The New Cost of Distance: Strategic Sourcing in the Age of AI

Why fashion businesses need to rethink how they plan, source and manufacture in an increasingly volatile global market

By Natasa Pitra-Grbic

For many years, sourcing strategy in fashion was dominated by one very simple question:

Where can we make this product for less?

Brands compared factories, manufacturing regions, minimum order quantities and unit prices, then selected the option that made the most commercial sense.

That model is changing.

Today, the lowest factory quote does not necessarily represent the lowest-cost supply chain.

Fashion businesses are operating in an environment shaped by rising freight costs, fuel volatility, tariffs, geopolitical disruption, changing trade conditions, currency movements and pressure on raw material pricing.

At the same time, artificial intelligence is rapidly changing how businesses forecast, analyse information and make decisions.

The challenge for fashion businesses now is not simply to source more cheaply.

It is to source more strategically.

Your factory is only one part of your supply chain

One of the biggest misconceptions emerging brands can have is viewing their manufacturer as their entire supply chain.

A garment may be sewn in Indonesia, but its fabric may come from China, its zipper from Japan, its labels from Australia and its packaging from another supplier entirely.

Every one of those components adds another layer of movement, lead time, cost and dependency.

A brand might technically be manufacturing in one country while its supply chain stretches across four or five.

That matters.

Because when one part of that system changes, the impact can move quickly through the rest of the business.

A delayed fabric delivery may hold up production.

A change in shipping conditions can alter landed cost.

A new tariff can immediately affect margin.

An increase in fuel costs can eventually appear in freight, manufacturing and distribution costs.

Understanding sourcing today therefore requires looking beyond the factory itself.

Businesses need to understand the entire journey of the product.

The cheapest unit price is no longer enough information

Imagine one factory quotes $38 per garment while another quotes $43.

On paper, the $38 option looks like the obvious choice.

But what happens if that supplier requires a significantly larger minimum order?

What if production takes an additional six weeks?

What if the fabric must travel from another country before manufacturing can begin?

What if replenishment takes three months?

What if the brand has to commit cash to inventory long before it knows whether customers actually want the product?

Suddenly, that $5 difference becomes much less significant.

The true cost of sourcing includes much more than manufacturing price.

It includes:

• lead time,
• inventory exposure,
• freight,
• cash flow,
• markdown risk,
• production flexibility,
• replenishment capability,
• and increasingly, geopolitical risk.

This is where strategic sourcing becomes critical.

Cost is not only what you pay to manufacture something. Cost also includes the risk attached to the decision.

Nearshoring is becoming part of the conversation

As global supply chains become more complex, nearshoring is gaining increased attention.

Nearshoring means moving some production closer to the market in which the product is sold.

For Australian fashion businesses, this does not necessarily mean moving all production back to Australia.

Nor should nearshoring be viewed as an argument against global manufacturing.

Different sourcing regions offer very different strengths.

China continues to provide sophisticated infrastructure and technical capability across many product categories.

Bangladesh offers substantial apparel manufacturing capacity.

Indonesia can provide strong opportunities across particular artisanal, textile and production categories.

Australian manufacturing may be highly valuable for limited runs, development, reactive production, premium products or businesses requiring speed and flexibility.

There is no single “best” sourcing country.

The more useful question is:

Which production model makes the most sense for this particular product, volume, customer and business strategy?

Nearshoring is not always about achieving a lower unit price

This is an important distinction.

Producing closer to market can sometimes mean paying more per unit.

Yet the total commercial outcome can still be stronger.

A shorter supply chain may allow a business to:

• produce smaller quantities,
• respond more quickly to demand,
• replenish successful products,
• reduce excess inventory,
• commit cash later,
• reduce markdown exposure,
• and respond more quickly when market conditions change.

This is particularly important for fashion. Fashion inventory is highly time sensitive. A product arriving four weeks late does not simply arrive four weeks late. It may miss a season. It may miss a wholesale delivery. It may miss an event. It may arrive when customer demand has already moved somewhere else. Speed therefore has a financial value.

Supply-chain diversification will become increasingly important

One response to the current environment is not necessarily relocating an entire supply chain.

Instead, fashion businesses should consider whether a more diversified sourcing model makes sense.

A brand may continue producing core volume products with an established offshore manufacturer.

Limited editions may be produced locally.

A faster supplier may handle replenishment.

Specialist categories may continue to sit within countries known for the capability required to produce them.

The objective is not to create unnecessary complexity.

It is to reduce unnecessary dependency.

A business that relies entirely on one factory, one region or one shipping route may be extremely efficient when everything is working.

But it can also become vulnerable very quickly when conditions change.

The best time to develop an alternative supplier is therefore not when your existing supplier has already failed.

It is while the relationship is still working.

Where does AI fit into sourcing?

Artificial intelligence is adding another important layer to this conversation.

AI has the potential to support sourcing teams through faster analysis, stronger forecasting and improved access to information.

Businesses can increasingly use AI to:

• compare supplier information,
• analyse historical sales,
• forecast demand,
• model different costing scenarios,
• identify inventory patterns,
• review production timelines,
• monitor external risk,
• and support range planning.

For smaller fashion businesses in particular, these tools may provide access to analytical capabilities that historically required much larger teams.

But AI does not remove the need for sourcing expertise.

It strengthens the importance of it.

A system may be able to show that one sourcing option appears cheaper.

Experience is still required to understand whether the fabric is appropriate.

Whether the factory can actually execute the product.

Whether the lead time is realistic.

Whether the quality will meet expectations.

Whether a supplier relationship is strong enough to manage problems when they arise.

And whether the cheapest option actually supports the long-term business model.

AI can process information.

Human expertise provides context.

That distinction will become increasingly important as technology becomes embedded across the fashion supply chain.

Strategic sourcing starts before disruption occurs

One of the most important shifts businesses can make is moving away from planning only for the perfect scenario.

Traditionally, production plans often assume that:

• the fabric arrives on time,
• the factory begins when expected,
• production runs smoothly,
• shipping remains stable,
• and stock arrives according to schedule.

Strategic planning asks a different set of questions.

• What happens if freight increases significantly?
• What happens if the shipment is delayed?
• What happens if the supplier changes its MOQ?
• What happens if a key sourcing country becomes commercially less attractive?
• What happens if a bestseller sells out and replenishment takes twelve weeks?
• What happens if one supplier represents the majority of the business?

These are not pessimistic questions.

They are strategic questions.

Resilience is rarely created after disruption occurs.

It is created by understanding where vulnerabilities exist beforehand.

The future of sourcing will be about more than price

Global manufacturing is not disappearing.

Nor should it.

Fashion remains dependent on highly specialised manufacturing regions, technical knowledge, skilled labour and established infrastructure around the world.

But the criteria businesses use to make sourcing decisions are expanding.

Price still matters.

So does quality.

But increasingly, businesses must also consider:

• speed,
• flexibility,
• inventory,
• cash flow,
• trade conditions,
• freight,
• supplier relationships,
• geographic concentration,
• and resilience.

Artificial intelligence will help businesses process more of this information and potentially make faster decisions.

But successful sourcing will continue to require something technology cannot easily replicate:

experience, judgement and the ability to understand how one production decision affects the entire business.

The cheapest factory may no longer represent the cheapest supply chain.

And the strongest sourcing strategy may not be the one that delivers the lowest unit price.

It may be the one that gives a business enough flexibility to adapt when the world changes again.

Because sourcing today is no longer simply about asking:

Where can we make this?

It is about asking:

How do we build a supply chain capable of supporting the business we want to become?

Natasa Pitra-Grbic is a fashion entrepreneur, educator and production and sourcing specialist with experience across fashion business strategy, product development, manufacturing and entrepreneurship. She will return to Global Sourcing Expo to explore production and sourcing in the age of artificial intelligence, examining how technology, industry expertise and strategic supply-chain planning are reshaping the way fashion businesses approach manufacturing.