Brands, retailers and manufacturers of apparel have had more than a year of acting in permanent crisis-mode. As the pandemic spread, we saw a massive collapse in demand across global sales markets resulting in cancelled orders at suppliers, excessive overstocks at retailers, and a consolidation of companies that have changed the global sourcing landscape.

Despite the clear rebound in consumer sales, many production countries are still severely impacted. Major disruptions, such as international freight, continued trade tensions, political instability in key sourcing markets and increasing shortages of materials—as well as catastrophic global events from fires to floods—still continue.

As we look at sourcing market shares, the long-expected move back from farther sourcing destinations to markets closer to Europe or North America seems to be gaining traction, where the ability to decide late and react fast is critical to cope with the high volatility and risk on demand and supply side.

For example, China, now at 25.3% of European apparel imports and still with the largest market share, has dropped from 34% in 2014 and more than 40% in 2011. Bangladesh, India, Cambodia and Sri Lanka also decreased in sourcing share during 2020.

As companies start to look beyond the immediate short-term, we asked retail sourcing executives about their challenges, priorities and predictions for the future of sourcing. Here are some of the key findings from our research.

Supply side risks regarding access to sustainable materials and general raw materials were the highest ranked concerns among our respondents, when asked about expected future sourcing challenges.

And it’s no surprise, following the recent disruption, that transportation costs (2.4), delivery reliability (2.0), supplier capacity (1.9) and financial stability of suppliers (1.9) are still key concerns.

When it came to mitigating risks, brands and retailers consider themselves to be relatively well prepared to control CSR adherence and mitigate currency exchange rate risks.

But sourcing executives are lacking the confidence in their preparations for transportation cost hikes (25%), raw material shortages (31%), and risks of political instability (31%). This emphasizes a clear need for strengthened capabilities to manage and mitigate transport and supply market risks, and develop respective contingency plans.

When asked about sourcing market developments, a clear picture emerges. Half of the sourcing executives expect total sourcing volumes to increase and 39% expect volumes per order to increase, while supplier portfolios will be more focused than in the past (67% expect a decrease in the size of supplier portfolios).

In line with the concerns regarding supply market and supplier stability, material availability, and transport cost, almost three-quarters (73%) of brands and retailers see a likely increase in near-shore sourcing and 72% expect stronger involvement of brands in material management, while suppliers are expected to be more closely involved in product innovation (expected by 61% of respondents).

The extent of change that brands and retailers need to tackle to build future-ready sourcing practices shows that this is not just about improving selected processes but completely transforming the role sourcing has within retailers.

Ultimately, sourcing will no longer be an executional backend-function but will take a seat at the C-suite table to effectively drive this change agenda as a critical enabler to business growth.

The Accenture Global Sourcing Reference Executive Summary 2022 is an extract from the full Global Sourcing Reference 2022 (GSR).

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