In this previous article on the digital supply chain, which I recommend reading to deeply understand the phenomenon, we described how the speed and versatility that the new digital client instills in the market forces companies to invest in digitizing their supply chains.

McKinsey’s Textile Sourcing Roundtable – Hong Kong

“As fashion brands are facing the dilemma of doing more with less, the focus is on suppliers. Apparel companies are concerned about the future of free trade agreements, the increasing terrorist threat in some of the main sourcing countries and the extended volatility of sourcing costs due to the effects of exchange rates. At the same time, labor costs continue to soar in the leading apparel manufacturing countries, as well as energy costs and the price of raw materials, which exerts additional pressure to streamline efficiency in the whole value chain, as the options for alternative sourcing countries are dwindling.

“Doing more with less”. Solving the current equation of apparel sourcing.

The changing landscape on the demand side increases this pressure. The topics of this year and the next –from the slowdown in sales to the rise of omnichannel—make it necessary for companies to adapt quickly and go from transactional sourcing to performance-based supply.

The answer to the challenges: digital sourcing

The discussions revolved around the issue of digitizing the supply chain and the Industry 4.0 with the backdrop of difficulties in sourcing. The main questions for the sourcing industry are how digitization can drive efficiency and improve services in sales and in the entire value chain. The good news is that, as many respondents agreed, “digital sourcing helps to do more with less”.

The advances in virtual design, digital printing, robotics and automation are changing the way companies in many sectors design and manufacture their products. However, with a hefty amount of preliminary work that stills needs to be done to optimize apparel sourcing processes, most of the respondents felt this industry is still in an early stage in terms of adopting these new approaches.

Considering the large proportion of manually managed processes in the industry, even the simple automation steps taken in the work process are seen as a big step forward. Other relevant initiatives from participating companies include automatization in manufacturing to increase the “local-by-local” rate and boost flexibility. Executives also mentioned the potential of the Internet of Things –a network that connects devices, garments with sensors and advanced analytics—to create new opportunities, improve planning and processes along the entire apparel value chain. For the moment, only the most advanced players are exploring this technology.

The participants at the Roundtable clearly see apparel sourcing digitization as part of the solution to solve the current equation of “doing more with less”. However, a survey conducted during the event highlighted their most pressing concerns as still centered on optimizing traditional, non-digitalized sourcing, and preparing for the future digital supply.

Digitalización, RSC – CSR  among the main topics.

It is not surprising that the improvement of end-to-end efficiency in the supply chain, corporate social responsibility (CSR) and the issue of compliance are among the top five topics mentioned by the executives. The current discussion on sustainability has expanded to cover a true “co-creation” of innovations among several players to find all-round solutions and to be in a “state of sourcing driven by purpose”, as expressed by a respondent.

Collaboration and development of suppliers is a main concern among sourcing executives. In order to secure long-term success, the participants believe they will need to support their providers to develop skills for the digital future.

The consensus among the participants of the roundtable was that apparel sourcing currently has a development delay in comparison with other sectors. Only a few companies were mentioned as showing true better practices in their path towards digital sourcing.

An obsession with digitization of the supply chain.

Statements such as “digitalize or die” and “the country of digital sourcing is the next sourcing country” –both heard during the conference—may seem far-fetched, especially because true digitization is quite far for most sourcing players. However, the participants at the Apparel Sourcing Roundtable were confident that deep change is underway. While currently few external signs of digitization are evident, many companies are busy paving the way for digital innovation. Those who manage to make rapid progress –and hence, do more with less—will thrive, instead of simply surviving the inevitable transformation of sourcing and purchasing”.

You will find this article and more about the textile industry in the Modaes.es Blog