Ministry for Foreign Trade of the Netherlands & Ministry of Commerce of the People's Republic of Bangladesh

to 29 September 2016

Peter Rinnebach directed a key note speech to the “Sustainable Sourcing Conference” in Dhaka on September 29th focusing on the transformation of global sourcing from cost based relationships to true value creation relationships. The discussions included high profile attendees like Lilianne Ploumen, Minister for Foreign Trade of the Netherlands, Tofail Ahmed, Minister of Commerce of the People's Republic of Bangladesh, and Helena Helmersson, Global Head of Production at H&M.

 

Dr. Peter Rinnebach:

While traditionally the industry first looked at the FOB price of garments when it came to margin improvement, it has become quite clear in today´s global sourcing environment that even achieving 1%pt of increased margin is extremely difficult as there is not much room left for suppliers to go down with prices and labor cost are on the rise almost in all regions globally.

In contrast to this, in today´s environment with eroding sell-throughs and high markdowns of often more than 15% there is tremendous potential in improving margin from reducing markdowns by being closer to market, having truly differentiating product innovations, and making sure consumer needs regarding technical requirements, fit, fabric, and sustainability are fully met.

This brings fundamental changes to the relationship of brands and suppliers. Brands start restructuring their sourcing country and supplier portfolios based on both market and supplier capabilities with regards to speed to market, technical capability and innovation skills, going beyond pure product cost. Suppliers are more and more coming into the role of acting as partners beyond purely providing products, but instead being closely integrated along the complete value chain with an increasing role in research, planning, development, innovation, and ex-post analysis.