Wolverine Worldwide's Supply Chain Transformation
In a recent conversation with Bishu Jayaram, Senior Vice President of Global Sourcing at Wolverine Worldwide, we gained valuable insights into the company's supply chain transformation journey. From overcoming challenges during periods of disruption to investing in advanced technology and streamlining operations, Wolverine Worldwide has prioritized resilience and operational efficiency. Here are the top 5 takeaways from the session, shedding light on the company's forward-looking strategy and its focus on optimizing the balance between cost and value.
1. Flexibility and Adaptability Are Key:
Wolverine Worldwide experienced supply chain congestion, port issues, and inflation during the disruptive periods, causing chaos within the industry. However, the company recognized that flexibility is key to mitigating risks. By adapting to changing order volumes, run lengths, and consumer demands, Wolverine Worldwide improved its ability to navigate through disruptions successfully. This emphasis on flexibility enabled the company to optimize its supply chain and enhance operational efficiency.
2. Transparency Drives Collaboration and Problem-Solving:
Wolverine Worldwide implemented a culture of transparency and collaboration throughout its organization. Regular meetings were held, involving stakeholders from different departments, including the CEO, brand presidents, and supply chain leadership. This transparent approach facilitated the identification and resolution of issues in real-time. By fostering open communication, the company created a platform where everyone had a role and contributed to the organization's success.
3. Cost Optimization through Strategic Sourcing:
The company undertook a strategic sourcing exercise, focusing on cost savings and optimization. By tearing down thousands of shoe samples and analyzing components and materials, Wolverine Worldwide identified areas for improvement. Frameworks were established to standardize product specifications and optimize material usage. The company also leveraged negotiations with suppliers, inviting them to bid for business and driving significant cost savings. This strategic approach to sourcing not only resulted in substantial cost reductions but also improved efficiency throughout the supply chain.
4. Digitization and Integration for End-to-End Planning:
Wolverine Worldwide recognized the need for digitization and integration across its supply chain functions. The company invested in a Product Lifecycle Management (PLM) system, digitizing materials and streamlining bill of materials. This digital transformation allowed real-time costing and provided designers with cost insights during the product development stage. Furthermore, the company aimed to integrate financial planning, merchandising, and inventory plans, forming an end-to-end planning team to improve visibility and decision-making across the organization.
5. Collaboration with Stakeholders and Future Focus:
The success of Wolverine Worldwide's supply chain transformation relied on collaboration with stakeholders, including brand teams, designers, and suppliers. By involving them in decision-making processes and forming steering committees, the company ensured buy-in and alignment with its strategic goals. Looking ahead, Wolverine Worldwide plans to continue its journey of digitization, exploring AI and digital sampling while enhancing visibility of real-time inventory. The company aims to strengthen planning capabilities and become more resilient against future disruptions.
Good afternoon, everybody. Thank you for taking the time to to listen to me speak and of course, thanks to Shark as well for giving me the chance to be here. A quick introduction of myself. I lead the supply chain, the sourcing organization in Wolverine. I think Rado reminded me of what I can tell him about my job in thirty seconds. I'll keep putting fifteen seconds.
I'm responsible for anything that a designer gives a shoe in terms of a spec, and then I take it all the way through to production, making millions of pairs of them, and then shipping out to the US, Europe, Asia, wherever those shoes go. So that's my job and we have a team of about three hundred or so people in Asia do that, but we're a large company in the US for which I will just do a quick intro of who we are as well. One other household name like Bayer or a few other leaders who are here in other companies. We're relatively small in this game of of the, what do you call, of the apparel footwear business.
We're about two point five billion dollars in revenue in twenty twenty two We had a good year in twenty two. And then the brands you see here are roughly the ones on the left hand side you see are the active group, which is Merrill hiking shoes. For those of you who are hikers, you will know that it's a pretty popular brand out there. Sau makes running shoes, And then we have one larger apparel brand called sweaty Betty, which is a competitor of Lululemon and alloy yoga and the active sort of scheme of things based out of UK. And then these are other groups too. We do manufacture work categories as well for for safety and those sorts of things.
It's great to see some of my former colleagues. I see some v f folks out here. Thank you guys for being out here, and of course, you will see me with a young lady. It's my daughter, she's also accompanying me on this rodeo, so it's great to have one member of your family and sort of these things.
We work with a lot of factories. We don't own any manufacturing We outsource everything to folks in the industry.
Southeast Asia is probably a largest country or group of countries, if you will, and then China, Bangladesh, we nominate a lot of materials.
So, when supply chain standpoint, it's complex, we roughly produce about sixty to seventy million pairs of shoes and our destinations are pretty much all around the world for these brands and as I said my job is to keep it all together.
Today, disclaimer, I'm not going to dig deep into planning there are components of planning I'll talk about, but I'll give you a little bit of intel on how we we procure and how we use our our enablers on on the sourcing side of things, but I'll do talk a little bit about our vision for planning as well. So you can understand how we're thinking. In many ways, our CEO said Go find the money first before you invest in planning tools. So, Shalk, we'll talk about the right planning software soon.
I think we found the money now. So that's a good thing is we've we've really done a good job and today I'm going to share a little bit of how we did that in that journey as well. So we want to invest back into our brands in terms of how we think of the business. So let me take a step back.
A lot of you guys have lived this journey as well through COVID, Right? We saw, you know, inflation all around us, reminding you again and not to give you PTSD or something about the last three years, We had supply chain congestion, port issues.
I was in our headquarters last year in September, and I was in the office working and I saw literally thirty to forty containers pull up in the parking lot in our office. I was wondering what's going on through the window and what I was told is that a DC is overflowing and they didn't have any place to put these shoes So they were starting to ask employees not to drive to work because they had to find a space to park these containers. So we had literally a hundred containers in our offices for like six months or so, they were there and then slowly were down. Good news is I was there last time a month ago, there were no containers in the parking lot which was a positive sign.
Inflation, as we all know wages, we had factories and suppliers come in gouging us with price increases, unreasonable, unrealistic, sometimes it's just give me a dollar fifty more a pair, give me two dollars a pair, and then we gave a lot of that away at that time too. And then you layer that with consumer changing behaviors, geopolitical stuff, demand just, you know, gyrated to the bottom So really created massive chaos as you can imagine and we're still in the midst of all that stuff as we can imagine. So in light of this, the commodity prices are dropping down and we're seeing that as well as a positive thing now.
What have we learned from this? I think what we've learned as it as it is in wolverine is flexibility is key and our factory partners and our vendors are all realizing that now that's important too. So the order volumes are changing. The run lengths are changing. The number of times they buy are changing. The number of colors they're buying are changing there's an enormous change in patterns and for that we're not equipped and I'll talk a little bit about why we will need some help soon.
Transparency as well, a lot of cost issues. Factors will come and say, listen, I need this. Sorry, because I can't. You need to give it to us.
And that also really didn't help us in that front. And then efficiency of our business, we had a lot of inefficiency in how we worked. We would say yes to every single order and we couldn't manage that and that also became a problem for us. And then scenario planning which country do we grow?
Which country do we reduce? That became a nightmare as well for us to manage So we had to look deep to see how do we mitigate those risks by scenario planning and so forth.
What does it mean for us? So we're not alone in this, but we also have really crappy for lack of better word processes.
Unbelievable. We have twelve brands that flash to you. Every brand president thinks they're they're not in this room, so I can have the liberty to say that every brand thinks they have their special child, right? My brand is so special.
I need a so so customized solution and that's what we were dealing with. Every brand had their own materials, their their own choices they would make. They would want their own packaging requirements. They would want their own criteria of how they did There was no platform to leverage and that became a problem for us too.
And then demand planners for those of you who are in your room here in the room here you know, we work with a lot of wholesale channels and they don't want to give us the order signals and that also becomes an inconsistent way. You think of a a retailer like REI or Dick's Sporting Goods, we have four sales guys calling on them. We got the Saucony sales guy calling on them, we got the metal sales calling on them, we got somebody else calling on them and they would give all kinds of information so that became a challenge as well and as they were starting to pull back an orders, you can imagine that city, their systems.
So we a hurdle recently other than a few purchase order management systems and a few other systems we have, we pretty much till now even run the company on Excel. Right? So you can imagine how how this can be done when when the middle of the pandemic happens. So we started to do some investments here on the systems fund but now we're in a good place to move forward.
I'll talk about a product lifecycle management, a PLM system, which we're kicking off. We will soon do the planning side as well in terms of getting a more world class planning system. We're on the cusp of doing that. And then, you know, large scale, a lot of Excel spreadsheets and so forth too.
This may not sound new to many of you, but there's equal population here who probably do a lot of cool stuff on the system side of things too. So transformative journey, right? Everybody's on a transformation journey. You've heard about Olympus one and so are we too.
When I came to Wolverine about fifteen eighteen months ago, it was the raging time of the pandemic.
You know, we just went and built a lot of capacity everywhere. Everybody who made a pair of shoe was allowed to supply to us So we went and said, we're going to cut you guys by half. Right? We went we literally went to half.
So now we're working with only fifty percent of the partners. We just don't need as many factories anymore it went through a massive transformation there to cut, but then we didn't use cost as a criteria. We only used capacity as a criteria to cut. So all the guys with the fat costs stuck in the system and we're trying to manage that now.
We this is where I will I'll jump into today a little bit more we launched a strategic sourcing exercise. We went deep in for the last six to eight months. We've done I think an amazing job. So if you look at our our earnings call, we've we've committed about a hundred million dollars of cost savings through this work that we've done. So it's really something that's moved the needle for us and this is fueling our investments into technology, into demand creation, into repositioning of our brands, So that's the work I'll talk today about within that piece. And together with that was some packaging, which I thought was interesting, so I threw it in there.
We are upgrading a PLM system. It's public that we are working with a company called Centric, and this is a company that we've chosen. And our goal is to link this to our planning tools which I'll talk about it as well. So we're really happy about digitizing our materials, putting in databases, having proper bills of materials and so forth.
So this is something that we're super excited about and, you know, that to enable better planning as well And finally, I'll talk about planning capabilities as well. When the early days of that journey, we are mapping that out as we speak. So in the coming months, we will dedicate a lot more time into the planning side of things too. So I think these are the levers we're pulling within our suite of actions.
The bottom of my call is out about common goals across the enterprise.
So every Thursday night in my time in Asia, and every Thursday morning in the US, our CEO and the brand presidents and the supply chain leadership and a few other leaders is about thirty people on a call and every Thursday religiously we get on and then it's a state of the union, if you will, for those Americans who are in the room, it's where the president comes and talks about what's going on in the country, right? So I think you can relate to that. So myself and the logistics leader, the both of us, present to the whole company every Thursday night, what's going on in the world in sourcing and logistics piece.
I think that helps us in enabling these transformation levers. We update them literally every week on any single issue that goes on. We update them. A CEO's goal is I don't want any behind the door conversations.
I want everything in the front. So let's talk about it. Right? What are you guys doing?
PLM, who did you sign up with? Are you facing a cost increase here? Or this factory shut down or this person is not, you know, delivering, right, as far as this factory base goes. So I think the transparency really helps and a few things I heard this morning as well, where you talked about that communication and for us that is that platform Nobody is a stranger in that meeting, everybody has a role and there's a really great platform.
So we're a small company, so we have access to leadership pretty easily. So that really helps us to get things going for us too. Otherwise, I don't think you could achieve some of the big things we've done if there is not that level of transparency across stakeholders.
So how do we do this cost saving? Right? So this is a procurement hat, and I'm going to put it on.
We have thousands and thousands of styles, as you can imagine, every shoe is made differently.
But we went off to some product labs. We tore down thousands of shoes.
We went to locations where we could get those samples and really see what the shoes are made of. Do we need this lining? Do we need this fabric? Do we need this outsole? Do we need this component? We ask these questions.
And then we we built frameworks. We started saying that, hey listen, for this kind of shoe, this is what it should look like and for this kind of shoe that would want to look like.
Marker optimization for those of you in our technical, there's also materials that goes into shoes. Does the shoe really need one point two yards of fabric? Or can we that shoe in one point one yard of fabric. That kind of stuff was what we pushed very hard there.
And then we we set up an e r effect tool which is what we will move into our PLM system. We want to digitize our way of re costing. So we we set up a tool internally to start getting, you know, those cost drivers in with the factories. Rapid evaluation of suppliers.
So in Vietnam, in China, we rented ballrooms like this size. We set up tables. We had product evaluation, we invited suppliers to come in, look at the product, bring you alternative samples. Let's compare that.
No waiting for three months for testing. Right? Okay. The product looks good. Okay. Let's go to lab now.
Right? Literally dynamically we did that, but I think what helped us do that is because we were able to get real time decisions and move on. So the teams came together there and we were able to make those trade offs.
This industry, at least our industry, the athletic apparel, footwear industry, is not used to a lot of competition.
Factors and vendors are not willing to share a lot of information. They like to they like to be very tight, but we opened that up through an RFP and they had to bid. They had to earn for their business, you know? So they really had to push hard and we were able to get some significant cost savings through negotiation so so forth to be prepped a lot. And as you guys know, negotiations all about preparation and we role played and we role modeled and we challenged and we critiqued and we were going through a lot of data, but really got through some great results and now we are in the journey to digitize these things.
I'm passionate about packaging because this is an area that's a waste of money, which is good for the environment, it's something that we don't think of. But, you know, we would ship sandals in double wall cartons. Why do you need a sandal to go in highly insulated bulletproof box. Right?
We stripped that down. We looked at shoe box sizes. We had roughly three hundred and fifty shoe box sizes for our brands. You don't need that many shoe boxes.
You can standardize them. We went to forty. Right? And that just you can imagine the cost savings that comes out of that.
We were able to stuff the containers better. Bear in mind, you're paying twenty thousand dollars a container at that time, so you can imagine the savings we got out of that. And then also we stuffed the boxes with a lot of crap that you guys all throw. The minute you get the shoes, you're going to first thing is to put in the garbage can.
So we said we establish for a running shoe this is what the standard SOP is, four is a safety shoe. This is what it is. And we put guardrails there and we built that into a PLM system so that nobody can choose a customized, I'm so special shoe category, right? So we manage that.
And then now we're looking to also Nike's done some really good work in this packaging space we're looking to streamline that as well as try to really not go into so much branding on those boxes. But as you can imagine, the last one we'll face a lot of resistance with retailers and brands and we're trying to work through that piece too.
This was not a big cost savings opportunity, but I just wanted to share that we didn't leave every we didn't leave any stone unturned just to show we went to the third decimal place on things like this.
Okay. So that's the cost side. Now where are we going in the future, right? We're not done. In fact, we're just tired of this cracks the surface.
We are digitizing product development and supply chain function, right? So we're now taking this further now. We're building all these cost negotiations were done. We're building all these frameworks were done into a PLM suite so that we're going to bulletproof the designers when they choose a shoe that becomes the cost that they get to work with. So that's something that we want to become and then now we want to integrate that to a planning suite as well.
We're looking at automation processes, particularly in checking information, in validating and triple checking, that's going to go with we've got we've got a couple of other softwares we're looking at that within that. And then overall, we just want to get ourselves insulated for the next wave of whatever disruption is going to happen. I think we cannot anticipate it, but you could do best is buy insurance against that and that's what we're targeting.
So, again, this is a big vision, but we just wanted to share with you how we're thinking about this.
Everything starts in financial planning at the top in any organization. Right? You you have a financial plan first. The finance guys tell, hey, I wanna make two and a half billion dollars in revenue.
And then the planning guy says, okay, how many shoes do I need to buy for that? How much talk do I have? And how do we take it all the way down to a capacity plan? So we're now connecting our financial, merchandising and inventory plans.
These were quite disparate if you can imagine the way they were organized. So now we're trying to bring them all together and I think that's the next step. We're forming an end to end planning team in our organization that's looking at that to bring them all together.
Our teams are heavily silos. We are trying to integrate them into good ways into the consistent ways of working and that's actually starting to really come together as well because when we do these PLMs, software, when we do this costing exercise, we are really connecting them all. So we're learning a lot through that and we're integrating that into a planning system too.
Our designers are I mean designers in general, I think they are very creative people, but they are notorious for over specking product. They're notorious for asking for too much in the shoe. And that's the right thing for them where they sit. But sometimes as consumers, do we use those features?
Do we really that the consumer value those features. So through this costing model I'm using, a designer can do the cost right now in their own house in Michigan, right? Because the costs are there now. They have the database, they have the materials, they know what it cost to make a shoe, So they are real time, not only designers, but they're also real time costing people.
We're moving the costing function all the way up to design so that they can understand those trade offs.
Planners as well, we're rethinking a planning organization. We will, a planner will not do what they're doing now through the systems and tools we're integrating, we are writing job descriptions for planners where they will be really managing that from an end to end basis and not only just the, and I'm only managing capacity for a factory. They're looking at a broader spectrum and we're expanding that scope as well. And then suppliers too, we're integrating them not only us, but also our tier two suppliers, our fabric suppliers, our leather suppliers.
How do we give visibility to that? That's also something we're just starting to sketch out now. This is an area we don't know much of. The AI piece, good conversation this morning.
I don't think we've scratched that. And so I'll be lying to you if I know that we've dialed it in nicely here. But we don't know what it means actually from a supply chain standpoint. We're looking at that digital sampling.
When COVID happened, everybody ran and digital sampled it, but that's a behavior that unfortunately went back. Now people still like physical samples. That's one area in COVID. The return to work in America and the rest of the world hasn't done any good.
It's gone back to where people really want to be working from home and so forth. But the digitization of sample, at least in our company, we have a long way to go. We're not there yet.
Same thing, visibility for real time inventory. That's connected to the planning suites we discussed.
That's a gap as well. We need to try to solve and we need more thought leadership within that front too.
So I was flying through this slide just to give a couple minutes for questions.
I think that's pretty much what I had. I hope it gave you a view of how we went about this. Again, was not a large planning focus because we haven't gone there yet. We will definitely be on that journey, but I feel like we've earned the credit inside the organization to go invest in something big and what about to do that in the coming year or so too. So I'll pause. That's it from my side. If there's any questions, happy to take them.
Here. So Toronto's earlier presentation about the narrative. If we ask your CEO, What's the greatest achievement you've delivered over the past twelve months as a supply chain organization? What do you think he would say?
I think he would say transparency of issues, opportunities, risks, whatever you call it. I think in the past there was everybody was trying to sort it is woven, the culture has been every man for himself, so every function for themselves.
And the integrated views were not there as to what it means for the organization, but I think he would say that, hey, listen, I think we at least understand real time, what's going on on the ground? How do we solve this? And you solve it in a in a conversation in a room and get it done. I think that's what I would say. Is probably a big one. The CFO, on the other hand, is probably going to say, I love the money that you guys saved, but the CEO probably feels you know, at least they've they've what you call escalated transparency, but yeah, I hope I answered that. Thank you.
Hi there. Probably probably a somewhat question in many respects.
And I link back to that piece around the narrative is, okay, have you got the you've got the top down sponsorship from the CEO, from the CFO, but actually how have you taken the brand teams, the designers, those guys on the journey? Have you encountered much resistance? And and what has that looked and felt like?
Yeah. So it's a good question actually. I like that because my my CEO always says, It says, you seem like you guys got this money without much resistance.
When is when is the real fight going to start?
But I so when is the real, you know, when is the real friction gonna come in? And I think the way I've approached this is that getting stakeholder buy in from day one is the most important thing. Actually, don't think there's going to be resistance because including them in the solution, forming a steering committee and getting the brand leaders into the steering committee in those decisions, hey, do I want this leather or do I want that leather? Well, guess what?
One sourcing guys, you guys make the call, but this letter is two dollars, that letter is two dollars and thirty cents. You guys decide. So I think because their margin pressures are there, I think COVID's probably put some challenges on them in terms of their own P and L, this time and I've been in the industry for a little while now. I think COVID has changed where people in the brands are not as dogmatic or as passionate, not passionate, emotional as you say about those choices.
I'll give you a good example. Leather was impossible to find in Bangladesh.
Brands were arrogant. They're like, oh, no. We will never buy a leather in Bangladesh because Bangladesh is not the best for quality. We only want to buy from China because China makes the best leather Vietnam is next. Italy is great, but we can afford that. That's the whole industry is realm.
Today, we source about ninety percent of our leather for the shoes we make in Bangladesh, we buy it in Bangladesh.
We don't ship leather around the world anymore. Because we are able to find good sources there and the brands are able to see it and they are more into that because we've involved them upstream I think my approach is getting people bought in upstream whether it's in a systems implementation, whether it's a material choice, whether it's a factory choice, alignment is key, so that's really helpful for us.
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