The apparel sourcing sector faced severe setbacks due to the pandemic and subsequent Ukraine-Russia and Israel-Hamas conflict, coupled with ongoing macroeconomic instability revealing vulnerabilities in global supply chains. Disruptions like factory closures, logistical hurdles and shifts in consumer behaviour underscored the necessity for more resilient and flexible supply chains. Not to forget the severe weather events adversely affecting supply chains and the accessibility of raw materials across Asia.
According to McKinsey & Company’s report ‘The State of Fashion 2023: Holding onto Growth as Global Clouds Gather’, the persistent disruptions in supply chains underscore the need to invest in faster manufacturing systems. Looking ahead, it’s increasingly evident that supply chain disruptions are no more a fleeting phenomenon but a lasting reality. To thrive amidst this scenario, the apparel industry must prepare for unforeseen challenges, fostering adaptable and flexible supply chains. This entails proactive risk management, contingency planning and enhanced collaboration among supply chain stakeholders.
Brands must prioritise transparency in their sourcing strategies, ensuring robust visibility and traceability throughout the supply chain. This approach empowers them to effectively mitigate risks and respond to unexpected disruptions.
Against this backdrop, industry leaders shed light on key trends shaping how brands and retailers approach their sourcing strategies, promoting innovation and adaptability.
Sourcing as a Service (SaaS)
In the ever-evolving landscape of the apparel industry, a new paradigm is emerging, one that promises to redefine the way brands and retailers approach their sourcing strategies. This shift, referred to as ‘Sourcing as a Service’ (SaaS), is gaining momentum and transforming the traditional model of apparel sourcing into a more agile, tech-driven and consumer-centric approach.
SaaS leverages the power of data, artificial intelligence (AI) and machine learning (ML) to create a seamlessly interconnected ecosystem. This interconnectedness offers unparalleled visibility into the supply chain, enhancing trust and predictability. At the core of this transformation journey is the integration of digital technology throughout the supply chain.
However, the SaaS model isn’t entirely novel, argues Narendra Babu, VP (Outsourcing), Jockey India – Page Industries, but its significance and impact have surged in the wake of the challenges posed by the Covid-19 pandemic.
One of the critical benefits of adopting the SaaS model is its ability to automate data analysis. By using AI and ML, companies can not only identify delays or disruptions but also assess the cascading impact on various activities within the supply chain. This level of predictive analysis empowers businesses to proactively manage potential disruptions.
“Today, if I ask any of my vendors if my goods are on time, first he is going to tell me that everything is on time. But they depend on Tier-2 supplier and those Tier-2 suppliers are again dependent on Tier- 3 suppliers. Now digitally we can integrate these supply chains. When there is visibility, there is a lot of trust in terms of when my goods are going to come. My flexibility and agility are much better,” explains Narendra.
Additionally, digital tools enable companies to optimise their orders by selecting suppliers with available capacity while avoiding overloaded ones. This real-time insight into capacity utilisation is a game-changer in ensuring smooth and efficient operations, better inventory management, eliminating duplicity and bringing forth transparency.
SaaS also digitises various essential processes that sourcing professionals engage on in a daily basis. From vendor onboarding to cost negotiations, technical audits and quality management, these activities are streamlined, reducing reliance on time-consuming email exchanges and Excel spreadsheets, thereby enhancing efficiency and authenticity of data.
This profound transformation has also brought sourcing professionals closer to consumers. In fact, it’s the consumers who hold the reins, influencing sourcing choices based on their acceptance or rejection of the final product. The ‘real disruption’ lies in this newfound closeness to the consumers, necessitating immediate changes in the supply chain.
“Digitally we can integrate these supply chains. When there is visibility, there is a lot of trust in terms of when my goods are going to come.” Narendra Babu, VP (Outsourcing), Jockey India – Page Industries
Collaboration between sourcing and sales teams
Sourcing has often been seen as the unsung hero, unnoticed unless something goes wrong much like a wicketkeeper in cricket. However, this perception is gradually shifting, marking a significant transformation in the sourcing paradigm.
According to Shirish Srivastava, Head of Apparel Sourcing, PUMA India, sourcing teams must work in close collaboration with sales teams. He suggests that sourcing teams must add substantial value beyond traditional roles. With automation threatening to streamline 80 per cent of sourcing tasks, the focus must shift towards innovation, product development and competitive pricing.
Collaborating with the sales team, developing cost-effective products, integrating new technologies and providing multiple solutions to challenges should be of prime importance. The goal should be to become indispensable to the business, creating a symbiotic relationship where the absence of sourcing would render the brand incomplete.
“I think sourcing teams which are especially for domestic industries, if they do not feel that they are an extension of the sales team and work closely with them, they’re going to get extinct. Trust me, 80 per cent of the job that any sourcing organisation does right now can be automated,” stresses Shirish.
Shirish also emphasises on the expertise expected from a sourcing organisation by a brand.
“Brands think of sourcing organisations as product masters. For instance, cotton prices went up last year and commodity prices are going up. How can we still maintain the price or bring it down? We are subject matter experts. It is the responsibility of the sourcing team to reverse engineer, find innovative solutions, possibly localised, to maintain or reduce prices,” says Shirish.
In essence, the future of sourcing in the apparel sector lies in the establishment of value-based partnerships. The traditional debate of Commission basis versus Free on Board (FOB) is evolving into a nuanced discussion about value creation. Leading industry voices are urging stakeholders to view sourcing not merely through the prism of money, but as a collaborative venture focused on mutual growth and innovation.
For Arjun Puri, Director at KAS India, the exclusive direct sourcing arm of Kmart Group, cost, while important, is no longer the sole determinant of success. The focus has shifted dramatically towards value creation, fundamentally reshaping the role of sourcing organisations. The capacity of sourcing teams to identify market-winning products, meet deadlines and optimise inventories has become paramount, redefining the criteria for their success. Simultaneously, businesses need to recognise and invest in the invaluable expertise that sourcing partners bring to the table.
Selection of buying houses and safeguarding data integrity
Careful selection of buying offices, fostering seamless collaboration between design teams and safeguarding data integrity are vital components of a successful apparel sourcing strategy.
Much depends on the choice of buying offices, emphasises Narendra. Each buying office has its unique strengths—be it punctuality, quality, sustainability or versatility. Therefore, the key lies in meticulous due diligence while selecting a buying office, as it significantly influences the challenges faced during the partnership.
The other significant hurdle is bridging the creative visions of brand designers and buying office designers. The struggle for alignment can impact product aesthetics and, subsequently, consumer satisfaction.
In the age of technology, data integrity also emerges as a pivotal concern. While advanced systems may be in place, the accuracy and reliability of data must be taken into account. Moreover, protecting this data from unauthorised access and ensuring it isn’t shared with competing brands, is extremely critical.
“Data integrity is crucial. Data can be wrong. You know somebody has to be realistic in finalising how buying officers protect these data. Are they giving this data to any other brands? How do you secure that? This is one of the biggest risks I see,” cautions the VP of Jockey India.
“Instead of taking the entire 50,000-pieces order at once, brands like Bestseller may request 2,000 pieces for one market, like Brazil, and another 2,000 pieces for another market, such as Denmark.” Rafee Mahmud, Director of Mahmud Group
Manufacturers as innovators
Traditionally, manufacturers were viewed as entities responsible for production, adhering strictly to the specifications provided by brands and retailers. However, this perception is undergoing a significant transformation. Arjun emphasised on the evolving role of manufacturers which involves moving beyond their conventional responsibilities and embracing a proactive approach. Manufacturers are no longer mere executors of designs; they are becoming trendsetters themselves. By investing in technology and fostering transparency, manufacturers are engaging in co-creation with brands, offering innovative solutions and ideas
Shirish underscores the intelligence and creativity inherent in manufacturing units. He urges manufacturers to adopt a forward-thinking mindset, suggesting that they venture into showcasing their unique products and styles directly to brands. By doing so, manufacturers can explore collaborative opportunities, potentially leading to the creation of their own successful businesses. This shift from being passive executors to active collaborators is vital for their growth and sustainability.
“If manufacturers can promise improved quality, adherence to deadlines and efficient compliance management, it can significantly enhance the value within the entire supply chain.” Rakhi Handa, Consultant
Manufacturers even need to demonstrate more appetite for ‘independence model’. Instead of relying solely on brands and buying offices for directions, manufacturers should showcase their capabilities in quality management, production timelines and compliance management. This demonstration of self-reliance adds significant value to the supply chain, fostering stronger partnerships between manufacturers and brands.
“In the existing system, a representative from a brand or a buying office visits the factory, overseeing production and quality control full-time, managing inspections. If manufacturers can promise improved quality, adherence to deadlines and efficient compliance management, it can significantly enhance the value within the entire supply chain,” says Rakhi Handa, Consultant and former Senior MD, Product Safety and Quality Assurance at Target Sourcing Services.
Bangladesh’s response to sourcing challenges
A combination of factors, including supply chain disruptions, escalating costs and apprehensions regarding working conditions, has prompted several Western fashion brands to reconsider their age-old reliance on Chinese factories. Bangladesh has grabbed these opportunities quite well over the last few years and also surpassed China in exporting product categories like denim to the global market. In this shifting paradigm, Bangladesh stands out as a beacon of opportunity for sourcing, especially as companies adopt China plus-one strategies to diversify their manufacturing bases.
Talking about the recent changes in the global sourcing practices, Bozlur Rahman Bhuiya (Tony), Director of Bengal Hurricane Group, says, “Brands like SHEIN are producing 100 per cent of their products in China, yet they are shipping these goods to other countries including USA and Europe in just under two weeks that too directly to consumers! Importantly, they are becoming mainstream brands! However, when it comes to the sourcing of value-added products, unlike SHEIN that’s an ultra-fast fashion brand, brands will always require a lead time of at least 45-60 days – be it for the Indian market or any other market in the world and the brands know this fact. If you are into innovations, this is the least time you can expect to fulfil your orders.”
Buyers are also increasingly adopting a ‘sell first, make later’ approach, leading to the emergence of split purchase orders, as seen with companies like Bestseller.
“Instead of taking the entire 50,000-pieces order at once, brands like Bestseller may request 2,000 pieces for one market, like Brazil, and another 2,000 pieces for another market, such as Denmark. To support this approach, brands have established regional offices that understand the preferences of consumers in specific countries. While this strategy benefits brands, it can pose challenges for manufacturers. Nevertheless, we are prepared to be as adaptable as possible and are exploring new methods, including creating smaller production lines,” comments Rafee Mahmud, Director of Mahmud Group.
Rafee elaborates on Mahmud’s denim factory set-up, revealing that they currently operate with 55 machines per line, a deliberate reduction from the traditional set-up of approximately 75 machines per line. This intentional decrease enhances line balancing and overall output efficiency. He emphasises on their ongoing efforts to further reduce the number of machines to a range of 30-35 per line in the future. This strategic move aims to enhance flexibility, allowing Mahmud to seamlessly accommodate orders of diverse sizes and complexities.
Another crucial element in this industry involves the meticulous sourcing and management of suitable materials. The factories in Bangladesh must go for an extensive global exploration to identify the right fabrics, as per the buyers’ requirements.
“Subsequently, designers are being recruited to contribute to the design aspects once the right fabric material is identified. We also have established two modern design studios in Hong Kong and the UK to collaborate with buyers on their sourcing needs as far as fabric technicalities are concerned. This strategic move also broadened our horizons and positioned us as the preferred manufacturer of high-fashion women’s clothing for our existing and new clientele including American labels like Calvin Klein and Tommy Hilfiger,” opines Fateh Ul Islam, Managing Director of Green Smart Shirts Limited.
The role of B2B Marketplaces
B2B marketplaces are speedily reshaping the procurement landscape, sparking a race among newcomers aiming to revolutionise supply chains and established players striving to maintain their positions. The retail sector has witnessed a surge in these platforms. Unlike in the past, suppliers and buyers no longer need to invest extensive time and resources searching for each other or worrying about order statuses and financial transactions. This newfound ease has become a significant advantage.
“We have also established two modern design studios in Hong Kong and the UK to collaborate with buyers on their sourcing needs as far as fabric technicalities are concerned.” Fateh Ul Islam, Managing Director of Green Smart Shirts Limited
These platforms also offer reasonable prices and quicker delivery times, addressing the industry’s pressing needs.
However, some industry insiders, especially those deeply rooted in the fashion ecosystem, express reservations about the rise of B2B marketplaces. The core concern voiced by sceptics lies in the essence of these marketplaces: they are aggregators. While they bring suppliers under one digital roof, the depth of their service offerings raises questions. Critics argue that these platforms, in their pursuit of providing a one-stop solution, often overlook critical aspects of the procurement process.
Delivery logistics, product quality, design aesthetics, and most importantly, intellectual property protection, are aspects that can’t be addressed adequately within the confines of these platforms, claims Devender Gupta, Founding Partner, Asmara International, a fashion company with a worldwide sourcing platform and GLOCAL expertise, focused on design and product.
He further states, “The primary problem with these B2B marketplaces is that they fundamentally operate as aggregators. Their main pitch is, ‘Come to our platform, and you can find whatever you need to source. We’ll provide you with a single solution for the product and its price.’ However, critical aspects like delivery, quality, design aesthetics and adequate IP protection are often overlooked.”
However, B2B e-commerce platforms like India’s Udaan have an ‘in-house’ expert team for creating exclusive brands. It offers essential support in brand creation, content making, enhancing product quality and technical expertise, enabling sellers to create and sell their garments exclusively on the Udaan platform. It offers products across various categories including apparel, clothing accessories, electronics and footwear, amongst others.
Udaan’s lifestyle business has already created over 20 exclusive brands in partnership with small apparel manufacturers and has plans to enhance the same to over 100 brands in the next few years.
The company claims that it has partnered with small businesses to offer best-in-class quality garments at affordable prices to serve the needs of rural India. In 2022, Udaan claimed to have shipped over 30 million products each in the lifestyle category.
