fully analyze how the pandemic permanently changed sourcing behavior.

Given how dramatically global supply chains shifted after 2020, future studies will need updated data.

Confidentiality Restrictions

Some detailed operational information from subcontractors could not be disclosed due to confidentiality agreements. This limited the depth of factory-level comparison.

Conclusion

The study “Understanding the Offshore Mixed Sourcing Strategy” provides a powerful reminder that modern manufacturing is no longer just about producing goods cheaply. It is about building systems that can survive uncertainty.

Through a detailed case study of a Japanese apparel company operating in China, the researchers show how businesses can combine in-house production with carefully selected outsourcing partners to achieve both flexibility and efficiency.

Perhaps the most compelling lesson from the paper is that successful supply chains are built on relationships, knowledge sharing, and strategic coordination—not simply on price competition.

In a world where disruptions have become normal, companies that understand how to balance control with collaboration may ultimately gain the strongest competitive advantage.

The research also reveals something deeper about globalization itself. The future of international business may not belong to companies that outsource everything or produce everything internally. Instead, it may belong to firms that learn how to intelligently combine both worlds.