The journey made by a Liz Claiborne sweater from a ball of wool in a factory in Guangdong province to a New York shop shelf is a long and complicated one. It can also be costly.
China is home to a fair number of the suppliers from which Liz Claiborne sources products, and like any big name brand in the fashion and apparel industry, it must make good on promises to deliver the right number of products at the right time. Unsurprisingly, it relies on technology to keep tabs on orders as they move through a global supply chain.
“Exchanging business information electronically means we can make changes closer to product delivery,” said Anne Cosini, vice president for customer service and electronic data interchange at Liz Claiborne.
For firms involved in a constant battle to maintain profit margins against rising costs, knowing consignment information in advance can translate into massive savings. Whenever Calvin Klein (CK) issues a purchase order for 10,000 pieces of white underwear, there is always the possibility that the supplier will miss the target. A thousand too many briefs and CK must pay the warehousing costs of holding on to the excess; a thousand too few and it must find a supplier to cover the shortfall, perhaps even flying the cargo in rather than shipping it in order to meet the retailer’s deadline.
The more frequent the orders, the greater the risk – and the earlier CK hears about problems, the cheaper it is to find solutions.
“The supply chain window is getting smaller and smaller,” said Gary So, executive director of Kerry EAS Logistics. “In the past it might have been two or three purchase orders a year but now it’s 20 or 30. As a result, stock visibility is much more important.”
For large-scale sources using proprietary stock-tracking models and smaller players who find it easier to rely on a third-party for software solutions, these early warning systems are becoming ever more sophisticated.
The latest innovation is scan-and-pack. The supplier scans the barcodes on finished products and then uses the information to validate each item in the consignment; a label is produced for each carton with a unique ID; and electronic packing messages are sent to the customer. As soon as the goods are ready to leave the factory, the customer knows exactly what is coming and can plan distribution based on the estimated time of arrival.
“You buy something as a retail customer and FedEx can tell you exactly where that package is,” said Dan Entac, CEO of Tradelink Technologies, which provides scan-and-pack services. “We’ve moved this up to container or carton level.”
He estimates that it costs US$1.00-1.25 to ship a pair of shoes from a supplier in China to a distribution center in the US, stock it and then, when a sales order comes in, ship it out. Given that consignments run to tens of millions of units, considerable savings can be made by shipping shoes directly to the retailer.
Tradelink users include Liz Claiborne, Coach and Timberland but it is firms in places like China – factory owners who supply the US brand names – that actually foot most of the cost for scan-and-pack. One of these is Nameson Group, a Hong Kong-based garment manufacturer with more than 10 factories over the border in Guangdong province.
“Scan-and-pack is our safeguard,” said George Lau, the company’s executive director. “If we can’t guarantee our packing lists are correct then our image suffers in the eyes of the customer.”
Time to diversify
With around 90% of its revenue driven by US-based apparel and footwear brands, Tradelink is keen to target new industries and also localize. The firm’s success so far has been built on helping foreigners move goods out of China, but now it wants to extend its focus to domestic firms that are also sourcing in the China market.
“These suppliers are getting bigger and looking for new markets,” Entac said. “They are going to supply US customers and then go local. Our intention is to piggyback – get our foot in the door with one customer who then asks us to work with others.”