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Archive for the ‘Supply Chain’ Category

To state the obvious, it’s bad when your brand gets associated with a phrase like “modern slavery.” That is just the situation that British retailer Boohoo finds itself in.

To backtrack a bit. Boohoo is an online fast fashion firm. We wrote about them a while ago. Their schtick is super fast product launches. They offer lots (as in over a thousand) of items each week and quickly replenish those that capture the public’s attention. As the Guardian reports, this served them well as Britain started to shut down because of the pandemic (Boohoo booms as Leicester garment factories are linked to lockdown, Jul 4).

It was a Friday, and usually the fast-fashion brand’s irrepressibly bouncy Twitter account would be pitching dresses and shoes to its followers ahead of a night out. But this was the first weekend of lockdown, and the company made a decisive pivot.

Instead of bandage tops and tapered trousers, it posted a “night in” thread, helping followers choose “that perfect movie for the weekend”. It advertised an everything-must-go flash sale, with 70% off all stock and 50% off 500 dresses.

And it started selling loungewear – that is, clothes for the sofa. A knitted lounge set, a cropped sweatshirt, and “Disney+ binge outfits” were all on show.

So a quick pivot from date night to night in. But how were they able to so quick adjust their offerings? By producing locally and relying on flexible suppliers mainly located in the city Leicester (How Boohoo came to rule the roost in Leicester’s underground textile trade, Financial Times, Jul 10).

Abandoned by big retailers three decades ago, Leicester’s industry splintered into 1,500 mini-factories, typically employing fewer than 10 people. …

Leicester’s flotilla of small workshops competed with rivals in Bangladesh and Turkey by offering an ultra-flexible service, handling small orders in quick time. It helps Boohoo test almost 3,000 lines of clothes every week and ramp up production of trends that catch on, be they brassy bodycon dresses or lockdown loungewear.

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Some interesting images from the Wall Street Journal (From Flour to Canned Soup, Coronavirus Surge Pressures Food Supplies, Jul 12). First up a look at supermarket out of stocks.

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Note that this graph starts in late May — well past the initial surge of lockdown panic buying. What we see is that we still have persistent shortfalls even as producers have reduced the variety they offer.

If we look at specific categories that surged as states imposed stay at home orders, we see that the peaks go pretty bad but that the likes of toilet paper and canned goods are within the realm of general goods that we see above.

Screenshot 2020-07-13 09.41.53

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An interesting story from Reuters. What should retailers do with all of the inventory they had for the spring season?

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5000The novel coronavirus have impacted many business as governments imposed lockdowns and consumers were just generally reluctant to spend. But in a global economy, those effects are not just local. As shops close down on one side of the world, suppliers on the other side also take a hit.

Take the case of Denim Expert Ltd and its founder Mostafiz Uddin who were featured in a recent Guardian article (‘My life became a disaster movie’: the Bangladesh garment factory on the brink, Jun 21). Denim Expert is a Bangladeshi based apparel producer that makes jeans for a number of brands. When the UK went into lockdown, a number of brands cancelled their orders. Between jeans that had already been produced with materials that had been ordered for anticipated future orders, Denim Expert was sitting on over $2 million of stuff it couldn’t convert into cash. The hit they took was just a small part of the toll imposed on the overall industry.

In Bangladesh alone, fashion brands have cancelled an estimated £2.5bn of orders at more than 1,150 factories, with the country’s garment industry seeing an 84% decline in orders.

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Today’s post has nothing to do with the coronavirus. I can’t tell you how happy that makes me.

The story comes from the Guardian and concerns a coffee roastery in the UK trying to have carbon-neutral beans. The obvious hitch here is that coffee beans don’t exactly thrive in the British Isles so sourcing beans means having to transport them a long way and that has a big carbon footprint. Unless, of course, you use a sailboat (Carbon-neutral coffee comes to UK – via sail boat from Colombia to Cornwall, June 14).

Yallah’s special Colombian coffee grounds and beans are finding their way into coffee shops and restaurants across the country. Using a sailboat to import the beans into the UK made the first leg of their voyage almost entirely carbon neutral. …

By using a traditional sailboat, the 7,500-nautical mile trip has a carbon footprint close to zero. A traditional shipping container might have emitted two tonnes of carbon. A plane would expend 178 tonnes of CO2. …

“Whilst the shipping cost was higher than if it had gone on a big tanker, we worked with the right people and were able to produce a reasonably priced product. There are savings in the fact that we are cutting out the middle men and buying directly from our partners in Colombia. The price the farmers received for this coffee was way higher than the ‘fair trade’ price, by quite some margin,” Blake says.

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Much like Tom T. Hall, I like beer. And much like other industries, brewers have had to adjust as consumers habits and tastes have changed as bars and restaurants closed. As the Wall Street Journal reported a few weeks ago, this has largely meant a shift from smaller craft beers to the watery, American lagers your grandfather drank (Coronavirus Brings Beer Drinkers Back to Bud Light, May 18).

Beer drinkers have turned to box stores and grocery stores, and they are buying beer in 24- and 30-packs so they can make fewer trips. Shoppers are experimenting less, gravitating to brands they trust and looking for healthier, lower-calorie beers. Some people, out of work or watching their budgets, are trading down to cheaper options. And distributors and retailers, looking to simplify their supply chain, are trimming the number of products they carry.

All of those factors are hurting small craft brewers, which make most of their sales in their own tap rooms. Many craft beer brands aren’t distributed in retail stores. For most craft breweries, on-site sales were down by more than 70% in early April, and sales of craft beer to bars and restaurants had evaporated, according to a survey by the Brewers Association, an industry group.

So craft brewers are in many ways like lots of other firms during the pandemic. They had a business model built around sending kegs out to bars and when that demand dried up, they had limited ability to switch to other channels. Even if they could switch to bottling beer, they did not necessarily have the distributional muscle to get their beer into supermarkets and convenience stores.

But that also raises the question about what happens to the kegs. It turns out the breweries own the kegs. When a keg leaves your local craft brewer for a bar, it is supposed to go back to the brewery eventually. This video from Brewbound (a trade publication covering “the beer space“) gives a bit of background.

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The Financial Times has an interesting set of articles on how the ongoing pandemic impacts supply chains (Trade Secrets: Supply Chain Disruption). These hit on things like toilet paper, firms pivoting to new markets or switching from a business-to-business focus to serving retail customers. The one I want to highlight deals with how any fragility exposed by the pandemic will impact supply chain strategy going forward (Be wary of scapegoating ‘just-in-time’ supply chains, May 27) that links to a post that Gady wrote a few weeks ago.

Here is the gist of the article:

A lot of intellectual momentum is building behind the idea that the Covid-19 pandemic has revealed the foolishness of corporate executives in extending their supply chains without properly assessing the risks. Companies have been thinking of “just-in-time” when they need to be thinking about “just-in-case”. …

The reality is complex, and — a crucial point — differs with each industry. Some, like the car industry, have such sophisticated supply chains involving thousands of different components, some manufactured to extremely low tolerance, that diversifying into different suppliers is totally impractical through effort and cost. Sure, you will have a more resilient supply chain, but you’ll also go bust before the next pandemic arrives.

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We have had a number of posts over the years on retailers filling ecommerce from brick-and-mortar stores (see, for example, here and here). From the perspective of inventory management, treating what’s in the stores and whatever is in a fulfillment center as one giant pool of inventory makes a lot of sense. In theory, there is no reason to turn down a web order just because the fulfillment center is stocked out if the needed item is sitting at some mall. The reality, of course, is more complex since picking and packing at a store is going to be more costly than doing the same work at a dedicated facility. Additionally, there is the question of how taking items to fulfill online orders impacts in-store customer behavior.

Now add to those concerns how shipping items from random locations impacts the logistics provider who has to collect and schlepp those packages. Apparently, FedEx has had enough and is working to rein in retailers shipping from stores (FedEx, Strained by Coronavirus, Caps How Much Retailers Can Ship From Stores, Wall Street Journal, May 14). (more…)

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The supply disruptions affecting some seemingly basic products have been fairly sustained. While it is now easier than it was at the start of the lockdown to fine, say, toilet paper and tissues. Other items continue to be hard to come by. Articles are regularly appearing offering one explanation or another for why [fill in the blank] still isn’t on the shelf.

Take, for example, disinfectant wipes. These are basically on every list of how to be safe during the pandemic. That led to a burst of buying in February and March and the likes of Clorox and Lysol are still trying to catch up. One consideration here is that in contrast to items like toilet paper wipes were not in every pantry before the crisis hit and they also aren’t that easy to make (Why Clorox Wipes Are Still So Hard to Find, Wall Street Journal, May 7).

Disinfectant wipes can’t be made as readily as hand sanitizer. The process combines fabric wipes with the cleaning solution, and the Environmental Protection Agency has in place criteria for cleaners to be considered effective for use against SARS-CoV-2, the virus that causes Covid-19.

And unlike toilet paper, which is ubiquitous in homes and businesses, only about half of American households stocked disinfectant wipes before the pandemic, Clorox’s Mr. Jacobsen said. That led to an even more dramatic demand spike as current wipe users consumed a much higher volume while new buyers sought them out.

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The ongoing pandemic has created a host of problems for a host of industries and supply chains. Logistics providers have had to scramble as demand for some goods has dried up while demand for other items has surged. On top of that, passenger airlines — which play a large role in international air freight — have been hard hit. How is all that playing out? Check out this video:

 

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