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Working on the supply-chain gang

Companies focus on moving components quickly

Unionwear, a Newark-based apparel and accessories manufacturer that makes caps and other products for the promotional, fashion and uniform markets, has to keep track of about 5,000 different raw material components, said Mitch Cahn, president of the 170-employee company, which touts its Made in the USA pedigree. On a daily basis, the business has to manage the movement of raw material, compare it to outstanding orders to ensure inventory stays lean, and then update the company’s purchase orders to prevent shortages.

Doing that efficiently and accurately requires a robust and disciplined supply chain, speeding the movement and storage of raw materials, work-in-process inventory and finished goods from their point of origin to point of consumption. Managing the supply chain involves a combination of people and information technology.

“We have a supply chain manager, and we also utilize Rootstock to ensure we don’t run out of raw materials and we don’t have excessive levels,” Cahn said, referring to a cloud-based material requirements planning system that helps to coordinate production, scheduling and inventory control. “Just one of our lines, handbags, requires about 300 different materials with different colors, width and thicknesses. You’ve also got snaps, grommets and about 1,000 different colors of embroidery thread.”

The balancing act means coordinating a host of activities with customers, suppliers and others. “We’ve also got backups in case there’s a problem with a supplier,” he noted.

A recent development —international tariff disputes — has troubled some supply chains but actually helped Cahn’s company. “We’ve been getting a lot of interest, and a number of orders, from fashion companies that want to diversify their suppliers,” he said. “Also, when prices on imported materials go up because of increased tariffs, the premium pricing for ‘Made in the USA’ is thinner. That makes it even more attractive for companies that want to use that angle in their marketing efforts.”

At one time, supply chain management systems were so expensive that only large companies could afford them, said Rudi Leuschner, an associate professor in the department of Supply Chain Management at Rutgers Business School. He’s also the program director for the university’s online Master of Science in Supply Chain Management program.

A Supply Chain Case Study

Last fall, supply chain manager John Moro shepherded a group of Rutgers University undergraduates through a consulting project on behalf of his employer, a global fragrance manufacturer with New Jersey facilities.
“During the semester-long project, students considered our S&OP [sales and operations planning] and recommended best practices to improve our forecasting, aligning customer demand forecasts with production capacity and supplier capability,” said Moro, who holds a master’s degree in supply chain management from Rutgers.

“Key measures included studying our company’s inventory turnover and comparing it to competitors’ turns; and researching best S&OP practices from other CPG [consumer packaged goods] companies.”

Moro said his company’s global supply chain “involves thousands of raw materials — primarily liquid and solid chemicals — and hundreds of suppliers from multiple countries. There are many moving parts, and some risk since some of our suppliers are the sole source for certain raw materials.”

The company’s planning typically begins with a sales forecast, which then drives operational capacity planning. In turn, that influences purchases and inventory planning.

“The Rutgers team found it was important to get the sales team in the same room with production at the beginning of the process, and ensure that everyone’s agendas were aligned,” he recalled. “They also recommended ensuring that the lines of communication between sales and production were maintained, and suggested implementing a series of checks and balances so production could ensure they had the capabilities to deliver on sales’ forecast, while sales would ensure that the capabilities of the production supply chain align with the forecasts for customer demand and sales. At this time, the recommendations are in the process of being put into practice.”

Dealing with changes

“Today, they’re still not cheap, but they are more affordable,” he said. “It’s important to design your supply chain to be flexible, since the movement of goods is always changing. In the 1960s, for example, many products were manufactured in the Midwest and were then shipped to both coasts. Today, of course, many of them are manufactured in Asia and are shipped globally. Now there’s also a shift to Mexico. Things keep changing and companies have to be able to adapt to that.”

Tan Miller, a Rider University professor and director of its Global Supply Chain Management program.

Tan Miller, a Rider University professor and director of its Global Supply Chain Management program.

One big change involves the battle over tariffs. “Companies in the fashion industry should be able to switch around suppliers, if needed, because they typically deal with a wide number of suppliers — sometimes using specific ones for specific products,” Leuschner noted. “But companies that produce products with a long lead time, like machinery and equipment manufacturers, are usually tied to a specific supplier because the lead time to set up production can be very long.”

As the demand for supply chain management continues to grow, more companies are looking for people with knowledge and experience in the discipline. “People who graduate from our [undergrad and grad] supply chain management programs have an easy time getting a job,” he added. “Some people in my master’s-level program have received job offers within two or three weeks of starting the program.”

Technological advances, including artificial intelligence and robotics, are dramatically affecting supply chains and their management, said Tan Miller, a Rider University professor and director of its Global Supply Chain Management program.

“Go back about 30 years and you had large multinationals serving global customers with smaller supply chains in each locale,” he said. “Today, they may each have as few as three plants shipping around the world to serve customers in 50 or 60 countries. Developments like Brexit appear to be driving a number of companies to redeploy their production plans as a safeguard.”

He added that as businesses seek to improve the way they manage their increasingly complex supply chains, more are considering blockchain — a digital, decentralized, distributed ledger that provides a way for information to be recorded, shared and maintained by a community.

“Blockchain got its start in the financial sector as a way to facilitate cryptocurrency,” Miller said. “But Walmart and other companies have been testing blockchain for supply chain management uses — Walmart to trace the movement of produce, while pharmaceutical companies are testing it to ensure product integrity — and it could have great potential down the road.”

A study by the market research firm Gartner projects the business value-add of blockchain will grow to more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030. “Walmart originally pushed the acceptance of RFID tags,” he added, referring to a type of radio frequency tracking system that uses smart barcodes in order to identify items. “Technology takes a long time to integrate with a broad spectrum of companies, but tech will continue to impact supply chain management.”

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