The latest survey on Global Sourcing published by the Asia Inspection (AI), a Hong Kong-based global inspection and accreditation body, said that cost-sensitive textile businesses increasingly turn to India and Bangladesh.
The survey said, China is maintaining dominance in Global Sourcing. Half of surveyed companies expected to source more from China in 2018.Outside of China, India and Bangladesh are increasingly given preference for Textile sourcing, being lower-cost destinations.
The respondent population for the survey included over 250 companies from across the globe, ranging from 5 to 5000+ people and working in all major consumer product segments (from Textile & Footwear to Electronics, Toys, Eyewear, Cosmetics, Homeware and Food).
AsiaInspection analyzed their survey sourcing, quality and compliance practices among global companies and identified trends likely to impact global supply chains. Generally global sourcing refers to buying the raw materials, components or services from companies outside the home country. Raw materials are sourced from wherever manufacturers can be obtained for the cheapest price and the highest comparable quality for the greatest satisfaction. The highlights of the survey –
Sourcing geographies
China remains in the lead, being a regular sourcing destination for nearly 88% of respondents, while half of the businesses expect to buy even more from there in 2018. The Toys and E&E sectors favor China particularly strongly, albeit Vietnam has some standing as its competitor in the Footwear industry.
Meanwhile, buying patterns in the Food sector were the most varied, with sourcing geographies ranging from Turkey to Latin America, and understandably high importance of home regions.
Top popular sourcing country by industry of textile and apparel
Outside of China, India and Bangladesh are increasingly given preference for Textile sourcing, being lower-cost destinations. India is also a popular sourcing destination for the Home ware and Promotional products sector.
Asia Inspection (AI) says the 21st century has great things in store for Bangladesh, which has been named one of the Next Eleven Countries. This designation indicates that, due to major investments, Bangladesh has the potential to become one of the world’s largest economies in the years to come. This has come as a great boon to the country, which has benefited from this participation in the international business community.
Product quality, safety, and regulatory compliance
70% of companies estimated that their product quality has improved in 2017, but only 54% would say the same about their product’s safety and regulatory compliance. Nevertheless, in the coming year businesses expect to worry more about managing product quality than they did in 2017, while regulatory compliance is expected to be less of a challenge.
Top sourcing challenges in 2017 and the near future
Cost of manufacturing and raw materials comes first for the top sourcing challenges in 2017 and the near future and a trend expected to continue into 2018. Politics then are expected to have a more immediate impact than technology.
Most of the surveyed businesses anticipate to be affected by tariffs, quotas, protectionism and embargos, rather than automation and 3D printing. More than half of surveyed businesses expect their sourcing to be affected by automation and big data.
More companies are expected to be affected by currency rate fluctuations and intellectual property issues. On the other hand, respondents expect to worry less about supply chain disruptions, regulatory compliance, and ethical compliance of suppliers in 2018 compared to 2017.
The sourcing challenges of 2017, respondents namely top 3 as below –
- Cost of manufacturing and raw materials,
- Maintaining / improving product quality, and
- Finding the right supplier capabilities.
Assessing supply chain expectations for the coming year –
- Cost of manufacturing at the top of coming sourcing challenges.
- Managing product quality is viewed as the second biggest challenge, and
- Its importance is expected to increase.
Challenges that respondents expected to affect in the coming year more than in 2017 –
- Finding the right supplier capabilities (know-how, technology)
- To a lesser extent, the required manufacturing capacity.
Sourcing practices
Up to half of respondents prefer to combine direct outsourcing with cooperation through intermediary vendors. The average rate of supplier turnover is around 27%, but the largest companies shop around much more, replacing up to 42% of their suppliers in a typical year.
Supply chain visibility
Supply chain visibility remains a strong challenge, with an average respondent knowing only around 55% of the suppliers involved in the making of their products. Complete visibility into the supply chain founf in the survey was only achieved by 11% of respondents, while 89% of surveyed businesses have blind spots in their supply chains.
Ethical compliance
Two-thirds of respondents are optimistic about the progress of supplier compliance and most expect it to be even less of a concern in 2018. However, the survey data has revealed obvious gaps in auditing practices, 19% of respondents have no clear policy on the frequency of supplier audits, and 18.5% rely on their in-house audit protocol as their sole compliance framework.
