The rate of change has never been greater — or faster — for the footwear industry, with new challenges popping up every day in nearly all corners of the business, from navigating cash crunches and supply chain issues to understanding the latest technological advances. In its “Ask An Expert” series, FN asks industry leaders — all solutions-based providers — to take on some of the most timely topics.
Recruiting international production partners has been a popular choice in footwear, due to the affordable manufacturing rates and the large number of established factories already in place. But increasing focus on compliance, standards and sustainability has created challenges when operating across multiple geographies. Oversight and transparency into operations has become critical in order to maintain quality production overseas, which is why many brands are now turning to specialized supply chain solutions.
Kate Alexander, co-founder and VP of Operations at supply chain visibility platform Silq, spoke with FN about the changing factors of international partnership; the impact of greater transparency on brand operations; and what to look for in an oversight solution.
FN: For brands exploring the possibility of using international manufacturing partners, what features should they be weighing up?
Kate Alexander: On the upside, cost is obviously playing a crucial role in the decision. Overseas manufacturing typically gives you access to a much broader selection of raw materials, a wider pool of skilled and often less expensive labor, and the ability to quickly scale up and down capacity as your brand grows, as you expand your collection. And so I think those are typically some of the more attractive elements that the brands see in taking manufacturing international. Then the biggest downsides that the brands often deal with are the extended production times, lead times that are longer; the inability to closely collaborate over new product development and making sure they have really strong control over product quality; and then lastly, often times I think there’s a little bit of a sense of helplessness around being able to effectively control compliance, both product compliance and more recently social compliance.
FN: What are the areas of compliance and oversight in the supply chain that are most challenging to maintain visibility over, that brands should be aware of?
KA: We like to think about clients specifically in two parts. The first is product compliance, which extends from the integrity of the raw materials that go into making that product, to care labels, packaging, safety marks. And it’s obviously crucial for brands to have control over all aspects of product compliance, without which they expose themselves to all the headaches that poor quality products bring, including penalties by government agencies or even the ultimate nightmare scenario: a legal claim from a consumer. Catching issues with product compliance quality early on in the production lifecycle can help brands to avoid really costly delays that come from having to rework orders for just-finished products. This is something we particularly saw in our old life in freight forwarding, the costly delays that come with this. So making sure there’s really clear lines of communication around execution of all of the product details and production milestones is really helpful in catching errors.
The other piece of compliance and what’s important to touch on is social compliance. And that’s also something that can be really tricky to gain control over: making sure everybody that’s involved in your brand is making a living wage and working in dignified conditions. What gets really tricky here is that the loophole many manufacturers have comes in the form of subcontracted manufacturing. Without an apparatus in place to continuously monitor and make sure all of the production is performed at the location that you think it is, compliance is much more difficult to monitor.
FN: Many smaller businesses are reluctant to onboard yet another solution right now. Why might using a supply chain third-party solution be worth the investment?
KA: In today’s social media-saturated market, particularly for smaller brands, your supply chain as a competitive advantage can yield greater benefits than ever before and is particularly important to get right. And in a COVID-challenged world where getting on a plane to oversee quality compliance and on-time performance is not really possible anymore, I think a third party solution is the key differentiator. They can help you create a much more agile supply chain, which more than makes up for their cost in enabling better planning, reduced inventory costs, and lower lost revenue due to manufacturing bottlenecks. For years brands have engaged one-time inspection services but this one-time inspection doesn’t catch a lot of the issues referenced previously, with catching product defects early and ensuring social compliance is there. A customized solution like Silq, that offers a combination of people and technology to help with those local market differences, that works all the way from product development and digitizes every step, is a really comprehensive and meaningful solution that can unlock a lot of benefits.
FN: How can improved factory visibility contribute to a brand’s broader sustainability goals?
KA: When we’re able to give brands this better transparency, they can plan with much greater precision and place smaller, more frequent orders. Unlocking that methodology of being able to order as such has the benefit of reducing waste: You have less product at the end that’s either heavily discounted or just discarded. And this is ultimately a loss for brands, because discounting doesn’t end up with factories – it’s absorbed by the brands. The second piece is that more visibility helps you much further up the supply chain, which results in less rejection at the factory. And then lastly, greater visibility into the factories, processes and facilities can allow brands to make really informed decisions and choose factories to prioritize sustainability and a smaller ecological footprint. And I think that choice is really powerful because as factories see that this is really important to consumers, they’re increasingly making strides to comply with that and prioritize getting certification.
What are the challenges of implementing a new supply chain oversight system, that brands need to pay attention to in order to succeed?
KA: One of the most common issues we see when we’re dealing with factories overseas is bridging the cultural differences and perspectives around what factories consider to be critical defects or delays in the production process, against what our customers consider to be one. And this extends to more than just production delays but also to compliance in other aspects of the production line. We are trying to be the customers’ trusted eyes on the factory floor, we are responsible to report the status on the ground promptly and accurately – but we also have to be a good partner to the factories because the last thing you want is the factories to feel like they’re constantly being scrutinized and put under the microscope. So finding that balance is something that takes a little bit of time and it only comes with trust on both ends.