strategic sourcing fashion industry

1. Strategic
Sourcing
• Theoretical Frameworks
• Current Practices
• Discussions
• Case lets

2. In past decade, Fast fashion has become the most recognized business model in the fashion industry due to its
impressive performance in the global market during recent years. Numerous inventions and innovations have shaped
and developed fashion industry within a complex system and scope. Fast fashion brands such as ZARA and H&M are
among those at the very peak of this development through their supply chain management, merchandising
techniques, and retail technology, which encompass almost every aspect of the fashion business.
For example, Inditex (the mother company of the famous ZARA), which opened its first store in a small town
in Spain in 1975, is now present in 77 countries, with 5,044 stores that boasted annual sales of 12,527 million
euros in 2010 (Inditex Group, 2011).
Why strategic sourcing?
Fast Fashion
Through this presentation we are try to explain that how
the change has impacted the sourcing function and what
is the current practices and sourcing strategies which are
fueling fast fashion growth.

3. Key strategies of Fast Fashion
Shorter lead-times
More Fashionable
clothes
Fast supply chain.
Limit the suppliers
Lower Quantity Scarce supply High cost
More styles
More choice to
consumer
Complex supply
chain
STRATEGY RETAIL ADVANTAGE
IMPACT ON SOURCING
FUNCTION

4. Agenda
• What is strategic sourcing
• Objectives of strategic sourcing in fast fashion
• Vendor Development
• Vendor Management
• Characteristics of strategic vendors.
• Know your product – A Frame work for product
differentiation
• Understanding of sourcing regions- world map
• Different sourcing models
• Lean supply chain
• Risk of lean supply chain

5. What is strategic sourcing?
A plan of action
designed to achieve
a long-term or
overall aim.
find out where
(something) can be
obtained/sourced
STRATEGY SOURCING STRATEGIC SOURCING
Ensuring to source right product from right
supplier at right price. Helps organization
in building long-term supplier relationship.
By focusing on core capabilities of
respective suppliers.
STRATEGIC SOURCING HELPS IN BUILDING SYNERGY IN BETWEEN ORGANIZATION AND ITS SUPPLIERS

6. Objectives of Strategic sourcing
Vendor
Development
• Building long
term
relationship
•Right Vendor
for Right
Product
• Performance
management
•(governance)
Crisis
management
Right Timeline
• TNA
•planning
• TNA
management
•Reduction in
Timeline
Right cost
•Costing a
product
Cost
Regulation
• Cost
negotiation &
mitigation
Right Quality
•TQM
•AQL/Inspection
• Vendor
Empowerment

7. Vendor
Development
Q. Your organization has given you a project to
expand vendor base considering fast fashion goals
of organization? What are the important factors
one should keep in mind?
INDUSTRY CASE:

8. Vendor
Qualifying
Factors
• Infrastructure(External/Internal)
• Market reputation
• Core capabilities(Thru RFI)
• Past business history
• Compliance(Social, Technical/Quality, Certifications etc)
Order
Winning
Factors
• Business requirement
• Product requirement
• Available capacity
• Short leadtime
• Best price
• Rating of past performance(Green/Yellow/Red)
Factors of Vendor Development

9. Vendor
management
Q. A vertically integrated vendor is in crisis in the mid
of the season and unable to supply the goods. You
have WIP of 1 million units of your core product
category. Store will be out of stock if goods will not
delivered on time? Remember the vendor is a reputed
vendor in the key sourcing region with good political
relations? Now what to do?
INDUSTRY CASE:

10. 5 strategies for negotiation
HAVE THE “RIGHT MENTALITY”
As Supply Chain
Professionals, We
are evolving to
here
Principles not Rules:
• Separate the person
from the issue
• Negotiate not
position focused but
interest focused
• Develop a criteria
which must fulfill
solution
• Have multiple options
to choose from.
LOSE / WIN
LOSE / LOSE
WIN / WIN
WIN / LOSE
LOSE
WIN
LOSE WIN
• MY WAY OR HIGHWAY
• Sacrifices Long Term
relationships
•I am a loser - step on me
•I am a peacemaker
•Win/Lose people love!
•Believe in Mutual Benefit
•Long term relationship
•Cooperative - Not combative
• Bad relationships
• War Situation
Supplier
Buyer
COMPROMISE

11. Vendor management
Vendor
profile/risk
Assement/fin
ancial analysis
Vendor
audits/certific
ation
Vendor
Product
profile
Building
business and
capabilities
Performance
monitoring
and reporting
Vendor
empowerment
Vendor
management
“SUPPLIER AND BUYER SHOULD GO
HAND IN HAND TO ACHIEVE SAME
GOAL”
“TODAY IS A TIME OF EMPOWERING OF VENDORS,
IT HELPS IN OPTIMISING OPERATIONAL EXPENSES
ALTHOUGH EMPOWERING VENDORS HAS ITS OWN
SET OF CHALLENGES”

12. • Respect the Ecosystem
• Provide competitive pricing
• Provide technical and design assistance
• Identify cost saving opportunities
• Engage in ethical business practices
• Provide quality product and services
• Deliver the product ontime
• Continuously focus on improving the efficiency of supply chain
Characteristics of Strategic vendors

13. Right Timeline
Retail stores have received high sales forecast for
a running order. You have received an urgent buy
requirements of 100k units. However, timeline is
too tight? Along with timeline another constraint
is to maintain the average unit cost?
INDUSTRY CASE:

14. Product Differentiation
“KNOW YOUR PRODUCT”

15. Identifying sourcing regions- world map Reference: Zara Annual report FY19

16. Activity
Fabric
weaving/knitting/yar
n making
fabric
printing/dye
ing
fabric transit
fabric
checking
Garment
Stitching
goods
handover
sea transit Air transit
TOTAL DAYS
(SEA)
TOTAL DAYS
(AIR)
Global Average time(no of.
days)
30 30 30 5 30 7 35 10 167 135
no. of weeks required 24 19
Activity analysis with standard timelines…
How Zara maintains 5-6 weeks vs while 4 weeks in required only for
garment stitching and finishing ??
* The numbers may vary at various levels
Turn around time
Key factors for Timeline planning
• Identifying product and its Differentiation
• Identifying sourcing regions
• Identifying vendors from vendor matrix
• Identify the suitable sourcing model
Lets revisit the timelines…
• Transit Time = 30+35+7 = 72 days
• Production time = 30+30+5+30 = 95 days
• Total= 167 days
Is the production timeline actual timeline of production??

17. What are different sourcing models?
Sourcing models are the different ways product can be booked with various Lead Times (LT).
Each sourcing models has a unique set of flexibilities and constraints.
Rapid response Rapid Response (~12 wk LT)
Generally vertically integrated or collocated vendors. can make unit/color/body
shifts
Chase Chase (Lead time varies)
(Open to buy) - OTB , Get into trend or fill a hole in the assortment.
Monthly Buying (~18 wk LT)
core products, long running items
Monthly Buying
VMI
Vendor managed inventory (8-10 wks LT)
Short lead-time. E.g. basic blue denim, white poplin shirt etc. (never
out of stock items)
Seasonal
Seasonal (~24wk LT)
Generally high fashion products. New products
Off-Cycle
Off-Cycle
Product booked in far advance of standard book date to capture
factory down-time and cost savings
Cost saving
Responsive
Supply chain
(modern)
Regular
Supply chain
(Traditional)

18. Lean supply chain
• Shorter lead-times, improved quality and reduced timeline
• Focused on eliminating non-performing suppliers and redundant
suppliers
• Consolidating supplier base. Efficient and reliable suppliers rather
than high number of suppliers
• Vertically integrated supplier base
• Co- locating supplier base- localization
• Capability mapping of suppliers
• Vendor performance management(key parameters- Service, delivery
performance, quality performance, cost efficiency)

19. Risk of lean supply chain
• Lack of alternative vendors
• Mismatch of vendor and buyer goals
• Instability of vendor core team
• Vendor monopoly on your product
• Financial Failure of vendor
• Ineffective management in vendor firm
• Mismatch in Technology
• Supply disruption in second and third tier
• Currency rate fluctuation
• Material price fluctuation
• Training issues with vendor core team

20. THANK YOU