Apparel Sourcing Weaknesses Exposed
Finally, somebody had the courage and the good sense to write an article like this. As an apparel sourcing professional I could not help but relate to it. I found myself nodding in agreement to the key issues Edward Hertzman talks about in his recent article on Sourcing Journal. We see this happening all the time but say or do nothing about it in the industry. This one article inspired me to write a post on my blog.
I strongly believe that apparel industry is ripe for disruption. The rules of the game are changing at an unprecedented pace. A pace much faster than most retailers anticipated or are prepared to deal with. As Edward puts it and I agree, ‘It is almost as if the apparel industry is still selling cassettes when everyone around them is streaming music.’ Music to my ears I say. We need to change and innovate on our supply chain processes and upgrade our skills for the new rules of the game.
The key pointers from his rather long and extremely readable post are –
No one wants to admit their own weaknesses.
It could be that millions of dollars in margin are left on the table each year because of poor sourcing. But no one is going to admit to having a bad supply chain. Most will in fact brag about their sophisticated processes and systems employed in apparel sourcing. As Edward points out that it is those very processes and supply chain structures that are responsible for their demise.
Rigidity Rules and Decision Making is a labyrinth.
Just because you start buying fabric upfront does not mean that you have cracked the secret to ‘fast fashion’. Rigid supply chain systems are often put in place and enforced so that sourcing executives feel that they have control over the chaos. However, these multiple processes (read as layers of approvals) stifle entrepreneurial thinking, quick decision making and end up protecting many an inefficient middle management level jobs.
Company owned sourcing offices are potential covering places for inefficiencies.
This makes sense because company owned sourcing offices are comprised of company employees and are hardly having to compete with outside sourcing service providers who could probably source cheaper and better. In any case a company owned office would not like to admit to any existence of such external cost saving sourcing option. After all, how will that make them look? If you want to create healthy competition in your organization, you cannot be the competing party who is also controlling the match! Well put Mr Edward.
Fear rather than innovation dominates the sourcing decisions.
With such a tough retail climate, what if a sourcing executive suggests changing a vendor in an effort to save money or increase speed to market, and it all goes wrong? Will he get fired? Apparel sourcing is a very flawed, chaotic and stressful job with too many variables out of one’s control. But the pertinent question is, have we created stagnant environments because fear rather than innovation dominates?
Corruption and Bribery – sensitive issue but one that exists.
Hardly ever anyone talks about this issue on a public forum. I laud the attempt Edward makes here of addressing it. Backdoor arrangements should not be keeping buyer nominated suppliers around who will charge higher price for a basic fabric, as compared to an outside source. If at all the nominated source should bring in consistency, control and efficiency at a cheaper cost because of economies of scale provided. If the team or person you empowered to make your sourcing decisions is corrupt, then your supply chain is toxic. (Read this article on TIB Bangladesh here. on corruption) Even if you can find and bring in new resources, the gate keeper responsible for managing these partners will keep them out and shut them down as quickly as possible. Companies need stringent checks and balances within their supply chains, and having them is more critical than most companies understand or care to think about
Overpaying on Duty for non-dutiable costs included in FOB is an issue.
When a company requires fabric testing or factory audits and expects that it’s the vendor’s job to absorb, they are actually being foolish. No service comes for free. You can either pay for these services separately or pay as part of FOB. If it is added in the FOB, you are actually paying duty on those tests, which you are not required to do. How much money is being thrown away here?
Transaction based hunting for lowest cost supplier each season is actually expensive.
Apparel sourcing is a very relationship oriented game. If you are going to jump from one supplier to the other, at the next incentive of the lower price cut offered at your doorstep, you are hardly allowing for any efficiencies to kick in which can only result after a solid relationship has been built of mutually understanding the systems, workflow processes over a period of time. Such shortsighted approach can be disastrous.
In the end, he builds a case for knowledge acquisition and staying up to date with current trends, technologies, trade regulations, currency fluctuations, discovering newer sourcing options, taking risks with the new and uncertain. All in all a wonderful post. I thoroughly enjoyed reading it. I hope you do too. Read Edward’s article in sourcing journal here.