Bangladesh and Vietnam are the sourcing markets most likely to grow in importance in the next five years

Bangladesh and Vietnam are the sourcing markets most likely to grow in importance in the next five years

Having established that rising costs are among the top challenges for apparel sourcing executives as they head into 2017, the second part of just-style's State of Sourcing 2017 survey analysis drills down into their strategic plans for the future, including likely shifts in global apparel manufacturing and technology investments to help them remain competitive.    

How much of your sourcing do you plan to reallocate in 2017?

The fact that sourcing is in a constant state of flux in a bid to drive efficiencies, manage costs, mitigate risk and navigate new duty opportunities, as well as strike a balance between speed and flexibility, is amply illustrated by the answers to this question. While 26.3% of respondents say they have no plans to reallocate their sourcing in 2017, this means a massive 73.7% are looking to make changes to the mix.

Of this, 15.3% say they intend to move 1-5% of their sourcing; 26.3% are looking to shift 5-10%; and 28% will makes changes to between one-tenth and one-quarter of their portfolio. A minority of 4.2% of respondents are intending to make big changes, with plans to reallocate more than a quarter of their sourcing next year.

Where you looking to for alternative sources of supply?

Who will be the likely winners and losers from this shift? By far the biggest beneficiaries are alternative sources of supply in Asia, according to 72.1% of respondents, who are likely seeking different options to 'Made in China' in 2017.

While this route was also cited by most respondents in last year's survey (69.2%) there also seems to be a marked search for new supplier countries outside this region in the coming year. This is especially the case for those importing into the US, with 21.6% saying they are looking at near-shoring to Central America and the US, compared with just 13% last year; and 16.2% eyeing on-shoring to the US as an option, up from 9.2% before.

The reverse is true, however, in the EU and UK, where respondents suggest on-shoring to European countries and the UK has slipped slightly in popularity to 8.1% from 10% a year ago; as has near-shoring to European countries and the UK, dropping to 15.3% of responses from 18.5% last time.

But despite talk about the rise of sub-Saharan Africa as an apparel source, it appears survey respondents are still treading cautiously, with 13.5% looking here for alternative sources of supply, down slightly from 14.6% the year before.

Which sourcing markets do you expect to grow in importance in the next 5 years?

Drilling down even further – and looking into the future – Bangladesh and Vietnam continue to be seen as the sourcing markets most likely to grow in importance in the next five years. While Vietnam leads with 62.5% of respondents, this is slightly down on last year's 66.4%. Bangladesh, meanwhile, strengthened its position in second place, with a strong 50.8% of those surveyed cementing its importance as a major apparel supplier in years to come (up from 41% last year).

Another strong contender is Myanmar, sitting in third place with a score of 40.8%, up from 35.8% a year ago. Ethiopia and India are also on the ascendant, with some 34.2% expecting the countries to grow in importance as sourcing markets (compared to 24.6% and 26.1% respectively in last year's survey).

From the other options given, respondents predict a rise in the popularity of Indonesia and Kenya as apparel sources over the next five years, with scores of 19.2% and 18.3% for these countries respectively, up from 17.2% each last time. But fewer picked out Pakistan (11.7%, versus 15.6% a year ago).

And the importance of China as a sourcing market is seen waning slightly, with those pointing to its growth falling to 17.5% from 20.15% last year.

Respondents also highlighted several other countries and regions not specifically mentioned in the suggested responses: led by Haiti, Tanzania and Central America, but also including the Philippines, Central Asia, sub-Saharan Africa, Uganda, Jordan, Sri Lanka, Eastern Europe and the UK.

Do you expect to source more or less from China in 2017?

That said, the survey confirms that China's undisputed dominance of global apparel manufacturing is unlikely to change anytime soon – with a rise in the number of respondents looking to increase orders from the country in the upcoming year.

Asked if they expect to source more or less from China in 2017, 21% of respondents said they would buy more here over the next 12 months (up from 17.2% last year). While the number looking at a significant increase of more than 5% has slipped slightly to 5.9% (from 7.5%), there is a rise to 15.1% in those expecting to source 1-5% more from China next year (compared with 9.7% a year ago).

Some 26.1% expect their China sourcing to remain roughly the same year-on-year (33.6% in last year's survey); while there is no change in the 33.6% who expect to source less from China.

Do you expect to source more or less from Bangladesh in 2017?

Of those who source from Bangladesh, the survey results also suggest they intend to place more orders here in the next year.

Echoing the answers to the earlier question that mark Bangladesh as one of the key apparel suppliers most likely to grow in importance in the next five years, a strong 38.6% of those surveyed say they intend to source more from Bangladesh in 2017 (versus 35.6% last time). Within this, 10.9% point to a rise of more than 5% (compared with 14.1% who gave this answer last year) and 27.7% are looking at an increase of between 1% and 5%.

19.3% are looking to source roughly the same from Bangladesh as last year (up from 11.9%), while just 4.2% say they intend to source less (from 6.7% last year) – indicating that despite Bangladesh's uncertain safety record, the need to balance compliance, cost and capacity in sourcing decisions mean there is little likelihood of the country losing orders in the near future.

Do you expect to source more or less from Vietnam in 2017?

Significant gains in sourcing volumes also seem to be on the cards for Vietnam, with nearly half of respondents who source here saying they expect this to increase next year (47.8% compared with 45.9% in last year's survey). One-third of these are forecasting a rise of 1% to 5%.

Around 15.4% expect to source roughly the same from Vietnam year-on-year (up from 11.9% last time), while there is a small rise in those who plan to source less here in 2017 (to 6.0%, up from 2.2% a year ago).

The survey was carried out after the election of Donald Trump as the next US president, and expectations for the country as an apparel sourcing destination do not appear to have been dulled by his plans to abandon the Trans-Pacific Partnership (TPP) free trade deal, of which Vietnam had been expected to be one of the biggest beneficiaries.

That said, foreign direct investment has been flowing into the country, improving both the upstream textile sector and the capacity for large volume garment orders. Manufacturers in Vietnam also stand to gain from improved access to the EU market once the EU-Vietnam free trade agreement comes into force.

Will sub-Saharan Africa gain importance for your sourcing strategy over the next 5 years?

In the wake of the renewal of the African Growth and Opportunity Act (AGOA) last June for a further ten years, investment has been flowing into countries such as Ethiopia and Kenya – not only in the garment manufacturing sector but also upstream in textile mills and training. Yet how this will translate in terms of market share remains to be seen.

Survey respondents are definitely taking a closer look at the region. While the 25% who say sub-Saharan Africa will gain importance for their sourcing strategy over the next five years is unchanged from last year's survey, the number who say it may be of more importance has edged up to 43.7% from 38.6%.

And in line with this, those who emphatically say sub-Saharan Africa won't be part of their sourcing strategies in the short-to-mid-term has fallen to 31.1% from 36.4%.

What do you hope to achieve from alternative sources of supply?

The number of possible responses to this question illustrates the complex array of factors that influence apparel sourcing – everything from lower costs to increased speed, compliance and reduced risk.

A first glance at the comparison with last year suggests little change. Many of the trends identified here – cost-cutting, flexibility, shorter lead times and quality – are, according to respondents, similarly influential in 2017. 

But, a couple of trends stand out: a strong 65% of those surveyed identified lower costs as a key driver for seeking new suppliers (although this has slipped from 71.1% last year), while 63.2% cite speed of delivery/shorter lead times (57.0%) and 54.7% increased flexibility (50.8%). Quality is a major motivator too, but perhaps surprisingly, less weight is given to improved fire and building safety or chemicals and environmental compliance – which may suggest respondents are happy with the provisions already in place.

Other suggestions offered outside the survey options include: "Outsourcing of own structural costs," "Providing our clients with diversified sourcing options," and "More productive supply chain."

Do you expect to invest in new technology in the year ahead?

Not surprisingly, respondents recognise the importance of technology in order to help them remain competitive into the future. Asked if they expect to invest in new technology in the year ahead the responses were split: 59.3% said yes, 28.8% said maybe, and 11.9% no.

Which tools is this investment likely to focus on?

The tool this investment is most likely to focus on is Product Lifecycle Management (PLM) software, mentioned by 45.5% (up from 36.1%), with platforms integrating dedicated fashion applications such as design and product development helping to speed sourcing processes and improve time to market.

Also edging up in popularity are applications to address often challenging areas such as product specifications and approval (cited by 33.9% of respondents, compared with 24.6% last year); while 33.0% highlighted vendor compliance (up from 32.0%).

3D design and prototyping, Enterprise Resource Planning (ERP), digital printing, order management, global trade and regulatory compliance were picked out in similar numbers to last year.

Respondents also highlighted several other issues, especially meeting growing compliance standards including supply chain traceability and transparency, and environmental sustainability. They also pointed to increased investment in automation and process improvements on the factory floor.

For more analysis of the results of just-style's State of Sourcing 2017 survey, click on the following links:

State of Sourcing 2017 – just-style survey results

State of Sourcing 2017 survey – Confidence and costs