Sourcing and Supply Chain Consolidation

Historically retailers across the globe have tended to use a large number of  suppliers. Even with smaller retailers (sub £250m Turnover) this could run into 100’s. This was driven by 3 factors.

1/ Suppliers specialised in categories ie woollens or lingerie

2/ Retailers felt that they could negotiate costs down by getting suppliers to compete.

3/ In house buying functions were disjointed.

Over the last 10 years the landscape has changed considerably.

1/ The Rana Plaza fire, The Bribery Act 2010 and the concerted efforts of the ILO on eradicating child labour, have focussed the minds of many retailers to ensure they fully understand the operations of their suppliers. This takes a lot of time and cost.

2/ The consolidation of the supplier base meaning larger suppliers now cover multiple categories with increased raw material buying power and operational economies of scale.

3/ Vertical integration of suppliers and logistics operations.

4/ The need to move supplier countries due to a variety of reasons ranging from increased labour costs to the current issue of corona virus

Our supplier partnership

We started looking at optimising the supply chain for a business we were looking to acquire and entered into discussions with one of the largest suppliers in the world,primarily from an intake margin perspective. The only way the business would survive was to consolidate the supplier base, eliminating multiple buying offices and benefiting from economies of scale. By doing this through our partnership, we were able to achieve a decrease in the cost of goods (on a landed basis) by an average of 18%.

Our partner is one of the largest garment manufacturers and logistics companies in the world and was therefore also able to solve the issues around governance (associated with using smaller suppliers) and given they have their own manufacturing operations in all the major supplier countries, are able to move production and logistics easily.

We are currently advising a number of major retailers in this area.

For more information contact

Barry Knight on 07715011062