Next Step for Sourcing? Go Where No Supply Chain Has Gone Before

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Sourcing Summit 2017

When it comes to sourcing trends, speed to market is so last season. Now, it’s about creating an entirely new supply chain that most companies can’t even quite conceive of yet.

That was part of the message reinforced at the Sourcing Journal Summit last week, where a panel of sourcing executives divulged what’s new, what’s now and what’s next.

The message, when it came to speed to market, was: if you’re not already doing it at scale, digitizing your supply chain to accommodate both the speed to market and your ever-demanding consumer, and working on the next thing, you’re already too far behind.

“I don’t think there’s a company in the room who is not working on all of this stuff,” Bill McRaith, chief supply chain officer for PVH said. The trouble, however, is that too many companies are going after a supply chain model they can already see, one they can already understand based on—often times—too many years of doing things the same old way.

The thing about supply chains that has left many brands and retailers stuck for how to move into the apparel industry of the future, is that too many are trying to create better versions of what already exists. Using cell phones as an example: companies are still stuck in the mindset of creating the next best flip phone or the Blackberry 27—but what they need to be dreaming up is the iPhone, the phone that changed the way all other phones were made (not to mention the impact it had on life itself).

Companies, McRaith said, are looking at “the models that exist out there, even the new startups, and that’s where they’ve set their sights as the ‘Where I’m trying to get. I’m trying to replicate what they’re doing,’ and quite frankly, I don’t think that’s enough.”

Change in the apparel industry has been the “subject du jour,” according to McRaith, and though many sourcing executives are hoping retirement will set in before they have to face too many of these newfangled upsets, really, companies should be embracing the opportunity to differentiate themselves in what’s a highly competitive environment. And it’s going to take more than just getting goods to consumers quicker.

“Speed, we’re on it. Digitization we’re on it. Consumer insights, we’re on it. We’re tackling all of those things,” McRaith said. “Our big challenge is not how you can do that for the U.S.—how do you do that on a global scale? How do you do that for the Tommy brand? How do you do that for the Calvin brand where product is going anywhere in the world at any moment in time and those consumers are somewhat different if not becoming more alike?”

For Untuckit, which doesn’t have the scale or history PVH has, but has carved out a niche for itself selling casual and dress shirts designed to be more flattering when untucked, the solution to getting goods to consumers faster has been: buy more often. And in conjunction with that, as the company’s chief merchandising officer Bjorn Bengsston explained, some goods get flown in and others get boated in.

“We really try to push the lead times as far as we possibly can,” he said. “We employ multiple kinds of strategies to minimize the risk of inventory.”

Is poor sourcing to blame for holding supply chains back?

The refrain that poor sourcing has been, at least in part, if not largely to blame for inventory glut, major markdowns and the spate of store bankruptcies the industry has faced this year in particular, has been one Sourcing Journal founder and publisher Edward Hertzman has stood behind, and in moderating the panel, he raised the issue again.

[Read more about the  sourcing question: Is Poor Sourcing to Blame for Recent Bankruptcies?]

“Guilty as charged. I think it would be tough for anyone to say that sourcing has not complemented some of that,” McRaith said. “We’re all guilty as charged—and not just in this room—but we the industry are all guilty as charged if you say that the supply chains that are in place are not what we need for today. They are simply a reflection of what we asked them to be. Now it’s our job to determine what we want them to be for the future.”

Bengsston sees things otherwise.

“I have some problems seeing how sourcing could have anything to do with it,” he said. “I do believe that bankruptcies and store closures are really part of the dilemma that traditional retailers have a hard time to sell goods at full price.”

As a result of that, pressure bounces back to the suppliers, sourcing executives have to find better prices and the consumer ends up at stake because they won’t pay for a product they don’t feel has the right valuation.

“I think it really goes back to the retailer and pushing through expectations and margins,” Bengsston said. “That’s really the root of the problem.”

Adding to that, as Liz Hershfield, chief supply chain officer for Bonobos explained, a supply chain that’s not effective obviously doesn’t help. The businesses that are moving forward are constantly looking at how to be faster, more nimble and how to serve the customer better.

“If you’re just kind of stagnant and thinking ‘OK, this is what we’re doing to serve the business as it is today,’ that’s where I think there’s a definite mistake,” she said.

What’s working and who’s winning

The companies doing their best to get out of their own way, for one, will see success. Beyond that, those who recognize that today’s supply chains won’t work for tomorrow have got their thinking caps on straight.

“I think the people that will win in the future are the people that build new supply chain types that meet today’s requirements, whether that’s onshoring, completely vertical startups, using more air for positioning materials or just having materials made right next to the places,” McRaith said.

Expanding on onshoring, which has been part of many a new strategy as the model of making everything closer to the customer has worked swimmingly for Zara, McRaith said onshoring isn’t just about making America a manufacturing nation again.

“Onshoring for us is not the U.S.,” he said. “A large amount of our business is around the world, so onshoring is everywhere that is out there.”

To be able to instantly react to what the customer is telling you, with product that’s being delivered to them globally, it really comes down to better decision making.

“There is so much dead space in the whole end to end calendar that we should be able to completely remove and streamline it to key decisions on the day they have to be made, with the level of clarity they have to be made,” McRaith said.

Before companies concern themselves with getting two-day turns on an item, however, they should be finding solutions that will get their development calendars down from six to nine months to just six weeks.

“We ship huge volumes of goods—tens of millions of goods—we ship them six or seven weeks by boat from all over the world,” McRaith said.

But for wholesalers who can’t move without a PO from Macy’s, while that may sound all well and good, they can’t just act on a timeline that suits them.

“Look, it will take an awakening on our industry,” McRaith said. “Part of the reason that these calendars are so long is that you’ve got all these different groups working in little silos…but the solution won’t be the traditional solution of everybody working individually. The solution will be everybody coming together to solve for it.”

So what is next for sourcing?

At Bonobos, which was born as a digitally native brand, the future will continue to be about leveraging data: understanding the consumer’s every move and trying to deliver on what they need next before they even know they need it.

“We can segment what we do every day, how we contact the customer, what we show them, how we can get someone to buy something based on their shopping habits,” Hershfield said. “We’re just able to collect a wealth of data, and we haven’t even—though it’s what we do—we haven’t even tipped the iceberg on big data.”

As with many companies today, Mark Rose, SVP at American Eagle, said the company is sitting on more data than it knows what to do with.

“We now have the ability to understand activities in a store on a much different level—how they shop in the store, what they might look at, pause at, respond to in the store. What they might take into a fitting room, what they might not, how many web page visits they get, the frequency of visits, how many things they put in the shopping cart—there’s a ton of information,” Rose said. “I think we are only just starting to really figure out what the customer is telling us by those actions, but we have to be students of it because that’s their conversation with us and if we can’t understand their language, we can’t participate in the conversation.”

Regardless of the approach to speed, big data and the like, it’s going to come down to sourcing executives to build the supply chain the future needs.

“I think our job…as supply chain experts is to go build capacity for the future, not to leverage whatever existed for the past,” McRaith said. “What worked incredibly well for the last 30, 40 years, that was great, it was tremendous, compliment yourselves. It’s not a bad thing but it doesn’t work for the next 30 to 40 years. And so how do you get everybody to reset their thinking given the climate that we’re in?”

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