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Sourcing Summit Panel: Top Sourcing Executives Share Concerns and Predictions

fights for increased wages in other nations, Mashooqullah said he sees wage increases happening across the supply chain as a sort of domino effect from one nation to another. And, he said, a 10 percent wage increase relates to roughly a 1 percent increase in FOB cost.

Panelists agreed noting that companies should not expect FOB costs to stay stagnant in the face of rising costs all along the supply chain. “It’s about cost mitigation as we move into the future,” Sinclair said.

But the one area where price should not increase, Mark Messura said, is in raw materials. He explained that with more cotton available in the world today than ever before, he expects that raw material prices for cotton and other fibers should remain rather fixed for 2014. Messura noted that cotton is still the preferred fiber in the market and that Cotton Inc. is seeing demand moving back to pre-cotton crisis levels. He mentioned that brands are signing up rapidly to participate in Cotton Inc.’s new “Cotton LEADS,” program committed to responsible cotton production.

In a more overarching view of today’s sourcing business, Streader said one of the biggest impacts in sourcing is finding out what the customer wants. While in the past brands and retailers took a, “this is what we’re designing, this is what you’re buying,” approach, he said, we are not doing that any more. Customers have become the ones who dictate what the stores provide.

Compliance was the most emphasized topic in this panel with a significant portion of the discussion dedicated to this hot button issue.

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As far as compliance and testing management, Mashooqullah said, “I have my own beef with that,” adding that, “there’s a very high cost if you don’t comply with compliance. Some companies have become over processed when it comes to following standards. When a company has its own internal auditors, plus outsourced third-party auditors and suppliers who are expected to have their own inspections, the process can become muddled and costly. But regardless of efficiency or lack thereof, Mashooqullah said, compliance is a standard that should be followed by all brands.

The overall cost of safety will spread out through the supply chain, which is what we need Sinclair said, because brands don’t want to risk ruining reputations. Over time, costs associated with complying will decrease, he said. There may be initial investments, but these costs should be viewed and long-term and necessary, it’s about “rationalizing compliance” he added.

Messura piggy-backed off of that statement reminding everyone that factories don’t get named for failure to comply, brands do. “Think of it as insurance,” he said referring to the cost of compliance.

Streader closed the panel with an earnest statement summing up the notion of compliance and striking a chord with sourcing executives both on the panel and in the audience, saying that it’s not about the cost of compliance at all, “It’s imperative that we embrace corporate social responsibility,” he said.

Brands can’t fuss over a $1,500 audit, it’s the cost of doing the right thing, he said. “It’s a moral responsibility and as soon as we get there as an industry, the better.”