CASE STUDY

Strategic Sourcing Helps an Apparel Industry Client Realize $4 Million In Savings

Dec 26, 2017

Overview of the Apparel Industry

Initially, clothing was used to protect the human body from harsh environmental conditions. Later, as the wheels of time started spinning, new trends emerged, and manufacturing of fashionable garments came into existence. The apparel industry produces finished clothing such as men’s, women’s, kid’s clothing, and other intimate apparel. Apparels manufacturing is one of the most in-demand businesses today. To remain competitive, apparel industry manufacturers seek to expand their business in various ways. Furthermore, factors such as volatile fashions, short product life cycle, unpredictable market trends and impulse buying behavior of customer are to be given highest importance by manufacturers to sustain themselves in the apparel industry segment.

The apparel industry plays a crucial role in developing a nation’s economy in terms of revenue generation and creation of employment. The apparel industry is undergoing a drastic change due to global sourcing and high level of price competition. Moreover, the rise in disposable incomes, favorable demographic factors, a substantial shift towards branded apparel, and change in consumer behavior has resulted in a positive growth for the global apparel industry.

Let’s take a look at some of the critical factors that are expected to influence the growth prospects of the apparel industry in the coming years.

  • Sustainability: Due to consumer’s ever-increasing environmental awareness and the detrimental effects the fashion industry has on the environment, consumers are now choosing to invest in brands that are actively seeking sustainable alternatives to conventional apparel manufacturing. Moreover, consumers have become hypersensitive to the way retailers manufacture their products regarding acceptable health and safety standards, labor practices, water consumption, and disposal. 
  • Product Sourcing: Sourcing is a two-pronged issue in the apparel industry. Increasing awareness of working environments in facilities across the supply chain, from garnering raw materials to manufacturing and shipping, puts pressure on firms operating in the apparel industry to practice responsible procurement that can enhance their brand image.

As a result of these factors, apparel industry firms have started leveraging the use of strategic sourcing solutions. Strategic sourcing analysis help firms increase focus on spend and supplier management and streamline the procurement process, thereby, ensuring service quality and best in class prices over the long term. request free proposalThese solutions also assist firms in generating optimal sourcing and procurement methods and measurement tools to drive savings across the supply chain and business units.

The Business Challenge and Journey

The client, a leading apparel industry firm with business units spread across several geographies engaged in manufacturing, sourcing, marketing, licensing, and supplying footwear, apparel, and accessories to the retail sector was focusing on top line growth. The selected growth path did not factor in optimization of procurement costs, neglecting obvious savings. This neglect led to an excessively large supply base, unleveraged spend, and mediocre service levels.

To help the apparel industry firm effectively manage its unwieldy supply base, the strategic sourcing specialists at SpendEdge tailored a comprehensive research methodology. The research approach comprised of primary and secondary research coupled with qualitative and quantitative data collection procedures.

During the course of this strategic sourcing engagement, the apparel industry client was able to identify suppliers offering best in class service levels. The client also identified and implemented procure to pay (P2P) improvements that would eventually drive financial and item availability benefits. Furthermore, an RFx tool helped the firm’s procurement isolate key cost-drivers for each category and engage suppliers in live auction events, thereby driving bottom-line savings.

Key questions answered in this strategic sourcing engagement

The Results

With the help of this strategic sourcing engagement the apparel industry client actively involved in a broad range of strategic sourcing categories including direct material, supply chain categories, marketing & sales, and indirect material. This helped them realize $4 million in savings.

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