If “the only constant in life is change,” then supply chain challenges are exceptionally constant.
“The challenges keep changing. Last year there was surging consumer demand and not enough inventory on shelves, and now we’re seeing 30 percent more inventory year over year, and a lot of the previous logistics issues have slowed down,” said Nate Fleming, chief marketing officer of multi enterprise product and supply chain platform Bamboo Rose at Sourcing Journal’s Fall Summit. “And I just learned at earlier sessions of new potential looming challenges that I wasn’t even aware of!”
The truth is, no one knows what will come next—be it geopolitical conflict, natural disaster or something else—but it’s clear that changing dynamics absolutely cannot be handled without agility, and agility can’t be achieved without rock-solid data.
But while it’s essential to be well aligned with upstream and downstream visibility across the partner ecosystem, companies don’t always know where to begin.
“The first step is really just starting to focus on a single business process—digitize that business process, digitize that collaboration, start reporting on that data, start using dashboards and things of that nature to allow different users across the organization to get access to the information they need,” Fleming said. “Once you start to build that kind of ‘bedrock of data,’ you can start to analyze it and start to use functionality to understand what the processes are, where they’re falling down, and maybe what partner or team isn’t moving quickly enough or being collaborative or transparent.”
This bedrock of data is key at every level. As retailers scramble to align product with demand, bring products to market on time and get that early holiday spend, precision is paramount. “Because if you miss a season, it’s really going to be devastating,” Fleming said. “We really work with our client base to manage and digitize processes to improve data quality, create more agility in terms of how they’re learning from suppliers and seeing different product opportunities they can bring to market.”
Companies that built really strong sourcing practices and relationships these past few years will are best equipped to survive challenges coming their way these next few months. But smaller cap companies shouldn’t despair. Even larger retailers like American Eagle Outfitters are building and monetizing networks that allow smaller companies to tap into them and scale supply chain operations.
Nearshoring gets closer
Commitments to supplier diversification and geographic diversification have ebbed and flowed, said Fleming, but a concrete shift has taken place in the last six to 12 months, and it’s not just about chasing price.
According to a Gartner survey of supply chain professionals, 28 percent are now planning to focus on regionalized sourcing models with two partners in several different geographies; 22 percent indicated they’re focusing on more localized or even domestic logistics strategies; and only 16 percent of supply chain organizations are focusing on manufacturing or sourcing just to the lowest cost.
Nearshoring might be an increasing draw, but not all brands and retailers are willing to cut ties with the overseas suppliers they’ve built strong relationships with over the years, if not decades. Luckily, some suppliers are moving on their own. Bamboo Rose client PacSun, for example, is seeing some of its existing overseas suppliers move or expand to allow for nearshoring.
“In some cases, they’re starting to bring some of that production capability that they’ve built with their partners over decades to nearshore geographies, so they can continue to work in the way that they’re used to while doing it much closer to where they’re bringing that product to market,” said Fleming. “This has allowed them to turn goods in 30 days in some cases, if they have the fabric on hand, and even more quickly for styles that they’ve used season over season.”
‘Good ESG, good data’
While change is constant, a company’s environmental and social commitments needn’t fall victim to uncertainty and change. In fact, as a company matures its supply chain transparency and traceability to meet some of these ESG requirements, that can give them visibility to manage other challenges. In other words, good ESG practices, good-quality data.
Strong reporting in place backed by digitization can catch—and help a company respond to—non-compliance issues as soon as they arise. “We have an integration with our ERP system that prevents ordering if there’s a compliance issue, and we found that that really changed behaviors. We saw a 65 percent reduction in at-risk audits, and a 96 percent reduction and compliance issues.”
Ultimately, Fleming continued, it’s that software backbone that helps you with your supplier base change your behaviors. Bring on third parties—not just suppliers, but also your inspection partners and other third parties—to help you validate that information.