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China crisis

With Brazil and India’s emerging economies and even the UK returning - albeit slowly - to its manufacturing roots, China could run the risk of losing its sourcing crown

Most successful fashion companies constantly review their sourcing strategy to find the most reliable and cost-effective suppliers.

For many, sourcing in China still makes most sense but retailers and brands are increasingly looking at a blend of markets, with nearby countries used for urgent deliveries or to keep up with consumers’ insatiable demand for fast fashion. Many believe that countries such as Vietnam, India and Bangladesh, along with those with certain strengths such as Brazil with its footwear manufacturing, offer serious competition for the future.

In fact, at Next’s Christmas trading update in January, its chief executive Simon Wolfson told Drapers that the high street giant will re-evaluate its sourcing strategy to ensure product gets to stores quicker. “We’re looking at new, faster sources closer to home, in some cases in Europe, in others at quicker air freight from the Far East,” he said.

A recent guide to sourcing published by management consultancy Kurt Salmon Associates (KSA) found that within Asia, China and India had different strengths, with China ahead in terms of quality, competency and reliability and India superior on costs, flexibility and speed.

Department store chain John Lewis also believes there are different strengths in the two countries. “They offer something quite different, with Indian product being very design-led and handcrafted, whereas China’s focus is more around our core products, with highly mechanised and very efficient factories,” says buying director for fashion Peter Ruis. John Lewis also sources from Eastern Europe, Italy, Portugal and the UK.

For some premium businesses, quality is all-important, which puts more emphasis on production techniques. For this reason, iconic department store Liberty’s in-house brand Liberty of London sources 95% of its products from Italy. Fabio Guidetti, director of sales and international business development, says: “For us, nothing can ever be allowed to jeopardise quality. The craftsmanship in Italy is among the best in the world.”

However, Liberty of London also sources some product from Portugal, Turkey, India and, in the case of accessories, ties, embroidery and knitwear, the UK. Guidetti says the brand constantly monitors new suppliers and he believes India may become more significant. “We source fabrics such as silks, embroidery and jewellery in India because of the incredible handcraft there,” he says.

Although many companies that use the Far East also use nearer countries to protect them from any break in supply and for quick production runs of best-sellers, sometimes forward planning can decrease the need for this. Michael Flanagan, chief executive of sourcing intelligence firm Clothesource, says it is the frequency by which ranges change that keeps customers interested more than just replenishment of best-sellers.

“An awful lot of what is called fast fashion is in fact fairly sluggish fashion that is constantly changing,” he says.

There are many issues to balance when choosing where to source. Eric Musgrave, director general designate of industry trade body UKFT, which represents the supply industry, says the most important criterion is reliability of production and supply, with price a secondary consideration. This has become even more pronounced in the current climate and increased the attractiveness of established sources. “The recession has made many retailers look at their inventory management. Their main requirement is to get the right product into the store and sell it at a full margin,” he says.

Super suppliers

KSA believes the difficulties of choosing suppliers will be eliminated in future by using ‘super suppliers’ who operate across several countries. Its UK managing partner Helen Mountney says: “[Super suppliers] are in daily contact with a broad range of factories across the globe and will be able to remove some of the unknowns.”

In fact, Flanagan believes there will be few future entrants into the manufacturing race and those with established industries will gain in strength. He believes that some countries that were thought to have potential, such as the Maldives, Seychelles, Madagascar, Botswana and the Ukraine, have failed to deliver the correct levels of service.

“There are virtually no emerging opportunities and, by and large, countries tipped as the next big thing have turned out to be damp squibs,” he says.

World Design & Trade, owner of the Firetrap, SC51 (formerly Sonneti) and Fullcircle brands, sources intensively from China. Logistics and operations director Nick Fox says: “We review our situation all the time and are always looking for new sources one way or another. But currently we find that the quality and service levels in China are more reliable than they would be with the Indian subcontinent.”

Morocco is also used heavily, particularly for more urgent items. “We find it does denim very well and we are able to achieve shorter lead times, with a delivery of four to five days,” says Fox.

Knitwear and T-shirt manufacturer Emreco also focuses strongly on China and, although the company does buy from other countries, managing director Richard Reinhold says the scrapping of quotas over the past few years has increased China’s appeal. As a result, the key may not be where to source from, but from whom. As Reinhold says: “You get better quality factories and poorer quality factories so we try to build up relationships with good suppliers.”

Fox adds that it is important to look at the longer term when choosing who to work with. “If you’re happy with a supplier, you want to grow volume year by year and build up a relationship over time,” he says.

But this can only happen slowly, according to Guidetti. “You have to go hand in hand [with suppliers],” he says.

Time to make a move?

As well as looking at the quality and price of a product, retailers and suppliers have to take into account the process of moving it to the UK, and this can increase the appeal of established markets such as China, as the internal infrastructure and service provided by shipping and airlines in less mature markets may not always be as reliable.

Gary Mortar, managing director of supply chain solutions provider WT SeaAir, says: “Certain countries do not have direct services, which means a transhipment needs to take place, increasing the risk of delays.”

Victoria Dahan, creative and PR director of logistics firm Belspeed, adds: “Internal infrastructure, communication and follow-up on all levels of the supply chain would need to be ramped up for countries like India and Brazil [for them] to really prove competition to China.”

The maturity of the fashion company can play a part in whether to switch sourcing from China, according to John Howlett, logistic firm DHL’s vice president of international supply chain for Europe, the Middle East and Africa. “Those who have been trading in China for less than 10 years are often less willing to change,” he says. “They are likely to be more cautious about using the Indian subcontinent.”

Sarah Humphrey, general manager for retail, northwest Europe, at logistics firm Kuehne + Nagel, says firms must assess all practical considerations, for example the speed of customs regimes, before switching sourcing.

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