New Deloitte Study Shows How Retailers Are Adjusting Supply Chains: Part II

{lm_summary}

By ·

Editor’s Note: As reported in Part I, Deloitte researches say retailers are adopting new strategic responses that correspond more closely to the acute cost of new pressures.

Retailers’ top three emerging strategies include: diversifying their country source of supply footprint (35 percent), re-shoring production to domestic vendors (33 percent), and consolidating vendors (28 percent). 

“Re-shoring to local markets is becoming an increasingly attractive option for retailers looking to reduce transportation costs and for products with low labor intensity,” said Michael Daher, principal and Retail Sourcing Practice leader, Deloitte Consulting LLP.  “For retailers in sub-sectors such as apparel, which tend to have the most vendor fragmentation, cost pressures may incentivize vendor consolidation – especially when retailers desire to improve their leverage to negotiate lower costs, manage smaller order sizes and execute faster production cycles.”

Outsourcing of retailers’ sourcing activities continues to play a significant role. Virtually every sourcing activity was fully or partially outsourced more than 50 percent of the time, and for activities like raw material and finished goods sourcing, that number rises to more than 60 percent.  Several retailers are disterimediating their supply chain partners by establishing off-shore sourcing offices to “go-direct” to the manufacturers.

Ethical sourcing remains a top priority among retailers: a total of 92 percent of respondents indicate their organizations are either currently enhancing their ethical sourcing capabilities to address sourcing pressures or plan to do so in the future.

Deloitte’s study also found that, among the 94 countries noted as sources of supply, China, Mexico and Canada are the most prevalent.  However, after more than a decade as the undisputed leader as a sourcing and manufacturing base, China’s appreciating currency, economic growth and rising labor costs have begun to impact its dominance in the supply market.  Survey respondents indicate that other Southeast Asian countries – including India, Vietnam, Cambodia and the Philippines – are becoming increasingly attractive sourcing locations, particularly for apparel and softlines.

To download the full report, “Private Label Sourcing: Strategies to Differentiate and Defend,” with detailed survey results and strategies for retailers, visit: http://www.deloitte.com/us/privatelabelsourcing


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

· All Topics
Latest Whitepaper
Improving Packaging: The Cost of Shipping Air is Going Up
Retailers and manufacturers that insist on using inefficient and sloppy packaging methods—oversized boxes, inefficient packaging, poorly constructed palletized contents—are paying for their mistakes in sharply higher freight rates. Pitt Ohio White Paper, Logistics White Paper, Dimensional Packaging
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo