As retailers struggle to differentiate themselves from their peers, and have little room to manoeuvre when it comes to mark-ups and markdowns, there's a growing awareness that the supply chain can contribute to improved efficiency and a competitive edge.

Rising costs in all apparel manufacturing markets, coupled with worker shortages, higher fuel and freight rates, and carriers cutting capacity, are among a cocktail of costs currently combining to end more than a decade of price deflation in the apparel industry.

Add to this the move towards more frequent and smaller order quantities, and it is becoming increasingly difficult for apparel firms to benefit from economies of scale.

But while the bad news is that higher costs will continue to weigh on sourcing decisions for the foreseeable future, the good news is that there is still plenty of room to offset them by introducing new efficiencies and new ways of working into the apparel supply chain.

And according to industry executives speaking at Prime Source Forum in Hong Kong over the past few days, unlocking the value of the supply chain can take many forms.

Peter Kaminsky, managing director of global sourcing at US-based children's wear retailer Carter's, says the company has cut its lead times down to 105 days by making sure all negotiations are done before purchase orders are issued.

He also highlights the disconnect between designers and product development teams who see factories as selling a product, whereas the factories themselves put the emphasis on selling production time.

So when designers make last-minute changes, or production emergencies arise, he implores the two sides to work together, to take pragmatic steps and rebalance production.

"When you run into problems be transparent, work with the factory and the designer to try to figure out how to minimise the risk to delivery.

"The solution is internal communication; talk through the problem, work with your working groups and teams, have them review the previous day's results. Remember your customer is your partner."

Solving internal challenges
Andrew Polins, VP and assistant managing director of global sourcing at retailer Dick's Sporting Goods, suggests that adding value to the supply chain involves "looking in before looking out."

"If we can solve the internal challenges we have the ability to eliminate them, and add all the necessary value to our existing businesses."

Among these internal challenges are "undefined ownership" of key sourcing decisions between a company's headquarters and sourcing offices, including negotiation and final confirmation with the supplier, who commits to materials and capacity, and when does this happen?

Defining internal roles and responsibilities for vendors, buying offices or support services is key, Polins says.

He also identifies the need to leverage resources more effectively across teams to avoid overlapping responsibilities.

"All of our teams in Asia have more than just merchandising and sourcing; we have compliance, testing, systems, tech teams. Also, does every supplier need to have the full range of services that your own sourcing office can provide? Probably not."

Another key challenge is to enhance the head office perception of leadership in the overseas team, shifting from an "execution based leadership mind-set in your local teams to a strategic based mind-set," and taking a step back to establish local personnel as the real decision makers in the process.

Strategic suggestions
Transparency is key, according to one US based women's wear retailer, whose strategy is supplier-led rather than country-led. Changes to its sourcing structure have also seen sourcing operations such as allocation strategy, costing, development, and raw materials all consolidated at its base in Hong Kong.

And efforts to clearly differentiate roles and responsibilities between the company's New York and Hong Kong sourcing offices have also seen the creation of category teams instead of separate vertical teams for each of its brands.

Other strategies that have made a difference, the executives say, include vendor scorecards covering elements like quality, cost, compliance, innovation, speed and flexibility, and global logistics (including on-time delivery). The scorecards drive allocation and communication with suppliers, and also boost trust, both internally and externally.

Focusing the vendor base to concentrate on those who are good at a specific programme is another suggestion. Not only does this help the supply chain by reducing costs and increasing efficiency, but it also helps build long-term relationships with existing vendors or suppliers.

At Carter's, responsibilities that have moved over to local sourcing operations include supplier evaluation and verification, "believing the people on the ground are most familiar with capabilities at the factory level.

While Mark Green, head of global supply chain at PVH, notes: "Most of the more conventional areas are being worked on by most retailers, so fit approval in region, colour approval in region, fabric management, quality, production management; these areas are allowing us to be faster by empowering, training and calibrating.

"The real unlock will be when they start putting a designer in the region or a merchant in the region [buying product], but we're probably a few years off that."

Efficiencies and expectations
Colin Browne, VP of footwear sourcing at VF Asia, believes: "We're only just scratching the surface of what we can achieve with efficiencies," pointing to technology developments, global data access, automation, and opportunities to "join the links in the supply chain."

Within VF, whose brands include Timberland, Reef, The North Face and Nautica, "we buy about 80m pairs of shoes a year, and deal with just eight core partners. I expect so much more from my vendors than I ever did before, and they expect so much more from me.

"I spend a lot of my time thinking about efficiencies, and how we as a business can be more efficient in the way in which we source product.

"Part of it is how we work between the brands and the factories as an integrated partnership; but part of it is also about how do we help the factories get more efficient and better at what they do? How we design product that makes it easier for them to make it, more efficiently?

"I can't build these relationships and drive performance unless we're really clear what our expectations are of our vendors, and what they're expectations are of us."