Upstream Focus is Sourcing Journal’s series of conversations with suppliers, associations and sourcing professionals to get their insights on the state of sourcing, innovations in manufacturing and how to improve operations. In this Q&A, Frank Loewen, senior vice president of the retail market line at Geodis, discusses the impacts of the e-commerce boom and the sustainability laws that could affect apparel operations.
Name: Frank Loewen
Title: Senior vice president of the retail market line
Company: Geodis
What’s the number one question you are receiving from your apparel clients now that was never really a consideration before the Covid-19 pandemic?
While speed to customer has always been relevant, in the past the consumer would typically be willing to pay a premium for it. Now, speed is simply an expectation with the purchase. Consumers today expect domestic shipment within two days of ordering. This shift can largely be attributed to the “Amazon effect” and a business model hinged on fast, free shipping and returns. As a result, customers expect that same shopping, shipping and delivery experience from other retailers.
Changing expectations related to speed are influencing how our apparel clients are approaching the fulfillment process. We are increasingly seeing brands utilizing multi-node order fulfillment to spread inventory across regions to allow them to operate at a lower cost closer to the end consumer to meet these changing demands.
What is the main thing brands and retailers could do (or stop doing) right now that would immediately improve logistics?
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With the explosive growth in e-commerce during the Covid-19 pandemic, the topic of returns is increasingly one that retailers—especially in apparel—should thoughtfully consider. The majority of retailers today offer unlimited free returns to manage the customer experience. However, it comes at a considerable cost for brands and creates significant logistical challenges from an e-commerce perspective. Retailers with a no-questions-asked returns policy can lose substantial revenue due to the incremental costs associated with reverse logistics while also creating further congestion in an already capacity-tight transportation network. At the same time, it can encourage and reinforce unfavorable consumer behavior.
Instead, brands might consider adapting their returns policy. For example, we are seeing some major retailers today reserving unlimited free returns as a benefit for VIPs to reward and incentivize their most loyal customers.
Given the rollercoaster of demand and shipment volumes during the pandemic, how are you adapting your operations to better prepare for and react to uncertainty?
The pandemic made us rethink how we operate, and one of the biggest industry challenges that emerged is related to labor availability and reliability. A major byproduct of the pandemic as it relates to logistics is the pace at which we are receiving goods. As e-commerce continues to spike—and with no signs of slowing down—labor will continue to be a pressing topic to ensure the ability to meet growing demand. We have adapted our operations in response to this by supplementing our workforce with strategies such as robotics and automation, flexible schedules, labor sharing and retraining. This has required us to be more flexible in how we shift labor and capacity planning to ensure that the safety of our workforce always remains our number one priority.
Which piece of technology or innovation have you found most useful during this time?
Geodis partners with a number of leaders in the robotics and automation space to deploy warehousing solutions that improve the speed and efficiency of our distribution services—which proved increasingly important as we navigated pandemic-related challenges. This technology includes autonomous robots, autonomous picking and packing machines, large-scale automated storage and retrieval systems and more. The technology is designed to assist with staff planning and overall throughput to offer solutions that better address both planned and unplanned demand. We take a disciplined approach to our investments in innovation to examine how new technologies can best serve our customers, solve a specific challenge or optimize our capabilities.
Resiliency has become a buzzword since the disruption caused by the pandemic. What could brands and retailers do right now to immediately start preparing for the next unforeseen event?
One of the most dramatic changes we saw during the pandemic is how disruptive global closures can be on the steady flow of goods and the ability of apparel retailers to quickly move product from vendors to customers. As a result, we are seeing retailers increasingly explore nearshore sourcing to provide alternatives to protect access to their product in the event traditional global modes of production and transportation are disrupted. While we were beginning to see a nearshoring trend prior to the pandemic, the past two years brought it to the forefront as retailers are especially eager to mitigate future risk in light of recent events.
What should be brands’ and retailers’ top lesson from the pandemic?
The direct-to-consumer sales channel is no longer a “nice to have,” but an absolute necessity. As we saw during the pandemic, e-commerce became the primary purchasing channel—while brick-and-mortar was secondary—to flip convention on its head. It goes without saying that this caused significant challenges for brands who solely relied on brick-and-mortar. Success in the future is contingent upon infusing direct-to-consumer e-commerce operations with more traditional channels to keep up with changed consumer behaviors. It is critical that retailers pivot their operations as needed and align themselves with logistics partners, like Geodis, who can service the direct-to-consumer channel to help them be successful in the future.
What’s one piece of pending legislation that should be on fashion firms’ radar? How can companies proactively prepare for this potential policy?
In New York, there is currently potential legislation that would require retailers to provide almost full transparency into their operations from a sustainability standpoint—from raw materials all the way to outbound shipping. If passed into law, this would dramatically shift how retailers approach sustainability and report on visibility into their operations. It could also challenge smaller fashion brands and affect their ability to compete with the larger mass merchants.
This is an important piece of legislation to watch due to the high concentration of fashion firms with major offices and headquarters in the area. We are already seeing brands in the area proactively prepare for this by partnering with outside consulting firms as well as logistics companies, like Geodis, that offer low-carbon transport and logistics solutions to reduce carbon footprint and limit polluting emissions.
What keeps you up at night?
Domestic labor and transportation capacity continue to tighten and present more and more challenges surrounding distribution and fulfillment logistics. As a result, the two most pressing industry issues today are the need to increase capacity in the transportation network and the ability to recruit and retain employees in a tight labor market. While transportation may be solving itself due to current market conditions, capacity will remain a challenge as we continue to shift from traditional retail to direct-to-consumer e-commerce to match consumer preferences. Going hand-in-hand with that, the rise in direct-to-consumer e-commerce requires more fulfillment facilities and, consequently, more labor to operate them. In today’s highly competitive labor market, there will be a continued focus on proper hiring and retaining through engagement as well as technology solutions in order to navigate this.
What makes you most optimistic?
Looking at the U.S. specifically, it’s optimistic to continue to see just how dedicated we are to making products more sustainable, investing in our country’s infrastructure to improve transportation and committing ourselves to innovation to remain competitive in the world market. A perfect example of our innovative spirit is in the sophisticated technology solutions we are implementing today and how it compares to just 10 years ago. We are constantly pushing ourselves to do better, and that’s a reassuring thought as we look to the future of our industry and how we fit into the global landscape.