Untangling the supply chain: What every industry can learn from an apparel company

Chaminie Padmaperuma's career has taken her from Sri Lanka to Malaysia and finally Australia, and from financial accounting to supply chain management, including jobs at DHL Express and Target. Of course, the changes have come even faster during the pandemic.

Padmaperuma, CPA (Australia), CGMA, has spent the last year at Underworks, a major apparel distributor that is navigating disruptions to a supply chain that links East Asian manufacturers with Australian stores. Underworks is a distributor of products including socks, underwear, and thermals, with some products made from organic bamboo fibre.

In a recent interview, she shared insights and advice about the supply chain crunch.

(Editor's note: This interview has been edited for brevity and clarity.)

Hi, Chaminie. Would you please start by telling us about your job?

Chaminie Padmaperuma: I'm currently working at an apparel company as a supply chain planner, and my customers are major supermarkets and upscale department stores all around the country. The company provides artwork and specifications, and the goods are made by manufacturers. In all, we serve hundreds of stores, and I manage millions of dollars in revenues.

My day-to-day work is to focus on customer demand forecasting and supply planning based on those forecasts. The retail market is always volatile, so a good amount of my time is spent on analysing demand and adjusting our stock levels. I also work on supply chain analysis and reporting, and then I do procurement monthly and seasonally.

How did you get started in supply chain?

Padmaperuma: I started as an accountant. I initially worked at a bank, and then different industries for three or four years. I didn't really enjoy the routineness in accounting. There's never a dull moment in supply chain. It changes every day.

Once I moved to Australia, the first job was in supply chain for apparel. That's where I realised, "Oh, this is fun!"

So, when did you first notice the current supply chain disruptions?

Padmaperuma: I first noticed it in early 2020, when China went on their first lockdown and suppliers started closing their warehouses. In Australia, most of us rely on China-based suppliers heavily, mainly because their low labour costs help to give us the quality we want at a very competitive cost and with a very good lead time.

Then, suppliers started increasing their material costs. We had to learn more about what's happening — that included delayed vessels, port congestion, closed factories, labour shortages, and material shortages in China — and then we started putting all the precautions in place: buying more safety stock, lengthening lead times, and looking for local supplies.

You've had to find new, local suppliers to supplement imports. What advice would you give others who are making those changes?

Padmaperuma: It's the same as looking for any source: Do the market research. Especially with the apparel industry, quality is very important; the fabric has to be right, the stitching has to be right, the stretch has to be right. All of these things have to be agreed upon in advance.

Buying domestically, you'll definitely face higher costs but shorter lead times. But the thing is, even with apparel, the raw materials still come from somewhere else, like China.

What's one common mistake that companies are making?

Padmaperuma: One of the biggest would be failing to create supply chain agility. They might have a limited number of suppliers, or they're relying on one geographical area. It's more important than ever to diversify the supply chain geographically and build more partnerships with different suppliers. You want to have alternative suppliers and partnerships where you have already approved the quality and the payment details.

What other traps are companies falling into?

Padmaperuma: Tight stock planning can be another mistake these days — not having enough safety stock.

This advice contradicts with just-in-time inventory management, which saves companies a lot of money. But, in times like this, companies should be asking how much money they can afford to have tied up in stock in order to avoid disruptions.

What types of metrics can help companies detect and respond to supply chain issues?

Padmaperuma: One would be cash-to-cash time. This measures the time between when a company sends cash to suppliers and when it receives payment for the product from their customers. The shorter the cycle, the better for the company. A longer cycle could be a good indication of a future possible cash flow issue. I've seen some companies go bankrupt exactly because of this issue.

Are there any short-term tactics that can get companies through this supply crunch?

Padmaperuma: I think, for now, we have to place buffers along the supply chain. For example, keeping more stock, giving more lead time, and underutilising warehouse space, so that if we have to take more stock, we are ready. Create a buffer in each and every stage of the supply chain.

Is there anything that you wish more people understood about the supply chain?

Padmaperuma: People who aren't in the supply chain don't really understand how hard it is to predict a couple of months or a couple of seasons in advance, and how long it takes to get things in their customers' hands.

On the companies' end, there are often hidden supply chain costs. For example, obsolete stock may be taking up space. Or they may be shipping less than a container load, not utilising the full capacity of the container. With the current disruptions, which are external to companies, it's more important than ever for the companies to look inside to improve their own operations.

— Andrew Kenney is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek at Andrew.Adamek@aicpa-cima.com.