COVID19, or Coronavirus, is quickly becoming a crisis in the fashion, apparel, and soft goods supply chain; however, it is not the first such crisis, nor will it be the last. And it is not unmanageable. Any company that requires timely manufacturing and delivery of goods must act quickly in this moment to offset as much risk as possible.
The Backbone design and product platform won’t solve all the challenges of this crisis, but it can help with some. We intend on leaning in across the next few months to help this industry — not just our customers — to disseminate and execute on best practices that are most likely to reduce the impact of COVID19.
In this first post, we examine some high level actions that any company can actively take to prepare and react (regardless of what systems they use). We will follow-up next week with a more specific webinar for customers using our platform on how they can use Backbone to do some of these things (details at the bottom).
But it’s clear at this moment that no company can ignore the impact of Coronavirus on consumers and businesses. That impact requires strong action to preserve and protect the ecosystem of SMB and mid-market customers we serve.
Here are some things companies should strongly consider implementing today (and continue focusing on in the future):
- Analyze your risk: The first action to take is a comprehensive risk analysis that ensures you have visibility into all your suppliers, what they provide you, their location and any known replacement for them. As suppliers in both China and other countries increase their downtime (due to quarantines, worker illness, lack of material/goods from other suppliers), companies need the ability to act quickly in replacing those suppliers. China makes up around a third of the world’s manufacturing, and it is the world’s largest exporter — and the impact of the virus there is already clear. The recently released Purchasing Managers Index showed a drop in manufacturing activity in China to 35.7 in February — down from 50 in January. Chinese factories are operating at 60–70% of capacity right now due to several variables from COVID-19, least of which is availability of workers. This is one of the, if not the most, significant disruptions to outsourced production and contract manufacturing in the last ten years.
- Understand the data: Second, centralize your data as much as possible to understand your products, components, raw materials — both your existing inventory and forward needs. You are planning for your spring, summer and fall cycles in this process (as much as is possible with your design approach). Having a centralized system of record is pivotal to see the progress and status of products and components in your supply chain to reconcile anything that’s currently been ordered and not received.
- Do worst-case scenario planning: While you can’t operate a business on worst-case assumptions, it’s good to have a clear view of it. With those supplier lists and aggregated materials/supply data, ask the hard questions. What are low, mid, high level projected losses? Knowing projected losses will help in putting together a strategic plan to minimize these losses and mitigate risks for future crises. While this might be alarming to contemplate, it will also help to identify frailties in the supply chain and production process to be considered downstream.
- Find replacement suppliers: Once you have access to this data and can analyze your risk, start diversifying your suppliers NOW. Do not wait. COVID19 is one example of the type of supply chain disruption that can occur from natural, biological or human incidents. More will occur in the future; use this work to insulate yourself from future shocks. For SMB and mid-market suppliers, finding and replacing suppliers can be challenging. It’s a time consuming process and a negotiation in which you can lack leverage and purchasing power. But that’s why it’s imperative to move now. COVID19 is likely to impact many countries before whatever normalization of the virus can occur does so. There is entirely too much risk when a company has all of their goods allocated to a single factory or country of origin. That said, there is no one best-practice way to diversify. So preparation becomes key. Familiarize yourself with what parts of the world are known for producing what to minimize the time and cost of replacement materials. Leverage third party resources, such as FOURSOURCE, to investigate other suppliers that not only will diversify your network, but are also focused on sustainability practices. The sooner starts diversifying their suppliers to other parts of the world (Cambodia for cotton and silks, Brazil for leather and latex, Canada for wools and furs, etc.), the less impact the business will feel long-term and the better prepared your organization will be for hiccups in the future.
- Eliminate errors in your design and production process: In a time of order delays and cancellations, apparel companies cannot afford to get their orders wrong. Having a seamless design and product process centralized in a system ensures that tech packs shared with new suppliers are the right ones, with the right specs, components and overall materials. In addition, a centralized system of product records helps to quickly communicate changes to suppliers to ensure real-time visibility and accurate product details — inevitably shortening time-to-market with the goal of less samples needed.
- Identify your Plan B: Once the risk analysis is complete, new suppliers have been identified and shared product details, determine what strategies you can put in place to make up the forecasted loss. Companies need to be strategizing on future plans to make up for the forecasted loss caused by the coronavirus outbreak (and to anticipate the next business disruption). Here are a few quick tips to consider when designing the next collection:
Tip 1: Tailor your collection based on the materials you know you can secure. Revise designs based on what the manufacturer is capable of instead of pushing for something that isn’t feasible.
Tip 2: Get your fabric requests and sample requests out much earlier. Request a swatch of fabric before you order the roll. Request a development sample before you place a bulk production PO. Discovering flaws early gives you time to either work with the supplier further or find an alternative.
Tip 3: Limit the amount of fabric choices within a collection, which will help with consumption and unnecessary complexity.
Tip 4: Factor in more time for production and ALWAYS account for shipping. Make sure your fabric production time is accounted for and be persistent on follow up to ensure deliveries stay on schedule.
Tip 5: Make sure your product information can easily be aggregated and shared with multiple vendors. Product data can multiply quickly and become unmanageable. Moving fast is an advantage during supply chain challenges but it can also lead to mistakes if handled sloppily. Preparation is crucial.
As outlined in this article, it is not too late to manage the downstream impact your business could face with the coronavirus. However, time is of the essence. To further support our network of brand partners — current and future — Backbone will be hosting a “Mitigating Risks in your Supply Chain” webinar for attendees to ask further questions, see a live demonstration of functionality a PLM can provide companies in a business disruption, and to collaborate with others on strategies to minimize the damage in the coming months.
Shocks to the system like COVID19 are challenging to entire industries. This is a time when we should all lean in to support and help the ecosystem as a whole to manage those shocks and come out on the other side. Backbone is a platform built by designers for designers. A focus on our customers, and on the success of this ecosystem is woven into the fabric of our culture and vision. This is important to us. We’ll be sharing more ideas to help soon, but please reach out if there are ways you’d like to get involved to share your best practices and learnings to help others.