Levi Strauss & Co. – A supply chain transformation at one of the world’s best-recognised brands
Levi Strauss & Co. has revealed plans to transform its supply chain. The company’s Senior Vice President and Chief Supply Chain Officer, Liz O’Neill, speaks to Supply Chain Digital about the initiative
In February, Levi Strauss & Co. (LS&Co.) announced a new “transformative new operating model” that will create “a more sustainable supply chain and a cleaner jean”. Called Project F.L.X. (future-led execution), this new model replaces manual techniques and automates the jean’s finishing process, allowing the company to reduce the number of chemical formulations used in finishing from thousands to a few dozen.
Traditionally, denim finishing – which creates worn, faded design elements on jeans – has been a highly manual, labour-intensive and chemical-reliant process, but the new model will automate much of the process, making it far more efficient and time-effective.
The company said the commitment is a major step to achieving zero discharge of hazardous chemicals by 2020 and accelerates the elimination of many chemical formulations that the company's Screened Chemistry programme identified as "phase outs”. Among the chemicals that will be eliminated is potassium permanganate, an oxidizer that is used industrywide to replicate authentic vintage finishes. Beyond eliminating many chemicals, Project F.L.X. is expected to reduce textile waste by more accurately making what the market needs and may also provide the opportunity to save water in the future.
Just weeks after the announcement, Supply Chain Digital spoke exclusively to LS&Co’s Senior Vice President and Chief Supply Chain Officer, Liz O’Neill, to get more detail on the plans that will revolutionise the company’s supply chain.
How significant a step-change do the February announcements represent for Levi's global supply chain?
Project F.L.X. is a radical breakthrough that will shape the future of how jeans are designed, made and sold. We believe it is possible to make iconic apparel with authenticity, agility and sustainability at the forefront – all while protecting the quality craftsmanship consumers know and love us for. Project F.L.X. is our biggest example of those values in action to date. This is the future of jeans manufacturing, and LS&Co. is well-positioned to lead the way.
How were these initiatives/ideas originality conceived and how much work has gone into making them a reality?
The best innovations come when you’re constrained. And our constraints were many: product authenticity, agility and sustainability. In the case of Project F.L.X., our initial mission was to find an alternative to potassium permanganate; a chemical used to finish jeans today. In turning to lasers to solve this problem, we achieved transformational benefits beyond sustainability.
Do you have an idea about how long it will take to scale-up this technology across your supply chain?
We have already begun piloting this new model with some of our strategic vendors and we’ve also begun to brief key retail partners. Our plan is to take a phased approach to rollout starting this year, with the goal of being fully scaled by 2020.
Automation is a big part of the new supply chain process. Could you give an overview of how it will make the supply chain more sustainable?
In addition to reducing chemical formulations used in the finishing process from thousands to dozens, the Project F.L.X. is expected to help us reduce textile waste by more accurately making what the market needs.
Could you tell us a bit about Project F.L.X. and how it will be implemented?
By using laser technology in new ways – and rearranging steps in our operating model – Project F.L.X. allows us to finish our jeans later in the process and dramatically reduce time to market, without compromising quality or authenticity and significantly decreasing our environmental impact. We can now design denim finishes with a revolutionary imaging tool that we developed, and then use digital files to quickly translate those designs to bulk manufacturing with automation — eliminating lengthy, labour-intensive processes and reducing our chemical finishing formulations from thousands to dozens. We’re all in on this new digital platform, and we’re committed to scaling it across our five-pocket jeans business, including the Levi’s, Denizen and Signature by Levi Strauss & Co. brands, by 2020.
To what extent are the initiatives are being driven by Levi's desire to reduce waste?
Our innovation process is informed by two key considerations, namely: how to deliver quality, high quality, durable denim styles to consumers when and where they want them, while making the manufacturing process more sustainable products. And so, at every turn, we ask ourselves: how can we make our supply chain more agile and competitive, while decreasing our environmental impact? Reducing raw materials waste is part of those overall objectives and considerations. For example, the Project F.L.X. is expected to help us reduce textile waste by more accurately making what the market needs.
We hear a lot in the industry about 'supply chain transformation', how much do you see these new initiatives as Levi's own supply chain transformation?
We often say that where we lead, others follow. That begins with getting things right internally at Levi Strauss & Co., to help ensure that our operating model sets us up to deliver great product, wherever our consumers like to shop. But we’re keen to see the industry take notice and adopt more sustainable manufacturing practices, to help make a greater impact together. We are transforming our own supply chain as we transition to this new way of doing business and we are excited to shape the future of apparel manufacturing.
What do you consider to be the main supply chain challenges facing Levi's and the apparel sector as a whole?
Supply chain agility and sustainable manufacturing continue to be two main concerns for most companies operating a global supply chain today. These are the innovation priorities for us and it was with these two pressing concerns in mind that we tackled the leading idea that brought us to pursue the Project F.L.X. breakthrough.
When you are dealing with hundreds of suppliers across the globe, how difficult is it to ensure your supply chain sustainability standards are being adhered to across the board?
The most effective way to help ensure that our standards are applied is to work with vendors to demonstrate that better working conditions means improved productivity – and a positive impact on the bottom line. More than 25 years ago, Levi Strauss & Co. pioneered manufacturing standards for our industry by introducing a comprehensive code of conduct. The Levi Strauss & Co. Terms of Engagement set out to protect the basic needs and rights of workers as well as the environment. Since its implementation, similar codes have become the standard and are employed by most apparel companies. In 2011, Levi Strauss & Co. began piloting the next phase of its commitment to creating a more sustainable supply chain called the Worker Well-being initiative. Through this new approach, the company partners with its suppliers and local organisations to implement programmes focused on financial empowerment, health and family well-being, and equality and acceptance. The initiative has created proven, sustainable business and social benefits at all levels of the supply chain, including a demonstrated four to one return on investment for some programmes.
How important is the Eureka Lab to driving supply chain innovation at Levi's?
It’s key. Our Eureka Innovation Lab is the nerve centre that brings together our developers, designers, vendors and sustainability experts to collaborate and tackle key supply chain challenges in a multidisciplinary way, to arrive at breakthrough solutions rather than incremental step-change. Established in San Francisco in 2013, Eureka is dedicated to design, research and creative development, and to creating advanced product prototypes. From exciting new products that tap into consumer insights through to cleaner manufacturing processes, this is the place where we embrace the opportunity to define the future of the apparel industry.
On a personal level, do you have any targets/goals that you'd like to achieve during your time at Levi's?
I hope to lead a global supply chain team that operates as a major competitive advantage for LS&Co. – one that is pushing the boundaries of sustainable innovation, that is able to help us stay ahead of a changing retail landscape and meet the needs of our consumers, wherever they want to shop. And I’d like to be able to one day say that our global supply chain team was an essential part of helping to make LS&Co. the best apparel company in the world – and a leading global company, across industries.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”