China’s portion of imports continues to decline, with Bangladesh and Vietnam picking up much of the loss in the past couple of years. But with massive supply chain disruptions coming at a time of strong consumer demand, country stability and flexibility are taking on added importance in the sourcing decision. Factor in a changing cost-margin equation, and we can see why companies that have been contemplating nearshoring for years are now actively looking for options closer to home. The sweeping changes of the past few years are redefining the value proposition for bringing work to the Western Hemisphere.
Transformational JourneyEvents of recent years have forever changed the trajectory of the fashion and consumer goods industries. Supply chains must morph to become more demand-driven to meet today’s ‘new normal’ requirements. Strategic and collaborative partnerships must replace historically transactional business relationships.
Opportunities for business improvement extend well outside the sourcing footprint. The product development process, for example, offers significant opportunities to simplify assortments by leveraging advanced analytics, increase adoption rates using 3D design technology, and better manage raw materials with PLM software.
Of course, productivity and supply chain transparency remain critical supply chain issues. Smooth communications and interactions with suppliers require digital platforms. Manual means of tracking and communicating (spreadsheets and emails) are no longer viable options. The mutually beneficial visibility and control from real-time Shop Floor Control (SFC) solutions streamline production and supply chain management while fostering improved partner relationships. Suppliers with multi-product flexibility and small batch capacity are also in great demand. The bottom line is, that suppliers that are digitized, more agile, and more efficient are now winning the day.
Forging strategic partnerships with supply chain partners requires a step change in these industries. The historical practice of focusing exclusively on sourcing at the ‘lowest’ cost is beginning to give way to achieving the ‘best’ cost, shifting the buying priority from ‘cost per unit’ to ‘best net margin’. Selling more products at full price delivers massive improvement to the bottom line. When this is considered, the value of reshoring/nearshoring is redefined.
Building a network of trusted suppliers requires more thoughtful supplier consolidation and selection. Manufacturers that continue to rely on old ways of working are less attractive in this environment. Today’s brands and retailers focus more on, and often actively participate in, their suppliers’ adoption of technology and upskilling of their workforces.
More Change NeededIt is abundantly clear that digital supply chains yield speed, flexibility, and transparency—and digitization has already come a long way since the onset of the pandemic. But significant obstacles remain. Lack of local raw material availability, production capacity, and labor supply are substantial roadblocks to reshoring. But improvements in these and other issues are coming more rapidly than in the past, thanks to increased strategic investments, manufacturer/supplier partnerships, government relations, and other industry initiatives.
Of course, such a transformation is not easy and requires bold actions. It’s a race that more closely resembles a marathon than a sprint. But 50 percent of companies surveyed by McKinsey said they have already started their journey to shorten lead times and create more demand-driven supply chains. Many of these decisions were jump-started by the pandemic. Regardless of the catalyst, sourcing processes are clearly going to look significantly different going forward.