Video Discussion: How Companies Are Overhauling Supply Chains to Ease Bottlenecks?

WSJ, January 2022

Discussion questions:

  1. According to the video, how has the supply chain for apparel and footwear changed over the past decade?
  2. What are the pros and cons of moving from a global supply chain to a regional one for fashion companies?
  3. For fashion companies interested in “near-shoring” and “re-shoring”, what factors should they consider? Why?
  4. Anything else you find interesting/intriguing/thought-provoking/debatable in the video? Why?

Note: Everyone is welcome to join our online discussion. For students in FASH455, please address at least two questions. Please mention the question number # (no need to repeat the question) in your comment.

Author: Sheng Lu

Professor @ University of Delaware

16 thoughts on “Video Discussion: How Companies Are Overhauling Supply Chains to Ease Bottlenecks?”

  1. Great thoughts! I have some slightly different views, for consideration only. My studies show that fashion companies overall treat “near-shoring” and “onshoring” as part of their sourcing diversification strategy. In other words, it is not the case that companies are permanently cutting sourcing from Asia. Instead, they want to avoid putting all eggs in one basket. Notably, despite COVID-19, Asian countries’ market share remain pretty stable in the US apparel import market:
    Also, sourcing needs to strike a balance of many factors. Whereas speed to market and supply chain risks matter, it doesn’t mean companies can easily ignore factors like production cost and flexibility & agility. Considering these factors, often near sourcing or onshoring is not a workable option.
    You may find this article interesting:
    Would love to hear any follow-up thoughts.

  2. #2 One pro of moving from a global supply chain to a regional one for fashion companies is so it can protect their supply chain and bottom line. Another pro is that with regionalization, which is setting up factories in multiple parts of the world so products are supplied to the closest markets, it minimizes risk when it comes to something of a disaster (pandemic, hurricane, etc.). For example, if something happens and a factory needs to close, it only impacts the sales in the one region around it. One con of moving from a global supply chain to a regional one is that it is expensive and has risks with the move.
    #3 For fashion companies interested in “near-shoring” and “re-shoring”, factors should they consider would be the risks of making this decision and how much money it will cost for fashion companies to do either. For background, near-shoring is pulling production from a factory located far away and moving to a closer factory where the products are distributed and sold and re-shoring is when a company who moved their factory overseas want it back to the country where it was originally located. These decisions will be made by fashion companies who have experienced trouble getting their products back and forth overseas. They should heavily considered these options as they come with an expensive risk factor. It would be about $1 trillion dollars just to move manufacturing out of China over a 5 year span. Some companies might not have enough to do this, but even if they did, would it be worth it to them? The product would also increase in cost with this move/decision, and do companies want to do this to their product / their consumers? Overall, they need to figure out if it would hurt their company and business or not.

  3. 2# Pros: I think one of the main benefits for fashion apparel companies to move from global supply chain to regional one is the shorter lead time for order delivery. Due to the pandemic, the shipping time and costs are increasing. As for those companies who source and mauncatue from other countries far away from themselves, they often need to wait for several months to receive the orders. Moving to a regional sourcing base would be helpful to solve the problem. Otherwise, there are some regional free trade agreements that can benefit companies who source from the near regions such as RCEP, Nafta or Cafta-dr. In this sense, if the apparel companies source the materials and manufacture in the FTA members, they won’t pay the tariff, which would lower the production cost for apparel manufacturing.
    Cons: Sometimes if fashion brand companies choose to source from global supply chains, it would get more access to the raw materials including yarns and fabric they want. Because they are able to source anywhere. And globalization allows countries to focus on protruding the goods that they have the comparative advantages to produce. In this sense, the production cost might be lower.
    3# As for the near-shoring and re-shoring, there are some factors that fashion companies need to consider. Firstly, the change of supply chain and sourcing base might be time consuming and costly, especially for some family-owned small businesses. They probably won’t have the capability and enough money to keep finding new suppliers. Meanwhile, the production cost and labor cost would be higher in terms of near-shoring. Also, fashion companies need to consider the capability of textile or apparel manufacturing in near-shoring countries. For example, the US is a developed country who would be good at producing capital and technology intensive products. If a US fashion company wants to do re-shoring domestically in the US, they need to consider if it is worth it to manufacture garments in the US rather than other developing countries who are good at making labor intensive apparel goods.

  4. 1. In the past, materials needed to assemble and produce different items sold by retailers were all sent to one main factory and the item was then assembled there when all the items arrived. After the item fails, it is sent to the country where it is sold into a mass distribution center. The retailer that owns the distribution center then sends the item to retail locations for these stores to stock the item for consumers to buy.

    2. One pro is that these regional retailers know that the items will have less shipping time and can be reviewed by stores and distributors much faster. There is also a lessened chance of issues with receiving items as they are all on the same land area rather than oceans away. I think that a con would be seeing a huge decrease in the textile and apparel sectors where these items are currently produced. It would be a huge hit to the economies within these countries and I do not know what financial state they would be left with.

    3. In terms of re-shoring and near-shoring, I believe that near-shoring would be best in certain situations. If the production was moved due to costs, then re-shoring would be preferred as the wait times and uncertainty of shipping is now costing companies even more than high labor costs. If it was due to worker treatment and unsafe conditions, the near-shoring would be a better choice.

  5. 2. Pros and cons of moving global supply chains to a regional one balance each other quite well, reason being why this is such a perplexing decision for fashion companies. On one hand, it would be nice to move to a regional supply so that there is more control and better oversight, lessening the probability of errors and delays. On the other hand, so move and reconfigure all of these operations can be a very expensive process and could get even pricier depending on the availability of resources regionally compared to resources overseas in the global supply chain. For fashion companies to make the best choice for their business model, they must compare the cost benefits to see what works better with what the company values.
    4. One strategy I found interesting that could help retailers combat ongoing disruptions in their supply chains is implementing regionalization. A business model that localizes production to minimize the risk of an issue in one area affecting supplies globally. Rather, a closed factory in an area that is regionalized will only cause setback in nearby stores. What is curious here is although the idea is similar to nearshoring, it still utilizes globalization rather than be limiting domestically. This sounds like a better deal to me, what do you think? Why is nearshoring a more popular solution?

  6. I answered the first and last questions! As a result of the COVID pandemic’s large backlogs and shortages, some enterprises are hoarding products and chartering private container ships in order to keep up with demand. However, these are just short-term remedies. Some firms are seeking long-term solutions, such as retooling their global supply chains and moving production closer to home, but these plans might require a complex web of global production to be retooled, possibly introducing additional risks and costs. In recent years, supply networks have grown more international. Disruption has the ability to occur at any point along the line, whether in manufacture, transportation, or in the distribution process once it arrives. Disruptions have recently resulted in lengthy delays and, as a result, an increase in the price of numerous commodities. Because of this, several businesses are considering other techniques for safeguarding their supply chains. Regionalization is a topic of discussion in company boardrooms. It is necessary to build up factories all over the globe in order to be able to offer items to the markets that are nearest to each location. The goal is to reduce risk. It’s fascinating to me that if a corporation is regionalized, a shuttered facility in one area has little effect on sales in surrounding regions.

  7. #1 Over the past decade the supply chain for apparel and footwear has gotten increasingly complex and global. Currently products are made up of pieces that are produced in multiple countries. For example, a shoe is made up of multiple parts, shoelace, hardwear, fabric, soles, etc., and each component is produced in a different country. Then all of these pieces are sent to one factory to be assembled.
    #2 One pro of regionalization for fashion companies is shorter lead times. If a factory is only shipping products to stores in its region, it will naturally take less time to make it to stores than if it was being shipped from a country far away. Additionally, if something were to happen to a factory, production issues, delays, etc, only the stores in its region would be affected as opposed to all stores. These pros are especially beneficial right now where there is a serious issue with supply-chain backups and factories are still randomly shutting down due to Covid outbreaks. A major con however for fashion companies if they decide to regionalize is the cost. It can be very expensive to move production out of China and into countries that are closer to the market. Many small businesses can’t afford it and many larger businesses don’t want to spend that much money if what they are doing now is working well enough. Another con could be the effect of moving factories out of a country on our diplomatic relationships. For example, if companies decide to move production out of China due to adopting regionalization practices, they could be less likely to entertain discussions on trade agreements and policy changes in the future.

  8. 1. Lately, the supply chain for apparel and footwear has become increasingly difficult with disruptions and delays due to the pandemic. Since these disruptions and delays are driving up the cost of some products, companies have been looking to source from factories closer to them. Although this seems like a good idea, it makes the whole supply chain process more complex since different components of a product are sourced from different parts of the world and then assembled in a different location.
    3. Nearshoring is the process of pulling production that had been moved away overseas back to a country closer to where products are distributed and sold. On the other hand, re-shoring is the process of a company moving manufacturing back to the country it was originally located after manufacturing was previously overseas. Although companies may believe this is a good idea to avoid disruptions in the supply chain, it still comes with several risks. These risks include the expenses of moving a supply chain which can lead to the increased cost of products, especially for smaller companies that might not have the budget to move domestically. Near-shoring and re-shoring can also take years since they are moving whole supply chains across the world. It is important for companies to consider these risks to weigh the risks and benefits of moving a whole supply chain rather than facing the hardships that the pandemic brought to the supply chain.

  9. 2. One of the primary advantages of shifting from a global to a regional supply chain for fashion apparel companies is a shortened lead time for order delivery. Shipping times and costs are growing as a result of the pandemic. Companies that source and manufacture in other nations far away from their own often have to wait for months to receive orders. To solve the problem, shifting to a regional sourcing base would’ve been beneficial. Otherwise, regional free trade agreements such as RCEP, Nafta, or Cafta-dr can benefit companies that source from nearby regions. In this sense, if apparel companies source materials and start manufacturing in FTA members, they will avoid paying tariffs, lowering the cost of production of garment production. A disadvantage is that if fashion brand businesses choose to source from global supply chains, they may have greater access to the raw materials they require, such as yarns and fabric. Because they can source from anywhere. And globalization enables countries to concentrate on promoting the goods over which they have a comparative advantage. In this sense, the cost of production may be lower.
    3. There have been some variables that fashion companies must understand when near-shoring and re-shoring. To begin, changing the supply chain and sourcing base may be time-consuming and costly, particularly for some family-owned small businesses. They are unlikely to have the capability or the funds to continue looking for new suppliers. Meanwhile, near-shoring would result in higher production and labor costs. In addition, fashion firms must consider the capability of textile or apparel increasing production in closer countries. For example, the United States is a developed country that excels at producing capital- and technology-intensive goods.

  10. 1. The supply chain has changed in many ways over the past decade. It is increasingly global, potential for disruption, during production or transportation or distribution. A lot of the supply chain will take place in different parents of the world, then will be transported to a different part to complete the rest of the production process then will be shipped out to different distribution places like retailers. Over the past decade there is an increase of cost of the supply chain overall, from freight costs to oversea costs.
    2. I think there is a lot of pros of moving global supply chain to regional one because of the connivence of having a regional supply chain. By having the supply chain closer to the fashion companies, it would allow the company to have better oversight and control over the supply chain. Also, if a disruption in the supply chain occurs again, the production and supply chain will be closer to the fashion company so the supply chain costs would be significantly lower than the global supply chain costs. There is a con that its hard to have a regional supply chain if many resources are from other countries, these resources may be very costly to source closer to the fashion companies.

  11. #1 In the past decade the supply chain for apparel and footwear has become increasingly global. An increasingly global supply chain has risks because there is a chance of disruption at every step. These disruptions cause extensive delays and ultimately lead to increased costs. Within the past few years, especially due to the Covid-19 pandemic, brands and companies are looking towards shifting manufacturing closer to home

    #2 Pros of moving from a global supply chain to a regional one for fashion companies include protecting the supply chain and bottom line, as well as overall minimizing risk. And one of the largest cons it that this is a complex web to disrupt.

    #3 The most important factor that fashion companies interested in “near-shoring” and “re-shoring” must consider is expenses. This is because pulling out of China is difficult due to the ecosystem of manufactures there, it will be costly to rebuild elsewhere. And for small companies, they can’t even afford to make products domestically due to high costs and small consumer markets

  12. 1. The supply chain for footwear and apparel has changed a lot over the past decade. Supply chains have suffered shortages and backlogs. This has caused companies to want to change the way their supply chains operate. Some companies are moving to change the location of their factories through a process called regionalization. This process allows companies to have factories built in the region that their product would be supplied to. This helps to minimize risk and have the products already be present in the country it would be distributed to. Companies are also looking into using the concept of near shoring, so that the production that had originally been overseas, would be moved to the country near where the products are distributed and sold. Another concept some companies have opted for is re-shoring. This is when a company had previously moved production overseas to cut cost, but now wants to move it back to where it was originally being made so it is closer again.
    2. There are pros and cons of moving from a global supply chain to a regional one for fashion companies. The pros of moving to a regional supply chain would be that it would help shortages, get products to consumers faster, and cause less of a carbon footprint because of the reduced need for far transportation. The cons of moving a global supply chain to a regional one are that it would be extremely expensive to transition to regional, it would also be very difficult for smaller companies to do this because it causes products to cost more to make, and it would take years to make the transition.

  13. 1) Over the past decade, the supply chain has changed drastically. Because of how global it has become, there is a high chance of disruption. We have seen a huge increase in costs within the supply chain and frequent delays. Especially recently with the pandemic, we have seen companies and retailers shift their manufacturing and supply chains closer to them to prevent more issues from arising.
    2) I personally think there are more pros than cons for shifting from a global supply chain to a more regional one. To start with the pros, by having a regional supply chain, companies would have a better idea and understanding of what is actually going on within these suppliers. This also means that there can be a lower risk of any disruptions and if there are, production will be closer to these companies so there would be lower supply chain costs. A con would be that other countries have a bigger variety of certain resources that may not be able to be available regionally.

  14. 2. The pros of moving a global supply chain to a regional one for fashion companies would be the decreased threat of disruption that would lead to less issues with meeting customer demands, and in turn saving profits. This is still avoiding the “all your eggs in one basket” risk, while also having enough variety within the supply chain to meet demands. Also, the increase in ow-cost supplies is a major benefit for near-shoring. Cons of a regional supply chain for a fashion company would be the time commitment and loss profit risk existent when making the move closer to home/closer to target markets.
    3. For companies interested in near-shoring and re-shoring, they must consider multiple risk factors that could make them profit if avoided but also cost them much more if hit with them. For example: the risk of not having enough production capacity, not having enough money to set up domestically, risk of increased product price for customers, risking brand loyalty, and willingness to sign onto a undefined time commitment to profit loss until the restructuring is running smoothly.

  15. 1. The supply chain for apparel and footwear has become increasingly complex because of globalization. Different materials for a final product are sourced from so many different countries, and this allows a brand to get the specific materials they want at their desired quality level or price level. However, supply chain disruptions have emerged due to the pandemic, and transportation has become an issue, especially in terms of sea transportation. These supply chain disruptions have caused increasing in freight charges and transportation costs, and products take that much longer to make it to their final destination. This is changing how US fashion brands are planning their products for the upcoming seasons and has resulted in them reevaluating their supply chain in order to do what is best for their company and their consumers.

    3. Nearshoring and re-shoring can create more risks and be more costly than utilizing the full global supply chain. However, this provides a faster lead time and more flexibility to respond to changes in consumer preferences and trends. Nearshoring and re-shoring is becoming more popular for brands, so this could mean that it would become more difficult to find suppliers closer to the US because of competition. This would further increase prices, and these shifts could take years to implement which can hurt their business until it gets properly established. Regionalization can be an effective way to minimize risks and minimize transportation costs, but this is only particularly effective for global brands in ideal locations.

  16. 4. I found the extensive delays and increased costs intriguing. Consumers are paying for these hidden costs. Consumers are just one of the parties affected with the issues within the supply chain. Consumers are sometimes overlooked as an affected party, but if they are a dominating factor in the success of a company, their profits, and their livelihood.

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