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

By Patrick Burnson, Executive Editor
August 05, 2013 - SCMR Editorial

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

image
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 .(JavaScript must be enabled to view this email address).

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!

Recent Entries

You’ve heard the old saying, it was the best of times, it was the worst of times. Rob Handfield sees this as the best of times for procurement professionals, who have an opportunity to deliver real value to their organizations

While core metrics were down from a very impressive July, the August edition of the Non-Manufacturing Report on Business from the Institute of Supply Management (ISM) was still very strong.

The Clean Cargo Working Group (CCWG) has released a report indicating that in 2014 average CO2 emissions in the global container shipping trades declined 8.4 percent from the year before.

UPS Freight, the less-than-truckload (LTL) subsidiary of UPS, recently announced it has rolled out a new service center facility in Franklin Park, Illinois. This is the company’s fifth Chicago-area service center along with other ones in Aurora, Chicago, Palantine, and South Holland.

Putting the renewed strength in the truckload market into a very positive perspective is a report issued by Avondale Partners analyst Donald Broughton, which was released yesterday. Entitled, “Q2’15 Trucking Capacity; Goldilocks Era Continues,” Broughton explained that in the second quarter only 70 truckload fleets failed, or exited the business. That number may seem high to some, but it is not, especially when you consider that the second quarter of 2014 saw more than five times as many truckload carriers, 375 to be exact, exit the business.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.