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What Sourcing Will Look Like in 2020

If your sourcing strategy isn’t evolving, your business may not be around by 2020.

That was the simple message delivered at a Sourcing at Magic panel this week, where Apparel magazine and management consulting firm Kurt Salmon presented findings from their 10th annual global sourcing study.

“If you look at the concept of sourcing, it has not really changed in many years. The same things people looked at then are the same things people look at now, and that’s cost and quality,” said Akshay Madane, Kurt Salmon senior manager. “What has changed is the complexity of sourcing.”

Today, the greatest factor driving the shifts in sourcing are maintaining the balance between consumer satisfaction and the uncertainty in the marketplace. And the biggest challenge for sourcing executives has been managing that uncertainty.

But, according to Madane, evolution will be the way to manage it.

“The companies that will win in the future are the companies that review their sourcing strategies and their strategy will be evolving continuously,” he said. “Leaders are evolving their sourcing strategies more frequently than ever before.”

In a break from what’s been the norm, 68 percent of companies are revising their sourcing strategy every six months and 94 percent are reevaluating and making changes to their game plans each year.

The role of China and sourcing is also changing. Instead of looking solely at China as a low cost country—which is increasingly less the case as costs go up—companies are continuing to look beyond the Asian nation, and alternatives, like Vietnam, Bangladesh and Indonesia are upping their viability.

According to the study, 68 percent of companies are exploring new sourcing regions. Two percent more are sourcing in the Americas, Bangladesh and Vietnam compared to last year, while 7 percent less are sourcing in China.

So what can sourcing do? The answer, Madane said—apart from being more nimble—lies in super vendors.

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“Companies need super vendors. Those that can manage trends, mitigate risk, add design value, provide fabrics,” he said. “Sourcing leaders are going to rely more and more on these super vendors.”

Should that become the case, the new challenge will be managing those vendors properly. And to do it, more companies are putting greater reliance on their offshore offices and agents are playing a bigger role.

Many of today’s most valuable vendors are running efficient operations, incorporating the latest in sophisticated technologies, and some are even helping drive sourcing strategies based on their level of knowledge. But while brands and retailers are stuck focusing on safety and social compliance from their vendors, many are missing the boat on the extent of what their vendors can offer.

As Madane explained, super vendors can invest in new sourcing regions and diversify risk by spreading production across factories—which will help organizations be the kind of nimble today’s market demands.

“Sourcing needs people who really understand the technicalities of sourcing,” Madane said. “A strong focus over the next few years is going to be on building up that sourcing talent.”

In the meantime, managing uncertainty and consumer expectation likely won’t get less challenging, but the solution for improving sourcing going forward is a fairly simple one.

“Look for vendors who are value-added super vendors and give more autonomy to offshore offices,” Madane said.