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Sourcing from cheaper countries 'only a temporary fix'

Fashion firms that seek to offset rising costs by moving their sourcing to cheaper countries will find it is only a “temporary fix”, a new report has warned.

Production costs are rising across all main apparel sourcing regions, according to the annual Global Sourcing Reference report by consultancy Kurt Salmon.

For example, Bangladesh has seen production costs go up by 47% since 2005, Pakistan by 40% and India by 33%.

China’s central and western provinces have also seen them go up by 33%, and the coastal and southern provinces by 10%.

As such, the report advises retailers to look “beyond production cost optimisation” and instead focus on reinventing their operating models to unlock value in their supply chains.

This includes better use of technology, such as analytics, cut-and-sew robots and 3D printing, to enable ”collaboration, visibility and control across the entire value chain, which will improve product innovation, time to market, reliability, execution, and quality”.

Following interviews with 21 senior sourcing executives, Kurt Salmon concluded that speed to market should be the number one priority for business leaders, followed by social and environmental compliance, quality, and innovation management.

Peter Rinnebach, managing director of Kurt Salmon, said: “Retailers that focus on shifting sourcing countries as the primary route to cost-cutting will ultimately fail. Analytics-driven sourcing and supply chain management can help retailers unlock trapped value.

“3D printing is improving efficiency and cutting down sample iterations, and cut-and-sew robots are paving the wave for greater production efficiency. This by far compensates for slightly higher production costs.”

Helen Mountney, managing partner of Kurt Salmon in the UK and Ireland, added: “Predictive analytics and artificial intelligence can optimise decision-making, which is critical when operating in a volatile environment and on short timelines.”

China is still by far the biggest exporter of apparel to the European Union (28%), followed by fast-growing Bangladesh (19%), Turkey (11%) and India (6%).

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