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AAFA Conference Seminar: The Sourcing Paradigm

The American Apparel & Footwear Association (AAFA) hosted a major event in Washington, D.C. that tackled the future of sourcing for the apparel and textile industries.

The event, entitled “2014 International Sourcing, Customs & Logistics Integration Conference,” spanned from April 7-9. One of the key panels, “The Sourcing Paradigm,” analyzed pressing issues like the rise of near-shoring, the sourcing capabilities of the Western Hemisphere and  the impact of globalization on sourcing.

The panel was studded with distinguished participants. Rick Horwitch, Vice President of Strategy, Solutions Business Development, and Marketing at Bureau Veritas, moderated the discussion. Joining him on the panel was Jeffrey A. Kuhn, Vice President, Enterprise Supply Management, Brown Shoe Company and Michael Walker, Senior Vice President and General Manager, Supply Chain Operations, Rocky Brands.

Walker opened up the dialogue by noting how his company has evolved to accommodate the changing contours of the global sourcing community. Rocky Brands has quadrupled production in its factories in the Dominican Republic, a response to the increasing costs of business in progressively more sophisticated China. He said his company has also been shifting more of its production to Cambodia and Vietnam, with particular emphasis on the latter in anticipation of the advantages it will accrue as a result of the settlement of the Trans-Pacific Partnership negotiations.

Trying to make sense of China’s transformation, Walker noted that labor costs in China, a rapidly appreciating currency, sharp fuel cost increases and ascending shipping costs have all contributed to the near prohibitive expensiveness of sourcing in China. This presents, according to Walker, both opportunities and challenges for a business crafting a strategic plan for the future. He emphasized the overarching importance of cultivating collaborative partnerships as a way to fortify a potentially vulnerable supply chain. Especially since Rocky Brands is not a billion dollar company, Walker contended that the right relationships, with foreign governments, factories or consultants, are indispensable to navigating the choppy waters of sourcing’s future development.

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Kuhn concurred that the cementing of key relationships is absolutely necessary going forward. He said, “There’s no substitute for working closely with brands, working closely with factories and working closely with suppliers.” The key, continued Walker, is ensuring that the free flow of information moves efficiently up and down the supply chain, keeping the whole moving as a coherent organism despite comprising disparate parts.

On the issue of China, in particular, Walker forcefully argued that sourcing executives should not pine for the emergence of another comparable replacement–there are opportunities embedded in its evolution as a manufacturing nation. Companies need to move nimbly and relocate and invest in other emerging sourcing destinations. Unlike the automotive industry, Walker said transitioning footwear producing technology from one country to another is relatively easy, since it largely involves the transference of expertise.

Kuhn spoke at length about the task of finding reasonable alternatives to China. The Brown Shoe Company has shifted some of its operations to Ethiopia, actually following a Chinese manufacturing partner. Also, the retailer has been slowly penetrating the Indian market which has certain advantages when it comes to the production of leather goods. However, India is beset with internal challenges, especially a ramshackle infrastructure. And those infrastructural problems translate into shipping difficulties, particularly transporting goods made inland to ports on the shore. At this stage, the Brown Shoe Company still considers its work in India an “in-country operation,” making and selling the products made within its borders. Kuhn said he was also looking to capitalize on China’s gathering middle-class, expanding the company’s domestic sales there as well.

Horwitch raised an important question about a classic sourcing problem: How can a company successfully juggle the sales demand for mass production with the consumer demand for increasing customization? Walker responded that variety is often a function of supply chain responsiveness, and so streamlined and well-integrated supply chain is central. For example, he recommended implementing new processes that more efficiently utilize distribution centers, that keep a tight and cohesive logistics strategy and that take advantage of the virtues of drop-shipping. Supply chain agility, Walker said, depends upon systematic inventory management.

Rick Horwitz has more than thirty years of experience in the consumer products industry covering everything from sales and sourcing to marketing and operations. Bureau Veritas is the world’s oldest and one of its largest providers of quality, health, safety, and environmental services. Horwitz sits on the board of many professional organizations, including the Board of Directors for the AAFA.

Jeffrey A. Kuhn is responsible for factory capacity and raw material planning, supply chain process, system optimization and social compliance at his current position. He is now taking the lead on helping the Brown Shoe Company leverage new forecasting abilities to deliver improvements to factory-on-time, cycle-time execution and the costs of goods.

Michael Walker has more than twenty-five years of global experience in several industries, including wholesale and retail footwear and apparel. He is now responsible for Rocky Brands’ global operations and supply chain functions. Additionally, he is redesigning the company’s sourcing structure and strategic direction, expanding its sourcing to Southeast Asia.