Managing the supply chain while expanding into new territories presents fresh challenges in five important areas
Let’s imagine you’re the chief executive of XYZ plc, a company that makes trainers. The global market for trainers has grown by more than 40 per cent since 2004 to around $55 billion a year and so there’s plenty of scope here. However, XYZ will have to rethink every link in its supply chain.
“The structure of supply chains has changed immensely. Linear supply chains – buy-make-move-store-sell-deliver – have evolved into supply chain grids, with each part in the traditional supply chain replaced by a series of sophisticated networks,” says Puneet Saxena, vice president of industry strategies at JDA Software.
Trainer brands, like others, are increasingly obliged to guarantee integrity and traceability throughout the process. “One of Nike’s core beliefs is that progress starts with transparency and collaboration, and that’s why a decade ago, Nike became the first company in our industry to publicly disclose our factory base,” says a spokesperson for Nike.
Here are five ways to manage the supply chain:
As with so many products these days, trainers are surprisingly complex. For instance, the Adrenaline GTS 17 by trainer brand Brooks, which hit the market on November 1, is made up of 106 pieces.
“What’s important when sourcing in the UK is critical when sourcing overseas,” says Jayne Hussey, partner at law firm Mills & Reeve. “Companies need to make local connections, understand the market place, carry out numerous factory visits. References can also help to understand who your potential suppliers are.”
Technology can help trainers companies such as XYZ, according to Ad van der Poel, head of financing services at enterprise software provider Basware. “E-procurement enables executives to make quick and informed decisions which result in a healthy balance sheet,” he says. “By providing teams with a new layer of visibility and access to actionable information, e-procurement places the user at the centre of the process. Businesses are able to source, manage and collaborate with the right suppliers, and bring spending under control.”
2. Rules and regulations
The Bribery Act 2010 and the supply chain reporting requirements of the Modern Slavery Act 2015 apply to XYZ’s activities both overseas and in the UK.
“The regulatory landscape is already complex and ever-changing, and the challenge is exacerbated when expanding into new markets,” says Sonal Sinha, vice president of solutions at MetricStream, a provider of governance, risk and compliance software. “There needs to be a controlled, centralised supplier on-boarding, monitoring and off-boarding process to ensure they are working compliantly with laws and appropriately reviewed for any other risks.”
Trainers need to have multiple size codes if they’re being shipped from a home market, Andrew Blatherwick, chairman of supply chain solution provider RELEX Solutions, points out. XYZ will also need an understanding of display practices. For example, in countries such as Egypt the soles of shoes should not be displayed upwards as this is considered to be offensive.
XYZ might want to consider licensing its brand to companies already operating in its new territories. In 2015, manufacturing under licence grew its revenue 4.2 per cent, an increase of more than $10 billion, according to the International Licensing Industry Merchandisers’ Association.
“If you’re a manufacturer with a UK licence for a particular brand, you would need to add further territorial rights before you could sell these products into other countries,” says the association’s UK managing director Kelvyn Gardner.
Either way, ethical considerations are increasingly important. “Some brands, for example, will now only source from countries that are above a certain ranking on the Worldwide Governance Indicators list, published by the World Bank, which gives a macro view of factors such as rule of law, political stability and corruption,” says Kosten Metreweli, chief marketing officer of Segura, a supply chain software provider.
For trainers brands, expanding into new markets is easier today because technology is reducing development and production lead times, and promoting greater product transparency, according to Ed Gribbin, president of Alvanon, a global apparel business and product development consultancy. “3D virtual product development tools speed design and buying decision-making on the headquarters side, and simultaneously speed the pattern making and fitting assessments on the factory side,” he says.
FedEx has been working with trainer retailer Sneakersnstuff to drive its international expansion. It has a store in London’s Shoreditch, but 70 per cent of the Swedish brand’s sales come from online customers as far afield as the United States and Asia.
“Visibility is fundamental to operations,” says David Poole, managing director of UK sales for FedEx Europe. “Making use of your logistics provider’s range of tracking options provides businesses with greater awareness of any potential delays, so customer updates can be given. This is an essential aspect of ensuring repeat customers.”
5. Marketing and sales
XYZ will have to study the competition in its new territories, advises Trish Young, UK and Ireland’s head of business consulting technology provider Cognizant.
“Only then will they be able to determine their product positioning and differentiate themselves,” she says. “From there, they will need to create localised assets and services through the various retail channels. Beyond this, they’ll also need to ensure their product is in front of important influencers and, where possible, analysts to get the nod of approval.”
For trainers producers, identifying the appropriate channels, be they wholesale, own retail, e-commerce or franchise, is also essential. “Brands and retailers that go down the wholesale or franchise route need to put in the leg work in the early days to ensure the partners they select have a clear framework within which to operate, so they can support the consistent execution of global brand values,” says Sue Butler, director at management consultants Kurt Salmon.