For sourcing professionals, the pandemic has served up a seemingly never-ending series of logistical quagmires. Factory shutdowns, transportation capacity constraints and cost spikes, and raw material shortages forced companies to adopt plan B, C or even D.
Outside of the direct effects of Covid-19, environmental disasters and geopolitical upheaval threaten to abruptly cut off supply or derail shipments. And when time is of the essence, it pays to have planned ahead.
“Companies have to start thinking about developing their own contingency plans and risk-mitigation playbooks,” said Murali Gokki, managing director at AlixPartners, who leads the company’s apparel and fashion services as part of the retail practice. “These need to be institutionalized; they no longer have the luxury of waiting for an event to happen and then putting their best brains in a room to think through a solution.”
What does this contingency planning need to consider? For one, freight. Importers have to brace themselves for shipping costs that can be up to 10 times more expensive than they were pre-pandemic. Companies must also put plans in place for managing and tracking the movement of goods.
“Right now, the mantra is, ‘Be prepared to overpay,’” Gokki said. “And be prepared to double and triple check that you still have the transportation mode that you thought you booked.”
Another preparedness strategy is diversification. Instead of simply chasing after low-cost labor, companies should consider aspects like agility as they choose their production destinations.
The pandemic highlighted the need for dependable supply chain partners. Currently, the relationships between suppliers and retailers are largely transactional, but Gokki sees the potential for these to evolve into more balanced partnerships.
“True partnership requires almost treating the relationship as a joint venture,” Gokki said. “This means you share more information freely, you conduct joint business planning activities, and you integrate your business processes so you can pursue collaborative initiatives that improve the efficiencies.”
Listen to the full episode to learn:
- How to navigate freight hurdles heading into the holiday season
- What it will take to scale nearshoring and onshoring
- The hidden impacts of inflation that are hurting bottom lines
- Where to start with digital design and production management tools
- How companies should approach the supplier-buyer relationship
Sourcing Journal will be publishing the full “2021 AlixPartners + Sourcing Journal Fashion in Focus: Investing in a Future Forged by Adversity” report later this month.