Blog | Industry News
Mitigating Supply Chain Risks
By: Team Backbone | Dec 1st, 2021
At a Glance:
Back in April of 2020, we shared an instructional, step-by-step blog to help Backbone users prepare for supply chain disruptions as the COVID-19 pandemic ravaged industries across the globe. Today, fashion, apparel, and other consumer goods brands face a new supply chain crisis as a backlog of cargo ships continue to idle the waters of California’s southern coast, overwhelming the state’s largest ports in Los Angeles and Long Beach.
The latest supply chain woes are not limited to the fashion industry, as accessories, appliances, home goods, electronics, and furniture brands are all greatly affected in different ways. Backbone’s design and product development platform won’t solve every challenge faced by this unwavering supply chain battle, but our team is prepared to open all lines of communication to help our customers mitigate the newest risks and continue toward an efficient, well-organized manufacturing process.
Related Article: Planning for Supply Chain Disruptions
Supply Chain Overview
At Backbone, we are fortunate to work with an array of industry leaders and developing brands throughout the consumer goods industry. While business specifics and development tactics are all handled differently from brand to brand, our customers share common themes and frustrations regarding supply chain risks and the ability to source product materials from abroad. Global sourcing and manufacturing can improve supply chain capacity and cost reduction benefits; however, this does not come without unique challenges, including:
- Adverse weather events
- Tariffs or other regulatory changes
- Transportation delays caused by geo-political events, oil prices, or shipping capacity
- Third-party delays (logistics, financial services, customer support, etc.)
- Unplanned IT or telecom outages
- Medical disruptions
As a cautious reminder, this trend of supply chain disruptions will continue to evolve. Yesterday’s struggle dealt with tariffs and COVID, and today, it’s backlogged cargo ships. Brands should come to expect the unexpected and prepare for what’s in store tomorrow.
The Current Supply Chain Risk
As we mentioned above, there are hundreds of ships waiting to unload containers along the ports of Southern California, impacting every stage of the supply chain. This bottleneck is expected to continue well into 2022 as the demand for imported consumer goods has led to major product shortages and increased costs throughout various consumer industries. Beyond the goods shortage, there is already a tremendous decrease in truck drivers, rail operators, warehouse workers, retail staff, and other employees working the back end of the supply chain.
This global supply chain issue has been enhanced by the pandemic, during which many consumer brands surprisingly saw increased sales amid staff shortages, limited inventory, and reduced transportation hubs. However, the pendulum began to swing tremendously by June of this year as inventory became a much larger problem. Data tracked by Adobe Analytics and reported by CNN Business states online consumer goods were listed as “out of stock” at an increase of 172 percent compared to January of 2020. And where are these “out of stock” goods? A great deal of them are still stuck between the ports of Los Angeles and Long Beach, where Goldman Sachs estimates there is roughly $24 billion in goods waiting to offload.
According to data from the Guardian, the Los Angeles port has seen a 26 percent increase in cargo compared to 2020, with 10 million containers processed in a 12-month span. The Long Beach port expects to process more than 9 million containers by the end of this year, the most the port has seen in its 110-year existence. What’s more, these two locations combined, move 40 percent of container imports for the entire United States.
This increase in cargo doesn’t just impact consumers; it also impacts the environment. A logjam of this magnitude means ships are constantly spilling out diesel-fueled smog, fumes, and other harmful pollutants. According to the South Coast Air Quality Management District (SCAQMD), ports are responsible for 100 tons of smog during normal shipping periods, which equates to more daily emissions than 6 million cars combined. The influx of ships that continue to arrive and remain inactive are rapidly polluting the air and increasing the level of cancer-causing contaminants for millions of residents.
Related Webinar: Mitigating Risks in your Supply Chain
What Does This Mean for the Fashion Industry?
The chronic shipping delays and port overflow indicate a post-pandemic shift in shopping habits for U.S. consumers. Historically, people spend more money on travel or at restaurants, but since March of 2020, there has been an uptick in consumer goods, such as clothing, furniture, and electronics, all of which travel from Asia into the ports of Southern California. As ships remain gridlocked with millions of tons of cargo, this contributes to long-lasting inflation with the potential to hinder corporate profits.
These shipping delays also create a much broader issue outside of California. The longer the loaded ships are stuck, the longer it takes to pass through U.S. ports into other regions. Fashion and apparel brands may experience a shortage of materials and be forced to temporarily reduce inventory, while labor shortages overseas can prevent orders from being fulfilled and slow the process of inputting return orders, causing a chain reaction of costly shipping delays.
As we enter the holiday season and inch closer to Chinese New year, your brand may already be on top of deadlines and manufacturing needs, but if your team is looking to mitigate supply chain risks and take back control of your product development process, then Backbone PLM is worth a look.
A Catalyst for Change
A cloud-based solution like Backbone streamlines product data into one single system of record, allowing teams to quickly run reports, provide feedback, make real-time changes, and assess any potential risks regarding sourcing, logistics, or manufacturing. Backbone’s interconnected product libraries and dynamic user interface save time in the sampling and revision process because all color swatches, fit samples, lab dips, and size specs are easy to access and organize.
When your development teams can effectively communicate with suppliers, it’s easier to track requests, timelines, materials costs, and shipping or arrival times. The items included in your tech pack allow internal teams and vendors to manage and consolidate sample data across different styles, SKUs, and seasons, while ensuring product specs, components, and the Bill of Materials (BOMs) are all accurate.
Given the magnitude of supply chain restrictions over the past decade, it’s fair to say this won’t be the last. The goal isn’t to find an answer to the present supplier dilemma, but rather to identify gaps in your current development process and reduce risks that are common to all types of product-related disruptions.
Related Article: Managing Sample Development
Analyzing Supply Chain Risks
As you examine your brand’s current development cycle and the potential risks involved, there are five main factors to consider.
1. Understanding data: Centralize your data across systems like Backbone PLM to better understand your products, components, raw materials, associated suppliers, existing inventory, and future needs.
2. Digitizing your process: Digitization and a cloud-based system is the core enabler to improve end-to-end supply processes.
3. Worst case scenario planning: Conduct a risk assessment to identify a roll-up of challenges across your list of current manufactures.
4. Supplier diversification: Create tech packs within Backbone to provide product details to new suppliers quickly and efficiently.
5. Remaining resourceful: Don’t be afraid to rely on patterns or competitors — we are all stronger if we work together.
Examining design and development needs in conjunction with supply risks isn’t only about data, it’s also about taking a holistic look at your brand’s approach and the conditions that allow you to make products at scale. Preparing for supply chain disruptions can be daunting, but once you have a system in place to help conceptualize liability and mitigate risks, it prepares your team to diversify unique development processes.
For your brand to maintain organization during a major supply crisis, it’s imperative to establish a digital workflow (which is easier than you think). Once your team consolidates component records into Backbone, you can start creating BOM templates and tech packs in a day or two. Create unique templates based on carryover products and include black and white renderings, colorups, size specs, baseline materials, and any details needed to create a product skeleton you can send to suppliers. A streamlined system used to transmit information from factory A to factory B is not a nice-to-have, it’s a must-have.
Related Article: Backbone Leads in High Adoption
Be Prepared to Pivot
During trying times, Backbone allows organizations to remain agile and pivot at a moment’s notice. It’s necessary for small-to-medium businesses (SMB) to diversify their supplier network as the fashion industry continues to evolve. By 2025, it’s estimated that 55 percent of companies aim to source at least half of their products from sustainable materials. If this is the case for your brand, you can utilize Backbone to send a tech pack to suppliers with instructions for specific sourcing for yarn, fabric, trim, and so on.
The core principle of any PLM should focus on designers and developers. Backbone offers these teams a place to house sketches, construction details, tech packs, size specs, and BOMs, to provide greater visibility and access to information company-wide. These items are the main ingredients for your brand’s margins, custom goods sold, return on investment, and everything else you look at downstream.
If you are a younger brand working in your first few seasons, establishing a succinct process is everything. If you aren’t actively filling in gaps in your process, you’re likely to fall behind. Identify areas where you can turn product over quicker and make note of inventory positioning. Knowing which products and materials are available allows you to make smarter decisions backed by data. If necessary, start by consolidating silhouettes and fabrications to limit future supply chain risks — sometimes less is more.
Creating a process isn’t about following a rigid calendar, it’s about creating a workflow where there wasn’t one before. Once your brand gets through the heavy lifting and starts saving time in the development cycle, your business will begin to grow. And don’t be afraid of technology — think of it as your friend and use it to remain competitive. There is a human factor and human connection to the fashion industry, and helping your fellow peers can go a long way. Times are different and the industry is growing, but fortunately, brands are more willing to share factory information and face this battle together.
Related Article: How to Choose Your First PLM
Supply Chain Tips & Tricks
As your brand continues to adapt through these uncertain supply chain delays, don’t lose sight of your current development process. These helpful tips and tricks will allow your brand to remain resilient and nimble:
1. Tailor your collection based on secured materials and revise designs based on what is feasible for the manufacturer.
2. Submit fabric and sample requests as early as possible. Request color swatches and development samples before placing a bulk production order.
3. Limit fabric choices to assist with cost savings, consumption, and complexity. If you discover a flaw, it’s easier to work with the supplier to find an alternative.
4. Don’t forget to factor in time for production and shipping. Do your best to ensure deliveries remain on schedule to avoid costly mistakes, and communicate proactively with customers if unexpected delays occur. In today’s unpredictable world, a little honesty goes a long way to maintain customer loyalty and foster understanding.
Supply Chain Recap
As we round out our supply chain guide, let’s briefly recap the main talking points from the paragraphs above.
Centralized data: Having a centralized system of record is pivotal to keep track of progress during the production cycle and reconcile any issues or orders that have not been received. Remember, product data should be organized and easily accessible for all vendors.
Planning ahead: While you can’t operate a business on a worst-case scenario basis, it helps to have a clear view of it. Once you have supplier lists and aggregated materials, don’t be afraid to ask what the low, mid, and high-level projected losses could be (if any). Maintaining a frame of reference will help your team put together a strategic plan to minimize losses and mitigate risks for future supply disruptions.
Diversifying suppliers: Finding replacement suppliers can be a challenge, but this will help insulate your brand from future supply chain challenges. Allocating goods to a single factory or country of origin increases the risk involved, so familiarize yourself with other suppliers that will diversify your network and prepare your company for eventual supply chain hiccups. For example, Brazil is known for leather and latex, Canada produces wools and furs, and Cambodia is home to cotton and silk.
Reducing errors: Fashion and apparel brands need to process orders correctly, so having a seamless design and product development solution ensures all tech packs shared with new suppliers are accurate and well-detailed. A centralized system of product records helps teams communicate changes to suppliers and ensure real-time visibility — inevitably shortening time to market with fewer samples needed.
Your Supply Chain Solution
Supply chain disruptions are a challenge for the entire fashion industry, but Backbone is set up to help businesses combat these issues and improve workflows along the way. At Backbone, we believe in supporting the entire ecosystem of our industry, while helping designers and developers enter a successful production cycle and improved manufacturing processes.
As your brand continues to research best practices to mitigate supply chain risks, Backbone empowers brands to operate at digital speed and develop products smarter, faster, and at scale. Refer to our case studies, blogs, and customer reviews to learn more about the benefits of a PLM tool.
Want to find out more? Click on the link below to check out our webinar, Mitigating Risks in the Supply Chain.