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These 5 Issues Will Define The Sourcing Business in 2020

Apparel sourcing in 2020 may look very different now that the terrible teens were left behind.

The way data-analytics consultancy GlobalData sees it, global supply chains in the year ahead will need to find their eye-of-the-storm center among tariff threats and trade sanctions, the increasing need for speed (and smarts) and growing appeals for sustainable innovation.

At the same time, these challenges will come with opportunities to “rethink business models and explore new ways of working,” particularly when it comes to digitalization and data, according to Leonie Barrie, apparel analyst at the London-based consultancy.

For Barrie, there are five key issues apparel companies need to look out for: global trade uncertainty, evolving sourcing strategies, machine thinking, next-level sustainability and fulfilling green promises.

Fashion businesses, for one, must learn to see the unpredictable trade landscape as the “new normal.”

Rising trade barriers and geopolitical tensions — everything from the ongoing U.S.-China trade war to penalty tariffs on U.S. fashion imports from the European Union to the potential fallout from Brexit — will continue to stymie the best-laid plans of apparel companies, making it difficult to plan ahead in both the short and long term, Barrie said.

Several free-trade agreements, including the Regional Comprehensive and Economic Partnership (RCEP), the EU-Vietnam Free Trade Agreement (EVFTA) and the US-Mexico-Canada Free Trade Agreement (USMCA), will also play a “critical role” in shaping supply chains as they take effect.

To mitigate risk in the face of fluctuating policies, brands and retailers must “rethink and diversify” their sourcing strategies, including shifting away from China, which is responsible for roughly 32% of the world’s clothing exports.

No one nation has the capacity to supplant China, she noted. Instead, the “next China” will be a “group of countries serving specific markets.”

“China will continue to remain a force as ‘made in China’ becomes ‘managed by China’ and its domination of upstream services and technical know-how persists,” Barrie predicted.

Fashion businesses that haven’t digitized supply chains will be at an even greater disadvantage in 2020.

“Digitalization and Big Data are the next frontiers in apparel and footwear supply chains, enabling companies to make smarter, faster and more effective decisions,” Barrie said.

Leveraging the power of data can lead to improvements in speed, cost and customer satisfaction while delivering new insights into purchasing behavior, competitors’ pricing practices and even next season’s big trends.

Efforts at increasing sustainability, too, must climb up a notch, if not several notches, Barrie said. Key stakeholders and shareholders are “increasingly asking tougher questions” and scrutinizing global supply chains for potential risks.

“The emphasis on ‘green, clean and recyclable’ must impact product design, materials, sourcing practices, logistics, consumption and disposal of used clothing,” she said. “[This], in turn, will require substantial financial investments and other resources.”

Indeed, lip service will fail spectacularly, said Barrie, who counsels “action, not words” as consumers become savvier about greenwashing.

“Trust and transparency are no longer buzzwords,” she said. “Consumers are demanding actions they understand and can relate to.”

As such, pledges by brands, retailers and suppliers to reduce the environmental impact of their products “must gather pace” in 2020.

“The challenge is to ensure actions and efforts are impactful without being viewed as ‘greenwashing,’” Barrie said. “ In an interconnected world, where information is instant, failure to meet consumer expectations could have an immediate — and disastrous — effect.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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