Given the dynamic nature of apparel sourcing today, it’s worth taking a close look at fabric sourcing. Specifically, how smarter strategies can affect the speed and cost concerns driving the industry as well as the decisions that companies are making in the face of the ongoing trade upheaval.
Patricio Ibáñez, a partner at McKinsey & Company, spoke with Sourcing Journal’s publisher Caletha Crawford to discuss the ways in which fashion firms need to think about raw materials, their mill relationships and emerging sourcing destinations differently.
Speaking about the elephant in the room, Ibáñez says apparel companies can’t be in too much of a rush when it comes to diversification. While he recognizes why businesses sourcing in China are antsy to get out, he cautions against jumping out of one problem and into a host more if the new country can’t meet the productivity, quality, speed and sustainability you need.
“It’s important to do the prioritization to think what is the heat map of what are the high priority items and capability and capacity available, and then think beyond that to the resilience you have in your supply chain.” he said. For instance, he said, the items that cost the most may not be the first ones you should move. “You may need to accelerate the low-cost items more. Even though the impact from the tariff on those is lower, those are the ones that you don’t have a lot of margin and you have less possibility to absorb any impact to speed to market.”
Beyond trade-related levers, Ibáñez offers several strategies for lowering fabric-related costs.
The first is the cost engineering the automotive and electronics industries have developed to manage cost of goods. Essentially, they’ve figured out how to determine what the inputs they purchase should cost rather than relying on prices set by suppliers. It saves money and alleviates the need to negotiate. Further, he said, it puts more power in the hands of the designers.
“You have a close collaboration between design and cost engineering so they can make better choices [based on cost and value],” he said, adding decisions between one type of DWR or another, for instance, can be based on price resistance in the market or the perceived value one might add over the other. “You can make better decisions about… where can I take features out because my customers aren’t going to care. I can make informed decisions about what are the extra costs and what are the benefits.”
Listen to the podcast to learn why Ibáñez says brands need to be more sophisticated when it comes to monitoring commodities like oil and how they can curtail material consumption by up to 20 percent by working with factories to create more efficient markers.