Preventing out-of stocks, eroded margins and missed opportunities 

A February 6th article in CFO Magazine reported that supply chain disruptions cut about 7% from a firm's share value, based on a recent study. The report, developed by the World Economic Forum and Accenture, is based on analysis of 62 supply chain disruptions from 2005 through 2011.

The findings say that share value starts falling about 10 days before the date the disruption is actually announced. Share prices generally don't start to bounce back until three months after the supply break has been announced.

The takeaway, according the report, is: "The longer it takes to resolve a disruption, the more negative is its impact. Firms need to develop the ability to quickly resolve problems and prevent escalation and worsening of the situation."

In the apparel world, share value is only part of the story. Brands and retailers who work with seasonal merchandise have limited margin for error. The window to sell spring garments at full price is open for just a handful of weeks.

A supply chain disruption that delays incoming seasonal merchandise has an immediate impact on business. The supply chain disruption factor is amplified - beyond shareholders - impacting sales, customer satisfaction, and overall brand identity.

Customers today are demanding, and they expect the items they want to be available anywhere - in-store, online or in-catalogue. They're shopping the aisles with tablets in hand, comparing goods and prices. If they don't see the merchandise or price that fits, they will shop elsewhere. So a misstep that fails to deliver goods has a ripple effect.

Getting back to the key takeaway from the World Economic Forum/Accenture report: Firms need to develop the ability to quickly resolve problems and prevent escalation and worsening of the situation. Apparel brands and retailers with vast supply networks in far-flung corners of the globe face significant challenges. But there's hope and opportunity. Where?

Businesses everywhere are embracing cloud technology. Brands and retailers are finding that cloud-based solutions are a reliable and efficient means for managing the global supply chain.

For example, instead of updating 10 or 20 trading partners regarding changes to the spring line order, a more collaborative approach, using the cloud, allows brands to post their updates in one place, where they are viewable by all relevant and authorised parties.

Connecting the entire supply network in the cloud opens the door to new possibilities for speed, efficiency, savings, visibility and agility. Processes from planning to purchase order, through settlement and delivery can be streamlined better when all parties are connected in the cloud.

How does this mitigate risk and the impact of supply chain delays? Here's a potential scenario:

A brand connects its entire network of manufacturers and trading partners on a cloud-based system to handle orders, production updates, delivery of goods and settlement. Each party interacts and fulfills its transaction obligation in a single cloud-based system.

A supplier receives an order, acknowledges receipt, submits important production updates and packs the goods to the retailer's specifications. The supplier completes the job, and hands the garments off to the logistics provider handling the transport, the next party in the transaction lifecycle.

These events are tracked in the system - and this is easy to enforce if the supplier also gets paid through the same cloud system. The brand's sourcing department is automatically informed in real time of any significant delays anywhere in the goods sourcing process. "Raw materials were shipped 4 days late" triggers a flag. Whether a delay originates in the availability of raw materials, during production or transportation, the brand is instantly alerted.

The brand starts the work day with exception alerts, which require immediate attention. But not only is the nature of the delay identified to the brand, it has also already been routed to the person responsible for handling that type of delay. This ensures the best use of time for everyone involved - and ensures enough time to find the best possible solution to preserve a full margin sale.

The biggest challenge to moving to a scenario such as the one described above is changing the way we think about communicating and collaborating with supply partners. Orders, amendments, work in process tracking, even invoice submission and payment, typically rely on a medley of emails, spreadsheets, phone calls and paper.

They shouldn't. Getting rid of the paper and other disjointed processes is the starting point. Automating these processes within a single cloud based system that becomes a control tower for the entire supply chain is the fundamental shift that can reshape the apparel supply chain.

In the scenario above, the brand is better informed of its orders at each stage in the process. In an automated workflow environment where "rule exceptions" or delays are flagged and escalated to the appropriate parties, there's more time to react. This gives the brand or retailer the best chance to deliver goods on time and maximize profits for the season.

About the Author
Lori Kinser works with retailers and brands to deploy cloud-based solutions for pack & scan, shipment building and work in process (WIP) tracking to extend supply chain visibility. As product manager for TradeCard, she leads the company's development of solutions for factory automation and production visibility. Kinser has more than 20 years of experience helping retailers and brands improve performance through effective use of business process management technology.