McKinsey Apparel CPO Survey 2017

McKinsey's biannual Chief Purchasing Officer (CPO) survey, first conducted in 2011, has delivered a comprehensive overview of the most important trends in apparel sourcing - including the need to balance cost, compliance, and capacity; navigating volatility; and exploring the growth opportunity in sourcing regions such as Bangladesh and East Africa.

Our 2017 survey focuses on digitization, a topic of critical importance to apparel companies worldwide. It is also an area where many companies need a major step-up, as was made clear at McKinsey's Apparel Sourcing Roundtable held in Hong Kong in October 2016. As one executive said at the event: "Most of us in apparel sourcing are way behind - we are far from being digital."

That said, some companies are already making exciting progress with digitization - to reduce lead times, boost innovation and collaboration, and better understand and serve customers' needs. This report shines a spotlight on these advances and considers what it will take to unlock digitization's promise across the industry. It goes beyond the buzzwords, highlighting the priority focus areas and practical steps that apparel companies need to take.

But the survey is also a timely reminder that digitization will end in disappointment if it is not integrated into a broader transformation to a customer-centric operating model. To realize the promise of greater speed and agility, companies will need to redouble their efforts to optimize four key factors of success: country selection, supplier collaboration, compliance and risk, and end-to-end efficiency. These factors still represent massive improvement potential across most of the apparel industry.

The survey reflects the perspectives of 63 participating CPOs, who together are responsible for a total sourcing value of over $137 billion. Our respondents cover the full spectrum of the market, including vertical apparel retailers, hybrid wholesalers, and sportswear companies.

This report presents their outlook for the future - interwoven with our own interpretation and experience from our client work - under four headings:

  • Sourcing in an uncertain world: the macrostate at play. Apparel executives must continue dealing with a volatile, fast changing environment along with heightened competition and increasingly savvy consumers. That is driving an urgent search for greater efficiency and flexibility along the end-to-end sourcing chain.

  • In search of the sourcing caravan's next stop. In recent decades, apparel buyers have relentlessly shifted sourcing to lower-cost countries - "the next stop of the sourcing caravan." Today, the search for the caravan's next stop is as active as ever, but there are new dynamics at play. Some traditional low-cost countries are losing their attractiveness, while sourcing executives are showing keen interest in newer markets - particularly Vietnam, Myanmar, and Ethiopia. As companies seek to step up their agility, however, there is also fresh focus on proximity sourcing and re-shoring.
  • Digitization - "the next sourcing country." Digitization could enable apparel companies to achieve a step change in performance, transform to a customer-centric operating model, and create transparency throughout their global supply chains. As one participant at McKinsey's 2016 Apparel Sourcing Roundtable put it: "Digitization will be the next sourcing country." But the apparel industry is still at the beginning of its digitization journey: companies need to accelerate digitization and integrate it into their broader transformation. Those that succeed will break down silos between sourcing and product development, shorten lead times, lower costs, and increase transparency to manage sustainability.