Navigating the Global Supply Chain Maze in Challenging Times
Summary: Russia’s aggression on Ukraine and the ongoing pandemic have had rippling effects on the global supply chain and logistics across industries. These factors have shown mercilessly the unpreparedness of companies to deal with such highly volatile scenarios. Fashion brands have been majorly impacted and they need to go back to strategy dashboards and align their mission statements accordingly.
The world is finding itself in an uncertain economic environment. The aftermath of pandemic induced slowdown and the chaos created due to the Ukraine war is having a cascading impact on the logistics and supply chain of most companies. Inflation is rising, demand is getting subdued, unsold inventory is piling up, logistics costs have shot up and there is widespread currency fluctuation against the dollar. The uncertainty is such that today’s best-laid plans may go to the dustbin tomorrow for every major fashion brand.
Experts are just falling short of terming this phenomenon as a recession. Presently this is being labeled as a demand-supply mismatch. Whatever the case, companies cannot afford to take logistics and supply chain management as an afterthought.
For a fashion company, the supply chain effectiveness focuses on meeting the demands of the stakeholders outside its organization. These can be a logistics partner or a raw material supplier who is part of the supply chain. Supply chain efficiency is achieved through mobilizing internal resources to meet these demands quickly and in a cost-effective manner.
Here are four simple strategies for putting in place resilient logistics and supply chain management practices to keep the cost low and optimize profit.
1. Develop an agile and resilient supply chain
In recent years supply chain heads were faced with two important challenges – one that required immediate firefighting at various levels. The other challenge was to build a supply chain network capable of withstanding future shocks. It is definitely not an easy task to navigate the two simultaneously considering the cost factors involved in financially strenuous times. The long-term goal should focus on structural reform as the pandemic has exposed the ineffectiveness of the old supply chain system.
Companies can, in fact, consider creating two teams operating at different levels to meet short-term challenges and other to build long-term resilience.
As a part of risk mitigation strategies, brands need to keep testing the `what-if’ business case scenarios. It may involve looking for new suppliers to widen the geographical spread as a risk mitigation strategy and keep the inventory level agility and flexibility. Apparel makers could well focus on realigning the value chain networks, recalibrating the inventory targets and safety stocks, and widening their sourcing net as a part of risk mitigation measures.
Moreover, the companies have to be on the lookout for new suppliers with lower carbon footprints following the US Securities and Exchange Commission March ruling on carbon disclosures.
2. Forge Collaborative partnerships with suppliers’ network
Fashion companies’ supply chain network is intricate and expansive, to say the least. It may have a network of suppliers, manufacturers, raw material vendors, retailers, and distributors across all five continents with each being governed by complex rules and regulations. It is not easy to weave it all in one thread, yet a collaborative approach can bring a semblance of smooth working to the entire setup.
The way forward is to have close partnerships even with competitors to share the pool of suppliers, logistics partners, warehouses, and information. A close network of suppliers brought together as a part of a long-term strategy is the new way of doing business that breaks away from earlier contractual and transactional relationships. Looking at suppliers as partners is aimed at building a system that can withstand hiccups in the supply chain.
3. Embrace digital technology for data-driven decision making
For long-term partnerships, trust can only come through transparency and traceability in the entire ecosystem. Technology is paving way for value creation in the complex system through effective and real-time exchange of information with trading partners.
Besides expanding the customer base, it can aid companies in rationalizing costs at each step in the value chain and make it more responsive to new developments that could trigger disruption.
For instance, digitalization can enable a company to track and trace the goods moving across its logistics network. It can also help predict and manage inventory better by deploying Artificial Intelligence and Machine Learning technologies that can process high-volume data to present actionable insights for clearer decision-making.
Companies that forge ahead in building robust digital and analytical frameworks can clearly be seen to outperform the market, by simply knowing and owning the factors that can impact their business than those which lag in digital maturity.
Importantly, Garter’s Recession Playbook for Supply Chain Leaders advises business leaders to make the right tradeoffs to keep the cost low and improve profitability while at the same time going for faster digital adoption.
4. Prioritize inventory, warehouse, and logistics management
The need for supply chain visibility was never as acutely felt as in recent years in managing inventory, warehousing, and fulfillment centers and keeping the goods moving smoothly in the logistics network. Companies need to re-evaluate their just-in-time strategies and, at the same time, cannot keep the stockpiling up for long.
An alternative to the fixed cost and capital-intensive warehousing model would be having small fulfillment centers where cheap labor is available and real estate costs are less. These centers could be offered as a-supply-chain-as-a-business to other retailers and e-commerce companies.
Similarly, logistics needs to come on a shared digital platform where loads and costs are optimized as per the destination and delivery mode.
Brace for the long haulThere is no doubt that logistics and supply chain management for fashion companies are in for a long overhaul. None of the measures listed above come without any costs. It may be difficult for business leaders to invest in long-term vision while firefighting at the same time. But it is a road that they have to travel with a collaborative mindset and data-driven technology as their aid.
Key takeaways:
Fashinza is a digital platform that connects brands with reliable manufacturers that have proven track records of ethical manufacturing practices.
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