Super suppliers to solve sourcing challange

Super suppliers with access to production capacity in a diverse range of countries are likely to be in high demand. Retailers are looking to reduce the risk of sourcing from new suppliers as they create a more nimble supply chain that can react faster to consumer demand and maximises working capital, says Kurt Salmon Associates (KSA), the leading global consultancy specialising in retail and consumer goods, which has launched its latest global sourcing reference guide.

"Every week saved in the production cycle is typically worth 0.25% of final achieved margin, which is why retailers are looking to work with experienced and globally represented suppliers," says Helen Mountney, UK managing partner, KSA. "Until recently, the primary focus of sourcing has been on increasing the mix of direct imported products to enhance margins. Advanced retailers, however, are now concentrating on the next level of costs: cutting spending on buying offices, optimising the mix of source countries and standardising processes and fabrics/materials. "

KSA believes that this requires a shift towards a more holistic supply chain-orientated approach. However, to achieve this necessitates a greater exchange of information between retailers, brands and manufacturers, as well as appropriate technologies, a shift in mindset and an incentive system that can influence the behaviour of all the supply chain partners.

One of the key factors to emerge from the survey was that respondents said while speed is critical, proximity is not. They ranked optimised processes such as a higher synchronisation of activities in the supply chain and the avoidance of redundant activities as more important than mere physical proximity. From this perspective the competitive advantages of Eastern Europe and Northern Africa lose importance, except for high fashion items where demand can not be forecasted well, but needs to be fulfilled within a very short time-frame.

"Buyers are also juggling the demand from stores to provide frequent deliveries to enable high service, with those of the logistics team looking to reduce costs and the CSR department wanting to see a reduction in carbon footprint," adds Mountney. "This further adds to the complexity of sourcing."

"While this situation could provide new opportunities, the task of weighing up all the factors and trying to compare one supply source with another is an even more daunting task these days. Super suppliers, who are in daily contact with a broad range of factories across the globe, will be able to provide valuable insight and remove some of the unknowns to help make better sourcing decisions."

From its research in compiling its guide, KSA also sees a greater acceleration in the trend of shifting from CMT to FOB sourcing as Western retailers and brands are forced to reduce their own complexity to keep costs down and to increase demand-driven flexibility. Countries without sufficient FOB capabilities like Romania, Bulgaria and the Ukraine will lose out to countries with more vertical capabilities such as Turkey, North Africa and increasingly the Middle East.

While China will remain a strong supply source for many UK retailers, over capacity in the area means that suppliers are very open to negotiation and price reductions. However, KSA says that it is important for buyers to be fair to suppliers and not push prices too low or they could be responsible for their producers going out of business and having to find a new source of supply.

Since 1991, KSA has produced guides to global sourcing for the fashion sector and this latest 9th edition covers hard goods for the first time. This guide includes results of a survey of 100 sourcing managers, a detailed analysis of China and India, specific details on hard-goods sourcing and in-depth interviews with three global sourcing experts.

Image: Kurt Salmon