A new study to help businesses optimise their sourcing strategy, particularly within the apparel and general merchandise sectors, has been launched by Kurt Salmon Associates (KSA), the management consultancy specialising in retail and consumer goods.

While cost continues to be a priority consideration, KSA contends that increasingly, retailers are becoming better at optimising their sourcing mix to enable them to fulfil their customers' demands for availability as well as value. Speed, responsiveness and innovation now play an important role in assessing the attractiveness of a particular manufacturing location and the chain of suppliers and intermediaries.

According to Simon Shepheard-Walwyn of KSA, most companies have already benefited from the initial big wins of driving down pricing by switching to lower-cost sourcing locations and removing middlemen from the equation.

"To meet current and future demand, though, and to extend good sourcing practice across entire categories, retailers are taking into account other factors such as ease of communication, flexibility of supply, lead times, technical expertise and contribution towards product design and development."

For many retailers, a big question mark hangs over the repercussions of China's accession to the World Trade Organisation. This could have a greater impact on retailers' sourcing strategies than any other single factor.

"Obviously China is looking to take a significant share of the consumer market, but while product there is still cheap, it continues to score poorly on other criteria," explains Simon Shepheard-Walwyn. "Firms wishing to do business in China, or any low-cost base, need to realise that they will have to make a greater investment in managing the process and must commit for the long term to reap the benefits. It's all a question of balance."
KSA recommends companies consider their sourcing strategy from two perspectives: cost modelling to identify the potential prize from a renewed mix of source locations and supply modelling to match potential routes with consumer demand.

"The most informed companies are also already undertaking scenario planning to look at how China's accession and quota issues could impact on their current and future sourcing mix," adds Simon Shepheard-Walwyn.

KSA's Sourcing Study includes details from extensive research of 55 countries, including the Ukraine, Madagascar, the UK, Germany and China, providing comparisons on a range of criteria and bringing together published data as well as KSA's considerable global experience within retail and manufacturing.