Sourcing, is undeniably the backbone of our industry. This function is the one that gives shape to the designers vision and creates that tangible product the consumers buy.

In India, we have many manufacturing hubs, like Ludhiana, Delhi, Kolkata, Salem, Tirupur and many more. And 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, there are merits to a centralised sourcing function, I believe it's a regional sourcing model that creates real value in this business. And hence I have taken up this topic as the fourth article in this series; My Sourcing Journal.

In this article I will discuss in detail

• Types of sourcing structures
• Regional sourcing teams & its advantages
• Developing regional sourcing teams as business centres

Our industry has many different players, big, small & medium sized brands/retailers who have different sourcing models. 

Let’s first understand what these different sourcing models are.

The below infographic indicates clearly 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 specialises 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 focussed or concentrated in a few hubs, then it is susceptible to calamities or geo political 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 regions.
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 and logistics. And also, helps in 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 and have no decision making powers. In most cases, this builds many wasteful days into the actual lead times, as samples etc are sent to and fro for approvals. 

REGIONAL SOURCING TEAMS SHOULD ACTUALLY BE BUSINESS CENTRES AND NOT MERE ASSISTANTS.

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.

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 teams 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 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 its important brands/retailers start making this shift and build strong empowered regional teams.

Do share your comments and views on this subject!

I would like to thank Ms.Poonam Sood Lal for helping shape this article with her invaluable inputs.

RELATED TOPICS:#Apparel,Anindya Ray