|Du Monde: "The REAL alternative to FUR!"
Traditional Fashion Supply Chain - derailed by Covid
The Department of Labor reported a 12.5% price drop for women's outerwear in 2020 reflecting the
market adjustment of supply and demand!
Selling prices decreased while cost has increased putting ever more pressure on the supply
underscoring the need for non-traditional solutions!
We specialize on fashion faux fur garments for Private Label. All products, fabrics to garment, are
made to order in our Chinese factories.
We control the production and provided the logistics for LDP delivery.
Covid shattered the traditional supply chain model:
Its focus on cost versus flexibility and risk management;
the broken links between demand forecasting and manufacturing;
the established assignment of Risk and Reward;
and decisions made in 'silos'...
Apparel retailing put a high value on price elasticity of demand; ever lower prices would trigger
ever higher demand. The supply chain decision therefore became highly cost focused:
Execute a fixed purchase order quantity at the lowest cost within a set fulfillment time.
Traditional wisdom was that lowest cost was the key to profit maximization.
This generally meant efficiencies of scale (the larger the quantity - the lower the cost) and off
shoring to low labor countries (long lead times).
Retail and consumers came to expect the (ever lower) price points and this in turn re-enforced the
traditional supply chain 'thinking'.
Retail was thrust into a new and unknown territory. Sales channels shifted dramatically. Established
forecasting, merchandising and purchasing systems no longer captured the market situation.
(Covid accelerated this process - it was likely just a matter of time for the problems to arise,
maybe slower and less drastic over a longer period of time.)
We launched "Business as Unusual", a dialogue project with our key customers that reviewed and
aligned decisions and processes. As we controlled the entire supply chain we could quickly and
seamlessly adjust parameters and create decision points:
Anticipated demand (forecast) triggers production decision for quantity, delivery time, and cost.
However, Real Demand reflects realized prices and realized margin for the quantities produced.
Optimizing margin is no longer driven by the lowest cost which is tied to minimum and lead time.
Margin is optimized by building adjustment processes in the supply chain fro quantities and fulfillment
time. The focus shifts from production COST to Risk/Reward management.
The dialogue sparked a cooperation and creativity. Each activity in the process was evaluated for
decision point timing and the cost and quantity variability implications. The demand models were
based on risk portfolios / assumptions.
It is a work in progress.
There are no magic bullets. No single buzz word or approach by itself is the solution.
Applying probabilities and their implication to risk and reward coupled with a deep understanding of
the individual activities and how they relate to overall success of the supply side is mandatory to
capture the purchasing potential of the consumer.
Last but not least, I would like to thank our customers. It was a very difficult year.
The challenges brought out the best in our cooperation!
Du Monde Trading, Inc.