AAFA Panel: Supply Chain Must Change

AAFA Panel: Supply Chain Must Change
A freight ship in China.

The future of the supply chain may lie in Central America and Africa in the next five to 10 years, said Edwin Keh, former COO and SVP of Wal-Mart Global Procurement, on Thursday at the American Apparel & Footwear Association Annual Executive Summit.

Speaking in his current capacity as lecturer at The Wharton School of the University of Pennsylvania, Keh presented recent research on how dramatic shifts in labor and natural resources, changing trade policies and geo-political challenges will affect sourcing patterns going forward.

Keh acknowledged China is prized for the high skill level of its labor force, logistics infrastructure, political stability, raw material supply chain and foreign investment climate, but he urged executives to look farther afield — especially as China continues to build infrastructure across Africa.

“There is no next China,” declared Keh to a room of about 170 attendees. “The traveling circus [of lowest cost production] stops here. And there’s a five-year window for us to figure out what the long-term supply chain will look like.”

Keh said Southeast Asia represents “a reluctant but optimistic alternative to coastal China.” But, he cautioned, “Vietnam is saturated. If you’re not already there today, you’ve missed the boat.”

In the panel, moderated by AAFA chairman and Li & Fung USA president Rick Darling, Keh added that the supply chain today has been built from east to west for the last 30 years, but must be updated to reflect the reality of the global marketplace and the challenge is in finding the opportunities.

“What we have now is a pipeline. But what we need is intelligence so it becomes a global spider web instead of a pipeline,” he said. “Look at what the big guys, like Li & Fung, are doing. They tend to pull the logistics suppliers along with them because of their size. They have the momentum, and that’s where the industry will go.”

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