Optimising Supply Chain Efficiency
Speed to market is critical for a high fashion retailer and Truworths is constantly striving to optimise efficiencies across the supply chain by shortening lead times, balancing local and offshore supply, and tightly managing inventory levels.
MERCHANDISE SOURCING AND SUPPLY
Directly and indirectly imported product accounts for approximately 65% of total merchandise orders, with China being the main source of supply for Truworths. Locally manufactured product is, however, the preferred source of supply owing to its faster speed to market relative to offshore sourcing. Approximately 45% of Truworths’ clothing is manufactured in South Africa. Unfortunately it is often not possible to source merchandise locally that meets the required quality standards at competitive prices.
Benefits of local supply
Local supply offers shorter lead times as suppliers can respond quickly to replenishing popular selling styles during a season. Quick response and fast-fashion models which have been developed with key local suppliers enable Truworths to improve speed to market and to react more rapidly to customer buying patterns. Buyers can also make late styling changes as close as possible to the time of delivery before committing to orders to ensure that the ranges reflect the latest trends.
Truworths Manufacturing, the in-house manufacturing division which outsources production to local and SADC cut-make-trim (CMT) suppliers, has continued to show good growth over the past year and is now an important supplier to Truworths. The manufacturing division has continued to make improvements on lead time management adding to quick response and fast fashion capabilities. In addition, the division has achieved an average lead time of eight weeks across all categories of merchandise that it delivers. Furthermore, direct engagement with service providers and fabric and trim suppliers has resulted in improved efficiencies and cost reductions. Our ongoing investment in Truworths Manufacturing presents an opportunity to further enhance our local supply capabilities.
Rationale for importing product
Products are generally imported in merchandise categories where Truworths is unable to source local products that meet the required quality standards at competitive prices. Shoes, fashion accessories, lingerie, fully fashioned knitwear, winter outdoor jackets, kidswear and denim generally have a higher proportion of imports.
Foreign manufacture generally offers a wider variety of merchandise and greater technical detail in clothing at more reasonable prices than local supply.
However, the disadvantage of imported merchandise is that it can take up to six weeks to be shipped from the East and therefore has a slower speed to market with repeat orders of popular ranges.
The Truworths internal sourcing division is now a highly successful division within the Truworths supply chain, playing a strategic role in sourcing a broad range of merchandise for the chain. It has become the largest ‘supplier’ to the business, sourcing product from manufacturers in the East as well as in Mauritius and Madagascar.
MANAGING SUPPLIER RELATIONSHIPS
Truworths has a diversified supplier base and regularly and closely monitors the units of merchandise being supplied by each manufacturer to reduce risk by limiting overexposure to individual suppliers.
A web-based portal enables Truworths to communicate with suppliers and make quality standards manuals available online, creating further efficiencies in the supply chain.
An enhanced supplier scorecard has been developed to better measure key supplier performance. This assists Truworths in growing volumes with better-performing manufacturers and identifies weaknesses in certain suppliers that can be addressed through a collaborative process. Suppliers will, in the future, be given access to the supply performance reports to assist them in improving and managing their own performance.
The Truworths code of conduct for suppliers is incorporated into all supplier agreements and binds manufacturers to comply with ethical business standards, labour legislation (particularly relating to child labour and minimum wage levels), bargaining council requirements, international health and safety standards, as well as environmental legislation and treaties to which South Africa is a signatory.
TECHNOLOGY DRIVING PRODUCTIVITY
The new warehouse management system implemented in the distribution centres at the end of the previous financial period is now fully operational and is starting to realise benefits. While the new system resulted in delays in merchandise being allocated to stores in July and August 2016, these challenges were soon overcome. The new technology provides greater visibility of the stock position across the distribution centres and is improving the measurement and management of productivity in the distribution centres.
SUPPLY CHAIN FOR ONLINE SHOPPING
The launch of the Truworths e-commerce platform and upgraded website in the first half of the 2018 financial period will offer customers an extensive catalogue of Truworths, Identity and Office London ranges online.
Shoppers will have the option of both home delivery and ‘click & collect’ in store.
Online orders will be fulfilled from some of the large Truworths emporium stores, rather than through the distribution centres.
New picking technology and a custom-designed order management system, together with a cost-effective delivery model, are planned to ensure that the new channel is efficient and profitable, while providing a world-class customer experience.
EXPANDING DISTRIBUTION CAPACITY
In last year’s Integrated Report shareholders were advised of the plans to commence with the construction of a third Truworths distribution centre in Cape Town. Construction has been delayed as local authority planning approval has not yet been granted for the new building which will be constructed across two adjoining sites currently separated by a public walkway.
The delay in starting the building of the new distribution centre has not impacted the business. Higher-than-expected product inflation and slower sales in the period under review resulted in a reduction in unit volume throughput, which was adequately managed within the existing distribution infrastructure. Management is comfortable that current distribution centre capacity will be sufficient to meet operational requirements over the medium-term.
Truworths also has agreements in place with third party warehousing facilities that can store imported goods to mitigate distribution capacity pressure that could result from high volume deliveries. This allows Truworths to effectively manage the flow of merchandise into its distribution centres.