Texworld NYC: Experts Say Sourcing Could Be on Course for ‘Catastrophe’
Softening sales. Logistics layoffs. A mass manufacturing exodus from China. With such issues at play, 2024’s sourcing outlook could be a stormy one.
In a candid conversation moderated by Sourcing Journal founder Edward Hertzman at Texworld New York City on Tuesday, experts discussed the uncertainty the industry faces in the year ahead.
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“Continuity of supply is, I would say, one of the biggest challenges and what is keeping many of the sourcing executives awake at night,” Murali Gokki, managing director of Berkeley Research Group (BRG), said. “And it comes from two sources: one is the supplier base and the second is global shipping and logistics.”
There’s a softening reliance on China as a manufacturing base, but emerging markets have also faced difficulty in re-creating China’s strengths. China still dominates in terms of raw materials, but its suppliers are “financially stressed” considering that as interest rates climb, importers’ requests for longer payment terms do, too. Logistics holdups in the Suez Canal and Panama Canal are forcing shippers to reroute their lanes, contributing to longer lead times and uncertainty surrounding container availability.
“So yes, there are challenges around traceability and sustainability, but what’s keeping senior executives awake at night is having a reliable global supply chain,” Gokki said.
Given the erratic market, planning for volatility is necessary. According to Gokki, forecasting demands are coming in earlier and earlier, making them less and less reliable and causing friction within the buyer-supplier relationship.
“I think that the relationship is definitely strained,” he said. “The reality is that all of the legacy processes and tools are not up to the standard to actually solve for this. Buyers and suppliers have to really start working closer than ever before to solve for this.”
However, Sparc Group, the parent company of Aeropostale and Forever 21, believes it depends on the strength of a brand’s individual relationships.
“At Sparc, we take our vendors as the backbone; they are sort of the heart without which you can’t work,” Mansi Thar Arora, group vice president of sourcing and product development, said. “When you have that mutual interest to protect each other…we are able to create a collaboration.”
The past five years have been “like a roller coaster,” though working closely with partners has allowed the company “to maneuver through all the challenges so far.”
“We’ve come out of it stronger because of that collaboration, and I think more and more companies and retailers are realizing the importance of that collaboration,” she said.
Untuckit’s chief product and supply chain officer, Bjorn Bengtsson, agreed.
“I think the relationships become more and more important and the pandemic showed that if you have great relationships, you can survive the supply shock,” he said. “If you have opportunistic relationships, you’re in trouble.”
Considering that retail is soft at the moment, Hertzman asked the panelists if they were concerned that sustainability efforts and investments could fall by the wayside as companies shed jobs. Will profitability be prioritized instead?
Gokki intimated that the latter is likely. The industry has yet to agree on a system to measure carbon footprints, validate it, and then report against the progress of carbon neutrality—and that’s an issue, he said.
“If I were to walk through the booths and want to see the carbon footprint for every one of the fabricators out here, I bet there’s not even one company here that has the carbon footprint for that particular fabrication,” Gokki said. “We are, unfortunately, a long way from getting there. But people are coming to a realization that somebody has to pay for this change, and it’s definitely not the consumer.”
