What constraints to managing several supply chains simultaneously ?
The textile sector has undergone great changes in recent decades which have directly affected supply strategies, shifting traditional localised production to a new model centered around outsourcing.
Since the year 2000 this trend has accelerated influenced by the globalisation of purchasing, a more diverse distribution and a much finer segmentation of markets. It is beginning to take on a new face which is profoundly affecting all jobs in the supply chain.
The model of systematic outsourcing has had its day. It is clear that multi-channel distribution creates a very competitive and quickly shifting environment, which demands labels to more finely segment their collections and to personalize and specialize their offer. The challenge is to prevent the distribution channels from cannibalizing one another and to find new added value based around sustainable development with traceable raw materials, and the technical characteristics of products which necessitate closer supplier partnerships.
The former model of systematic outsourcing
The former model of systematic outsourcing to Asian countries with low costs is no longer feasible as it considerably limits the flexibility of establishing supply chains. Furthermore the rise in production costs linked to the economic development of developing countries no longer allows companies to compensate by volume and uncertain quality or has sufficient reactivity to satisfy commercial expectations.
Companies today are establishing new supply chain models which mix the relocation of certain production, and outsourcing using the most reactive channels.
The impact seems to have been different on integrated network labels or multi-brand networks.
The impact seems to have been different on integrated network labels or multi-brand networks. The first fared better, as control over distribution enables better streamlining of the supply to sales outlets. Daily shared vision of shop inventory facilitates delivery of products and stays as closely aligned with demand as possible. Optimisation of outbound logistics reduces inventory and permits the maintaining of the policy of high-volume supply.
On the other hand, it also appears that independent network labels have had to rethink their supply strategies, focusing more on purchasing flexibility. To avoid being hit by fluctuations in client demand, they have ushered in a new model of supply which is beginning to be standardized.
Streamlining the balance between different channels
The high-volume low-cost production model is now insufficient.
The kind of supply which anticipates client orders using hypotheses for re-stocking leads to large amounts of stock piling up. Furthermore there are always ‘production tail-ends’ that, when put upon the market by factory outlets, run the risk of outperforming the new collections.
The principle of an on-demand production rules out supply through long channels
The principle of an on-demand production rules out supply through long channels, or considerably increases forwarding costs, being more based on air transportation than sea. There have to be ´near-shore’ channels with higher production overheads. On the other hand, the limiting of inventory increases the risk of running out of stock to supply sales channels, which can be detrimental both commercially and in terms of marketing.
We can observe a great diversification of supply with balance between the different channels. The challenge is to streamline supplier purchasing, meet the needs of the different distribution channels and punctuate commercial periods with varied marketing operations.
The relations with suppliers of finished products or raw materials is becoming strategic and needs to be structured
Whatever the chosen outsourcing strategy, the relations with suppliers of finished products or raw materials is becoming strategic and needs to be structured. There is a higher demand for quality and traceability which requires a more structured manner of working with suppliers, with greater added value and without affecting production costs.
The challenge is to find balance between the negotiation of anticipated volume with suppliers, and the adjustments of production schedules according to real needs lead by demand and sales.
Creating a cooperative space and modernising relations with suppliers
The setting up of a collaborative Supplier Portal enables easier arbitration on production schedules to find a win-win arrangement.
The idea is also to standardize quality control policies between all suppliers and have access to supervision consoles for all outsourced production.
Rapid interaction enables adjustments to be found, risk limited and action plans to be reframed.
So, ironically, it is better to pay a fine for a cancelled order than to be obliged to receive product which will remain unsold. On the same lines, in controlling the supply of certain materials it is possible to find adjustment margins with suppliers of finished product to switch production from, say, one colour to another.
Within the company the implementation of a Supplier Portal also brings about a significant rise in productivity and makes operational reporting on reception schedules more reliable.
The e-SCM solution allows us to reconcile commercial expectations, refined throughout the course of the season, with the logistical constraints of outsourced production.
Director of Operations e-SCM
Having worked for more than 20 years in consulting and the implementation of IT Services, I was instrumental in the creation of the e-SCM supplier Portal application beginning in 2002.
In the last 15 years I have accrued solid experience in the Textile and Luxury industries through my contact with the major labels in New Aquitaine Surfwear as well as with several national and international groups.
All of my energy and expertise goes into promoting the modernisation of Supply Chain Management as a means to profitability.