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Digitisation driving change in apparel sourcing – McKinsey Survey

"McKinsey's biannual Chief Purchasing Officer (CPO) survey has brought out the most important trends in apparel sourcing. These include: the need to balance cost, compliance, and capacity; navigating volatility; and exploring the growth opportunity in sourcing regions such as Bangladesh and East Africa. The 2017 survey focusses on digitisation, a topic of critical importance to apparel companies worldwide. It is also an area where many companies need a major step-up. Most of the CPOs in apparel sourcing are far from being digital."

 

 

Digitisation driving change in apparel sourcing McKinsey Survey

 

McKinsey's biannual Chief Purchasing Officer (CPO) survey has brought out the most important trends in apparel sourcing. These include: the need to balance cost, compliance, and capacity; navigating volatility; and exploring the growth opportunity in sourcing regions such as Bangladesh and East Africa. The 2017 survey focusses on digitisation, a topic of critical importance to apparel companies worldwide. It is also an area where many companies need a major step-up. Most of the CPOs in apparel sourcing are far from being digital.

Digitisation driving change in apparel sourcing McKinsey Survey

 

Some companies have started taking digitization seriously and are deploying technology to reduce lead times,  boost innovation and collaboration, and better understand and serve customers’ needs. The McKinsey survey reminds that digitisation will end in disappointment if it is not integrated into a broader transformation to a customer-centric operating model. In order to bring in greater speed and agility, companies will need to redouble their efforts to optimise four key factors of success: country selection, supplier collaboration, compliance and risk, and end-to-end efficiency. These factors still represent massive improvement potential across most of the apparel industry.

Way ahead to drive growth

The survey reflects the perspectives of 63 participating CPOs, who together are responsible for a total sourcing value of over $137 billion. The survey offers an outlook and way ahead for CPOs to drive growth. The key elements include:

Apparel executives must continue dealing with a volatile, fast changing environment along with heightened competition and increasingly savvy consumers. That is driving an urgent search for greater efficiency and flexibility along the end-to-end sourcing chain. In recent decades, apparel buyers have relentlessly shifted sourcing to lower-cost countries – ‘the next stop of the sourcing caravan’. Today, the search for the caravan's next stop is as active as ever, but there are new dynamics at play. Some traditional low-cost countries are losing their attractiveness, while sourcing executives are showing keen interest in newer markets - particularly Vietnam, Myanmar, and Ethiopia. As companies seek to step up their agility, however, there is also fresh focus on proximity sourcing and re-shoring.

Digitisation could enable apparel companies to achieve a step change in performance, transform to a customer-centric operating model, and create transparency throughout their global supply chains. The apparel industry is still at the beginning of its digitisation journey. Companies need to accelerate digitisation and integrate it into their broader transformation. Those that succeed will break down silos between sourcing and product development, shorten lead times, lower costs, and increase transparency to manage sustainability.

 
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