A new McKinsey report, based on a global survey of apparel Chief Procurement Officers (CPOs), suggests a significant shift in the way fashion brands approach their supply chains. The study, ‘Reimagining the apparel value chain amid volatility’, highlights a growing emphasis on efficiency, resilience, and sustainability. These factors are prompting a potential paradigm change in sourcing strategies, particularly for brands in the US and EU.

The survey, encompassing CPOs from companies with a combined annual sourcing spend of $110 billion, sheds light on five key themes reshaping apparel sourcing:

Prioritizing agility:  The traditional model of apparel sourcing, characterized by long lead times, mass production, and a focus on low costs, seems to be nearing its end.  Consumers demand faster turnaround and more responsive designs. Survey results highlight a growing urgency among brands to address volatility in the market. This translates to a heightened need for agility and responsiveness to consumer demands.

Building resilience: Supply chain disruptions have underscored the need for diversified sourcing strategies to mitigate risk.

Sustainability as a focus: Environmental and ethical concerns are a growing priority for both brands and consumers. CPOs are seeking suppliers with strong sustainability practices.

Collaboration over competition: The survey indicates a move away from a purely transactional relationship with suppliers. The survey underscores the growing importance of supplier relationships. CPOs are prioritizing closer collaboration with suppliers to achieve greater transparency, resilience, and ultimately, a competitive edge. This could mean a move away from a purely transactional approach towards a more strategic partnership model.

Digital transformation: Embracing digital tools for supply chain management is crucial for improved transparency, efficiency, and responsiveness.

Impact on traditional sourcing hubs

These shifting priorities have implications for traditional sourcing powerhouses like China, Mexico, Bangladesh, and Turkey.

China: While China will likely remain a major player, its dominance may wane. Brands may look to diversify their sourcing base to mitigate geopolitical risks and ensure compliance with stricter labor and environmental regulations.

Nearshoring: The report suggests a potential rise in nearshoring, particularly for the US and EU brands. Sourcing from geographically closer locations can improve agility and reduce transportation costs. Countries like Mexico, Turkey, and those in North Africa could benefit.

Focus on sustainability: Countries with strong sustainability credentials will be better positioned. Bangladesh and Vietnam, for instance, are investing in cleaner production processes.

The survey also highlights a crucial gap in digital adoption within the apparel supply chain. Most CPOs rated their organizations' and suppliers' digital maturity as low.  Investing in digital tools for better visibility, data-driven decision making, and real-time communication will be essential for building a more efficient and resilient supply chain.

The McKinsey survey paints a picture of an apparel industry in flux. While the full impact on sourcing locations remains to be seen, the focus on agility, resilience, and sustainability will undoubtedly reshape global supply chains. The ability to adapt and embrace these new priorities will be key for both brands and sourcing countries in the years to come.