Every time you have the opportunity to speak to an executive vice president of global supply chain for a nearly $12 billion company, you know you’ll learn something. Cameron Bailey, Executive Vice President of Global Supply Chain at VF
VF Corporation (VFC) is a global apparel, footwear and accessories company headquartered in Denver, Colorado. The company’s 12 brands are organized into three categories: Outdoor, Active and Work/Work-Inspired. Its best-known brands are Vans, Timberland, The north faceand Dickies. The company sells its products in more than 125 countries and has approximately 1,300 company-owned stores.
VFC’s supply chain supplied more than 410 million units of apparel, footwear and accessories in its last fiscal year. To achieve this, 10,000 supply chain associates worked with 450 global suppliers who operate more than 600 factories. These goods passed through three regional hubs – in Singapore, Panama City, Panama and Stabio, Switzerland – to 49 distribution centers, 24 of which are operating. The company works with 13 sea carriers and 7 air carriers. Goods pass through 25 ports of entry in North America and 10 in Europe, the Middle East and Africa.
Achieve agility with regional supply chains
COVID has hurt many multinationals. But it affected the VF less than many. VF was committed to selling goods largely to consumers in the same region where they are made. China, for example, only produces 14% of its total units, only 3% of those units end up being exported to the US and 2% to EMEA. In Asia, Vietnam and Bangladesh are more important sourcing locations. Approximately 29% of North American volume is produced in the Western Hemisphere and approximately 25% of EMEA volume is produced in EMEA.
Achieving agility with a strategy to sell goods in the same region where they are produced “has never been more important,” Bailey exclaimed. This is not a new strategy for VF, they have been working on it for 4 years.
A regional supply chain does not mean that supply chain operations are unaffected by global events. Much of the world’s fabric is produced in Asia, for example. VF is having conversations with fabric manufacturers to encourage them to produce more fabric in factories outside of Asia. These conversations include long-term commitments to buy at the new plant to encourage the manufacturer to invest in capacity in a new region.
A regional supply chain may still have issues at entry points. VF procures many items for the United States in Central America; the poor performance of US ports remains a problem. However, VF is mitigating this issue by continuing to diversify its supply footprint, committing to raw material and inventory purchases earlier, leveraging its existing relationships with carriers to secure additional capacity and equipment , ship to more ports, hire more carriers, and even charter full-size airliners when needed.
A digital transformation of the supply chain
The VF digital platform is transitioning to manage its supply chain is SAP’s S4 HANA as the transactional backbone; Blue Yonder is implemented for assortment planning, allocation and retail planning; and they implement a solution from o9 Solutions for end-to-end supply chain planning. They are looking to take their end-to-end global demand for wholesale and retail operations, bring it into the o9 solution, and then create a plan for their entire supply base. “We will build a demand signal and produce a supply plan,” Bailey said. The supply plan will include the supply plan for their supplies of raw materials (Tier 2) necessary for their suppliers of finished products (Tier 1). “There will be no emails or spreadsheets. We will only manage by exception. There will be a single view of inventory across the entire distributed network.”
Some modules from o9 and Blue Yonder are live. “We plan to have one of our biggest brands live by the end of the financial year – April next year.” VF also leverages Infor for production planning and Infor Nexus for supply chain visibility.
VF also worked to improve its go-to-market process. The old product development process involved sending prototypes back and forth. It was too slow and inefficient. They moved on to 3D applications that create virtual representations of new products. These 3D renderings can also be used to improve consumers’ selling experience. Products and future products may be displayed in showrooms and for other consumer experiences. Creating digital products will allow the company to pursue faster revenue growth with faster responses to changing consumer demand and margin expansion through more focused assortments. VF uses Visulon for line planning and Browzwear for digital product creation and PTC’s product lifecycle management solution to generate BOMs. BOMs are essential for procurement and manufacturing.
E-commerce and omnichannel support
COVID has accelerated a long-term trend towards consumers buying more goods online. During COVID, VF responded to COVID-induced consumer behaviors by adding new omnichannel features such as online purchase, in-store pickup, and ship-from-store. To achieve this, VF has invested in its logistics infrastructure.
To support digital sales, fulfillment centers increasingly need to support pick and pack rather than pallet shipping. To improve efficiency, they began installing warehouse robots from Locus robotics in North America and Europe. This increases worker productivity and helps the company deal with the difficulty of finding workers who want to work in the warehouses.
VF has built a highly automated distribution center (DC) in Barden, England. It is a BREEAM (environmentally friendly) certified 750,000 square foot warehouse with the capacity to process 200,000 units per day and the ability to store 6,000 pallets. This single distribution center can serve 90% of the UK with dispatch in two days or less. Rather than having traveling workers in the warehouse picking up goods, it is a person-to-person goods model where goods travel on conveyors to workers at stations.
There will be 18 e-commerce stations (goods to person), 24 stations to support e-commerce orders that require value-added services, and 72 stations to support the wholesale channel. The conveyor system is a marvel with 20 diversions to ensure the correct flow of goods to the correct station. TGW is their material handling provider and Manhattan Associates
VF is also building a new distribution center in Ontario, California. This highly automated distribution center will be commissioned in the second quarter of 2023. It will be a LEED gold certified facility of approximately 1.2 million square feet. This DC will have a storage capacity of approximately 13 million units with the capacity to process 650,000 units per day across their wholesale and e-commerce channels. The boxes will be taken from the back of a truck and taken to a conveyor. These goods will not be touched again until they arrive at a pick/pack station. This level of automation will be achieved using 38 robotic cranes, 304 robotic shuttles for product storage, 28 person goods stations and 5 high-speed e-commerce lanes. Vanderlande is their material handling provider and Manhattan Associates is their warehouse management system provider.
It should be noted that the construction plans for these DCs were already in place before COVID. Building highly automated warehouses takes time. There’s no way the DC in England would be up and running today if it hadn’t already been part of the game plan. When it comes to their fulfillment capabilities, Mr. Bailey explained, “the only thing expedited by COVID has been shipping from store.”
Their digital investments have also helped. Because there is now a holistic view of inventory, the right warehouse can be leveraged to support order flow.
COVID has hurt many VF competitors far more than them. The company started investing in agility and digitization before the outbreak began. Finally, a trend towards more casual clothing has been accelerated by the outbreak. Of course, this also works to VF’s advantage.