Clothes manufacturers 'strategic over suppliers' - McKinsey

McKinsey survey finds market pressures are forcing clothes manufacturers to ditch shallow & fragmented supplier relations in favour of strategic approach

After a lifetime of shallow and fragmented supplier relations, the clothes industry is finally becoming strategic about its suppliers, a McKinsey report says.

The apparel industry, says McKinsey, has traditionally been characterised by “limited supplier collaboration and few long-term strategic relationships compared with other industries”. 

This, it says, is because clothes and footwear manufacturers not only have traditionally had a fragmented supplier base, but also because brands “pursue low production costs across different regions”.

The report details how sourcing in the global apparel and footwear market has become more challenging over recent years, with brands having to navigate “complicating factors”. 

The first of these, says McKinsey, is increased pressure from demand fluctuations and supply disruptions that have pushed brands to reduce or cancel orders. 

It adds that external forces such as regulation and new market- entrants are also resetting industry standards for speed, sustainability, and digitalisation.

Clothes industry forced into deeper supplier relations

McKinsey says these pressures have forced the industry to adopt a more strategic approach to supplier relationships. 

Its survey of chief purchasing officers (CPOs) reveals that apparel companies expect to continue to increase their share of deeper relationships to 51%. 

“This continued shift is recognised as a must-do strategy to keep pace with increased sustainability regulations and speed requirements as well as to achieve the expected level of digitalisation,” McKinsey explains.

The company warns that “striking the right balance on supplier relationships will be crucial”, adding: “Both brands and suppliers still value the flexibility to handle shifts in demand and use their bargaining power to secure higher margins.”

The survey also found that although apparel manufacturers have been prioritising nearshoring for some time, actual relocation is happening slowly. 

It also found that, despite inflation, most respondents expect a slight reduction in sourcing costs, and also that fashion brands are accelerating their adoption of digital innovation to enhance transparency across their value chains.

  • For further insight check out other issues of Supply Chain Magazine, as well as Procurement Magazine & Sustainability Magazine
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