The spread of COVID-19 has meant that brands aren’t just feeling the impact at home — supply networks are vulnerable at multiple stages, from sourcing to final distribution. As different countries introduce restrictions, try to control the outbreak and re-open their networks, brands must remain nimble and adjust their supply chain strategies accordingly. FN spoke with Mark Burnstein, CEO of supply chain platform NGC, on ways brands can minimize the effects of the coronavirus on the production cycle.
FN: What is the main disruption to supply chains right now?
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Mark Burnstein: The biggest supply chain issue currently is a shortage of raw materials coming from China, where the vast majority of products are produced. With major factories closed or at limited capacity, employees in quarantine and production halted or slowed down, retailers are reeling from the impact of supply chain disruptions. We expect the disruptions to continue as most of North America and Europe react to the coronavirus. Even if Asian factories start coming back online, the looming questions are the timing of the retail stores reopening and the publics’ enthusiasm to return to them.
What advice do you have for these brands that have important supply chain elements in affected areas?
MB: Retailers need real-time visibility to move production quickly out of China and other affected countries. Most factories have hundreds or even thousands of vendors and, in the face of a crisis, teams need to be able to reach out to all these suppliers to make rapid changes, like shifting material sourcing to unaffected areas. If you don’t have a platform to help you intelligently make those decisions immediately, by the time you figure out where and how to move production, the coronavirus will be over. After all, if you can’t make the product in the first place, you certainly won’t be able to sell it.
More broadly, how can footwear and apparel brands position themselves best for the coming months, without knowing what exactly to expect?
MB: Due to the unknown timing of the retail stores reopening, most fashion companies are repositioning their production capacity towards back-to-school and fall assortments. Many fashion retailers are also narrowing their collections to more basic items and colors that have a longer shelf life and broader appeal. If the current situation lasts longer than most analysts estimate, no company wants to invest their capital in products that will be marked down the minute they hit the stores.
What are you forecasting for fashion brands in the next few months?
MB: As Chinese factories return to normal production levels, most fashion companies with global retail locations will redirect distribution back to the regions where the coronavirus situation is diminishing (i.e. China, at this moment). Distribution to other regions will begin growing, even if the demand remains soft, once the stores reopen. The successful fashion companies are using their digital supply chain platforms to apply just-in-time and postponement techniques within all tiers of the supplier network. They have one simple goal: get the right products to the consumers that want to buy them. Fashion companies without resilient supply chains will suffer the consequences; many of them might not be in business six months from now.
If you could recommend one or two steps for brands to take right now, to mitigate the impact of the coronavirus pandemic, what would you suggest?
MB: Brands should immediately implement a digital supply chain to manage disruptions. By implementing a digital solution, retailers can mitigate the impact of the coronavirus in a number of ways. The most important of these include: improving transparency and visibility across the production chain; clarifying global communication and collaboration, through shared workflows and records; improving vendor management and sourcing, as different partners are impacted by COVID-19; and providing omnichannel inventory visibility and fulfillment, as brands adjust to shifting distribution needs.
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