New Articles

Embracing a New Normal: Why We Should Never Go Back to a Pre-Covid Supply Chain

supply chain

Embracing a New Normal: Why We Should Never Go Back to a Pre-Covid Supply Chain

For the past decade, global supply chains have been running a seemingly normal path. However, when COVID hit its peak in March 2020, it exposed many of the vulnerabilities that have been affecting these networks. Even a year and a half later, industries across the board are experiencing the impacts of supply chain disruptions. With massive labor shortages and continual shipping delays, there is increasing desperation to return “back to normal.” Instead of quickly returning back to the way things used to be, we should examine the root causes of these issues and create a new model that better aligns with the world we live in today.

Currently, the majority of global supply chains operate on a global warehousing method due to the industry standard of bulk production from a single manufacturer. Typically, bulk orders are routed from one vendor to another distribution center across the globe. While this system can provide some economies of scale, it has also led to wasteful overproduction, increased pollution, inflexible startup costs and major supply chain disruptions.

Industry leaders, brands, and retailers should instead consider incorporating smarter supply chains that uniquely combine technology, data, and manufacturing to automate and optimize the flow of production, procurement, and logistics.

Because consumers can order around the clock, forecasting demand is less predictable, the volume of order sizes lowers, and the number of products offered increases. Coupled with consumer expectations of short delivery times and high customer satisfaction, businesses need to ensure their supply chain requirements can deliver on speed, complexity, and efficiency. A smarter supply chain can meet and even exceed these seemingly impossible expectations.

Smart Supply Chain: On-Demand Manufacturing + Global Production Network

The manufacturing portion of a smart supply chain unites on-demand manufacturing, a process where goods are created only when needed and in the quantities required, with global production, a distributed network that transfers raw materials to production facilities closest to end consumers for final assembly.

On-demand manufacturing and global production are not only more sustainable than traditional manufacturing methods, but they also allow for more flexibility, efficiency, and responsiveness when issues arise such as the current global shortages and delays.

Moving from Global Warehousing to Global Production

Global warehousing, or traditional wholesale manufacturing, relies on storing items until they are ready to be shipped. Many retailers and businesses have historically depended on this method given there were no other reasonable alternatives for decades. Technological advancements have not only paved the way for new more affordable options but have brought to light the many disadvantages of global warehousing including, but not limited to:

-Producing excess inventory

-Inflexible to changing consumer preferences

-Leading to disengaged workforce

-Requiring high start-up cost

The inflexibility and costly nature of global warehousing are two of the major reasons why global supply chains have been struggling to keep up with unprecedented demand.

Use Cases of On-Demand Manufacturing + Global Production

While both on-demand and global production are relatively new processes within the past decade, remnants of each model have been proven across multiple industries.

-The automotive industry embraces a similar just-in-time approach with their parts and assembly. Instead of selling their vehicles at traditional dealerships, Tesla uses stores that are usually found at popular shopping centers. Customers can’t simply drive away with a Tesla either, they can view sample vehicles and then order a customized car online with the help of a sales expert. That level of personalization and detail can only be achieved via an on-demand production model, which Tesla and other European automotive brands successfully utilize.

-Ecommerce businesses that implement a print-on-demand model also only produce items until a customer places an order, eliminating the need for wasteful inventory and costly order minimums. Additionally, this on-demand method helps shrink the supply chain—meaning, the time it takes to produce and ship an item—from 30 and 45 days to between two and three days. Lowering the restock supply chain lead time allows brands to significantly cut down on the initial inventory runs which in turn helps them be more reactive to customer preferences that dictate the winners and the losers within a design, a SKU, a model, or a season.

-Similar to the distributed network in the global production model, Akamai paved the way in the computer network industry by eliminating network hops and putting servers closer to the end-user in order to quickly and more efficiently deliver content. Akamai’s platform has greatly improved Internet latency and exemplifies how a distributed architecture can yield more flexibility and responsiveness. Gooten, a smart supply chain provider, has a parallel approach in the manufacturing space where they utilize a distributed network of global manufacturers to fulfill on-demand orders more efficiently, sustainably, and at a competitive rate. What’s more, Gooten produces 70% of its orders in the U.S. at 23 factories spanning from New Jersey to Oregon.

Embracing a Smarter Supply Chain

With all the benefits that on-demand and global production provide, it’s easy to wonder why more businesses aren’t embracing them. Despite major outlets such as Vogue and Amazon creating buzz around on-demand manufacturing as an answer to many of the supply chain industry’s biggest challenges, it has made headway primarily amongst startups and eCommerce brands. The major impediment for embracing on-demand is primarily due to knowledge gaps and general resistance to change.

Whenever there are revolutionary shifts in any industry, there are always old guards that are comfortable with the existing status quo. One of the more notable examples of this is the film industry shifting from film cinema cameras to digital recording technologies. While the advantages of digital are paramount—from cost savings, ease of use, flexibility, and accessibility—it took over a decade for the industry to fully adopt the method. Hollywood began filming digitally in the 2000s but it wasn’t until 2013 that digitally shot films began the norm amongst the top 100 grossing films.

While they are not mutually exclusive, one can argue that the supply chain disruptions have a far greater impact than the use of digital over film. That’s why it is imperative for companies to embrace the change, even partially, from global warehousing to global production in order to overcome supply chain disruptions and sustain themselves for years to come.

________________________________________________________________

Mark Kapczynski is the Chief Marketing Officer of Gooten, a globally distributed company that operates a smart supply chain for brands and retailers that are looking to utilize print on-demand manufacturing to transform the way they do business.

hybrid

The Future of Sustainable Manufacturing is a Hybrid Approach

If you’re in the retail business, one of your worst nightmares is being stuck with boxes and boxes of unsold inventory taking up space in your warehouse. Wasted stock can be a huge cost to your bottom line and pose serious risks to your business.

For eco-conscious brands, a lot of unsold inventory is also detrimental to the environment, especially if the products are textile-based. Of the more than 100 billion items of clothing produced each year, some 20% go unsold leftovers are usually buried, shredded, or incinerated (Forbes).

Businesses that end up in an overstock situation generally use traditional bulk manufacturing which requires products to be made and then warehoused until they are shipped. While there is a risk of costly unsold inventory, bulk production can also be economically effective if a product is proven to be a best-seller.

On the opposite side of the spectrum sits on-demand manufacturing–a process by which goods are produced only when they are needed and in the quantities required, eliminating the cost and effort of storing and managing inventory. Although on-demand products are not produced at economies of scale, businesses can more easily and quickly test and go to market with new products and designs.

Previously, businesses would need to choose one method or the other but with recent advancements in technology in the past decade, retailers can get the best of both worlds through hybrid manufacturing. An economically and environmentally sustainable solution, a hybrid approach blends the cost-effectiveness of bulk production with the risk-free per-order fulfillment process of on-demand manufacturing.

How Hybrid Works

Before adding any new item to product lines, experts recommend testing them through on-demand manufacturing to ensure viability. An on-demand approach gives retailers the freedom to sell more SKUs and products that they might not think will take off en masse. Once retailers know a product has the potential to move into mass production, the switch can be made. Eventually, when interest wanes and the product becomes more evergreen but to a smaller audience, retailers can realize ongoing value by going back to an on-demand approach.

Having spent a career as the former VP of On-Demand at One Live Media, an eCommerce agency that works in sports, music, and entertainment, I am well versed in fulfilling merch orders for thousands of sports teams and artists including but not limited to the L.A. Lakers, KISS, Willie Nelson, and Zac Brown Band. Before getting stuck with a warehouse full of stuff, my team would run every new product through the on-demand cycle. Most of the brands we worked with fulfilled 25-60% of their orders through on-demand and the rest with mass production. It’s important to find the right mix of on-demand products and bulk inventory in order to optimize sales.

Why Utilize a Hybrid Approach

Adapt to trends quickly without risk. Culture is now manufactured on-demand. In the past, consumer trends were generally set by businesses. However, in the recent decade, the tables have turned and consumers are setting trends on social media. Because buyers are now changing the way we capitalize on culture, it is affecting how brands produce and manufacture products on-demand. With a hybrid approach, brands can quickly mock up a design and add the product to their online store without prepaying for costly order minimums by first using on-demand manufacturing. If the product doesn’t fly off the shelf, then you can simply remove it from your store and not have to worry about piles of unsold inventory. If it proves to be successful, then they can switch the production process to bulk manufacturing.

Improve cash flow. When a business utilizes a blend of on-demand and bulk manufacturing for its products, it can more easily optimize its cash flow. For bulk products, they can get a higher per product profit margin due to economies of scale. For on-demand products, they don’t have to pay for costly inventory or order minimums, freeing up a business’s cash flow. This liquidity allows brands to boost revenue-driving activities such as marketing, which increase sales, and ultimately grows their business.

Shift toward sustainability. Being eco-conscious is no longer a consumer marketing trend, it is a real practice many businesses are implementing in their business model. Because on-demand manufacturing allows companies to produce only what consumers order, it eliminates unnecessary production and harmful waste—saving both the business’s bottom line and the environment.

Be better prepared for economic disruptions. When COVID-19 disrupted supply chains across all industries last year, many retailers were forced to shut down and were left with boxes of unsold inventory. When utilizing on-demand manufacturing in a hybrid approach, it is important to look for a provider that manages a distributed supply chain network. This type of fulfillment process allows on-demand manufacturing providers the ability to carry a large number of product SKUs in more than one facility, therefore orders of that product are able to be fulfilled in multiple locations. That means if one location closes or has an external disruption— they can seamlessly move order fulfillment to another facility.

It has never been easier to embrace a hybrid manufacturing approach. Many retailers can use traditional manufacturing for bulk products that sell all year round in conjunction with on-demand for short-term collaborations and innovative, trending designs. Because on-demand doesn’t require a large amount of startup capital, it is a low-risk method that can lead to high returns. The ease and efficiency of on-demand combined with the cost-effectiveness of traditional manufacturing is truly paving the way for the future of sustainable retail.

_____________________________________________________________

Dale Manning is Head of Market Expansion at Gooten