New markets will challenge your supply chains

Roger OakdenSupply Chains & Supply Networks

Marketing and Logistics are two sides of the same coin.

When entering a new market, your DIFOTA (delivery in full, on time, with accuracy) objectives for the established markets may be compromised. This requires marketing and logistics to review, within the S&OP process, your supply chains to identify a better way to satisfy all customers.

This challenge became real when I read an article by Malcolm Maiden in the March 26 edition of the Melbourne Age newspaper; it concerned the challenges for international fashion retailers as they enter the Australian market.

Their number one challenge is that international retailers are all based in the northern hemisphere and that is where their supply chains – factories, contractors and suppliers are located. But the fashion seasons are inverted – when its winter in the north, its summer in the south, so they best not try to sell winter fashions in December as there is too much sun!

At the design level, the weather in the northern hemisphere dictates that clothing must contain heavier fabrics than those required for warmer climates. Some years ago, Benetton failed in its launch into India and SE Asia because its clothes were too heavy.A sunnier climate also requires a different range of colours.

Even within a country there can be different requirements and tastes; if a winter fashion does not sell as expected in the south east of Australia, you cannot off-load the remainder in the north of the country, because their winters are warmer; also, transport costs would eat into the gross margin.

As was said by an American retail fashion brand that failed in Australia “seasonal and demographic complexities of products developed for the North American market has not translated into the Australian market”. This situation also applies for all other southern hemisphere countries in South America and Africa, New Zealand and the Pacific Islands.

So, here is a market that requires a particular product range that must be manufactured, shipped and stored at the ‘wrong’ time, when retailers are satisfying their major markets with a different product range. To overcome the challenges will require a very close liaison between marketing and logistics, or better still, an opportunity to change thinking about their supply chains.

Supply Chain solution

If you and your contractors and suppliers do not have well structured ‘just in time’ processes, then buying inputs and requiring ‘out of season’ manufacturing and distribution to satisfy small, start-up markets on the other side of the world is a recipe for problems that logistics professionals can find challenging!

The solution is not to try the impossible but instead review your supply chains. In this case, a potential approach is for a retailer to establish separate supply chains for northern and southern hemispheres. The total southern hemisphere market is large, there are established centres for textile and notions production, sufficient low cost countries (LCC) for assembly operations, plus developed countries where design, marketing and logistics skills are available.

To make it happen would require close co-operation between marketing and logistics teams – could your business manage a radical change in its supply chains?

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...