The supply chain for small to medium-sized businesses (SMBs) has seen significant changes in recent times, helping to level the playing field against the major players.
Many of the new developments have come in reaction to the e-commerce phenomenon, where a slew of start-ups and smaller companies have been able to operate successfully thanks to the lower overhead of not owning a physical store. They’ve also been able to thrive because logistics and technology companies have created new means for shipping geared toward these companies.
In addition, the shift to more localized manufacturing and on-demand production has seen a push by government and industry to improve capabilities. This has been seen in traditional locales like New York and North Carolina, but also in some nontraditional places such as Nashville and St. Louis.
Manufacturing
Local manufacturing lends itself to more niche operations, but the logistics and services still have to be there. New York City officials and industry leaders rolled out a comprehensive package this month to support fashion production in Manhattan’s Garment District. The plan includes a new tax incentive program to preserve 300,000 square feet of manufacturing space in the district and support for a public-private partnership to acquire a building dedicated to production.
The tax incentive package will allow property owners to offer long-term, affordable leases to fashion manufacturers, including companies that provide a service that supports the garment-production supply chain, such as pattern-making, embroidery, embellishment and dyeing services. The program requires property owners to offer 15-year leases with a maximum gross rent of $35 per square foot, which includes utilities and other expenses.
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In exchange, the participating property owners will receive discretionary tax benefits from the New York City Industrial Development Agency (NYCIDA) that range from $1 to $4 per square foot of manufacturing space that ranges between 25,000 and 100,000 square feet.
This initiative builds on Mayor Bill de Blasio’s commitment to garment manufacturing across the city, including the $136 million investment in the Made in NY Campus in Sunset Park, Brooklyn. This investment aims to create a 200,000-square-foot garment-manufacturing hub at Bush Terminal, with small spaces for companies working in pattern making, marking and grading, cutting and sewing, and sample making.
Also in Brooklyn, the NYCEDC recently unveiled some 500,000 square feet of new industrial space for 1,000 new jobs through the transformation of the former Brooklyn Army Terminal (BAT) into a modern manufacturing hub. As part of the New York Works plan, the new space will be a home for industrial innovation, creating affordable space for up to 20 companies.
NYCEDC is welcoming a new wave of modern industrial companies to the campus, including Tailored Industry, an on-demand 3D printed clothing company. NYCEDC’s full strategy includes a Micromanufacturing Hub cluster, dedicating 55,000 square feet of space for small industrial businesses to grow within the campus, and activating underutilized space to bring in new manufacturing and distribution.
Looking to bring back an industry that has not existed for decades, the Saint Louis Fashion Fund is making a push to bring the city’s fashion industry and manufacturing back to its roots of a Midwest center of apparel wholesaling. Saint Louis Fashion Fund co-founder and chair Susan Sherman said the fund’s incubator, ongoing search for a high-tech apparel manufacturing facility and request for proposals to transform Washington Avenue and restore its garment district, will help re-ignite the fashion industry in St. Louis.
The incubator is offering a two-year program in business, fashion, merchandising and retail to six designers selected through a national search. Each designer has a studio in the Saint Louis Fashion Incubator and access to shared resources like cut-and-sew capabilities, a reference library, conference and meeting rooms, office equipment, and a small retail boutique to show their lines.
Similarly, the Nashville Fashion Alliance (NFA) hopes to build on the area’s denim tradition to foster start-up and emerging brands’ growth. The NFA issued a report last year that said Nashville has the largest per capita concentration of independent fashion companies outside of New York and Los Angeles, contributing $5.9 billion to the city directly and indirectly and employs more than 16,200 people. Those numbers could reach $9.5 billion and 25,000 people by 2025 with the right investment.
Later this month, the NFA is holding “Brandology 2018,” with a theme of “The Study {Art} of Talent Development.” NFA is also holding its second Brand Builder contest in partnership with AMAX Talent to award one fashion company a Brand Builder package to help maximize awareness and reach customers. The package has a $2,500 value.
Shipping and Logistics
Further down the supply chain, companies are devising systems to meet the needs of SMBs. These are meant to help them compete with large firms, notably in the e-commerce realm.
Chainalytics, a supply chain consulting specialist, and Drewry, the global shipping consultancy, have partnered to launch an innovative ocean freight procurement solution for shippers. The Chainalytics Ocean Buying Group, in partnership with Drewry, will provide participating cargo owners with enhanced purchasing power, service monitoring and cost transparency.
The strategic partnership delivers a new ocean freight procurement platform that will enable medium and small-scale importers and exporters to collaboratively achieve “big shipper” rates and terms direct with ocean carriers. It also allows them to benefit from shared intelligence for better commercial decisions, the companies said.
John Westwood, senior manager at Chainalytics Transportation Practice, said the Ocean Buying Group was created “to provide companies often outsized by competitors the opportunity to gain big shipper value relative to the size of its organization and quantity of shipments.” Westwood said the partnership with Drewry enhances the capability of clients “to competitively acquire ocean freight services.”
Arjun Batra, group managing director at Drewry, added that “Smaller retailers and manufacturers often struggle to achieve favorable rates on their international shipments. This initiative levels the playing field by providing these organizations with a collective buying solution that can deliver real purchasing power.”
UPS recently announced a major expansion to its ocean Less-Than-Container Load (LCL) service with the addition of direct sailings in 130 lanes, covering most of the globe. The LCL service allows customers that do not have enough cargo to fill an entire ocean freight container to access cost-effective ocean transportation using UPS’ extensive network of capabilities and freight facilities. Customers benefit from an economical way to transport goods compared to other modes of transportation, while gaining access to a broad portfolio of value-added and alternative services, UPS said. These include cargo insurance and financing solutions from UPS Capital, customs brokerage services, supplier management and sea-air service.
Steve McMichael, UPS vice president of Global Ocean Freight Services, said, “Shippers are looking for alternative service options to limit risk, increase security and manage inventory more efficiently with reliable transit times.”
Also in the New York area, Lincoln Equities Group (LEG) recently closed on a 152.9-acre site in Bayonne, N.J. The new Bayonne Logistics Center, which sits on the former Military Ocean Terminal at Bayonne, will be redeveloped into 1.6 million square feet of industrial warehouse space. The site offers maritime access to the Hudson River and the Newark Bay, as well as direct access to the major highways and the Global Container Terminal.
“As the e-commerce industry and same day-delivery services expand, the demand for industrial warehousing near ports and major metropolitan areas will rise,” Joel Bergstein, president of LEG, said. “We see tremendous potential in this underutilized waterfront site and look forward to transforming it into a port related 21st century warehouse and distribution center.”
Reacting to the explosion of e-commerce, DHL recently introduced DHL Parcel Metro, described as a “fast and flexible service” for online retailers meant to help meet fast-growing consumer demand for same-day and next-day delivery. DHL said the new service is part of its continuing innovation efforts to develop strategies and tools to improve e-commerce logistics, including robotics and augmented reality.
DHL said Parcel Metro creates a “virtual delivery network” of local and regional delivery vendors and crowd-sourced drivers and vehicles that will ensure maximum flexibility and capacity for the last-mile, which has become a key aspect of e-commerce delivery for major carriers.
Amazon has also been a panacea for many SMBs, providing a highly travelled marketplace for their goods. Amazon is also looking to create its own freight and parcel delivery network. In the last couple of years, Amazon has expanded into ocean freight, built a network of its own drivers who can now deliver inside homes and leased up to 40 aircraft, while establishing an air cargo hub
Amazon already delivers some of its own orders in at least 37 U.S. cities. With the new pilot program called Shipping With Amazon, or SWA, Amazon reportedly plans to send its own drivers to pick up shipments from warehouses and businesses and deliver the packages to consumers.