At a Glance
- Companies frequently shift their supply chains to countries with lower production costs but this requires close monitoring of supply movements
- The interconnected nature of a supply chain resembles a chain of dominoes – if one link is affected, it sets off a chain reaction that affects other activities that follow
- It is essential to diversify your supplier network or explore alternative sourcing solutions, especially when we have seen unprecedented disruptions since the COVID-19 pandemic
The footwear supply chain is long and complex, involving many actors at different stages. It begins with the sourcing of raw materials, followed by their transformation into semi-finished products, the design and manufacture of finished products, distribution and finally retail.
This sector faces uncertainties, including changes in environmental regulations, fierce competition from new entrants, and changing consumer demands reflecting environmental and social concerns. Other factors such as land availability, material supply and demand, labour costs, and national tax policies also influence the dynamics of the footwear supply chain.
In the pursuit of cost reduction and long-term business growth, companies often move their supply chains to countries with lower production costs. However, this move requires close monitoring of supply movement risks.
Managing supply chain risks
The interconnected nature of a supply chain resembles a chain of dominoes – if one link is affected, it sets off a chain reaction that affects other activities that follow. Therefore, maintaining a resilient supply chain is important to prevent disruption to your operations.
What happens when supply chain disruptions occur? Take a look at the apparel and footwear sectors in the United States. These sectors rely heavily on international supply chains. According to the Recent Trends in US Services Trade: 2023 Annual Report, the disruption caused by the COVID-19 pandemic resulted in significant costs to the sectors, ranging from US$9 billion to US$17 billion. This highlighted the fragility of the global supply chain and the need for a risk management strategy in an unpredictable environment.
Below are some of the strategies that can be adopted to tackle the challenges within the footwear supply chain.
1. Build long-term relationships with suppliers 
Cultivating trust and mutual respect accelerates innovation and supports brands’ ability to produce more responsible products. Building lasting and long-term relationships can lead to increased procurement from the supplier. As a result, brands can consistently improve quality, delivery, and sustainability through ongoing dialogue with suppliers.
2. Review supply-chain risk management 
Mitigating supply chain risk remains important, particularly in today’s rapidly changing market landscape. The common challenges evolve year-on-year, from changes in national tariffs and global trade policies, to supply chain disruptions caused by extreme weather, to rising production costs due to inflation. It is therefore essential to review and reassess the risk management strategy to ensure its relevance and effectiveness.
Your supply chain risk management strategy might include:
- Identifying vulnerabilities and potential risks within your supply chain
- Developing a roadmap to navigate through supply chain changes
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3. Broaden your supplier base 
It is essential to diversify your supplier network or explore alternative sourcing solutions, especially when we have seen unprecedented disruptions since the COVID-19 pandemic. Depending on a limited number of suppliers increases your exposure to risk.
Diversifying your supplier base will give your company more leverage when negotiating contract terms. In addition, working with new suppliers, especially those on a smaller scale, can give you an edge as you may discover unique niche products from these suppliers who are striving to differentiate themselves from their competitors.
4. Understand your suppliers’ operations 
A comprehensive understanding of your suppliers’ operations allows your company to closely monitor their activities. The data provided by suppliers is a valuable resource to better equip your risk management and compliance teams to develop effective risk mitigation strategies.
This data gives insight into supplier’s delivery schedule, shipments, and status changes. It enables you to respond swiftly to unexpected developments. It also makes a significant contribution to your Key Performance Indicators (KPIs) and Environmental, Social, and Governance (ESG) initiatives. Improved visibility across the supply chain promotes transparency and minimises the bullwhip effect.
Navigate the ups and downs with Renoir
This industry is full of unknowns, both on the supply and demand side. Some of the common supply chain management challenges clients face are:
- It takes a long time for our products to move through our supply chain.
- The bottlenecks in our supply chain affect our product margins.
If you are looking for effective supply chain management, talk to our subject matter experts who will understand the current state of your supply chain and identify suitable solutions that can help address the issues you are facing.
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