Global apparel brands are realizing the importance of diversified partnerships in today's market. The working between retailers and suppliers requires more flexibility to enhance relationships and drive sales. The global supply chain, originating from low-cost sourcing destinations, is currently facing logistical challenges due to geopolitical tensions and fluctuating demand driven by inflation.

External factors, such as changing government regulations and new market entrants, are impacting delivery timelines. Sustainability and digitalization have become key focal points in the global supply chain. Leading apparel brands are actively strengthening their ties with global suppliers, a shift from the past when this segment had limited collaboration and fewer long-term relationships compared to other industries.

This change in strategy is significant, especially considering the traditionally fragmented supplier base across various low-cost manufacturing countries. Companies in these regions have historically prioritized quick production of low-cost apparel and accessories to keep up with rapidly changing catwalk trends.

Focus on long-term order volume commitments with suppliers

As per 2023 McKinsey Chief Procurement Officer (CPO) Survey, which covered companies with a collective sourcing value of approximately $110 billion, it is evident that stronger relationships, particularly those involving long-term order volume commitments, yield better results. The survey reveals a notable increase in shared commitments, with three-to-five-year plans and collaborative partnerships accounting for 43 per cent of the total supplier base in the apparel segment. This represents a significant rise from the 26 per cent reported in 2019.

Although near-shoring of supplier destinations is in focus, the survey indicates a gradual shift towards actual relocation despite challenges posed by inflation and economic instability. Major retail companies surveyed are demonstrating a slight reduction in sourcing costs, coupled with a growing adoption of high-tech digitalization to enhance efficiency and transparency across the various stages of the value chain.

Interestingly, the survey highlights regional differences, with most European countries being more open to long-term volume commitments to foster better supplier relationships. In contrast, the majority of North American countries are still hesitant to commit to volume orders. The report underscores that over 80 per cent of larger respondents have established strategic supplier partnerships, while small and medium-sized enterprises tend to adopt a more transactional approach, with only one percent engaging in shared investments.

Flexibility in vendor selection to help sourcing

In a recent report by Just-Style titled “Outlook 2024 - What’s next for apparel sourcing briefing’, featuring insights from industry experts, Sheng Lu, Associate Professor, University of Delaware, highlighted shifting focus in vendor selection amidst global economic and geopolitical uncertainties. Beyond the traditional factors of cost, market delivery speed, and compliance, fashion brands are expected to prioritize flexibility and agility.

Projections from the World Bank and International Monetary Fund (IMF) indicate a slow global economic growth of around 2.6-3 per cent in 2024. In response to this, fashion brands are advised to build a more flexible supply chain to navigate market uncertainties and mitigate unpredictable sourcing risks, ensuring readiness for stock requirements.

Looking forward to 2024, retailers may face challenges in finding cost-effective alternatives to China for raw textile materials and items requiring smaller runs and enhanced versatility. While South Asian and Central American sourcing destinations may benefit from the partial boycott of Chinese goods, this doesn't necessarily diminish China's enduring position in the apparel supply chain.

The report underscores growing importance of sustainability in the apparel sector, emphasizing the need for close collaboration among sourcing, legal, and sustainability teams across the value chain. In the rapidly evolving landscape of the fashion industry, characterized by high-tech digitalization, connecting with GenZ from the initial sourcing stages becomes paramount for brands aiming for success.

By Fashionating World
https://www.fashionatingworld.com/new1-2/global-apparel-brands-forge-flexible-partnerships-for-supply-chain-resilience