The only constant in sourcing is change.
At the “Managing Operational Challenges in Global Sourcing” panel during CBX Software’s Global Sourcing Day last month, participants discussed a few of the most pressing transformations facing this dynamic sector.
And right from the start, moderator and CEO of CBX Software, Michael Hung, steered talk to the biggest possible disruptor: How the Trump administration could affect China, specifically, and Asia, in general. The consensus was largely that it’s too soon to tell—though the panel had opinions.
On the subject of Trump’s plan to impose 45 percent duties on goods coming from China, Glenda Wee, CEO of KGS Sourcing, essentially said, good luck with that. “For the U.S., [it could] gain revenue of $90 billion,” she said, by way of acknowledging a possible upside. “The impact on the people of the U.S. would be very different because I don’t think the world can replace 29 billion units of capacity. That isn’t available anywhere in the world.”
That’s that kind of number crunching Guido Schlossmann, president and CEO of global supply chain manager Synergies Worldwide, hopes the incoming president will employ rather than relying on the fly-by-the-seat-of-your-pants approach Trump has been accused of in the past. “It will be crucial for Trump to make data-based decisions,” he said, citing inflation and a slowing economy as potential negative outcomes otherwise. “If he were to make popular tactical changes to trade policies [without data], it could backfire a lot for the U.S.”
Ian Spaulding, CEO of Elevate Global, which manages supply chain performance, warned that the proposed actions by the President-elect might not have the desired effect, especially on the apparel industry in the U.S. “There is a hope that we can bring back jobs and improve the economy in certain parts of the country. But in my world, I don’t see those jobs coming back,” he said, adding that even if they did provide jobs, the question is for whom. “Let’s be clear the people who he is fighting for don’t want those jobs either.”
On the other hand, Spaulding said the heavy manufacturing sector could benefit from the proposed measures.
The biggest casualty to a Trump presidency could be Mexico, according to Schlossmann. Besides the fact that Trump has had Mexico in his crosshairs for months over immigration concerns, Schlossmann thinks NAFTA makes the region particularly vulnerable, since it can be amended easily and quickly. He sees that combined with TPP as potentially very detrimental to the country.
The challenge is it’s too soon to tell what challenges await with the arrival of the new president. But no matter which way Trump goes, some major players in global sourcing are facing questions of their own, as roles shift and times change.
In a world in which brands are increasingly operating their own sourcing offices, the group wondered what role, if any, agents and importers play.
It seems from the discussion that neither is going anywhere, but they must adapt the services they each provide. To remain relevant, both groups need to create their own opportunities by evolving, differentiating themselves and being their own best cheerleaders.
“There’s still a future for agents. But they can’t do it the way they’ve done it before,” offered Tomi Buic, managing director of retailer Clas Ohlson’s Asia office. “For some agents who are skilled in areas in which we’re not skilled, where we can use their competence instead, the future could be good.”
The trick, of course, is identifying those gaps in the market. Schlossmann said one is obvious. Agents must look for clients for whom using an agent makes the most sense for the scale of their business in a region. Rather than taking on the expense of operating their own sourcing offices, these companies would get more value from using a third party.
He sees others specializing, “becoming virtual manufacturers, emphasizing design, product development and offering product rather than a service.”
Ultimately though, one doesn’t have to come at the expense of the other. For some companies, Schlossmann said, the internal sourcing office and the agent can—and should—coexist. The agent can provide benchmarking and a sort of checks and balances system that keeps the company’s sourcing team to make sure it stays competitive. Most importantly, an external agent can keep companies from becoming to myopic. “The agent usually works with a portfolio of customers,” he said, “so he can provide a much broader market intelligence than your office can.”
Whether a company uses an in-house team, taps into an agent or employs both, Spaulding says nothing’s set in stone. The same companies he saw clinging to their agents just a few years ago are now setting up their own offices—and vice versa. Plus, he said there are some roles for which an agent is vital. “For companies that don’t want to go to Ethiopia and set up new factories and set up new frontiers [like that], they’d rather work with a partner who can do that for them.”
When it comes to importers, their value comes with experimentation. “For new lines, we use importers so we don’t gamble too much. We don’t know the volumes. They can gamble on it and if we see it works, we pull it to our sourcing,” Buic said.
Wee echoes this need for importers when it comes to niche markets. Ultimately, she said no matter how you operate, the expectations for transparency are higher across the board today. “One key area to focus on whether you’re an agent or internal sourcing, make sure your partner believes in your process to move forward. If not, it will be quite tough.”
When deciding whether to use an importer, Schlossmann advises companies think about more than the bottom line. “One can’t forget soft factors like culture and communication. In many cases, it makes sense to bring the same nationality to the sourcing country to establish that comfort zone,” he said. “It’s still a people business. We talk a lot about technology and digitization, but people still have to feel comfortable working together.”