As global trade recovers from COVID-19, apparel sourcing – the garment supply chain – still faces a barrage of challenges: demand instability, logistics gridlocks, increasing costs, and more.
And it’s clear that supply-chain disruptions—in particular, the price of shipping and raw materials and strains on capacity—are here to stay, 71 percent of apparel and fashion brands are planning to surge their nearshoring share by 2025, says the latest report by McKinsey & Company.
While 50% of brands have initiated a key transformation to achieve speed and flexibility.
According to the leader of the Apparel, Fashion & Luxury practice Karl-Hendrik Magnus, Senior Partner, McKinsey in Germany, “Harbor shutdowns, port congestion, container shortages, and capacity issues in sea and air freight are putting the fashion industry under massive pressure. For the first time, shipping disruptions are becoming the main price driver.”
While 82 percent of sourcing executives surveyed said rising freight costs as the biggest driver. And only 21 percent say additional labor costs in source countries is also a top driver — the previous top drivers.
“Patricio Ibáñez, Co-Author of the study and Partner at McKinsey said, The era of sourcing continuous cost improvement is being challenged as never before and there’s an increasing focus on other competing goals.”
“50% of companies have already embarked on extensive transformations to increase sourcing speed and flexibility,” according to the key findings of the study “Revamping fashion sourcing: speed and flexibility to the fore” by McKinsey & Company.
As part of the global study, McKinsey surveyed 38 CPOs (chief procurement officers) from top apparel companies and retailers in North America and Europe, who collectedly account for roughly $100 billion of sourcing volume.
Conversing the growing importance of nearshoring, resilience, and sustainability, the McKinsey report states that to remain competitive, fast response times and supply chain resilience are vital for today’s fashion companies.
Ever more businesses have stated earnings fall in recent months as new stock and refills have arrived too late, the collection fails to echo with consumers, and markdowns on overstocks are growing.
One way to answer more flexibly to supply chain risks and present trends, while also managing production by sales data, is to familiarize quicker transport routes, says the McKinsey report by the global consulting firms. Despite the higher sourcing costs, almost three-quarters of respondents are planning to grow their nearshoring share—that is, to source apparel from nearby countries.