Inverto Case: FashionForward’s Sourcing Shake-up

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What we expect - A MECE framework addressing:

A. Risk Exposure

• Geopolitical risk & FX exposure
• Supplier dependency
• ESG compliance risk
• Port/transport disruptions

B. Cost Efficiency

• Unit & transport cost
• Minimum Order Quantities (MOQs)
• Inventory holding costs
• Rework and quality issues

C. Flexibility & Responsiveness

• Lead time & replenishment capability
• Cancellation terms
• Fulfillment accuracy
• Forecasting / volume triggers

D. Strategic Fit

• Differentiation by product type (basics vs. trends)
• Fit with sustainability goals
• Brand perception and supply chain transparency

Bangladesh = €5.00 / Turkey = €5.62 → €0.62 difference per unit → €18,600 more/month

Assume 30,000 units monthly:

• Bangladesh:
  • Fulfillment Accuracy: 85%
  • Shortfall: 4,500 units → Lost margin: 4,500 × €2.00 = €9,000
  • Excess Inventory (due to MOQ 12,000 & Overstock Risk 17%): 2,040 units overstock × €1.50 markdown = €3,060
  • Total downside risk = €12,060/month
• Turkey:
  • Fulfillment Accuracy: 97%
  • Shortfall: 900 units → Lost margin: 900 × €2.00 = €1,800
  • Excess Inventory (MOQ 3,000 & Overstock Risk 17%): 510 units overstock × €1,50 markdown = €765
  • Total downside risk = €2,565/month

Hint: Net Evaluation should compare Cost, Flexibility and Risk dimensions.

Conclusion:

• Bangladesh is cheaper on paper, but risk & inflexibility erode margin.
• Turkey costs €18,600 more/month (30k × €0.62), but avoids up to €10K in lost margin & markdowns.
• Turkey offers strategic value for volatile products.
• Despite higher cost, Turkey offers significant benefits in agility, risk reduction, and ESG alignment. Use it for trend-driven products with volatile demand."

• Dual Sourcing: Split SKUs between low-cost and agile suppliers
• Category-Based Strategy: Basics from Bangladesh, Trends from nearshore
• Nearshore Supplier Expansion: Evaluate Tunisia, Romania, Serbia
• Flexible Framework Agreements: Volume corridors and rolling forecasts
• ESG Governance: Scoring system for supplier qualification
• Postponement Strategy: Pre-produce raw material, finish near market
• Forecasting Enhancement: Use POS data, demand sensing algorithms
• Vendor Managed Inventory (VMI): For core SKUs
• Localize high-margin, low-volume SKUs

Expected Approach:

• Split the sourcing model by category:
  • Basics: high-volume, low variability → Bangladesh
  • Trend-driven items: low-MOQ, high responsiveness → Turkey
• Define volume triggers for nearshoring based on forecast volatility
  • Introduce ESG risk filters in vendor approval
  • Develop a decision matrix balancing cost, risk, and responsiveness

Model Summary:

“I recommend a hybrid sourcing strategy. Bangladesh remains the base for stable basics, ensuring cost efficiency. Turkey should be used for fashion-sensitive SKUs to increase flexibility and reduce markdown risk. We further propose ESG filtering in supplier selection, a modular forecasting strategy, and pilot programs in alternative nearshore regions. This balances cost control, risk mitigation, and design responsiveness.”

"I recommend a hybrid sourcing model that balances cost, risk, and responsiveness. Bangladesh remains the core sourcing base for cost-effective basics, while Turkey and potentially Tunisia are used for fast-reacting, trend-sensitive categories. This model reduces geopolitical and ESG risk, improves fulfillment accuracy, and allows FashionForward to be more agile. To implement, I suggest setting clear category-based sourcing rules, ESG filters in vendor selection, and piloting flexible order structures to better manage uncertainty.”