Over time, my journal has been filled with many tidbits about what ought to be done and what not… These chapters in the fifth part are nothing but extracts from my past, which are key learnings and lessons I want to pass on to all.
In most cases, the onus of delivery delays lies with the sourcing team, for they are the link between the brand and the vendors/manufacturers, accountable to get goods into the warehouse on time. And when asked why the delays occurred, the sourcing team invariably gets into emotional discussions and go through hundreds of emails, trying to figure out when & what went wrong. In this exclusive article, written for Apparel Resources by Anindya Ray, Chief Sourcing Officer, Arvind highlights some major aspects that help companies in better planning.
In the apparel industry, most of us have witnessed it. But, unfortunately, no one calculates the actual loss to business due to this. Instead, it leads to emotional changes and counter charges. It is this lack of accountability for lost opportunities, which essentially does not allow for measurement, hence there are no improvements that can be seen.
You may think that I am being harsh; but am I really? Why, otherwise, is the sourcing landscape so cluttered and chaotic?
Delay in delivery is commonly heard in our daily lives. All business functions are affected by these, from the merchandisers to the sales staff.
That happens because instead of planning and monitoring a Time and Action Calendar (TNA), the sourcing team works on vendor promises, commitments and prayers to God.
If we were to analyse the sourcing function, it’s nothing but simple project management and TNA is that planning tool which helps and enables efficiencies. It highlights issues on a timely basis and allows for proactive measures to be taken, minimising losses for the organisations.
The benefits of the TNA are immense, yet for some reason, it’s not utilised to its potential in our industry.
To understand the TNA better, we need to understand the 3 components of sourcing which keep this machine rolling.
PREPARE: Ensure all pre-production planning is in place for example, gold seals, tech packs, approvals, counter quotes, compliance checks and vendor partner selection. Make sure that the orders are all actionable and not some excel sheet that’s mailed across; there should be no gaps in data.
PLAN: Ensure that fabric/yarns are all pre-planned, capacities with mills are blocked, vendor capacities are taken well in advance and commercials are closed. And most importantly, backward planning for all timelines is done from the targeted delivery date and this plan (TNA) is confirmed with the vendor.
PROGRESS: Monitor the plan daily, create checkpoints and take proactive measures to ensure delivery is on time.
TNA is a tool that takes care of all pillars of sourcing and helps a merchandiser keep track of orders through the manufacturing process.
From preparing to planning to monitoring progress, a TNA helps in organising the workflow, ensuring that issues are dealt with proactively and do not cause business losses. It’s the best tool a merchandiser can equip himself with to ensure the smooth flow of all orders.
The apparel industry is a complex one and sourcing apparel products is even more so.
In a year, we deal with 2-4 seasons, which are further divided into monthly drops. And the total number of styles per month may vary based on the size of the brand, categories the brand caters to and the sub-brands it has. In essence, a merchandiser has to deal with about 100-200 styles, each at different stages of the manufacturing process, with a different end date. Each of these styles have 20-30 different components such as fabrics, interlining, buttons, thread, labels, and many more…
So, a merchandiser is dealing with about 2000/6000 components, each of which is important and can impact the delivery. For example, if the correct thread is not supplied on time, the garment cannot be stitched. If the washing chemical is not supplied on time, the garment cannot be finished. Even something like a hangtag can lead to delays.
Adding further to this complexity is the fact that every product is unique and most of the components cannot be standardised.
The fact that fashion companies, by default, and designs keep changing a majority of the products in every drop, leading to so much variety that they end up using many unique and non-standardised components in the products. Each style we make has something unique of its own which makes standardisation of all components rather difficult.
If we look at other industries, we may find that the same components are used across products, and many are standardised. For example, in the automobile industry, the same engine, chassis, tyres may be used in different models of cars. Only the outside elements may change, minimising the number of components being used, hence simplifying the supply chain. Also, the rate of new product introduction is nowhere close to fashion.
This is unfortunately not possible in the apparel industry for every component is visible and impacts the consumer’s decision-making. And most of the time, the consumer wants variety. The embroidery used on one style will not be used on another, the fabric colour will vary from style to style, the stripe pattern will be different, and so on.
The merchandiser is actually dealing with multiple unique components on a daily basis, and what makes this further difficult is the fact that the decisions making isn’t easy.
‘This is not the right shade of blue’, ‘this button does not look good’, ‘this embroidery is not aesthetically pleasing’…We have all said or heard these words often. For most of the decisions, made in the apparel industry, are marred by subjectivity. There is no right or wrong, it’s just a matter of perspective, derived from individual experiences. Now, imagine the impact this causes on the supply chain!
Most of the times, merchandisers don’t even know if the fabric is the right shade, or the embroidery looks aesthetically pleasing. This subjectivity also leads to multiple changes.
Subjective decision-making, changing consumer preferences, market insights, or last-minute add-on requirements – all of these have an impact on the apparel supply chain. And it’s imperative that these are addressed.
These add to the built-in complexity of this supply chain, making it difficult for the merchandiser to always keep track. These decisions are, in most cases, taken by people who are not even a part of the process such as designers, sales teams, business heads, etc.
This subjectivity is one of the unique problems of this supply chain.
Given this complexity, it’s humanly impossible to remember everything by the merchandisers. No amount of to-dos, emails and lists can help organise. Yet, I have always noticed that the merchandisers tend to plot everything in their minds and expect things to flow smoothly. And experience tells us that anything that can go wrong, will go wrong. Hence, I always maintain – the only way this business can function is by planning a TNA and following it like law…
Once the order flows in, the TNA should be plotted and calendarised. Then, it’s a matter of tracking it daily, and proactively solving any problems before they arise. It’s only with a TNA plan that a merchandiser can anticipate these problems and ensure they do not hinder the delivery of the product, ensuring a smooth business flow.
It’s all so common-sense and of course everyone does it. So, why are we even discussing it? The reality is that if you really ask sourcing merchants for their TNA, most will look blank and the few that do have it may not be updating it regularly.
What is the problem that people have with ‘planning’? I don’t know, but it is simply not done. Maybe, they feel it will throw up new challenges by exposing the risk factors, hence, increasing mental anxiety and work. Or maybe people simply like to be paper-pushers, doing a postman’s job…That way if anything goes wrong, it’s always someone else’s problem.
The main thing is ‘ownership’. If sourcing teams have ownership, they will ‘plan’ for success. And I have seen that if the planning is done properly, it’s 80 per cent success with in-time deliveries and quality. But it’s when they allow vendors to dictate their fate that companies suffer.
Unfortunately, Indian companies and their CEOs do not spend adequate time on sourcing and supply chain. This in turn leads to the apathy we see in the back end today.
Over my many years in this industry, my journal has amassed quite a few pages which are about my day-to-day learnings at work.
These learnings today have become unique insights into this industry and its functioning.
When people asked me to write something about sourcing, I decided to peek into my journal and share a few of my insights.
A vendor is one of the main stakeholders of our business, hence my first chapter in this series is about:
How important is it to select the right vendor? How often do we go with the vendors we are comfortable with? The ones we know will offer us least resistance in terms of last-minute changes and slip ups, and will cover for us during reviews.
So, this brings us to the question,
It’s important to stress the criticality to study the geographical spread of factories. For easy example, split the country into four zones - north, east, south, west. Identify key category hubs in each region and decide the percentage split in desired business from these hubs.
This decision can be based on cost, product handwriting, logistical ease, capacity, regional stability to name some.
It’s important to also de-risk the business by ensuring that each category is well-balanced in capacity allocation. So, if there are any major disturbances in a region, it does not impact the whole business and one can localise the impact.
Once done, look at developing factories or placing business in these hubs. The same applies internationally as well - specialisation, cost, duties and lead times play a major role in the decision. It’s always good to revisit this regularly and set clear targets for de-risking and optimising before getting into vendor selection.
It’s always good to develop a points-based vendor rating system which allows for objective assessment and unbiased decision-making. These points should be from different stakeholders in the system, like finance, quality, compliance, sourcing and product/design teams.
It’s good to even look at taking feedback from raw material vendors to understand the culture of the vendor.
The first question to ask is - if the vendor has the financial capability to manage his working capital. The most critical point being - can he manage an additional month of working capital stress? It’s important that a month-wise investment plan is worked every season with the vendor before deciding volumes to be placed with him.
How is the vendor’s attitude towards business ethics? Is he too stuck up with his idea of working or is he open to new ways of doing business? Is he the kind of vendor one can build a long term commitment with? All businesses have ups and downs - can we count on the vendor’s support during such times.
Is there possibility of growth? What kind of internal quality processes does the factory have? Is there some basic compliance in place? Is the factory capable of investing in ethical, sustainable business practices? Does the business have the capability of going online and digitally managing the business?
What kind of design and innovation support is the factory capable of giving? Is the factory investing in innovation and sampling? This becomes very important as we keep moving to value added products.
What is the cost structure of the factory? How has the factory invested in efficiency and cost management? How good is the factory’s own sourcing capability for raw materials? These continue to be one of the key driving factors.
Can the factory become a green channel quality resource in the next one year? Such factories should be prioritised over others. Ideally 30-40% factories should be green channel in the complete supply chain.
Having discussed the above, it would be important to understand the following aspects as well like: Management control of vendor base (defining an optimal span of control by number of vendors being managed) is as important as keeping an ongoing vendor development plan to ensure that there are always new vendors being identified, assessed and kept future ready.
And finally, I cannot emphasise enough on the importance of a seasonal audit and making it the key deciding factor in placing business. This will ensure a seasonal vendors’ review that will allow vendors at the bottom of the rating system to be either replaced or given a warning and pushed to improve.
A lot of people will say, what about other teams wanting their vendors or urgent requirements, when there are no capacities blocked. Well, if you are diligently following this way of working, it’s never going to be an issue. Just remember - as long as you clearly define a span of control, introducing a new vendor will mean taking another one out.
These were some simple pointers to creating a relevant and robust vendor base. What do you think?
I started writing chapters to share my learnings and experiences. To that end, I like discussing subjects that most people don’t talk about. This topic came about because a person, who is new to the industry, but quite senior, recently told me that he had heard that this industry had an integrity issue.
That set me thinking. And I don’t want to get defensive, but the fact is that it is very important to ensure, through processes and practices, that there is none or very little opportunity for leaks in the system.
In this chapter, I will share some good practices that I have seen over the years. Loosely put, this chapter is divided into,
I understand that these processes and steps cannot be implemented at scale, in one go. This holds true for large companies as well as mid-size ones. To that end, I would recommend that financials be given the most importance, followed by vendor trust and lastly, organisational structure.
However, let’s start by understanding Why and How to Gain the Vendors’ Trust.
The vendors are the most important piece in this effort, and it is important to ensure that they feel secure against backlash and be guaranteed of fair play. Mostly, vendors deal with junior and mid-level executives in the company and are at their mercy for business. Hence, the following is very important in creating trust.
Senior Management should regularly interact with vendors and sometimes, directly ask them about their interaction with the company. Mostly, at that time, vendors may not respond but may well come back, anonymously or will know that they can approach the senior management team.
This will allow vendors to anonymously approach or complain without fear of backlash. It could be done using a drop box or some online complaint recording platform. But the important thing here is to ensure that the complainant is protected, and the complainant’s identity is not revealed. Very few people come forward to complain and their interest must be protected.
Large companies can have their own teams, but smaller to medium sized organisations should utilise third party organisations that could do surveillance, study financial etc., in case of reportage or suspicion. Do not leave it to internal reviews and discussion.
Having done this, it’s then important to build processes that help in,
It is important to understand the potential leak points and then putting in robust processes to manage those. These processes should be independently managed by a resource, ideally attached to the finance team, who manages this data and independently ensures that these processes are enforced.
This should be managed in the following manner:
• Putting in place a core business - price tracking mechanism with a minimum of 3 years data availability. This should be backed by a dual region, cost comparison and ideal placement.
• Ensure zero-based costing - for fashion. With reasonable sample sizes being taken through multiple costings (cross costings) for the same style.
It is important to negotiate and maintain,
• Rate cards for various processes across vendors and comparative charts across regions as well. These should be separately negotiated and compared within minimum two regions.
• Ensure that there is a scientifically done SMV’s and process mapping to ensure back ups for cost allocations.
• Keep regional trims vendors and a minimum of 2 or 3 for each region.
• Allow for competitive bidding in trims.
• Should be CAD based. Separately verified by tech team.
• Similar consumptions compared between vendors.
As we all know that there are many commercial calls taken during the manufacturing process, these should be managed on 3 levels:
• The Company or Business head or
• Sourcing/Category head or
• Quality/Category head
These calls should ideally not be taken by the junior merchants on their own.
• Ensure all cost breakdowns are in a common system with access to other stakeholders in the company as well.
It is good to reiterate once more that financial processes need to be kept robust and independently monitored. Now it is important to understand how to support this through proper organisational structuring.
These are simple, yet very effective in ensuring that processes and relationships are kept professional.
It is very important that there is job rotation at junior levels.
• Yearly rotation of quality auditors (QA).
• And, at least, a two-yearly rotation of Sourcing Merchant.
This avoids familiarity and keeps the relationships professional.
Most companies have vague policies or maybe policies like ‘no gifts’. But these should be calibrated well, as every country has unique cultures and policies, and one should recognise and be sensitive towards the same. For example, flowers, cards or sweets may be acceptable in some cultures and refusing those may be insulting to others. But clear guidelines must be put in place to avoid ambiguity.
This is a must and should be fully enabled and supported. I have noticed that most financial auditors stick to basic procurement logic, but it is important for them to understand the nuances of the industry as mentioned in the financials’ section. These should be audited keeping those aspects in mind as well.
To conclude, I will say that - what really matters is the culture created in the team. It should be one of meritocracy and transparency, process and data-driven. This must be led from the top by the senior management team, through demonstrative leadership.
Having spent many years in the Apparel industry, I have come across multiple situations where organisations have lost business due to delay in deliveries. The onus of this delay lies on the sourcing team, and, invariably, they do not seem to have objective answers. All we get are emotional responses.
When asked about Time and Action Calendar (T&A), mails and words are shown to the stakeholders instead of an actionable plan.
I have always wondered why this happens!
The basis of any sourcing organisation/team to function well, is planning and a T&A is the heart of that planning process which keeps everything on track.
Hence, I have taken up this topic in the series – ‘My Sourcing Journal’.
In this article I will discuss in detail:
• Pillars of the sourcing function
• Why apparel sourcing needs a T&A
• Why merchandisers shy away from it
• Basis of a good T&A
• Tips to manage the T&A, and
• Digitisation of T&A and making it a management tool
Let’s begin by first understanding the pillars of the sourcing function, namely:
1. Preparation refers to pre-production planning that includes counter quotes, prior approvals and selecting the right partners who would, therein, ensure timely delivery along with quality.
2. Planning is ensuring that every variable is taken care of. Right vendor is allocated with the right product and all variables like costs closures, approvals, fabrics orders, trims etc., are in place.
3. Once the preparation and planning are in place, monitoring the Progress is the key to ensuring success.
T&A plays a role in all the above as creating the plan and execution monitoring is the essence of sourcing, yet it is the most ignored.
A simple tool like T&A does wonders in organising the workflow and ensuring that issues are dealt proactively, without impacting the business adversely.
While we speak about the importance of T&A, it’s pertinent that we understand its importance specifically in the apparel industry.
Apparel industry is a complex one, and sourcing products even more so.
Many a times, we see changes happening during the manufacturing process like changing embroidery, wash and similar parameters. Some of these decisions may be last minute calls, taken by people who may not even be a part of the process, such as designers, sales teams and business heads. This subjectivity is one of the unique problems of this supply chain.
At any given point, a merchandiser deals with 100-200 styles, each style consisting of 20/30 variables. In essence, we are talking about each merchandiser managing about 5000/6000 variables - variables like fabrics, trim fabrics, buttons, interlinings and many more.
I have never understood why merchandisers tend to rely on their minds to manage this complexity. Invariably, they plot everything in their minds and expect things to flow smoothly. And as we know from experience, in sourcing, anything that can go south, will.
Apparel products are ever-changing and so are its variables. If we look at other industries, many of these variables are standardised.
For example, in automobile manufacturing, the same engine, chassis, tyre may be used to produce many different models of cars. Here, only the superficial elements change, minimising the number of variables used.
In apparel manufacturing, however, everything changes, every time. For example, fabric, sewing thread, buttons to interlinings change from one style to another, hence a T&A is of the utmost importance in our industry.
While we understand that the T&A is the backbone of sourcing, we see many merchandisers resist using this tool.
Many believe that updating and maintaining T&A is a cumbersome process and often takes up a lot of their working hours.
The T&A begins with planning in minute details many different variables and then updating the progress against these variables on a periodical basis. This requires a lot of discipline, and it becomes a reason behind the merchandisers’ resistance towards it.
If used properly, working hours will reduce by 50%. If the T&A is shared with everyone, it cuts down unnecessary meetings, reviews and updates. The data is available with everyone, and things move smoothly.
Ours is a very old industry and many buying houses, exporters, sourcing businesses have reached great success by keeping the T&A as the backbone of their businesses.
One of the best practices to overcome the inertia and resistance towards the T&A is to create a simple work discipline within the merchandising team.
• 1st hour - spent going through the emails and actioning out the urgent and important ones.
• 2nd hour - spent updating the T&A which in turn tells the merchandiser the priorities and the action points for the day.
• Last hour of the day - spent responding to all the emails and queries which have come in during the day.
As the T&A is updated every day, the critical aspects start falling into place and work gets aligned. This is typically how a merchandiser’s day should look like.
• Most people keep changing the end date when there is a delay and then map the actuals. One must understand that the end date is sacrosanct. The right way to go about this is to ensure a missed deadline doesn’t impact the end date. If one deadline is missed, the key thing is to catch the next deadline.
The real job of the merchandiser is to create the T&A, monitor it closely and come up with solutions when a deadline is missed, ensuring the end date is not changed.
• A tip I always share is to chase the PCD or the ‘planned cut date’. If a factory cuts the product at the right date, there are minimal chances of delay in the delivery. A factory will only cut the product when all its variables are in place. Once it has cut the product, it is not going to hold it and wait. This will automatically ensure that the product moves out of the factory as soon as possible.
• Regular reviews, maintaining T&A hygiene and accuracy, and updating it every week are some of the key areas which a sourcing organisation needs to focus on.
Today, with digitisation becoming a mainstay, there are systems built around T&A. Many PLM tools systemise the T&A to an extent where it automatically creates actionable points for management. Within the system, an escalation matrix is created, which eases out the work process for everyone. It allows for transparency between all stakeholders making everyone proactive and keeping delays in check.
To conclude, sourcing is like project management and T&A is the perfect tool to enable efficiencies.
Once an order is placed, we decide on an end date/delivery date and work backwards to decide on milestones to meet this end date. These milestones must be aligned with the various stakeholders to execute the product in the stipulated time.
Once this is calendarised, it’s just a matter of ensuring each milestone is met. And in case of delays, proactive measures need to be taken.
I believe that T&A management and adopting digital systems to do is the key to succeeding in a sourcing team/organisation.
In India, we have many manufacturing hubs, like Ludhiana, Delhi, Kolkata, Salem, Tirupur and many more, yet we usually have one sourcing team sitting in the HO trying to source from one place.
But the fundamental question I ask is - Should sourcing be centralised?
While I am very sure that there are merits to a centralised sourcing function, I believe, it’s a regional sourcing model that creates real value in this business. Hence, I have taken up this topic as the fIfth article in this series – ‘My Sourcing Journal’.
• Types of sourcing structures
• Regional sourcing teams & its advantages
• Developing regional sourcing teams as business centres
Our industry has many different players - big, small and medium sized brands/retailers who have different sourcing models.
Let’s first understand what these different sourcing models are.
The below infographic clearly indicates the different models that exist.
Each of these models have their own merits and demerits. While a centralised sourcing model helps in consolidation of vendor base, a regional model offers varied products at effective costs.
There is no right or wrong sourcing model, and each business needs to take a call based on its own requirements.
For many big brands/retailers, who have requirements of varied products across different categories, it’s very important to source from different regions and build a strong regional sourcing model.
So, what are the advantages of regional sourcing model?
• Each region or manufacturing hub has an expertise unique to them. For example, knits from Kolkata have a higher lustre due to the softness of water in the region which impacts the dying process. Delhi specialises in hand embroideries, Salem in cotton fabrics and so on. This expertise is so unique to the region that, in most cases, it cannot be replicated elsewhere. Hence, it is very important to diversify and create a regional sourcing model, particularly for the big brands/retailers.
• Having a diverse geographic mix in vendor base de-risks business. If sourcing is focused or concentrated in a few hubs, then it is susceptible to calamities or geopolitical upheavals that can have a negative impact on the supply chain. We can take the example of the recent pandemic, where brands with concentrated sourcing hubs, have seen a negative impact on their supply chain.
To keep businesses on track, even when there may be a natural calamity, it is important to distribute the sourcing of products across regions. This creates a safety net and helps brands/retailers wade through difficult times without any hiccups.
A regional sourcing model builds competitive advantage within the organisation and benefits the brands/retailers by:
1. Creating competition for orders amongst the different regional teams
2. Building access to specialised vendors across region
3. Giving effective cost benefits
We usually see that brands/retailers go with a centralised sourcing model. They believe that a centralised team builds economies of scale. It helps in creating better control over the supply chain & logistics and consolidating vendor base.
Consolidation of vendor base is good but should be done sensibly keeping regionality and product specialisation in mind.
While most big brands/retailers source from multiple regions, they limit decision-making to the central team.
The regional teams are mere assistants, following up on orders, having no decision-making powers. In most cases, this builds many wasteful days into the actual lead times as samples and all are sent to and fro for approvals.
When regional sourcing teams become business centres, they will compete and
• Find new factories
• Negotiate better costs and payment terms
• Study the competition
• Ensure timely deliveries
• Build a competent vendor base
But for regional sourcing teams to become business centres, they need to be empowered to make decisions, approve samples, finalise vendors, decide which orders to take etc.
An empowered regional sourcing team saves time with on-the-spot approvals and quick decision-making, making the supply chain agile.
To empower them, it is important that the regional sourcing teams are trained well by the central team. This builds trust between the teams and helps in smoother transition of orders. It should also be ensured that the regional team’s KRA is a combination of OTIF and business turnover.
An empowered regional sourcing team doesn’t just deliver quick results and create business impact, it also removes a lot of burden from the central sourcing team. In fact, in many cases, a small central sourcing team and a QA team is all that’s required, while the regional team takes charge.
Of course, the regional sourcing model has some demerits as highlighted below.
But the merits, by far, outweigh the demerits and create a value win situation for the brands/retailers.
I believe that regional sourcing model is the way for the future and it’s important that brands/retailers start making this shift to build strong, empowered regional teams.
COGS! - The ‘Direct costs of producing the good sold’ by any company.
It is a term we are all familiar with. And the quest to ‘Reduce Cogs’ is one of the key deliverables of any sourcing organisation. All companies look first at the sourcing function when it comes to reducing the COGS.
But the question I ask here is - Is it just the responsibility of the Sourcing function?
I believe, it is the collaborative responsibility of different functions, and they can empower the sourcing team to deliver better results. Hence, I have taken up this topic as the sixth article in this series – ‘My Sourcing Journal’.
Here I will discuss in detail:
• Factors influencing COGS
• Sourcing controlled factors of COGS
• How design and buying teams can influence COGS
• Hidden costs which need attention
COGS may be a simple four-letter term, but its impact on any business is considerably high. There are many different factors influencing costs and each needs to be looked at closely under a lens. It is an interplay of many different factors. Some of which are directly controlled by the sourcing team.
Let’s first understand the factors that are controlled by the sourcing function directly and how they can economise and impact the cogs.
Volume, in business, has a direct impact on costs of the products. Higher the volume, lower the costs. Hence, volume bundling has a big impact on the costs. This bundling can be done by consolidating orders across brands/sub-brands and business units. It helps in achieving scale in production and improving efficiency, thereby lowering the costs.
Consolidating the vendor base within and across business units also helps in achieving scale, as orders are not fragmented across too many vendors.
This involves granular cost-visibility through open-costing and internal standardisation of rate cards across processes and functions.
Cost transparency leads to analytics-driven best-price evaluation, which keeps the emotion and the comfort levels out of the negotiation and price evaluation. Today, we can also rely on digital tools and advance data analytics techniques to evaluate the costs.
Another aspect to consider here is establishing a competitive bidding process to get the best prices. This opens the orders to multiple vendors, and each compete to get the business in. Sometimes, it makes sense to do this, within the established vendor base, allowing processes and quality to remain untouched. This gives rise to the competitive spirit in vendors. However, care must be taken to ensure that vendors do not cartelise to take prices up, hence a hybrid between existing vendors and a few new ones is probably a good practice.
Nomination of yarns, fabrics and trims helps in further ensuring that costs are managed across the value chain and that one benefits of scale through consolidation of raw materials across the vendor base.
Each vendor has different strengths and weaknesses. Some may have design capabilities but higher costs while others may have exceptional operational efficiency but provide no market intel.
The vendor’s strengths should be assessed, and a comprehensive vendor mix should be created based on the need of the business and what the vendor is bringing to the table, not necessarily only on cost.
The order allocation and bidding should be done based on these vendor capabilities. For eg: core products could be allocated to low-cost vendors, while a product with special features should be given to a vendor specialising in the same, irrespective of cost competitiveness.
Another aspect to be investigated is to ensure regional diversity of the vendor base. A regionally diverse vendor base gives an organisation a competitive advantage. While it safeguards them against many issues (refer to previous article), it also creates a unique competitive environment and helps to play on the region’s strengths.
Ensuring an optimal distribution across sourcing hubs, with diverse offerings, is very important. One region may have advantages which the other region lacks, and this advantage is passed on to the brands in the form of costs.
Undeniably, the sourcing team plays a major role in determining the COGS in a business.
But is it the only function responsible for reducing and optimising it?
The answer is no!
There are other factors which play an equally important role but outside the purview of the sourcing team. This is where the Design and Buying teams step in.
The designers and buyers are the foundation of any apparel business. Many factors, when controlled at the conception stage, can economise the costs. These are directly influenced by the design and buying teams.
Product specification comes from the designer and building a design led cost control mechanism helps in reducing COGS effectively.
Small shifts in design process, as demonstrated in below infographic, have a big impact on the costs.
Standardising product components like fabrics, trims, tags etc further adds to it.
Clubbed with optimised buying depths, through regulation-controlled design width, based on analytics, help in building scale and achieving component as well as garment MOQ’s. Thereby, reducing COGS.
Due to the seasonal nature of the apparel industry, manufacturing capacity is under-utilised during lean periods. The buying teams can use this to their advantage and plan production of core/all year-round products at this time. The vendors usually give lower costs to keep their production capacities occupied.
Another important aspect in planning is, fabric platforming and forward buying. Based on historical data and trend analysis, the buyers can book griege fabrics, core fabrics, yarns etc. which offsets increase in raw material prices. A low hanging fruit is to take advantage of platforming across departments, standardising a certain minimum percentage of designs through platformed bases.
Sampling cost is an often neglected one which is built into the final COGS. Utilising technology and shifting to digital sampling and prototyping also reduces number of iterations, costs along with building other efficiencies into the process.
Along-with diversity of vendors, it is also important to optimise the buy model itself. How much are buying through agents, how much through direct FOB, imports, specialised vendors for value added products? This has a direct impact of cost, quality and delivery effectiveness.
All these factors, whether controlled by sourcing or influenced by the design and buying teams, are not mutually exclusive.
They are interdependent and a collaborative interplay, required to impact COGS - a responsibility to be borne by all the three functions. If platforming and cost optimisation is done at the design stage itself, then leveraging them becomes easier which benefits the overall business.
Any organization, which is looking to impact COGS, must develop a strategic sourcing plan based on the above factors.
The factors charted above are some of the big-ticket items, strategising which will have an immediate impact on the COGS. But what one overlooks are the hidden costs. These may appear to be of lesser consequence, but further examination shows that they do have a substantial cumulative impact.
Managing inwards logistics through strategic third party tie ups may prove efficient and cost-effective as against fragmented vendor managed deliveries.
Standardising fits and specs across brands and sub-brands have an impact on reducing the COGS as well as improved consumer experience. Having a technical team with CAD’s to back up consumptions and resolve disputes, scientifically, helps.
Trims account for 12-15% of the costs, and yet this is an area which is often ignored. We over engineer these at product level but they have no actual relevance to the end consumer, often landing in garbage bins.
Questioning the purpose of each trim and eliminating the unnecessary ones is a way to reduce costs. Also, harmonising trim specs across brands and sub-brands helps in bringing down the costs.
This is an often-ignored area, as it does not impact COGS directly. But creating GREEN CHANNEL factories reduces manpower requirement. Also, increasing the scope field quality team, for factory follow ups and reporting, can ease out a lot of the manpower required for this work at the office. These also reduce travel costs.
All businesses need money to function. This is most often borrowed money which attracts costs such as interest. This again is an ignored area that affects COGS. Even costs, such as raw material holding, warehousing etc. have an impact. Assessing the vendor’s financial strength and costs that he incurs in such places are also of significant importance.
Reducing COGS is not an elusive dream, it is easy to execute. One must look at each and every factor that influences COGS and assess them minutely and derive business relevant strategies for their organisations. What’s required is - simple rules, clear accountability and some out-of-the-box thinking. And lastly, it’s a collaborative effort which needs focus from multiple functions.
There is no right or wrong way to do this. Different business models should focus on different aspects of this and develop a tailored strategy.
Over many years in this industry, a question that has been asked again and again is -
The answer to this is very simple:
1. Good planning
2. Robust review mechanism
Any organisation which gets this right is surely on the road to success.
While much is discussed about planning and its impact, we usually do not focus on the importance of review mechanisms. While, in reality, a plan has to be supported by a good review mechanism to ensure smooth flowing of work.
Hence, I have taken up review mechanisms as the topic for the seventh article in this series – ‘My sourcing Journal’.
In this article, I will discuss:
• Importance of planning
• Common mistake in the review process
• Important tenets of a good review
• Reviews at different hierarchical levels
• The outcome of a good review mechanism
As mentioned, operational excellence is nothing but good planning and a robust review mechanism. They are both interdependent elements, which cannot function independently.
It is nothing but a time and action plan.
T&A is the heart of the sourcing function which keeps everything on track.
A lot of people in the industry go around rubbishing the calendar in the name of changing demand patterns. But the real science is in creating multiple calendars for different requirements rather than a single calendar for the whole organisation. But to try and operate without any calendar is like committing harakiri.
Aligning different stakeholders and calendarising at each milestone, ensures a smooth workflow.
The importance of T&A is discussed in detail in my previous article “The much-maligned T&A in sourcing”
While we understand that good planning is the backbone of the sourcing function, the question I ask is - “Is It Enough?”
And the simple answer to that question is NO!
For any organisation to understand, if the plan is working or not, it needs to build a good review mechanism.
As the above graphic highlights - the importance of reviews is immense. They formalise workflow and create a proactive environment.
• With reviews built into the work process, it compels the merchandisers to be consistent with follow ups, be it with internal or external stakeholders.
• This consistent follow up leads to timely identification of issues, current or future, which may impact the delivery timeline. It helps in timely resolving these issues, ensuring smooth flow of work.
• Any issues which may need senior management intervention are escalated at the right time, which helps avoiding last minute firefighting.
• This builds a proactive environment where the issues are anticipated and dealt with at the early stages.
I cannot emphasise enough on the merits of a good review mechanism. But the reality is that the reviews, in most cases, are marred by mistakes and are not conducted to extract the benefits stated above.
Mostly, during review meetings, the merchants arrive exhausted having spent most of the previous evening, late into the night, calling up factories and other stakeholders to get their data in place. And in the meeting, they take great pride in the correctness of their data.
But when asked to present, they start reading out the data rather than pointing out the red flags and presenting their plan of action for risk mitigation and approval. And they have the most blank expressions when their outcome is challenged. A few probing questions, and meetings become extremely animated and emotional.
The important thing is to develop a skill in anticipating and pre-empting possible issues and acting well beforehand to ensure that they never arise.
One should look beyond the ‘now’ to anticipate future problems. We all spend so much of our time firefighting the issues, which could have been avoided with a futuristic mindset. Planning for tomorrow minimises the problems of today.
The closures discussed in reviews should become action points, which should be documented and circulated to all stakeholders involved. And the next review should start with the updates on the previous actions points, failing which the objective of a review is lost.
A good review is when focus shifts from problem-spotting to problem-solving. There are a few key points one must follow as the pillars of this review process.
Operational excellence is not an unachievable task. All we need to do is to follow these tenets and ensure that we reap the benefits of a review mechanism.
Many a times, I have noticed that reviews happen only with senior management and the merchants do not follow a process of formal reviews with the vendors or other stakeholders. While, in reality, every level of the hierarchy should be involved in reviews.
In fact, it is the merchants who should spend a large part of their time on reviews with factories and other stakeholders, and managers should spend more time on planning.
One must allocate their time to reviews, meticulously and follow them through.
It ensures that:
• Problems are identified and red flags are raised in a timely fashion
• Future problems are anticipated, and orange flags are raised months in advance
• Focus is on problem-solving
• It builds a proactive environment in the team
A good review mechanism builds a proactive environment in the team and creates a big impact on the overall business of a company. The actual money lies in anticipating and problem-solving, not firefighting.
A sourcing leader’s job is not to just look at deliveries, but to build a proactive team. The merchandisers need to be conditioned early on in their careers to look at the future and anticipate problems, and then think beyond the ordinary and solve these problems.
The most obvious question these days is how to become a preferred vendor in this new emerging market?
I am writing this feature because I was asked this question, during my session in the ASW Marketplace in Dec ’20 on The Future of Sourcing — ‘How to become a preferred vendor?’. It is a very relevant question and one that requires a more detailed discussion.
Vendors are the backbone of the fashion retail industry. It is they who execute the brands’ vision and give life to the products. A collaborative union of a brand and a vendor can do wonders in this industry. But how does a vendor become a preferred one?
For this feature, the words ‘brand’ and ‘retailer’ have been used interchangeably.
Here, I seek answers to this question by dwelling on the following points:
– The basic qualities brands look for in a vendor
– Understanding the evolving requirements of brands
– How should the vendor position his business
Having spent many years in this industry, I have come across many kinds of vendors - big, small, specialised, full-service providers and so on. They all aspire to work with big brands and retailers. While they are able to procure orders for a season or two, many are unable to impress the brand teams and build long-term partnerships.
One may debate about lack of capabilities, infrastructure or high costs as the reasons behind it, but I believe the answer lies elsewhere. They need to demonstrate the four fundamental qualities which are:
• Dependable – Meeting commitments is the steppingstone of dependability. Vendors, who meet their time-commitments, within cost parameters and requisite quality, are always desired by the brands. They are considered dependable as they don’t just deliver the product on time but can be trusted to deliver quality product.
• Consistent – ‘Every time, on time’, is a mantra every vendor needs to follow. Clubbed with consistency in quality and costs, this becomes the secret of success for many. Many reputed vendors formally brief their customers about this regularly, reiterating their reputation as a consistent performer. This builds trust and reliability, thus helping build a long-term business with them season on season.
• Transparent – One of the most important aspects in building trust in business is, transparency. A vendor who is transparent about costing, compliances, dealings with nominated vendors as well as daily/weekly status is always preferred by the brands. They build confidence in the buyers and compel them to work with the vendor again and again.
• Flexible – Business, by definition, is dynamic. In many cases, vendor support becomes the need of the hour. This support may vary from holding the goods to reprioritising for early deliveries, reworking commercial terms, changes in shipping instructions or quick turnaround. By extending this support and being flexible, the vendor goes closer to empathising with the brand and their requirement. This building of trust allows the brand/retailer to see the vendor as a partner.
If a vendor is unable to deliver on these 4 fundamental qualities, it becomes very difficult for them to earn the brand’s trust and ensure long-term business.
To move further, we need to understand:
The circumstances today are fast evolving. Businesses are under immense pressure to become more and more efficient. Markets are becoming dynamic, trends are evolving at a much faster pace, go-to market cycles are reduced. In such a scenario, brands are looking for more from the vendors.
Handling smaller volumes with ease, taking on some of brands’ inventory pressures, adjustable working in terms of delivery phasing, innovation & design partnership are a few such additional propositions.
And this is where I see as an opportunity for vendors to become the ‘preferred’ ones. So, how should a vendor approach this opportunity? It is by positioning his business properly?
So, we now come to:
In the yesteryears, vendors used to clearly position themselves as – ‘Low cost, High Quality’ or ‘Specialist Vendors’ and some vendors and agents used to position themselves as ‘Design and Development Partners’. But are these positions sustainable? For a few years maybe, but as brands keep evolving, this will change.
In this fast-evolving market, the dynamics of what brands are looking for is changing. A simple way of looking at it is by positioning himself either as a Flexible Vendor or a Value-Add Vendor. The graphic below throws light on what this really means for a vendor.
Vendor needs to develop a positioning strategy. The first step in doing so, is to understand what his brand’s business is and how is the brand looking at his factory. Then he needs to understand where he can position himself and accordingly, deliver. He needs to answer what is beyond the fundamental requirements that he is offering to the brand:
• Is he becoming an innovation partner or
• a trend translator and design partner?
• Is he taking some of the brands inventory pressures or
• Is he reducing his working capital requirements?
• Is he supporting with shorter lead times or
• Is he managing demand pull based production?
I would simply suggest that vendors need to look beyond just cost and design to become brands on their own - trusted for their commitments and valued for what they bring on board for their brand partners.
Today, businesses are looking at vendors, who mirror them and work hand-in-hand with them. Gone are the days where the relationship was of a customer and a buyer. Today, it is about partnership and collaboration. A vendor, who can become a true collaborator, is the one who will become a ‘preferred’ vendor.
Inside Apparel is built as a platform for not just our writers to express, but also for our readers to opine & share their points of views.
We are thankful to all our readers for sharing multi-faceted and thought-provoking comments with us. It makes this journey of learning, fruitful and encourages us to write more.
With each comment we learn something new and insightful.
We are sharing some of these opinions and comments from our MY SOURCING JOURNAL SERIES. We are unable to represent every comment here but would urge you to read through them at leisure.
Now let’s look at the varied comments posted by our readers! Enjoy the insights
“Well-structured and articulated finance - payment on time, and maybe we need many geniuses like Tim Cook with inventory management and payment on time. Then our industry in India can have many billion-dollar brands like P&G had but, in our geography, called India”.
“Very well-articulated. Supplier Relationship Management is the key to success for both, the brand, and the business partners/suppliers. It’s also very important how do we classify and reward our business partners in terms of their performance considering both hard and soft skills. I also felt that Sustainability initiatives should also be considered while a supplier selection is being done alongside capacity, capability, willingness, investment and growth, quality etc.”
“Sourcing and vendor selection is equally a commonsense approach. It is a relationship where vendor & brand or retailer, over the period, supplement each other and become partners in progress.
A person with right attitude is the biggest and most important deciding factor and I suppose such entity can always be cultivated to be a reliable & long-term vendor – gradually other supporting pillars can always be created with intelligent nurturing and regular support.
Indian value system largely gives importance to an element of trust or BHAROSA & PURANA SAMBANDH which plays a big role in uninterrupted supply chain and it’s mutual.
India’s consumption story is a real one and very few factories with scale and understanding of the business brands need to create sustainable supply base to stay relevant and profitable”.
“I recently went through a program ‘‘Become conducted by Kaospilot, Denmark’. They asked us to do an exercise of finding ideal collaborator characteristics. This was a very interesting exercise where I looked at colleagues I have worked with as well as my clients and other collaborators.
Very interestingly this led to looking at things that are tacit and not explicit. My list was: 1. Attitude of giving more than taking 2. Connectedness to a larger cause 3. Mutual respect and trust 4. Having deeper personal connect than just being a collaborator in a task 5. Wisdom and continuous quest for learning
This list made sense to me because this is what I stand for. Hence, I believe that alignment in terms of deeper principles and values are far more important in choosing any collaborator – be it a vendor or even customer!”
“Interesting article and something which is a real problem in our industry. The more data driven the decision-making is, the cleaner and transparent the sourcing setup will be. Constant benchmarking of prices is also important to ensure such problems are caught quickly”.
“It’s high time to make changes in the structure and processes as suggested by you to ensure integrity is intact and served with honesty and perseverance of following best practices as a Top-down approach.
Also, would like to mention the sense of achievement and the respect such a person generates from co-workers and people he/she is dealing with. They become friends for life and a great support system like a family in the workspace!!!”
“While TNA is the most efficient tool, it is time-consuming, and one needs to be patient enough to update at regular intervals. As it is said the simplest things are the difficult ones to do and adopt.
When the Business head or the management is serious about TNA and they review regularly, then every merchant would update. Initially, a merchant would feel the tool is cumbersome and a waste of time, but once he adopts it in his routine, he will find the real benefit of it”.
“‘Decentralization’ is always the key to success BUT lot of sincere efforts need to be put in to build ‘champions’ who would own up region wise ‘spokes’ and run non-stop like a well-oiled machine, day in and day out, independently, thereby being the CORE DRIVERS/PILLARS of entire supply chain”.
“Fortunately, during my past work experience, I have been part of Hub and the Spoke Model, and it works wonderfully. Ensuring you are getting the best product at the best cost as various Spoke`s, besides sourcing what is the niche of the region, also compete against each other in cost competitiveness and timely delivery.
And of course, it comes with the right amount of empowerment to the regional teams”.
“In my opinion, this is equally applicable across all the industries, of course, in different versions, but the principle remains same.
Costing, direct or indirect, does impact the end user, the customer. Therefore, every organisation should look at how this factor can be looked at, holistically, in a manner that the end user gets the resultant benefit.
Having said so, my own observation is that corporates or organisations are not transparent in their financial dealings, be it contracts, bidding process or even routine purchases. There are no standardised processes to monitor this important aspect. Vendor favouritism is the norm of the day and is readily accepted, without any question, thus directly impacting and jeopardising the profits/savings. Though, this is another point of discussion but is also interlinked and therefore, worth pondering”.
“As part of support to the sourcing teams in defining cost accuracy can be done by partnering with the industrial engineering teams. The IE teams can assess, evaluate and provide in-depth analysis on the entire cost structure of a production unit like cost per minute and efficiencies which the production unit generally work on. This will help the sourcing teams decide and select on the production unit as well as on the product capability front of the production unit/business partners. Another theory to establish with the design teams while working on COGS is to have a consolidated COGS% for the season. This will help sourcing teams to average out the costs on an overall product basket”.
“Great ideas! Would like to add another element – the sourcing process. Very often we build processes – which are checks and balances, without realising the implication it has on long term costs. I have often used this example – imaging if you had a vendor base where for all styles, no fit approval process was required. How much saving does it give you in terms of cost and lead time? Investing in improving vendor factory processes and working with building factories with greater capabilities really helps in reducing overall costs. So, taking up pilot projects with vendors really helps. The Quality team should be focused on this”.
“It is very important for individual contributors (merchants) to be able to leverage technology to view insights from data rather than running after collating the data and cleaning the data so that it is in presentable form. The organisation should empower the team with the latest tools rather than depending on the excel sheets. And the tool should be accepted throughout the organisation.
Also, the day of the review meeting with the individual contributors is very important. Whether it is on the first day or the last day of the working week. I believe the review meet with individual contributors should be on the last day of the working week so that they don’t lose the precious weekend to unwind”.
“Key point is Review and the sub point is Practice team/environment.
The basis of review mentioned in the article is like walking in a cul-de-sac.
The boss is doing a review based on the data available but what about the proactive team and environment building? How is this taken into account?
The best way is to get the anonymous feedback from the other parties involved– the fabric suppliers, the trim suppliers, the factories, the logistics and the finance.
Each of them will give a true picture of a person, how well he tackled the problems and how much realistic money he saved for the company.
This will be true proactive team and environment building which will help the company to grow”.
Sourcing is one of the most important pillars of the apparel industry, and implementing best practices and innovating processes, is of utmost importance. More so, in this era of change and upheaval.
These articles and comments have shed light on various aspects of the sourcing function and compelled us to think differently, strategically and with a future perspective.
Our readers have made the discussion fruitful with exciting insights into this subject.
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