Round table Fashion and Luxury industry

Supply Chain challenges caused by demand volatility, labor scarcity and quality of 3PL performance were discussed including various measures to deal with these, at our roundtable in Fashion and Luxury industry.

On Wednesday September 5th we organized and moderated a round table for VP’s in the Fashion and Luxury e-commerce industry. Michael Kors hospitably invited us at their European DC in Venlo and provided a tour in their location for this event.

Participants were enthusiastic about the possibility to connect, share and learn with their peers in their industry. A lot of the issues that they are facing were discussed. The overall sentiment is that the complexity of supply chain management is increasing due to several factors at the moment, as summarized by Pieter de Wit (Partner at BCI), during his opening speech jointly with Tom Bonkenburg (Director European operations at St. Onge), like:

• Higher channel complexity
• Increased service requirements
• Unpredictability and volatility in demand
• Labor market and warehouse-location challenges
• Rapidly increasing cost of logistic and freight

We like to share some further insights we had this evening:

Demand planning and inventory

Carlo Peters (Principal Consultant at BCI) challenged and moderated the discussion of the group: “We see so often unclear responsibilities for inventory within organizations causing challenges, such as too high, and lot of excess and/or obsolete inventory”, he stated. “Because the demand side is so volatile, it is hard to plan and in addition inventories are not being managed efficiently”. The group concluded various measures that can be taken, among other:

• To separate administratively and define clear roles and responsibilities. By separating each owner can be made accountable for his portion of the inventory 
• To introduce allocation algorithms, e.g. based on margin contribution, to make founded decisions and to filter out underbelly feelings of sales departments
• To ensure capability to transfer inventory among channels
• To bypass the DC and ship direct eventually via a x-dock for pre-order and launch.

Labor challenges

“How do you deal with the widely felt scarcity of labor in a competing market and how do you make the jobs more attractive to get the right quantity of blue and white collar labor? Besides the scarcity, there is also the rising costs of labor, which is already high. Inflation, energy crisis, the war with Ukraine, it all adds up”, states Michiel Thobokholt (Senior Consultant at BCI), in the following part of the roundtable discussion.

The group concludes that new labor engagement initiatives are crucial to attract and retain blue as well as white collar labor. Blue collar labor shortage can partially be resolved by automation and robotization, although most technologies are yet to be matured. Semi-automated solutions, such as conveyors and sorting belts are all engineered out and can help solve this problem (partially). Both though, have the most effective performance  in newly build warehouse set-ups. Automating within existing warehouses remains to be challenging. 

Logistics Service Providers are reluctant to heavily invest warehouse automation

LSPs are reluctant to take the risk of investing in automation and want to depreciate within (short) contract terms. To alleviate this problem, companies can consider alternative options of outsourcing, like outsourcing only labor and IT-systems and as brandowner investing in buildings and automation. Such way of outsourcing also eases a potential change of LSP if the LSP is underperforming. “From experience we nowadays see a slightly growing appetite at LSPs to  invest in more generic automation that can cater for more customers instead of investing large sums in tailormade automation”, says Carlo Peters. A promising service trend for the near future is Robotizing As A Service (RAAS), which would definitely take the risk and investing reluctance away for both LSP and brandowner.   

The roundtable was held at the European Distribution Center of Michael Kors in Venlo. Other companies that participated included Acushnet, Asics, Capri Holdings, Crocs, Justbrands, Tapestry, Under Armour, Van de Velde and St.Onge Company.

If you want to be present for the next round table, please contact carlo.peters@bciglobal.com. There will be a virtual event in spring 2023 and another physical event in fall 2023.