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Increasing profits trough strategic sourcing

By FashionUnited

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Fashion

Retail management consulting firm Kurt Salmon Associates (KSA) estimates that most consumer businesses can realise a 2-4% reduction in cost of goods sold by using a strategic sourcing programme. This would imply

retailers can increase gross profit margins by 20% through better sourcing and product.

Further more, according to KSA retailers can increase their profit through changes in product development, and the way they work with suppliers. Through an authoritative strategic sourcing programme centred on negotiating more favourable agreements and improving collaboration with suppliers retailers will benefit.

“As total product costs can add up to as much as 80% of net sales, it is not surprising that as part of their margin management activity retailers are looking to find ways to slash costs,” confirms Richard Traish, senior partner, KSA. “A more strategic approach to sourcing, product development and managing suppliers can help improve that all important gross margin.”

“Better integration of customer insights on the one hand and delegation of more added value activity to suppliers on the other is part of the retailers’ formula to reduce costs,” adds Traish. “Many consumer goods companies could learn a lesson or two from those fashion firms that have built a supply chain that can develop product closer to demand and have upped the stakes in delivering ‘newness’ because they are benefitting from improved margins.”


KSA is further researching strategic sourcing, and will publish its latest findings in its annual global sourcing guide. Together with its clients, KSA makes strategic, operational and information technology decisions to create tangible and meaningful results.

Image: Kurt Salmon Associates

Kurt Salmon Associates