The revolutions in the global supply chain are affecting brands and marketers.
“One thing that people don’t really talk about or understand is that logistics is an important part of the customer experience and that it is an important part of marketing today. Everything that is marketed today is much more 1: 1, much more. Informed. , People everywhere want an emotion like that of the Amazon.
The words do not come from a marketer, but from a leader in the aviation supply chain and logistics, Erik Mumford, co-founder of REFASHIOND OS, systems development, research, and strategic consulting at REFASHIOND Ventures, which focuses on supply innovation jail. . With Mumford, complemented by written contributions from co-founders Lisa Morales and Brian Laung Aoaeh, we strive to understand the global logistics changes accelerated by COVID-19 and what it means for brands.
Macro trends in the face
“There are clearly macro trends that you will find, such as recovery, the Chinese approach, and reducing dependence on China,” said Mumford (‘innovation’ is the practice of completely identifying a supply chain). “Our entire business is focused on localization. This is what we mean by localized manufacturing, manufacturing centers driven by geographic demand, and this is something that we are trying to orchestrate and acquire before COVID is successful.” In light of the pandemic, Mumford’s activities focused on supporting things like the personal protective equipment supply chain and addressing the many additional frauds, risks, and benefits that the pandemic brings.
As with changes in consumer habits, digital transformation, and many other important things for brands, COVID was not an instigator, but a major accelerator of existing trends. “For COVID, it’s more than just sustainability, being green, buying more ethically, forced labor, transparency – things like that,” said Mumford. ‘Not only that, but also a change faster than we expected, away from traditional models in the world and more in the United States, and close to the rigidity and greater resilience of our supply chains.
“In a slower sales environment, releasing costs and inefficiency is no longer a luxury, it is clearly a fundamental need,”.
Will the supply chain withdraw from China?
One thing COVID realized is the questionable confidence in the global supply chain from remote and potentially hostile sources. Some take China as an example, but the solution – if necessary – is probably not an easy one.
“It’s a complicated subject,”. ‘Yes, China was the center of the global production chain. Due to the trade wars between China and the USA, many companies are thinking about their manufacturing operations in China, but it is not so easy to uproot and move to a new place because many types of tangible and intangible infrastructure are being developed. Production. from China. Therefore, China will remain an extremely important part of world production for the foreseeable future, explained Aeoh, although Vietnam, India, Mexico, and other emerging markets are potential competitors.
Mumford points to some specific problems. The US pharmaceutical supply chain is largely rooted in Chinese manufacturing. About 90% of our antibiotics, vitamins, and other basic medicines come from China, he explained. “This creates an incredible national security problem, especially when we have a crisis like COVID.” He also cites China’s ability, due to the central position of the production chain, to force countries with high food insecurity, such as Argentina, to continue exporting food to China. “We are going to take some logical things home,” he said. Brands should also consider alternatives to China that are more politically aligned with the United States, such as India.
A hybrid of local and global
“Not everything goes home,” he agrees. “There will be hybrid models of localized and demand-driven supply chains, and their traditional global model, working in parallel.” Changes to the traditional model have obvious disadvantages, such as increasing poverty in communities that depend on participation in the supply chain. “On the other hand, there is how much work we are going to create here and how much we will increase our national security and resilience and eliminate waste, pollution, and the impact on the planet.”
The traditional global supply chain has its historical roots in cheaper labor, higher profit margins, and the need to meet the insatiable demand of the American consumer, in addition to the perception that a multinational enterprise deserves. “We are again seeing a normalization of supply and demand. I think there will be some harmonization of the local and global model,” Mumford said, although ‘that component of greed still exists.’
The impact on brands at the beginning of the holiday
In a recent interview with MarTech Today, Taylor Schreiner of Adobe notes the trend among retailers to extend the Christmas season: strict. Mumford stressed how big this concern could be.
‘You need to be transparent and control everything from start to finish, not just your digital touchpoints. People want to know where your product is, when it’s located, where it’s coming from, all these things – and these things are coming up more and more. “The big brands are taking unprecedented steps,” Mumford said. Companies like Walmart and Amazon buy additional cargo planes to meet the unknown demand curve that arises during the holiday season. They are blocking these extra planes, taking them out of their luggage and now we are seeing the struggle to mimic passenger jets on cargo planes because they are underutilized on the passenger side.
As for alternatives to air travel, “we will see at least a few months of real volatility and an increase in transportation – we are seeing volatility in transportation costs, as opposed to what we have seen for decades”.
From the supply chain to the supply chain
Another critical change associated with the pandemic is the shift to demand-based production; a supply chain instead of the traditional supply chain. Mumford recently bought cotton pants. ‘When I see different websites and remember it for the first time, I see websites where you order clothes like before. This is a direct result of COVID. The same can be seen on food websites that offer a future date for sending your order – the food will be canceled during the order.
It’s part of a rapid shift to smaller production, not overproduction: ‘Major brands like H&M, which produced about $ 4.5 billion in inventory last year,’ Mumford said. “This is a lot of nonsense. The demand for dealers is everywhere and now it is also reflected in the logistics.”
Morales gave an example of the fashion space. Gerber Technology has already implemented a micro-factory of less than 1,200 square feet in its Hudson Yards office in New York. With this micro-factory, the customer can measure, draw, design clothes, print, dry, cut, and sew in less than one hour. The ability to sell exactly what the consumer wants to buy with a personal subscription surpasses endless operations with billions of dollars in dead shares.
Looking for silver linings
Can more sustainable and ethical supply chains emerge from this global revolution? “Yes,”, “but the public must demand that companies pursue it as a central strategic priority and push politicians to pass laws that make it essential for business.”
Morales agrees: ‘Globalization has created supply chains consisting of billions of layers with low and low coverage. The global scarcity of PBT highlights the need to know not only suppliers but also the need for real, unchanging data to confirm manufacturing standards, materials, laboratory tests, and certificates. The lack of transparency has led to billions of dollars, if not trillions, being paid for useless or fraudulent products. “Localized supply chains are inherently more sustainable”.