Half of US Fashion Companies Plan to Reduce Their Suppliers: Why?

Results from a recent survey revealed that nearly half of the surveyed US fashion companies intend to reduce the number of their suppliers in the coming period, in a clear reversal of the broad diversification strategy adopted by companies following the supply chain disruptions exposed by the COVID-19 pandemic, according to reports.

Surveyed executives attributed this shift to several factors, most notably the difficulty of managing a large number of suppliers in a volatile trading environment marked by rapid changes in tariffs and regulatory requirements, in addition to companies' desire to build deeper and more strategic relationships with a smaller number of partners capable of meeting higher quality and sustainability standards.

However, supply chain experts warned that this shift carries compounded risks, as concentrating production among fewer suppliers makes companies more vulnerable to sudden disruptions if one of these suppliers faces a crisis, similar to what occurred during COVID when factories in Asia shut down and paralyzed supplies for many major brands.

In the same context, analysts note that this trend also reflects pressure from consumers and investors on companies to enhance supply chain transparency and ensure compliance with labor and environmental standards, making it difficult for companies to maintain a large number of suppliers and audit their practices simultaneously.

What do these terms mean?

Supply Chains: The network of stages a product goes through from raw materials until it reaches the final consumer, including suppliers, factories, distributors, and stores.

Supplier Diversification: A strategy based on dealing with multiple suppliers from different geographical regions to reduce risks in the event that one of them stops supplying.

Sourcing Concentration: Reliance on a limited number of suppliers, which reduces administrative costs but increases the risk of disruption during crises.