The Covid-19 pandemic has disturbed the global supply chains. Companies, the world over are looking for new low-cost country sourcing locations to shift their manufacturing jobs from China. A recent retail survey report published by the Global Sourcing Society has indicated that global retailers are interested in Myanmar, Cambodia and Ethiopia as the new retail sourcing locations.
Although, these low-cost countries offer huge cost benefits for retail and private label manufacturers, they also pose several challenges in establishing a reliable supply chain. Some of the important challenges that a retailer face for sourcing from the new low-cost countries includes the following:
- Unskilled labour
- Lack of road and port infrastructure
- Lack of local raw materials
- Cultural differences
- Technology disruptions.
The retailers who responded in the Global Sourcing Society report revealed that the lack of local raw materials is one of the biggest challenges they face in the new low-cost sourcing countries. The second biggest problem they highlighted was about unskilled labour, which makes sourcing services quite challenging. Lack of proper infrastructure like roads, continuous electricity and port infrastructure also pose a huge challenge to establish a smooth supply chain for global retailers in these countries.
This report reveals the stark trade-off between cost and benefit that retailers and private label manufacturers must make for using low-cost countries as sourcing options. Despite these challenges, retailers still bet big on low-cost country sourcing to improve their bottom line significantly.
Supply Chain Technology Disruption and Its Effect on Sourcing
Any disruption in the sourcing or supply chain technology can bring the entire industry to a halt. To avoid such a situation, industries need to prepare themselves. The Global Sourcing Society report revealed that the respondents were aware of technology disruption and were also excited about it. However, the seriousness of the disruption and its inevitability was making the majority of the respondents very anxious. Some of the respondents revealed that facing large-scale disruption and technology will be a big challenge and they need to react fast to adapt to the new situation. Some of the respondents even stated their fears that they will find it very hard to keep up with technology disruption.
Many big organisations that work with multiple suppliers need to establish a good communication channel with them to manage their logistics. One way to face the problem of technology disruption is by collaborating with suppliers. However, most respondents of the Global Sourcing Society report were lukewarm in transferring their technologies to the suppliers. The increasing market volatility and its unpredictability is forcing companies who are hesitant in collaborating with their suppliers to build alternative supply chains. Building an alternative supply chain improves flexibility, which is essential to compete effectively in the marketplace.
To summarise, well thought out and reliable sourcing services and strategies can immensely benefit businesses worldwide. Technology can play a huge role in linking retailers with global suppliers to establish reliable supply chains. This will help in reducing material and product costs, which in turn will improve the growth of retail and label manufacturers. Retail sourcing software can play a big role in establishing relationships between retailers and suppliers. Such technology can improve the gross margin, increase efficiency, reduce cycle times and augments the product development process.