Global sourcing in a world less flat

October 28, 2009

There is passage in an article in McKinsey which says, “Security, safety, and environmental regulations could become new forms of protectionism.” In other words, we will not source from your country because we do not think it is safe or healthy.

Does this mean the opposite could also be true, “that we WILL source from your country because we assign VALUE to the level of safety, security and compliance we see there”. In other words, we are delighted to pay more – higher value means lower risk!

What are the chances of that? Has the needle reached the lowest cost country left on this planet? Will inflation begin to increase the costs of sourcing and the costs of products and the price of garments at the same time high unemployment rocks the very definition of the ‘typical’ American consumer?

As an executive wrote us here earlier today, “Many (retailers) are only used to costs going down - look at the long history of retail prices going down year after year. The customer has been trained to this also - they now believe that each year the cost of a garment will be lower and they will be able to get more features and higher quality at a price lower than the year before. But the cold reality is that inflation is coming. And yet retailers and consumers still have the expectation that retail price tags will remain the same, not increase, and the cost of the garment will be less.”

Interesting challenge isn’t it. How to balance the ever-shifting risks of buying with the abstract chances of it actually selling.  

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