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Multichannel report: The supply chain challenge

Drapers brought together a group of retailers to discuss the stresses that multichannel and international are placing
on their supply chains.

Today’s retailers are serving a multichannel consumer, who wants to see new product in store or online 24/7 and they want to be able to shop for that product however they want, so retailers’ supply chains have to be finely tuned
to cope under the strain. With those same UK businesses metamorphosing into global brands, adding in a new dose of complexity, the supply chain has become central to meeting the needs of this new retail reality.

Drapers brought together a selection of retailers to discuss the issues for our Supply Chain Report round table, held at The Soho Hotel in London in June, in association with freight forwarder Kerry Logistics and inventory optimisation software provider Quantum Retail, where the overwhelming consensus was that the supply chain has been pushed to
the forefront of business decisions.

Martin Gane, logistics director at Topshop owner Arcadia Group, said: “Businesses recognise they can’t meet their objectives unless they’ve had that conversation with the supply chain director, because that role is becoming more integrated into the business.”

For lifestyle retailer The White Company, head of buying Kate Conway said supply chain has become part of the daily discussion and sits alongside product and product strategy. Conway adds that whereas previously supply chain was an afterthought used to correct and fix things, that “now it’s absolutely joined at the hip. The buying team for
example is much more informed than they ever were before”.

In addition to this, retailers are having to invest in their supply chain and logistics operation to meet consumer demand. Mark Robinson, head of combined service buildings for department store John Lewis, said the multichannel retailer has now surpassed the £1bn mark for online revenue and will be investing more than £300m into its infrastructure to deliver its multichannel offer over the next seven years and support this migration of sales.

Robinson said: “Supply chain has become a key enabler in the organisation as trade moves online. As that grows even further it is imperative that we continue to invest and drive efficiencies in our supply chain. It’s absolutely critical we get the balance between the customer proposition and the cost base.”

He added that increased customer demand for product and speedier fulfilment options, such as same-day delivery, will pile continued pressure on the supply chain. Robinson explained that the investment in supply chain processes, such as single view of inventory, will be key in driving John Lewis’ proposition, establishing a lower cost base going forward, and making it profitable.

As supply chain has become more aligned to business strategies, Kerry Logistics UK sales director Emma Rowlands believes suppliers are now working more closely with brands and retailers. She said their conversations with clients have moved from general freight forwarding to end-to-end supply chain management.

Rowlands added: “It is becoming more of a supply chain focus than a freight forwarding focus, so the relationship is more aligned with the business strategy. We have more of a partnership and more understanding with the business, whereas before it was less of a collaborative approach.”

Quantum Retail co-founder and vice-president of international and co-founder Wyndham Albery agreed and added that supply chain is no longer simply supplying to stores, but is now a complex network that requires strategic management, as product can be supplied from multiple suppliers to multiple stores, different countries and via ecommerce.

In addition, Drapers’ supply chain survey found that quality control is one of the biggest challenges, with 41% of retailers admitting so. Jaeger head of product development Lindy Maddock said quality control is important to
the premium womenswear retailer, but also emphasised supply chain visibility, which was highlighted as an issue by 34% of respondents, as central to maintain quality.

Maddock explained: “To protect our product and its quality we need full visibility of all of our manufacturing sites. The problem is when it comes to subcontractors. It is very important to retain visibility of our full supply chain and to minimise the risk of any damage done to the brand or to our product by subcontractors who are not making to our standards.”

Jaeger has responded by reducing the number of suppliers it works with by about 30% year on year to reduce the risk and make quality control simpler. Even then with so many processes involved in making product, from the dying to embroidery, it remains a challenge to ensure all stages are working to the same standard.

Also on the agenda was sourcing, as our survey found that cost, speed to market and flexibility were the three most important factors for choosing a supply chain partner. Maddock said Jaeger is moving some of its production away from the Far East because it is easier to manage product in Europe, where lead times are shorter and, as such, stock replenishment is quicker.

She explained: “In Europe we can get there very quickly and do quality audits and development projects a lot easier.

We also find lead times are shortened so you haven’t got the freight factor to counter into your lead-time process.”

However, delegates agreed it is a balancing act of sourcing between the cheaper locations in the Far East and the shorter lead times of near sourcing sites. Arcadia’s Gane believes it is about having the flexibility, especially when it comes to repeating into a best-seller.

He said: “Near sourcing works incredibly well for you because you can get back into it, but it does hit your margin. So many businesses source from the Far East, [because] they are driving that price down. So for that basic look [item], major retailers still go there.”

Gane said Arcadia takes a “garment by garment, season by season” approach to be flexible and reactive to the market, concluding “on the whole it’s about keeping our cloth uncut until the last possible point”.

The message echoed around the table by the retailers present was that real working partnerships and collaboration are required for supply chain success. Conway said long-term this is fundamental.

She added: “For us it is about genuinely partnering with suppliers and understanding what their challenges are and if we can help them. It is in our interest to make it right for them so we can be together for another 20 years. It is as important for them to understand your challenges as it is for you to understand theirs.”

Having these eyes and ears on the ground is also key for international expansion. Simon Doyle, international logistics director for Marks & Spencer, highlighted local regulations as a particular challenge. He recommended finding people in the chosen local market who are “experts at what they do and that can influence people in the right places”.

In terms of dealing with customs officials and regulation, Doyle explained: “We use our local logistics providers to help us open doors and get into discussions with local customs to find out how we can work better with them to make sure product moves faster and isn’t held up.”

He said this approach has been key to M&S’s success in China, which he underlined as having been incredibly difficult due to local regulations: “It is a country very much focused on exporting, but try importing into them.”

Albery agreed that having people in the market is vital, but believes questions remain over how to manage international operations, as it is difficult to manage from the UK due to the local differences.

He said: “How do you get local people to suddenly get to grips with a system that has taken you 20 years to evolve in the UK and is pretty complex. The challenge is finding a system that they can be trained quickly on and used locally.” He says local variances such as size, religion and weather patterns all come into play.

He concludes: “It’s about getting those tweaks right by country, by town.”

Read more from the Multichannel report

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