CULTURAL SHIFTS SPARK CONVERSATION AROUND TRANSPARENCY, MAXIMIZING RESOURCES & DETERRING LOSES

 

 

Today, everyone is an entrepreneur with an idea that just might be ‘the next big thing.’ You conceptualize your product, form a team, and see the vision start to become a reality. But what most entrepreneurs underestimate is the tenacity and hands-on approach it takes to bring that product to life. A few things are different with this generation compared to the last and it’s sparked a conversation on sourcing, manufacturing, and supply chain as it relates to your brand. We live in a culture of instant gratification driven by the consumer. “We get what we want, when we want it,” and that has certainly been reflected in buying habits. But sometimes even the most robust companies can’t mirror this instant gratification on the production line. How can you take preventative measures?

Today’s consumer is also extremely well educated. Because this generation of buyers cares just as much about what they are buying as whom they are buying from, the supply chain story is becoming a point of conversation as brands decide how to reflect their company’s values in the manufacturing process. “The consumer is king and we have no choice but to redesign our business to please them,” says Glenn Brumage, CEO of Performance Sk8 Group and IASC board of directors veteran. “It doesn’t matter where in the chain you are, this is your primary responsibility.”

Last but not least, we live in a global economy where companies have the ability to source and manufacture from a portfolio of options—comparing everything from quality control to factory lunches—so how can your company maximize global resources in manufacturing to turn profits?

Overall, one thing that still rings true and has, more or less, survived the cultural shift of instant gratification and button-clicking is the necessity for an old-school approach to building business relationships face-to-face.

We sat down with experts in the field to help break down the key areas of the supply chain process, preventative measures, and common misconceptions.

“DOING BUSINESS IN CHINA OR OVERSEAS IS A DELICATE PROCESS THAT REVOLVES AROUND VARYING CULTURAL NORMS AND PRACTICES”.

TRANSPARENCY

Doing business in China or overseas is a delicate process that revolves around varying cultural norms and practices. The more transparent your partnerships are, the better. “China, in particular, bases many business-related decisions around ‘guanxi,’ or relationships,” says Jake Bolling, principal and founder of BOLD Innovation Group, which supports clients like ALEX Bottle. “If you’re able to communicate the clear direction of the company, passion for a product, and willingness to enter into a relationship that spans beyond the walls of the business, the more timely and succinct the outcome of the problem will be when it arises.” The need for constant communication is fundamental, “Establishing transparency throughout the vetting process and into the production runs, with photos, progress updates, and third party testing is helpful,” advises Bolling.

“The biggest thing at the end of the day, when talking QC [quality control] and manufacturing, is the need and the will to do it yourself,” explains Jeff Filkins, Brand President of DVS shoes. “Once you tip the domino, it’s really difficult to tip back…so you have to put yourself in the position to cut problems before they arise.” Creating and maintaining trust is a key element in the production process. Having a reliable person from your company on the manufacturing floor is crucial, and without this, “you just won’t succeed,” says Filkins.

When shopping for factories, come in with clear, actionable company values you can share with your factory. Communicating the right message from design, to production, to commerce is imperative and needs to be consistent. “Carefully interview a potential manufacturing partner and ask for backup documentation in areas that the pre-established criteria falls under,” explains Bolling. For example, if sustainability and transparent labor laws are the backbone of your message to the customer, you need to be able to prove your factory and suppliers are supporting this. Proper certification helps. For example, finding a factory that has an international standard for sustainability would most likely have ISO 14001 certifications.

PARTNERSHIPS & PREVENTATIVE MEASURES

Manufacturing overseas is a humbling process, and it’s smart to maintain a portfolio of partnerships with factories in the same area in the off chance something goes amiss. Basically, don’t put all your eggs in one basket.

“Partnerships with other suppliers and factories are huge just in case something becomes insolvent,” says Filkins. “At DVS, our director of footwear is constantly developing networks, partnerships, and looking at additional sourcing opportunities. It’s just what you have to do.”

In June of this year, Vans announced they would not be delivering snowboarding boots for Winter 2014/15 after experiencing an unexpected snag with one of their suppliers. “It really was a shock to the system,” explained President Kevin Bailey in an interview with TransWorld Business in June 2014. “We scrambled to find alternatives and considered a couple options with potential factories that could potentially get up to speed, but ultimately no one could meet two important criteria: one, quality, and two, speed.” The incident was a sobering reminder to the industry. Regardless of breadth and experience, especially in this case for Vans—one of the most dedicated and longest-standing companies in action sports— manufacturing can hinder anyone at any time. The solution for Vans in the Fall ’15 line came down to diversification in manufacturing, and ultimately, “to not be so dependent on a specific factory,” says Bailey.

For ALEX Bottle, the need for a procurement firm like BOLD Innovation Group was vital.

“If you’re not an expert in this field then my biggest recommendation is to hire someone that is,” says Chris Hotell, CEO of ALEX Bottle. “Work with a team that has sourced similar products to yours in the region where you’re going to manufacture and ideally speaks the language.”

Hotell looks at the cost of using a sourcing team as insurance because they ultimately are the ones who will make sure issues get resolved in the most positive way possible. With smaller companies, the costs for setbacks can be insurmountable, and in the worst cases can either kill a company or force them to completely start over. According to Bolling, these setbacks can range anywhere from “$10,000 to $100,000, or more in cases where product complexity requires a great deal of equipment to complete the production.”

Ultimately, mistakes are inevitable, but controlling the margin of error goes back to transparency in communication, establishing a clear criterion for production with a potential manufacturer, and sticking to a firm schedule. Pick a factory that aligns with your values and standards of quality, has partnered with premium products in the past, and ultimately is affordable. Most would agree that visiting the factory before signing contracts is crucial in demonstrating your commitment to the product, and thereby, to the factory producing the product.

MADE IN USA?

Despite the success of doing business overseas, the budding question still looms: “Why not made in America?” The consumer is better educated than ever before on products, sustainability, labor laws, and quality, and brands are forced to address this in all areas of their business. “Made in the USA” is certainly a marketable footnote, but US factories might not be able to meet production requirements, let alone at a price the consumer is willing to pay. “As a US company, we started by talking to over 60 US-based factories and heard everything from ‘We don’t make stainless steel bottles’ to ‘This bottle is too complex for us’ or ‘We can’t even make it for what you sell it for,” says Hotell.

But it all depends on your product, and some brands can justify domestic manufacturing. Freenote, a boutique denim brand that has gained significant traction since its launch in 2013, notes “Made in the USA” as a part of the brand’s DNA. Freenote attributes the quality of their apparel to domestic production, offering the brand full creative control and versatility over the collection. In what some would argue is a saturated market, the brand has used domestic manufacturing as a means of differentiation.

Reducing issues with intellectual property, regulating compliance risks, and lowering travel dollars are other elements to deliberate when moving manufacturing to the US. But more and more, we’re seeing parent companies providing future options for US manufacturing. Elan Polo, DVS’s minority shareholder, opened a factory in Georgia that, once fully operational, hopes to produce 250 full-time jobs and 20,000 shoes per day. Factories like this are supported by a 2013 initiative created by the US Secretary of Commerce and Walmart. The superstore committed to purchasing an additional $50 billion in US-made products over the next 10 years. Although the majority of our industry’s products will never touch the shelves at Walmart, it’s a sign that mass manufacturing in the US could become easier in years to come.

Like anything, the supply chain story is ever evolving. Brumage urges the question for brands: “Am I better off designing in a way that allows for smaller runs made closer to my customer? Should I build skate shoes and decks in Brazil for Brazil? Should I make snowboards in the US for the US? Will this allow me to make less with shorter lead times and more customization for the consumer?” Maybe today’s market calls for evaluating logistics and manufacturing from a more nimble and globally intelligent perspective–much like that of our consumer. The question lies in the hands of you, the brand. How will you choose to evolve?

 

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