When altered consumer preferences, a global trade quagmire and a radically different way to buy and get goods collide—it makes for a Big Bang-size evolution in an industry that had long been the same. The task at hand today, is learning how to navigate this new universe without drifting off into irrelevance.
While it seems most has been upended, key consistencies do remain—and finding new ways to deliver on the same fundamentals will be how supply chains survive in the future.
“Some things don’t change,” William E. Connor II, CEO of The Connor Group, told Sourcing Journal. “Price, quality, and speed to market remain key drivers. Production timing and production lead times are changing, however. Smaller, more frequent orders are becoming much more common. Private brands penetration is increasing rapidly as retailers seek to offer differentiated product to their customers.”
Here’s what Connor sees around the bend for sourcing and what he thinks will serve as the supply chain’s biggest bane.
SJ: What’s causing the greatest disruption in supply chains right now?
William E. Connor II: Clearly the growth of e-commerce is a major agent of change. The impact of e-commerce is less a matter of supply chain disruption than it is a disruption of the face of retail itself. The rapid growth of technology and new production and communications platforms is putting tremendous pressure on vendors to adapt. Those that don’t adapt cannot expect to survive.
SJ: That considered, what’s the biggest hurdle Connor has had to get over in the last year?
WECII: Arguably the biggest challenges facing our industry is financial weakness on the part of clients. The significant consolidation and retrenchment we’ve witnessed in 2016 and 2017 is continuing. Challenges for bricks and mortar retailers include rationalizing floor space utilization and leases, reducing outstanding debt and trying to reverse shrinking margins.
SJ: So how can retailers hope to survive the rampant disruption without facing bankruptcy?
WECII: The reality is that there remains too much retail capacity and more retrenchment is necessary. This is happening. Callous though it may sound, being one of the “last men standing” augers in favor of success. As such, managing through the turmoil is essential.
For bricks and mortar retailers, the customer experience becomes essential. One worry is retail layoffs may prove counterproductive due to less customer engagement.
Winners will emerge. Specialty retailers and brands who have their finger on the pulse of the market and are able to adapt to consumer tastes and trends quickly should succeed. Many of our clients are leveraging data analytics to a greater extent to pinpoint consumer preferences and make better buying decisions.
SJ: Speaking of data, supply chains could definitely benefit from a greater use of it—why has it taken apparel supply chains so long to evolve?
WECII: The industry remains quite manual and not particularly vertical. Interlinked production venues, meaning apparel factories, fabric mills and trim suppliers, are often far flung. While technology is being leveraged, apparel supply chains have historically chased the lowest cost of labor and raw materials with fluctuating exchange rates playing a part. This has put great pressure on vendors. For many vendors, additional capital investment presents a major challenge.
SJ: Has digitizing the supply chain been a major focus for Connor—and how are you building ethics into this future-facing supply chain along the way?
WECII: Let’s start with ethics. The demand for better corporate governance, social accountability, corruption prevention and sustainability has never been greater. The matter of corporate ethics is not a single solution issue, but is built into the mindset and structure of an organization. Maintaining a culture of ethics means sending a clear, unambiguous message to everyone in an organization, constantly reinforcing that message, acting swiftly and decisively when breaches of ethics are identified, encouraging and rewarding disclosure, and creating an internal staffing structure that avoids excessive concentration of decision making power in departments or individuals. Maintaining horizontal and vertical transparency is very important. Whether in the office, on the factory floor, or in the field, relentless attention needs to be paid.
On the supply chain management side, Connor continues to work on its own proprietary, shared platform as well as client and vendor platforms. We have developed our own proprietary platform, as well as discrete client portals and supplier portals, that shares information across a secure network. From design to raw materials to production and ultimately delivery, our objective is to deliver a transparent platform for information exchange between suppliers, ourselves, our clients and other trade partners. Our goal is to eliminate duplication of data, and eliminate input errors, to accelerate the exchange of information and thereby increase the speed of the supply chain to make our clients more competitive. All of that said, quite a bit of data input remains manual. This will not change.
SJ: What are your thoughts on automation and how it’s set to impact your business?
WECII: More advanced, higher cost origins, such as China, are investing in greater automation to minimize the impact of increasing labor and social benefit costs. In many product categories, automation has created better raw material yields, lowered lead times, lowered costs and resulted in a more sustainable supply base. At Connor, our technical teams are expert in assessing the impact of automation on production, lead times and cost to deliver a sustainable supply chain for our clients. At the end of the day, it is about selecting the right partner for the right product including cost, quality and speed.
SJ: Well, what does the supply chain of the future really look like and what’s Connor doing to build it?
WECII: For a supply chain service partner such as Connor, a true global presence is essential. In the face of prospective new tariffs, looming protectionism, and the need to keep costs down, production venues continue to shift. We deal with this by ensuring we have a robust global footprint that spans all major global production venues. “Boots on the ground” services remain essential in an otherwise digital age that includes increasing demand for social and environmental compliance.
The supply chain of the future will include a seamless platform to link trade partners together for better communication and management of the supply chain—from design to raw materials to production and ultimately delivery. At Connor, we have developed a proprietary supply chain management tool that delivers a secure and transparent platform to manage the production supply chain. We continue to enhance our digital platform to stay at the forefront of supply chain technology. This includes virtual samples, virtual showrooms, and other technologies that allow for faster and better decision making. Technology is being leveraged to a greater extent to deliver price, quality and speed.
SJ: What’s the next innovation needed for supply chains?
WECII: Cellular manufacturing is interesting, where a qualified vendor partners with multiple smaller manufacturers to create a more flexible supplier. While this allows greater flexibility for speed and order quantities, this must be managed carefully to ensure that all cellular sites are compliant and produce consistent quality—and does not result in unauthorized sub-contracting.