Consumer brands and retailers are struggling to cope with the effects of the global coronavirus outbreak. They’re facing both a plunge in sales and interruptions of supply. At the same time, they need to be preparing for a resurgence of demand when the crisis ends, and the economy begins to recover. In this conversation with SupplyChainBrain Editor-in-Chief Bob Bowman, Sue Welch, CEO of retailer software vendor Bamboo Rose, discusses what the industry must do to adjust to uncertain times.
SCB: How have brands and retailers been affected to date by the coronavirus outbreak globally?
Welch: There’s been a lot of confusion, a lot of chaos. They're all trying to figure out how they’re impacted by the virus, which is hitting sales pretty hard, and the long-term impact on their business and supply chains. They’re just trying to dig out and figure out what's going to happen to them. There’s been some encouraging news out of China, which is giving people a glimmer of hope. But at this point, it’s matter of seeing sales hurt. They're looking at stock that's not arriving. They're wondering, do I even want product to arrive —is there a market for it right now?
SCB: Can they diversify sourcing when the virus is everywhere?
Welch: No. It isn't like when we had the trade war. People were already starting to move out of China because they were worried about having such a high concentration of production there. Everybody was scrambling for alternative sources, but here it's everywhere, so it's not like you can move from one geography to another. Those options are cut off, and that's what makes this even more difficult to deal with.
SCB: You noted a possible improvement in the situation in China. Do you see any sign of improvement as it relates to the condition of brands and retailers, or do you expect things to continue to get worse?
Welch: I think they’re going to get a little bit worse, simply because you've got the whole fallout from the disruption. The supply chain has to be put back together again — it’s like a Humpty Dumpty-type of environment. But there is hope. Production appears to be ramping up. It's reaching normal states in some areas of China. A second outbreak, which people were worried about happening once everybody went back to work, hasn't occurred. All of those things are giving people hope, and now they're just trying to get back to business. But it's just so disruptive.
SCB: How must brands and retailers change their relationships with their supplier partners as a result of what they've learned from this crisis?
Welch: First of all, everybody's relearning the word “partner.” In the past, retailers have sometimes had rocky relationships with their vendors, where they play the “beat the vendor.” They can't do that anymore. It is a partnership. We see retailers trying to help their suppliers stay in business, while looking for alternative sources of components. There have been a lot of blank sailings — we don’t have containers positioned in the right places, so some suppliers can't get components. Our retail customers are trying to help them, as opposed to just saying, "Look, it's your issue. Fix it."
SCB: I know you say that there's a need for retailers and brands to “seamlessly collaborate” with their partners. As you know, that’s been one of the biggest buzzwords in supply-chain management for years now. When you talk of the need to collaborate in a way that that hasn't been done before, what are you talking about exactly?
Welch: It's about doing a lot more things virtually, as opposed to having all these face-to-face meetings or telephone calls. Retailers are willing to collaborate on the internet. We’re seeing a lot more willingness to put ideas up in the cloud, to share then with suppliers. They’re not just passing information back and forth, but saying, "Let's do this together."
SCB: Going forward, though, what do they need to be doing, other than just doing it online?
Welch: Here's a perfect example. The way retailers design their products, they go through a rather lengthy process which can last anywhere from 30 days to four or five months. Then they put the design out to the supplier community to bid. That can take three months. Then the supplier might say, "The design won't work because of this" — maybe the fabric won't work with those types of zippers or buttons, or the drape isn't going to be right. The supplier then gives feedback and the retailer redesigns and puts it out again. That process takes a lot of time. It isn't true collaboration; you’re just passing information back and forth. But if the retailer starts to work with the supplier at the very beginning, before it designs the product, the supplier can come in and share its ideas at that stage. And they don't need three months to design anymore. They’re able to get products made faster, at a better price, and at a higher quality. That's what happens when you truly collaborate.
SCB: It seems clear that we’re just at the beginning of what's going to be a pretty severe economic downslide. To the extent it's possible, should brands and retailers be stocking up now in anticipation of recovery, or should they be waiting?
Welch: I'm not a big believer in hoarding or stocking up too much, but I think you have to be wise about taking positions on fabrics and components. Stocking up on finished product is probably not so good, but componentry is definitely an area of opportunity.
SCB: When it comes to logistics, distribution and order fulfillment, how should brands and retailers be preparing to handle the inevitable surge in demand when things return to normal?
Welch: I think with gratitude. It's going to be a slow process back to normal. I think it will happen in ways that people can manage. We'll see more vessels coming on, and fewer blank sailings. Everybody's got to ramp up, and that's going to take time.
SCB: Do you think things will ever return to normal?
Welch: I think there will be a new normal — it won't be what we're used to. In some ways we'll probably become less acquisitive. You can already see people growing much more aware of their surroundings, of what they need as opposed to what they want.
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