RESEARCH REPORT

In brief

In brief

  • After more than a year of acting in permanent crisis-mode, brands, retailers and manufacturers are now starting to focus beyond the short-term.
  • In this dynamic environment, retail sourcing leaders need a deep understanding of market developments, industry direction and growth opportunities.
  • Our new research among retail sourcing executives explores the future challenges, priorities, and predictions of senior retail executives.
  • Our new Global Sourcing Reference 2022 is an essential guide for global brands and retailers, providing key insights to inform strategic decisions.


The retail sourcing transformation

Brands, retailers and manufacturers of apparel have had more than a year of acting in permanent crisis-mode. As the pandemic spread, we saw a massive collapse in demand across global sales markets resulting in cancelled orders at suppliers, excessive overstocks at retailers, and a consolidation of companies that have changed the global sourcing landscape.

Despite the clear rebound in consumer sales, many production countries are still severely impacted. Major disruptions, such as international freight, continued trade tensions, political instability in key sourcing markets and increasing shortages of materials—as well as catastrophic global events from fires to floods—still continue.

As we look at sourcing market shares, the long-expected move back from farther sourcing destinations to markets closer to Europe or North America seems to be gaining traction, where the ability to decide late and react fast is critical to cope with the high volatility and risk on demand and supply side.

For example, China, now at 25.3% of European apparel imports and still with the largest market share, has dropped from 34% in 2014 and more than 40% in 2011. Bangladesh, India, Cambodia and Sri Lanka also decreased in sourcing share during 2020.

Future sourcing challenges for brands and retailers

As companies start to look beyond the immediate short-term, we asked retail sourcing executives about their challenges, priorities and predictions for the future of sourcing. Here are some of the key findings from our research.

Supply side risks regarding access to sustainable materials and general raw materials were the highest ranked concerns among our respondents, when asked about expected future sourcing challenges.

2.7

Sourcing of sustainable materials is the highest ranked future challenge (marked at 2.7 out of 3).

2.4

Availability of raw materials is the second highest ranked future challenge (marked at 2.4 out of 3).

And it’s no surprise, following the recent disruption, that transportation costs (2.4), delivery reliability (2.0), supplier capacity (1.9) and financial stability of suppliers (1.9) are still key concerns.

When it came to mitigating risks, brands and retailers consider themselves to be relatively well prepared to control CSR adherence and mitigate currency exchange rate risks.

80%

is the expected level of preparedness of sourcing executives on supplier adherence to CSR.

69%

is the expected level of preparedness of sourcing executives on currency exchange rates.

But sourcing executives are lacking the confidence in their preparations for transportation cost hikes (25%), raw material shortages (31%), and risks of political instability (31%). This emphasizes a clear need for strengthened capabilities to manage and mitigate transport and supply market risks, and develop respective contingency plans.

Future sourcing developments for brands and retailers

When asked about sourcing market developments, a clear picture emerges. Half of the sourcing executives expect total sourcing volumes to increase and 39% expect volumes per order to increase, while supplier portfolios will be more focused than in the past (67% expect a decrease in the size of supplier portfolios).

In line with the concerns regarding supply market and supplier stability, material availability, and transport cost, almost three-quarters (73%) of brands and retailers see a likely increase in near-shore sourcing and 72% expect stronger involvement of brands in material management, while suppliers are expected to be more closely involved in product innovation (expected by 61% of respondents).

The combination of intensified brand-supplier collaboration and increased near-shoring can provide an effective lever to tackle the continued challenges of demand and supply market uncertainty.

Considering the high priority on actions to drive carbon reduction and production compliance, it is not surprising that a reduction of air freight and a strong increase of Environmental, Social and Governance (ESG) activities are anticipated. This again also relies on close supply chain collaborations and a strengthened involvement of retailers in earlier stages for ensuring material sustainability promises.

Future-ready retail sourcing

The extent of change that brands and retailers need to tackle to build future-ready sourcing practices shows that this is not just about improving selected processes but completely transforming the role sourcing has within retailers.

Ultimately, sourcing will no longer be an executional backend-function but will take a seat at the C-suite table to effectively drive this change agenda as a critical enabler to business growth.

The Accenture Global Sourcing Reference Executive Summary 2022 is an extract from the full Global Sourcing Reference 2022 (GSR).

SEE PERSONALIZED FASHION

Akshay Madane

Managing Director – Accenture Leadership​​​


Tom White

Managing Director – Accenture Strategy, Retail


Dr. Peter Rinnebach

Managing Director – Accenture Strategy, Retail


Praveen Kishorepuria

Managing Director – Accenture Strategy, North America Cost & Zero-Based Transformation Practice Lead

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