Participants in the third Manufacturers Forum, organized by the World Federation of the Sporting Goods Industry (WFSGI) in Hong Kong earlier this month, called on sports brands to develop a more collaborative spirit along the supply chain in order to optimize processes and reduce costs.
The message was relayed through numerous speeches at the convention, which was attended by almost 200 people like the two previous ones in Taipei and Leipzig. It was the main conclusion of an interesting presentation made by Alex Thomas, who has been working for VF Corp.'s well-oiled supply chain since 2012 on what he calls “the Third Way” of sourcing. VF became a member of WFSGI earlier this year along with another big player in the sporting goods market, Decathlon, which was also represented at the conference.
Thomas, who bears the resounding title of vice president of manufacturing excellence and technical services, has developed a new sourcing structure that makes a clear distinction among VF's network of 32 company-owned factories, occasional contract manufacturers and a new class of “partner factories” with which it negotiates clever solutions to mitigate costs and improve productivity in exchange for shared benefits.
The system basically consists in developing sophisticated engineering processes at VF's own factories, such as its apparel plants in Central America and the shoe factory in the Dominican Republic inherited from Timberland, that can be safely and usefully transferred to the partner factories by building up long-term relations of mutual trust.
Thomas told us after the conference that he is aiming to get 80 percent of the group's manufacturing operations carried out through a combination of its own plants and these partner “Third Way” factories. The balance would basically consist of “transactional sourcing” of specific fashion products on an occasional basis from certain specialists.
Typically, VF will develop three degrees of collaboration with a “Third Way” manufacturer: a “light” collaborative agreement on a project basis, a “medium” model based on the factory's commitment to build up capacity to fulfill VF's orders; and a “heavy” relationship whereby VF will transfer some of its know-how, with its own engineers stationed at the distant factory to supervise processes.
The relationship doesn't have to be necessarily exclusive, Thomas noted, as working for others may help maximize skills among the partner factory's workforce. It may also help reduce fixed costs to everybody's benefit. On the other hand, VF insists on the manufacturer's respect of safety and corporate social responsibility guidelines.
The know-how transfer may even involve the installation of robots and other automated operations at the plant, considering the fact that labor costs are rising everywhere, especially in China. The “Third Way” factories that are working for VF are situated in countries like China and Taiwan. The group has helped a Chinese manufacturer to relocate to a cheaper site in Vietnam, however.
In general, VF's system is designed to reduce the industry's migration from one country to another. The group continues to work with manufacturers in lower-cost countries such as Bangladesh, Cambodia and Vietnam, and it is also looking at other possible new sources such as Ethiopia and Kenya.
Thomas has given himself five years to fully implement VF's multi-stage collaborative sourcing system. Before joining VF, he worked for various fashion brands in India, Denmark and the U.K. and then spent ten years with K-Swiss in China and Southeast Asia, handling design, development, operations, production and quality control.
We plan to run other reports from the WFSGI convention in the next issues of SGI Europe, where we shall also discuss new ways to engage factory workers like those that we have seen adopted at KTC, a manufacturer of highly technical sports apparel near Guangzhou. VF is doing its bit in this respect by supporting a school for the children of workers at a backpack factory in Cambodia.