The Go-To Sourcing Destinations: Experts Share details from ‘where’ ‘why’

by Dheeraj Tagra

04-May-2019  |  14 mins read

Sourcing Destinations

Right from costing, to countries with bilateral relations, capacities and circular economy… apparel sourcing is becoming more complicated with every coming day. This is the reason why brands and retailers are constantly concerned about their sourcing destinations. Considering all the factors like customer behaviour, raw materials, manpower availability, wages and product innovations that relate to the ‘where’ and ‘why’ while selecting the appropriate sourcing destinations, sourcing experts with rich experience in global sourcing move ahead with their decisions on the various go-to destinations. Apparel Resources explored in-depth the opinions of top sourcing experts of various global brands on the present apparel and textile industry scenario and most of them unanimously agreed that Bangladesh and India will remain far ahead in the long run.

Apart from several well-known challenges arising at different levels, the sourcing destinations are evolving much around the issue which is the root of these challenges. And this is the frequently altering customer behaviour visible especially in the last couple of years. Leave aside the patience factor which is no longer a trait that customers of today display, they have even gone farther ahead to have everything anywhere they want. Not only are they socially and environmentally sustainable, the present day customers are also quite service-oriented and want to have diverse experiences. Every brand has to prepare its package and offers accordingly based on such demands. All these are redefining the sourcing strategies for brands working with their suppliers.

Tanuja Sinha Roy, Regional Manager, JCPenney
Tanuja Sinha Roy, Regional Manager, JCPenney

“We have many sourcing destinations… so bottom line, ‘sourcing’ is a verb! It moves with the brands and customers at its centre wherein brands have to choose who their customers really are. There are multiple levels we have in the world for this like we have cost (of course it is taken into consideration), but speed and how fast can you deliver it are of even greater relevance. Similarly while deciding about any sourcing destination, other levels that have to be kept in mind are – How socially responsible are you? Are you flexible enough for the needs of the brand that we need? Then, how much is the social risk or political risk in that country or that region that we are looking at? For emerging markets like Myanmar or any other such country. How much should be the investments that should be fixed? and so on,” says Tanuja Sinha Roy, Regional Manager, JCPenney.

Tapan Bansal
Tapan Bansal, Regional Manager, Mothercare

According to Tapan Bansal, Regional Manager, Mothercare, sourcing is dependent on the equation shared between brands and manufacturers. If they are not on the same line of thinking, things are not going to work out in future. Go-to destinations, as per him, will be where one can built partnerships till retail so that all can understand what works and what does not. Everyone needs to understand what the customer will pay for or not pay for. This is where brands and manufacturers need to develop a strong partnership with each other. Tapan feels that margins have shrunk for all, be it the brand, manufacturer or anybody else in the supply chain. Hence, in order to survive and to ensure that all parts of the supply chain go together, probably people who are more proactive and have forward thinking will be the chosen ones.”

Hande Diltemiz
Hande Diltemiz, Regional Country Head, Production, H&M

Hande Diltemiz, Regional Country Head, Production, H&M, gives the perfect example from H&M to prove how demand is ascertained by the customers and not the brand. “In H&M, we have the business idea, facial quality at the best price in a sustainable way. We are demanding production to be more agile, flexible and to be ready to accommodate the different demands of customers through us. It is very important that innovation takes an important place in investment. The customers need to be aware about how we are bringing in speed and quality to our products. That is why brands are not putting forth their demand, but rather the word ‘customers’ are deciding about demand and we should facilitate this for the growth of the industry.”

With strong partnerships and customers at the backdrop, the lifecycle of a sourcing base should be forecasted upon. One of the best ways brands can implement this is by entering or planning to enter a sourcing destination with the minimum wage of US $ 45. Brands can peek and optimise between US $ 90-120 and start planning an exit from US $ 120 onwards and perhaps exit at US $ 140-150. Tapan believes this is a beautiful concept as there are two ways which evolve through this – first is how one optimises one’s cost and secondly, one becomes cognisant about the lifecycle and the economic cycle. If the cost goes up, wages will have to go up, which means planning for the future is a necessity.

Shirish Srivastava
Shirish Srivastava, Head Sourcing –Apparel, Puma

With regard to the established sourcing destinations, increasing minimum wages and huge capacities are the common thread shared between the two Asian giants China and Bangladesh. Both will maintain their position for many years but sourcing professionals see this scenario from another perspective of exploring new options. “There is a limit to which China can do so – what are the next options? This is to restrict the export production from China and get it manufactured to the bases, closer to the market. There are the areas in Europe, where we are exploring like Portugal which is doing production for us,” says Shirish Srivastava, Head Sourcing –Apparel, Puma. He firmly believes that this is also a great opportunity for India as the country will have all the infrastructure in place and will not have to do any extra work to grab opportunities. But ironically, India doesn’t seem to be ready for the same, especially in terms of the supply chain infrastructure that is needed. If one looks at the sportswear and performance fabric segment in the country, there is no other name except for Arvind. Shirish asserts that brands are too powerful and will find a source base elsewhere if India does not upgrade itself up in a timeframe of two to three years.

In fact India needs to learn from Bangladesh whose flexibility and adaptability has made it have 75 textile mills today. Even though the country imports yarn, it has built fantastic capability as far as fabrics are concerned. Moreover, they have grown tremendously on woven fabrics and some of their premier brands and twill fabric are coming to India. Similarly countries like China and Turkey which have fabric strength will always remain very important in the textile supply chain and they will grow as long as they will invest. Therefore, these countries will also remain very relevant for the fast models because they possess in-house fabrics.

Venky Nagan
Venky Nagan, CEO, Asmara

Venky Nagan, CEO, Asmara, is of the view that the availability of raw materials and manpower are the primary decisive factors for this labour-oriented industry. He avers that within Asia, Bangladesh and India are important go-to destinations for the future in garmenting. But the same spirit is missing in case of Vietnam as workers have plenty of opportunities and options. So, the country faces shortage of workers for garmenting industry. As far as Myanmar is concerned, it is always facing some human rights concerns and similar is the case of Cambodia.

Venky goes on to cite the instance of China and Chinese brands which are also exploring and even investing in Africa, especially in Ethiopia, as there are opportunities growing in these regions. Many Indian, as well as Bangladeshi companies, are also on the same track. However, these places are not without several challenges whether it is about their freight movements or their cotton not being contamination-free and so on. Hence, Venky confirms that the preferred go-to would be India and Bangladesh compared to slowly emerging countries like Ethiopia. India provides a huge platform in the form of Make-in-India and its rapidly upgrading Eastern states which will provide wider scope when they invest in polyester fabrics.

Apart from stable political conditions, changing bilateral agreements and their impact is something that no one can predict strongly and which are bound to impact the selection of a sourcing base. Though small-to-mid-size brands remain out of the purview of this factor, brands with global reach definitely need to respond to such change. Like Mothercare which changed from being UK-centric to now having 70 per cent international business.“When Mothercare came to Bangladesh, India, or any other such sourcing destination, duty-free advantage was not the sole point to be focused upon because our volumes were quite spread. So for developing relationships, it is important that as a manufacturing fraternity, we don’t get complacent…,” says Tapan.

There are many such areas where manufacturers can innovate and brands will not mind paying as long as there is a solution which links their business with the kind of idea one comes up with. There are areas of growth for manufacturers in the field of product development with the use of technology. Since India and Bangladesh are not focusing enough on this, they are missing out orders and also losing good price. “We have a tie-up with English Premier League; we do a lot of heat transfer which are RFID readable. If a user of our tees goes to the stadium and scans our logo, it will take him to 15 different spots in that stadium and customise his tee for free. He will also get a beer free along with discount to buy product next time. So, there are lot of things happening around printing such as heat transfer, stickers. Sadly, such solutions are not coming out of this region (India and Bangladesh), all these are coming from Europe,” says Shirish.

All in all, any established sourcing destination or emerging country has to be sharp on all fronts as brands are concerned about all aspects. “We are not making decisions just based on price, we are also looking at how flexible the vendor is, how conscious he is about the social policies and how much he takes care of the environment and of course close to the needle, we have to be sure the timelines are reducing. However, when we have core programmes, we do take care of duty advantages as well. We go to countries which have a longer lead time. For us, all things are important. Not because someone is watching us, but because someone believes in us,” concludes Tanuja Sinha Roy.

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