Covid: What Happened to Manufacturing? | Komar Brands | PI Apparel

Welcome to PI Apparel. It's an exciting event that we're talking about. I know it's not the subject that we all want to be talking about, COVID but it is definitely an important subject, especially what happened and what continues to happen in the apparel industry. So we all remember that crazy day on between March 13th and March 19th, 2020. I feel like we can all think back to that day. And an email was sent that said, "Go home and stay home and work from home indefinitely." So I'm gonna turn it over first. What was the one word that came to your mind when that happened? What was the one thought that you had?

If it's a couple, I'd say, "How long for?" How long for?

Great. Sorry, you wanna introduce yourself to the team?

Oh yeah. So I'm Shehan from MAS Holdings. It's an apparel tech company based out of Sri Lanka. Fairly large, working with a lot of the brands that's here. Happy to be here.

What was your one word?

Panic mode. Full panic mode. My name is Kim Kalasinas. I work for Vandal Industries. We're a manufacturer for ladies' intimate apparel and sleepwear. And, you know, after the shock of really what was happening, I was in, you know, full panic and trying to figure out what our next steps were going to be.

My word was definitely shock. I had just checked into my flight to Portland and received a notification that we're not allowed to fly anymore. Hi everyone, my name is Lisa Amlani and I run a consulting firm called the Retail Strategy Group.

Hi, my name is Ashley. I work for a Chinese trading company, Jin Su Guo Tai. I would say my word was responsibility.

Responsibility.

Right, I felt responsible for the information I was given, how I was going to communicate that to the China team, what this looked like, and what my next steps would be.

My name is Ed Gribbin. I'm, uh, CEO of Gribben Strategic, boutique consultancy, and I'm also on the boards of AAFA, AAPN, and I'm the chairman of SPISA currently, and I'm on the board of IAF. So the word that comes to mind for me didn't happen for about 4 days after the 13th, but on the 17th, that word was opportunity. Because I realized that things were in such a state of disarray that there were going to be many opportunities to help companies navigate their way through the situation. And one of the very first was people calling me up and asking, where can I get PPE? And basically motivating US manufacturers to come back to work and produce product here was a large part of what I did in 2020.

Great. So now I wanna go and really talk about what happened with the retail market, okay? I remember that scary day when all of a sudden I got on my computer on Monday morning and all the salespeople are emailing me, stores are closed, they wanna cancel orders, stores are closed, they wanna cancel orders, stores are closed. I mean, that's the mode that we started on. Kim, what about you? What happened when, from a sales perspective and merchandising, when retailers said stores are closed?

Well, I mean, most of our stores were closed. The one store that was open that's on our matrix was Costco. And we actually were trying to land that account for about 4 straight years. We kept flying out, flying out, trying to get an order, trying to get a test order. And finally they gave us our first test order and the ship date was March 10th, 2020. So I was like, that's it, that's dead, it's gone. The goods left our warehouse pre-pandemic and we got a phone call on probably the 15th from Costco and said, can you hold the goods? I'm like, the goods are already in your warehouse, so I don't know what to say, but I was very concerned. I didn't know, it was a sleepwear item, it was a 4-piece sleepwear item. Never did I think that it would be so successful and blow off the shelves that everybody's going to be in pajamas for 6 months. But at the time, that was something that, that was like my only good news that I had, that we at least shipped that one order, but then panicked about us. That was our one shot, and it ended up being very successful.

So like Ed said, opportunity.

Yep.

You got an opportunity. What about you, Lisa? Well, how did you—

and yeah, I think for me, I was working with Accenture's retail strategy group at the time, and my background is 20 years in merchandising and product creation. So I think my first instinct hearing that stores were shut down was, oh my gosh, all of my friends and colleagues that are merchants and buyers and friends working at factories, what is this going to mean for them? From a project perspective, we had to suddenly work remote and pre-pandemic, the consultant life, we were on a plane every single week for 6 to 8 months. So that was a big transition. I think that probably everybody here felt the Zoom calls, the Zoom fatigue, are you on mute? So I think that there was a major shift and almost a sense of eye-opening that we had to work differently.

Yeah, absolutely. And we sometimes don't think about, but when the pandemic happened, you know, Chinese New Year was just ending and China was kind of a little bit coming out of COVID 'cause they were back to work. So Ashley, how did the factories feel that all of a sudden now the US is closed and I'm sure they're, hearing the cancellations, they're seeing from their side the manufacturers are reaching out to them saying, you know, where are you in production? So how did they feel from that end?

Well, I think from the factory's perspective, I mean, I felt again, this responsibility where I had to communicate the stress, the anxiety, the panic from my clients, my brands that I worked with. And, you know, we really took things step by step. We broke down Orders, I'd say maybe 5% of all orders were canceled. Wow, that's a lot. So we took down every single thing, every issue, problem solved, came with a solution, and as far as China production, at that point we pivoted, we were in Vietnam, we were in Cambodia, we really allocated different areas other than China 'cause they were afraid. What does the US think of China? Do they wanna be in China? What are we gonna do? So then it became issues within fabric. How are we gonna move fabric from China into Vietnam, into Cambodia? You know, or pivoting ports. We'd have goods stuck in Shanghai that we would have to truck 1,000 kilometers to Shenzhen, or in Hanoi that we'd have to truck to Ho Chi Minh. So it was a constant everyday problem solving and how are we gonna, address and conquer each order and each problem.

What about you, Shihan?

Yeah, so I'd maybe answer that in sort of 3 lenses.

Yeah.

Soon after we had, so if you talk about people, then product and our brands that we work with. So starting with people, MAS, our company employs a lot of people, over 100,000 people. So day 2 of that is how do we sort of sustain production in that environment where you've got to take care all the precautions. So we set up a COVID task team or a task force almost, looking at multiple pillars. How do you get raw material in? How do we get the production going safely? How do we manage our working capital? Because the costs are going up but the inflow is a lot less now. So we looked at how do we keep our employees safe, that was one. At the same time, product also, like you mentioned, Overnight it shifted, right? Whilst orders were either getting pushed back or canceled, there was this big opportunity. Can we turn around millions or tens of millions of PPE within a week or two? How can we change our product, use our existing fabric, existing capability, and make that an opportunity? And then brands also, what we saw was whilst some of the brands that had a heavy offline or the store footprint struggled a bit during that initial couple of months, we saw the brands that were digitally native booming, right? They had their infrastructure set up to sell online. So we focused on that category of brands and we saw during that year whilst there was contraction across the other main players, portion of that got negated through the portfolio that we slightly shifted to. So that would be sort of how we initially handled the scenario.

Very interesting. Anybody else? So speaking of which, and I think that everybody's interested to, or topic of conversation that is interesting is how did how we work change? You know, how did that change from a digital perspective? I know for us at Komar, 3D and 3D fittings became basically essential. Right? We were doing fittings via Zoom. So all of a sudden that was so different that we're fitting and the model's not in front of us. We're not actually touching product. All of a sudden we're relying on factories to do approvals. So that was such a different way of working. You know, how was that for you, Kim, working in a different manner, and how did you guys manage that? And Are you still working in that same way or have you shifted back?

We are doing a hybrid now, I would say. We do have some in-person fittings. I mean, I prefer that. I'm very hands-on. I struggled with, you know, in the beginning, it was just, we were trusting our factories to do everything, which, you know, I'm a control freak, so that freaked me out as it was. You know, they were approving my lab dips. They were, you know, it was very scary. But then we figured out a way to do it. They would ship it to us. It would delay things. You know, you were talking to me today, 'cause we are friends outside of this. We live in the same town and we have children the same age. So we're in competitive company, so it's interesting. But she was explaining to me that they're doing fittings now on a—

On Browzwear, 3D.

3D, it's like a form that, And they just— I don't even understand it. I learned something new from you today. Maybe I'm going to use it at my company.

Exactly.

But I am very hands-on, and I prefer in-person fittings. But we are still doing Zoom fittings. Some of our models are uncomfortable coming in. So it's just— we're weaving through and going with the change.

What about you, Lisa? I'm sure that that was definitely a diff— like you said, you traveled a lot. Now all of a sudden, we're not traveling anymore. Everything, the way we're working, is just so different. We're different today.

I think that what the pandemic did, it was it really put merchandising and planning in the spotlight, as well as the entire product creation process. Coming from merchandising, I spent about 20 years in this space developing product, building assortments. And again, yes, we were constantly traveling, traveling to market. What the pandemic did was it just put a halt on everything, including travel. We weren't able to travel to market, to trade shows, to see samples. It was impossible because we were in lockdown. So what this shift did was it told us that we had to find new ways of working, new ways of creating product, new ways of concepting, going to market, looking at ColorLab dips, et cetera. While it put merchants and planners in the spotlight, it also told us that we haven't changed our ways of working in, you know, 30, 40 years. Merchants are still using Excel today, a lot of merchants that I know, in fact. And with planning, we didn't know the pandemic was coming. Maybe some of us did, but we didn't have the time to react because it takes us so long to get to market, sometimes 52 weeks. Sometimes longer if it's footwear or equipment. I think it really accelerated the way that we thought about getting closer to the customer, to getting closer to market so that we could better react to shifts in how we were planning and building assortments because we planned so far ahead. We couldn't change orders, we were canceling them.

What about Xian and from a factory perspective working, how did they have to work differently with us? I think that's really interesting too.

So over the last maybe 5, 6 years, we've been dabbling with a few capabilities that us as supply chain partners also need to build. Some of them were around digital product creation, so 3D and likewise. So, but where we struggled was getting traction with some of the brands to change, you know, their ways of working because they were working with multiple vendor partners as well. But then post-pandemic with us having no other option, we managed to expedite some of those capabilities. So we had the foundations laid, so we managed to sort of put it on boost mode or make it go a lot faster. So within a couple of months, I think within about 2 months, we managed to do an entire season's collection for a large customer and finalize the entire order on 3D. So that was one example. Another, so working virtually was one pillar that we were really focusing on. The second was also, once you design your assets in 3D, since there is no way to see it face to face and can't send samples, we had to also set up a showroom virtually. That was the second pillar that we started working on. And that need actually came post-pandemic whilst the design really was there before. The other pillar was with a lot of brands selling more digitally, we felt that their needs were also changing. You didn't, they didn't have to fill thousands of stores, which meant the order quantities reduced, right? The SKU counts weren't a restriction anymore. They can test out with very low inventory risk, which meant for large-scale manufacturers like us, we had to change how we work as well and build those models to support it.

Yeah, I mean, I know at Comar, one of the biggest emerging was that we, although we sell to a Macy's or Bloomingdale's, we're shipping direct to consumer from our warehouse. So that was definitely a major shift when it came to the sales aspect of it, is that now we are shipping direct from our, you know, direct to the consumer, although it's through a retailer. So that was a major shift in the sales for us.

Just one small thing to add, there was some of the orders that we already had which were to be sent to certain DCs or warehouses, the brands actually asked us to convert them to like what you said, individually pack it to go to DC.

Right, direct to consumer, DDC. So all of a sudden now you become a DDC shipper.

Yeah, exactly.

And not just, you know, bulk warehouse.

Exactly.

So you yourself have to reconfigure how your warehouse operates, how your sales operates, right?

Sure.

Before I started Gribben Strategic, I was the president of Alvanon for a dozen years. And back in 2011, we started— we were the largest maker of fit mannequins in the world and decided to go digital. So we started developing avatars to match up with all of our fit forms. And whether they were custom for a particular brand or they were standard series, ASTM for instance. And we launched this in 2012, and it's like you invited people to a party and no one showed up. And we partnered with all the 3D companies— Browzwear, Clo, Optitex, Gerber, and Lectra— and made sure that our avatars were compatible. It wasn't until really the beginning of the pandemic that all of a sudden sales went through the roof on avatars.

Right.

So you could tell that there was this major shift in how people were working. And you mentioned Macy's. I do a lot of work with Macy's. 11 Penn Plaza was the entire, you know, Macy's merchandising group, and they're gone. So when when they went to remote work, most people are still working remotely, but they have kind of like a WeWork setup going on at Herald Square where people come in and they have to rent a desk for the day if they're going to do— and the people who do the fittings used to do them 6 hours a day, 5 days a week. And now there's 1 day a week when they do in-person fittings for about 4 hours. And everything else is virtual.

It's really—

and it's not going to go back.

Yeah, it's interesting you said about Avalon because that's actually something that emerged with us as well. We actually just engaged Avalon because we're seeing such a delay in product shipping, sample shipping to us that we are having forms made to our specs, and we're having our major factories buy those forms so we can actually do virtual fittings overseas with them so we can right away see if the product— you could see something so wrong, please don't even ship it. We don't want to wait the extra week. We don't want to fit it. Let's just talk about it and make a new sample. And so we're actually— that's something that we're doing that's new that we didn't do before.

I think from a factory perspective, our customers and our brands were trusting us more and more. No one can visit the factories, no one can go inside. We have to do the lab dip approvals, we have to do the factory audits. There's no inline inspection. Really training our QC. There's so many nights at 3:30 in the morning I'm doing a factory walkthrough with a Costco or somebody else because That's what we're doing and getting all of, you know, if it's WhatsApp or Zoom to work and coordinate at that time, you know, to check out the lines, to make sure the ins and outs of the facility are working. And to this day, we're still doing it. I think not until September we're gonna be going back for the tours. But the product has shipped and it's fine and the quality's fine, so I think we've gained a lot of trust.

I agree with that statement. I think that post-pandemic, we are absolutely trusting factories more and more. I mean, when we used to say they're our partner, I don't really think that was as true of a statement as today. When you have a factory partner that's a true equal to you and a true partner, they're doing so much for you and you're putting so much trust into them. That's a completely different way of working. Compared to every single thread used to be sent to us for approval. You know? So definitely a shift in how we work here in the States and how now factories have to work because they were never used to this either.

No.

So how did everyone taking a step forward now and major topic that we're all discussing is containers, shipping. Okay, so post-pandemic, not only were we struggling now, now all of a sudden go few months later, 6 months later, a year later, now we're having container issues. Now we're having delayed boats, boats going around the world. I mean, I have a major issue right now with CrocKing because garments sat in a container for way too long. You know, whose issue is that? All the testing passed, but you know what? It literally went around the world. I had goods that left Bangladesh and did not get to the States into my warehouse for 120 days. That's unheard of. How did each of you manage that process and how did each of you continue to kind of manage that?

Yeah, just to start off maybe on a cost perspective, what we— started doing was consolidating some of the shipments that are going out so that we get the benefit of loading a full container. That's just an easy win. Some of the brands that we work with also started getting creative where instead of paying duty full price when it comes to the US, they approached certain other options nearshore where D2C shipments happen through certain warehouses outside outside the US, which comes in duty-free below that $800 threshold. Those are some of the areas that they looked at for visibility and, you know, going around the world. There are solutions we started using which tracks at least where the goods are. There are solutions that are quite cheap and available at the moment. So at least you know where your container is so that you can follow up with the right people and make sure things are going at least according to some plan.

Kim?

I mean, really, that's not fully in my wheelhouse. I have the fun job of creating the product, sales and merchandising, but I definitely deal daily with the screaming and yelling about the containers and the prices of the containers. And I mean, we didn't have, that I know of, any damaged issues. I mean, we did have a few containers 'cause that got wet or whatever. And we dealt with shortages. But yes, I mean, it's a huge problem. I could take orders all day long, but then we have to actually get them here. So, it's not fun.

And FIT, so I'm an adjunct at FIT, and I tell my students, we used to take an order, it had a ship date. Goods had to ship on that ship date, or I would actually be yelling at factories, calling them, getting a discount, Now I feel like it's arbitrary. I have a ship date. It's going to ship around that ship date. It's going to get to the— to our warehouse around a certain date. I can't really tell my salesperson exact date that they can ship it to their store. I feel like I'm like in this alternate universe of working completely different than when I started in this industry.

Yeah.

You know, how do you feel?

I had to deal a lot with containers and shortages.

Right.

And port congestion and lack of chassis when they get to the port or your containers are in a closed area. We don't know when they're gonna get released. And for me, I was forced to over-communicate. And I'm like you, I'm, well, you're gonna get the goods on time. You know, I'm used to people, pleasing, but you had to get really real, real fast. I'm not getting answers. I'd share all the information, all the contacts, all the forwarder's information, and it was what it was. On our end, as far as cost, we really took a bloodbath.

Yeah.

We had a lot, most of our business was LDP, so we—

Oh wow.

The costs on those POs were including shipping. So if you go from $3,000, $4,000 a container on a 40-high container, $25,000 plus additional fees and whatnot for, I mean, you're eating it. Luckily, I had a lot of partners and those are some hard conversations to split the cost. So we worked on splitting the cost and those that would not split the cost, you know, we'll get you on the next end, I've severed those relationships and I'm focused really hard on the relationships that are partners. And had to make some tough decisions because it's a reality that we were all faced with and I think we should share it together. So, but now it seems like we're turning around slightly.

Yeah.

Yeah, it's a good thing.

Slight silver lining.

Exactly. Before we get into the silver lining, anything you wanna add?

Sure, when I was in 2020, I got into helping people people produce PPE here, and I became a vendor to Defense Department and to the Commonwealth of Pennsylvania and started importing product as well through my connections in Asia. And one particular order was quoted at $25,000 in freight costs delivered for 4 containers. And it turns out it was 4 months later and it was 4 times as much. And luckily my customers and I worked out the differences. But it was— and that was 2020. 2021, it just got worse, right? And exactly, I was just at the AAFA Global Supply Chain Conference and listened to the shipping companies talk about how contracts aren't worth paper they're written on anymore. So it's— and no one expects anything to really mitigate until at earliest late 2023, but probably 2024, absent, you know, a global crisis like a war. So, you know, there's a lot of pressure on the industry. And logistics, as you mentioned, is just— it's the cost of doing business today. And you have to kind of figure that in. And that's one of the things that's pressing on inflation as well that we can't control.

Right. Anything?

I have something to add.

Yeah, definitely.

I don't know where this story— I just thought of it, but I spent a lot of time working with Ralph Lauren in my career, and I was in a role about 15 years ago as the merchandise production manager for Canada. We had just opened the office. Suddenly I'm making air-sea decisions, and there was one decision that I couldn't make because pirates had infiltrated one of the ships and we had lost everything at sea. And I thought, this is the most ridiculous thing I've ever heard. Fast forward to 2020 and you hear all these stories, and it really just brings me back to how do we change the way that we're creating products today? How do we reduce our vendor base to partners and people that we trust? And how do we go to market faster than we have ever done before? Because we implement digital tools, 3D fit, um, and really using our partners and utilizing them to test product, to fit product. And that's something that I've been working with a few of my partners with, um, in the last, I would say, 3 years. But more recently, last week with one of my clients, we just heard that raw materials are in a huge shortage, especially things that are technically innovative. And we're looking at raw material lead times of 300 days. Imagine, how do you supply plan your raw materials and how do you forecast and how do you plan merchandise when you're strategizing and planning your revenues and gross margin and profitability, it's a lot to take in. It's not just that one part of the supply chain. We really do have to look at the entire, all the components in the supply chain.

It's interesting you say speed to market. I feel like I haven't even heard that term in so long.

You should come to Lidl.

Because of how long it takes now to produce product, ship product that that term speed to market is sort of something that we used to talk about, have conferences about them, and it's on the back burner today.

Well, not necessarily.

But I feel like it's such an, we need to bring it back. We need that speed because we need that newness and kind of moving forward, how do we deal with that, how the pandemic really had huge consumerism, right? I mean, we all know that most companies that we work in, we did well. We sold a lot of product and people were buying. People had money. And now I think everybody is speaking towards the same thing, towards inflation, and that there is an overage. We now have excess. We are now having difficult conversations with retailers because there is this excess in a lot of categories. So how do you pivot so quickly from this consumerism high to this now, this excess of inventory?

Yeah, so I think it's a cycle always. So 2020, there was a dip, and 2 years later, uh, it's a similar kind of scenario. So as production partners, we have to also make sure that we are very careful with the capacity Do we maintain which geographies we offer it through? So for an example, our company, we are present in about 15, 16 countries in terms of manufacturing. So when it comes to even COVID, not all countries go down at the same time. So how do you net off that risk? And we, we've seen, as I mentioned previously, that digital native brands are growing a lot faster. Some of the challenges that our bigger brands see, they don't face at the moment because of their scale, because of the target audience. So tagging along with some of those to mitigate the risk is also something we closely follow.

What about you, Kim?

I'll admit we went very overzealous with the business. When we finally got back into it, the business was wild. It was fast. We didn't have enough goods. We were begging them. We were shipping, airing goods. We were just doing whatever we could to accommodate the needs. And then, you know, on the merchandising end, I was being asked to over-create. We had to double up our creation. We had to get more goods coming in. And we were just following the lead of the retailers. And now we're seeing this dip in sales. I think everybody's just like, slow down. But we've already committed to accommodating those major orders that were placed last last year. So now, again, difficult conversations. I believe it's going to turn around. I hope it's going to turn around quicker than we think. But, you know, I've been in the industry for a long time. But I do think, you know, right now we're, you know, there's definitely a struggle. And you and I talked about it on the way in. I mean, this is everywhere. It's not just us.

How about your customers, Lisa?

I think that Kim actually raised a really great point around overbuying and retailers love to overbuy, and the challenge with that is we have to start questioning and preventing overbuying by being smarter about what we're buying, getting closer to the customer, getting faster to market, speed to market, and I would say it's, it's more important than ever to get faster to market in the right way, and overbuying and overproducing, customers are going to start questioning questioning what we're doing as retailers and brands because they're not going to sign up for things, product that doesn't align with their own values around sustainability and what overbuying and overproducing is doing to the planet. And I think that's something that we can't hide behind anymore.

Very good. Ashley?

I agreed with what everyone said. I think they had a lot to offer. I mean, for us, I remember last Christmas, we started DSV business, a dropship direct from a warehouse that had 3 or 4 picker-packers, and to doing 30,000 dropships a week. So it was a disaster. It was something I was dealing with every single day, to now on the opposite side of the spectrum, holding 300,000 pieces in a warehouse and dealing with the storage fee and fighting with the analysts on ways that we can show the retailer that they need to bring in more goods. It's a total flip-flop on where we were last year to where we are this year, but like anything, it's being flexible, it's learning how to pivot, how to come up with new solutions. I think everyone rode that wave last year on the big orders, a lot of money coming in, but I did have customers that would get an order, say for a million pieces, pieces and they would only commit, oh, we're only going to do $600,000. They would reject and they would question the merchants or the buyers and say, no, this is what we're willing to commit because we know we're on the hook for that amount and that's what we're okay with. So I think it's not just always saying yes, having a better partnership and understanding.

That's a really good point, is how you communicate with your partners and are you able to tell them, you know, You should buy less, you know? 'Cause who doesn't want the orders? Come on, we all want the orders. We all want the sales, you know? So to actually have a conversation like that and say you should buy less is a difficult conversation to have, you know? And I'm sure from a factory standpoint, they need to fill the lines, so they want the orders as well.

Absolutely.

When you're riding a wave, you don't want it to end, but you know it's going to end, so. So if you think back to 2008, this is nothing like 2008. So I think hopefully we learned a lot of lessons then about inventory management and overbuying. And I think if we look at the situation now, and if you just look at retail stocks in general, I think that a couple big major global brands that I work with have been really smart through 2022, anticipating and rather have reduced sales but manage their inventories better. And, you know, does that speak to everyone? No. But there are, there are going to be winners who have figured out how to manage their inventories properly and expect the downturn that's, that's going to happen.

Well, I want to thank everyone today for this great conversation. I want to thank the audience. If anybody has any questions, you can reach out to us. I'm happy to chat some more with anyone. Thank you.

That's it.

Thank you.

Thank you.

Thank you.