The event was sponsored by Bureau Veritas, Dassault Systemes ENOVIA, MFG.com, Porini and WRAP (Worldwide Responsible Accredited Production).
KSA senior manager Josh Benton set the stage with a review and analysis of Apparel's 3rd Annual Excellence in Global Sourcing Research Study (see the August issue of Apparel or download a copy at www.apparelmag.com), which indicates that focusing on vendor relationships to reduce costs and manage risks is paramount in today's environment. The panelists heartily concurred.
Said Rick Horwitch, vice president, solutions business development & marketing
of Bureau Veritas, Consumer Products Services: "Retailers and brands need to know who they're doing business with and they need to know the cost of quality." Referencing the infamous and massive 2007 toy recall by Mattel Inc., Horwitch stated that Mattel executives cited their complacency in knowing their vendors as their Achilles heel. "They thought they knew who they were doing business with."
Liisa Fiedelholtz, senior vice president, corporate sourcing New York, Ann Taylor, noted: "You have to have non-negotiables in choosing your vendors. We have two: quality and social compliance. We measure constantly against our scorecard, and we award business based on the scorecard and where the trend and need is." She added that Ann Taylor works from short-, mid- and long-range plans with formal updates on a six-week basis.
As with the other panelists, Charming Shoppes' executive vice president of global sourcing, Anthony (Tony) Romano, said the $2.3 billion, 2,000-store specialty retailer is focused on fewer significant vendors, with 20 suppliers representing some 70 percent of volume. (The next 30 percent is represented by approximately 30 vendors.) Romano looks for vendors that can operate in multiple countries across multiple product categories. "We are taking a one- and three-year plan approach, with a 12-month rolling plan - a sourcing strategy is not static; it builds off changes in the world."
Charming Shoppes' continuous vendor evaluation includes a twice-yearly sourcing summit with all of its executives, focused on a top-down and bottom-up SWAT approach that evaluates by each of the retailer's brands, by country and by product category.
Charming Shoppes' sourcing vendor selection "pillars" include, in priority order: (1) continuity of supply; (2) quality that is appropriate for the brand and rewarded at retail; (3) speed and flexibility specific to the circumstances; and (4) cost/value.
"If you put the right balance on pillars one through three," says Romano, "you will be able to drive the right price."
Outerstuff's compliance & sourcing manager Nathan Fleisig agreed that chasing vendors on low price alone is ineffective. "You can't have a cost-grazing point of view," he said.
Fleisig also cautioned against trying to source "from a desk," saying it is imperative to get into the factories two or three times a year. Additionally, he advised seeking out a country infrastructure that includes raw materials and services inclusive of textiles, embroideries, trims and accessories, etc. "When you match up your sewing with this infrastructure you have a recipe for success."
The Right Structure
Fiedelholtz discussed some of the internal changes Ann Taylor has undertaken to improve its sourcing efficiency. Its New York team is now more intently focused on product development and the "ability to describe the brand," while the Hong Kong team is more "vendor focused." The Hong Kong team is charged with "developing the sourcing strategy and building those relationships," she said.
Moreover, Ann Taylor has taken weeks out of its production process in the past six months by having its plants be in charge of more color and fit approval. Another initiative is Ann Taylor's Adopt a Supplier program, wherein everyone from director level up is assigned a vendor and charged with ensuring transparency in communications, sharing news good and bad, etc. "This has helped us succeed in the past year," said Fiedelholtz.
Relative to compliance and quality challenges, Fleisig implored sourcing managers to get themselves involved in design and merchandising. "You need to have a strong say in what goes into the product; you need to be a part of the process and help direct the design and help take out the risk"
Horwitch agreed that clear communication between design and production is key to preventing compliance problems. "It's not about testing," he said. "It's about doing the right thing [initially]." Horwitch pointed to McDonald's as the classic positive example. The fast-food chain turns inventory on its toys for its Happy Meals 52 times a year, putting a tremendous amount of effort and resources into design. "If they can succeed producing one of the biggest risk products out there, you can do it [in apparel]."
Romano addressed Charming Shoppes' experiences in several regions, noting that Bangladesh and Cambodia are "not easy places to work." He said that India has good creative potential, but that price points are a challenge. Vietnam is gaining in importance for the retailer's portfolio. And as for the Western Hemisphere, he commented: "We look and we will continue to look, but we keep struggling with any real opportunity to place work."
The Green Thing
Asked by KSA's Ward how Wal-Mart's push on sustainability would change the public's perception on what retailers should be doing, the panel had this to say:
Horwitch: "This is about efficiency. Wal-Mart came to the conclusion that through sustainability, by focusing on design and factories, by knowing who they're doing business with, by bringing their vendors together closer geographically, they can save money and add to the bottom line. This is a for-profit solution. Their initiative started in transportation (they have the largest trucking fleet in the country) and in one year they saved $100 million in trucking. ... I think Wal-Mart will have a profound effect, and if you are not thinking about sustainability, I believe you will be out of business in the future."
Romano: "We don't feel we're large enough to drive the effort and we struggle to pay the price component, which can be crippling ... but we believe in it; we'd like to see it ... and we'll be fast followers."
Fiedelholtz: "Three of our best factories are the most sustainable. They are the most efficient and they have the sharpest prices."
Susan Nichols is publisher of Apparel.
About Sourcing at MAGIC: Sourcing at MAGIC is North America's largest apparel and fabric sourcing event, drawing thousands of apparel buyers who come to source directly from hundreds of apparel contractors from the top 30 apparel producing regions in the world. It is co-located with MAGIC Marketplace in Las Vegas, NV, and held twice yearly, typically in February and late August and/or early September. To learn more: sourcingatmagic.com. Apparel's Sourcing Summit at MAGIC is an official program of the event. To learn more: [email protected].