Overcoming Trade Uncertainties – Why A Digital Strategy is KeyAugust 9, 2019
With President Trump opting to add tariffs to the remaining $300 billion worth of imports from China, slated to take effect on Sept. 1, the apparel and footwear industries are bracing themselves for potentially chilling consequences. The ongoing trade war between the U.S. and China has left fashion companies with a choice to make: continue to source in China amidst uncertainties and additional rounds of fresh tariffs or reduce China’s portion of supplied products and increase sourcing from other countries. However, transferring sourcing out of China is easier said than done.
According to the American Apparel & Footwear Association, in 2018, 42% of apparel and 69% of footwear sold in the U.S. was imported from China. The country’s dominance and longstanding history as a sourcing base makes simply picking up and exiting a challenge. While China’s stake in the worldwide sourcing economy remains, more and more companies are opting for sourcing diversification, seeking a balance between China and other suppliers. Yet others are finding a way to leave altogether to escape risks and costs. At any rate, the evolving circumstances call for new strategies when it comes to supply chain management, vendor compliance and quality control.
Before Leaving China, Supply Chain Managers Should Assess the Risk
Since the trade war between China and the U.S. has escalated, big-name apparel and footwear retailers have shifted sourcing to alternative countries. They now operate out of Bangladesh, Cambodia, Indonesia and Vietnam, to name a few. For supply chain managers considering a similar approach, they should contemplate the fact that identifying new locations to source from is only the start of an extensive process that includes completing risk and financial assessments, evaluating product quality and assessing other criteria.
As companies assess potential sourcing destinations, they should also remember that each country has its own standards and regulations in place. Before signing deals with future vendors, retailers and brands should ensure they are aware of quality standards and the degree of speed to market when sourcing raw materials. Additionally, different countries have different expectations for supply chain ethics, which has at times devalued ethical and safety practices. In the face of these struggles, making proper evaluation of vendors and subsequent onboarding are important factors supply chain leaders and executives should take into account.
Despite Instability, Retailers Can Pursue a Flexible, Demand-Driven Supply Chain
As the trade war evolves, fast-paced changes add incentive for companies to pursue a flexible, demand-driven supply chain. In the event of retaliation against new tariffs, additional product categories may be unexpectedly added, leaving a company with increases in the cost of raw materials, components and finished goods. As companies are continually faced with tough decisions about where to source from, the ability to analyze data and make informed decisions through strategic planning is proving to be essential. With a digital solution in place, fashion brands and retailers can be prepared for uncertain economic times.
NGC’s Cloud-Based Tools Help Companies Optimize Strategy, Planning and Processes
Whether a retailer chooses to continue operations in China, shift production to another nation entirely or move forward with a mix of both, it doesn’t have to manage its supply chain blindly. NGC’s cloud-based Andromeda Supply Chain Management solution maximizes transparency and helps retailers and brands optimize their supply chain to prevail through the trade war.
For those exploring new home bases for sourced products, Andromeda Vendor Compliance and Quality Control allow the digitally connected platform to evaluate and manage the details of vendor onboarding and management, send RFQs to multiple vendors to achieve the best price and delivery, as well as monitor quality control during the production process. By streamlining these essential functions, brands and retailers can enforce control and accountability, and gain the agility and responsiveness they need in the face of trade uncertainties.
Interested in learning more about how NGC’s Andromeda Cloud Platform can support your business in the face of the trade war? Get a first-hand look at our solution.