“Unless we can control the supply chain, we are always going to be a victim.” – Gary Wassner
The existing supply chain model is broken, and all the broken pieces have been laid bare by COVID-19. But the challenges the coronavirus exposed aren’t new.
Lead times are too long. Visibility is low. Teams aren’t connected. Automation is scarce. Transparency is rare.
What is new, however, is the severity of the consequences. A broken supply chain impacts product, impacts sales and impacts the environment.
Purchasing and production can represent between 75 percent and 90 percent of the international fashion supply chain. In addition, a majority of the processes done to manage those functions are completed manually (as told through “Threads that Bind” by Tom White).
The blunt truth is that too little attention has been spent on the first mile of the supply chain, and with severe consequences. Too much or too little inventory. Increased government and consumer scrutiny. Failed businesses. Great harm to people and the planet. Inefficiency, risk and waste.
While it’s too late to undo the damage, it’s not too late to turn the crisis into an opportunity. A transparent, efficient and ethical supply chain is the opportunity, and it’s possible now.
Step 1 is to reimagine what a supply chain should look like.
In her groundbreaking work, Donella Meadows describes the greatest points of leverage in a “system” to produce the best possible outcome. Unsurprisingly, the first point of leverage is the power to transcend paradigms. The international supply chain desperately needs a new paradigm.
Here are three retailers that have shifted away from outdated supply chain models.
Public Habit is challenging the notion of trying to gauge consumer demand a year in advance. These were artificial constraints, which led to massive waste, notably an estimated 50 billion garments headed straight to a landfill. Instead, Public Habit has turned its supply chain into a demand chain. Rather than trying to anticipate sales a year out, Public Habit has adopted a one-order-equals-one garment approach, supported by an agile delivery process.
By changing that singular paradigm, everything else in its system also improves for the better. Supplier selection improves, time-to-market improves, distribution improves and #sustainability improves.
Everlane challenged the paradigm of “opaque” supply chains. It has instead embraced radical transparency. The old paradigm led to tremendous sustainability issues as it wasn’t clear how, and by whom, the products were being produced. Everlane puts every supplier front and center on its website, and even shares its manufacturing costs and expected profit.
Zara challenged the notion of long lead times. This allows the brand to respond quickly to the market and simultaneously embrace relevant fashion trends. Achieving this meant creating a hyper connected supply chain from the POS to design, production, and logistics. Long lead times led to waste, markdowns and outdated fashion. The new one leads to tremendous profits, market leadership, and a devoted following. More important, it’s better for the planet as relevant product sells quickly.
All three are great examples of “Be Good. Do Good.”
What does it take to execute on building a better supply chain?
How do companies execute a paradigm shift? New rules mean new tools.
The primary tool today is a “hammer.” Most importers have to use blunt force to operate their supply chains as there is little technology in the current state. PDF, Excel, email and even fax are still the lingua franca of international trade.
I still find it amazing that with millions of dollars worth of products and sales at stake, we are still importing like it’s 1999.
Here, I go back to Donella Meadows’ 12 “leverage points” and the power to add, change, evolve or self-organize system structure.
The biggest point of leverage is the order itself. Imagine if you ordered a cheeseburger at McDonald’s and the cashier started to WhatsApp and WeChat with the burger barista and the fry guy in the kitchen to get your order made? Sounds crazy but that’s how it works in the international supply chain.
So start with the order. Is a PDF order coupled with Excel and email sufficient to manage an entire made-to-order supply chain from 8,000 miles away? A digital order could be used to connect and direct the entire supply chain in order to enable a new paradigm.
Next, focus on the supplier. Is a supplier database and/or list sufficient to unleash the full power of the supplier’s capabilities relative to the strategy? A supplier portal would allow you to build a multi-dimensional relationship to fully understand the suppliers constraints, capabilities and possibilities.
Third, look at the people. There are up to 30 people touching each order within the chain to design, buy, build and move your product. How are they connected? According to Meadows’ leverage point No. 6, the structure of information flows (the order of people who do and do not have access to information) ensures that new feedback loops are delivered to a place where the information wasn’t going before. Connecting all people digitally inspires creativity, collaboration, understanding and—most important—a shared mission.
Production begins with product, and that’s another huge point of leverage. Is a WeChat stating “inspection ordered” sufficient enough to provide the insight and oversight you require to ensure what you ordered is what you get? Fully connecting to your work in process is the best way to ensure both speed and quality.
There is massive leverage at each point in the supply chain, and it simply takes a new paradigm and modern technology to unleash it.
At the end of the day, it comes down to this: As an industry, we need to make a fundamental shift in the way we think. Continuing with “the good old ways” simply won’t cut it anymore. We need to be more operationally efficient and resilient, more cost effective, and more socially compliant in order to push through challenging times like these and come out in a much better place.
Begin with a new paradigm, implement new digital tool kits and end with a much better outcome.
Rob Garrison is CEO of Mercado. Learn more about the company’s supply chain solutions, visit mercadolabs.com.