The world’s clothing and footwear manufacturers are reorganizing their supply chain by prioritizing the relocation of production to areas closer to the point of consumption.
David Tichiaz has a relaxed look or at least that is what he projects into the distance. As General Manager of Vans Americas, he has dealt with the havoc that the pandemic has left on the sales, production, and distribution of one of the best-known casual tennis brands. He now works to try to cover the blind spots surrounding the brand, such as the complete availability of its products in the United States, its main market. That’s where Mexico comes in.
It has been two years since the health contingency burst onto the global scene and changed the expectations of the business, the same ones that Tichiaz has in his current position. In January 2020, VF the clothing and footwear firm that owns brands such as Timberland, The North Face, and Dickies, as well as Vans, forecast revenue of $11.75 billion at the end of its fiscal year in March.
In the end, it registered 10,488 million and a drop, in the last quarter of the fiscal year, of 7% globally and 8% in the Americas region, only for Vans, the brand that adds the most value to the company, according to their quarterly reports. The following months were as unpredictable as the evolution of the pandemic itself.
In the beginning, VF predicted a drop of just over 50% in revenues in the first quarter of fiscal year 2021 -from April to June 2020-, affected by the closure of stores and restrictions on mobility in some regions of the planet. The prediction was fulfilled almost in its entirety, making it clear that the strategy going forward would be in the flexibility to respond to the ups and downs of the market, which still prevails.
“The biggest challenge we face is uncertainty, which is how our consumers feel on any given day. But also the uncertainty of macroeconomic impacts: today we are talking about rising inflationary prices, yesterday we are talking about supply chain constraints, and tomorrow we really have no idea what is around the corner.” declared the manager in a video interview at the end of December.
The company has global manufacturing partners that supply almost all of the products it sells. A relevant part of the supply is in the hub of Panama and Hong Kong, which includes other countries in the region, where, in the early 90s, Paul Van Doren – one of the founders of the Vans brand – moved part of the production. In May 2021, VF admitted that the supply from the Western Hemisphere –although less competitive in costs– gave it greater flexibility to reduce delivery times and manage inventories in the United States, a market that represents more than 50% of sales.
“We can prepare, plan, we have already done it; but what we really need to do is make sure our teams are focused on our highest priorities to deal with uncertainty.”
To avoid supply disruptions, the firm has diversified production between countries and contractors, as well as supply from countries where products are readily available and have preferential tariffs and free trade agreements, according to the fiscal year 2021 report released in May of that year. “VF works with its suppliers to minimize disruptions and is employing expedited freight as needed,” it added in its latest quarterly report last December. It is not an exclusive plan.
The world’s clothing and footwear manufacturers are reorganizing their supply chain by prioritizing the relocation of production to areas closer to the point of consumption, according to the report ‘Fashion Supply Renewal: speed and flexibility in the foreground’, published by McKinsey in November.
The vision is shared by the members of the American Apparel and Footwear Association (AAFA). In a meeting with officials from the office of the United States trade representative, they discussed the possibility of expanding the supply of the industry in countries of the Western Hemisphere and, in particular, to nations under the FTA between the United States, Central America, and the Dominican Republic.
A more advanced partner
In Mexico, Vans already manufactured the brand’s footwear and clothing; but at the end of 2020, it decided to establish a new relationship with a Mexican partner dedicated to advanced manufacturing, which differs from traditional manufacturing by including specialized technology and developing processes that complement the production chain, according to the Advanced Technology Center (CIATEQ).
“We want to start with advanced manufacturing in Mexico and then see how this would be done in other parts of North America and even in Europe. We want to see how to get there with this process,” Tichiaz stated, without revealing the name of his Mexican supplier. During the video call from his home in San Diego, California, the regional leader of Vans did not hide the emotion that this implies.
“We were investigating for a long time, we had many conversations with them [their manufacturing partner] and we recently started producing with this process in the country,” he said.
In general, he added, the brand “is happy with the manufacturing capacity developed in Mexico,” which is why it is also analyzing accelerating the manufacture of its products in the country, which is, according to the manager, one of the most relevant for the brand. in the region. Without revealing business data at the local level, Tichiaz added that part of the strategy to increase its market share is in the initiatives aimed at strengthening the brand’s connection with Mexicans.
The inauguration of House of Vans in Mexico City is “a great example of that and we want to do more of these approaches with our consumers in the next two years,” he said.
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