The VF Corporation Value Chain Prioritized Agility Even Before COVID Hit

Anytime you have a chance to talk to an executive vice president in charge of the global supply chain of a nearly $12 billion corporation, you know you will learn some things. Cameron Bailey, EVP of Global Supply Chain at VFVFC
Corporation, did not disappoint. Mr. Bailey has worked most of his career at VF – as an industrial engineer in facilities, in strategic sourcing, running offshore operations, and now as the person in charge of the company’s entire supply chain.

VF Corporation (VFC) is a global apparel, footwear and accessories company headquartered in Denver, Colorado. The company’s 12 brands are organized into three categories: Outdoor, Active and Work/Work-Inspired. Its best-known brands are Vans, Timberland, The North Face, and Dickies. The company sells their goods in over 125nations and has approximately 1300 company owned stores.

VFC’s supply chain sourced over 410 million units of apparel, footwear, and accessories in their last fiscal year. To accomplish this, 10,000 supply chain associates worked with 450 global vendors who operate over 600 factories. Those goods flowed through three regional hubs – in Singapore, Panama City, Panama and Stabio, Switzerland – to 49 distribution centers, 24 of which VF operates. The company works with 13 ocean carriers and 7 air carriers. Goods move through 25 ports of entry into North America and 10 in Europe, the Middle East, and Africa.

Achieving Agility with Regional Supply Chains

COVID adversely affected many multinationals. But it affected VF less than many. VF had committed itself to largely selling goods to consumers in the same region they are manufactured in. China, for example, only produces 14% of their total units, only 3% of those units end up being exported to the United States and 2% to EMEA. In Asia, Vietnam and Bangladesh are more important sourcing locations. Roughly 29% of North American volume is produced in the Western Hemisphere and about 25% of the volume in the EMEA region is produced in the EMEA region.

Achieving agility with a strategy to sell goods in the same region they are produced in, “has never been more important,” Mr. Bailey exclaimed. This is not a new strategy for VF, they have been working toward this for 4 years.

A regional supply chain does not mean supply chain operations are not impacted by global events. Much of the world’s fabric is produced in Asia, for example. VF is having conversations with fabric manufacturers to encourage them to produce more fabric in factories outside of Asia. These conversations include long term commitments to buy from the new factory to encourage the manufacturer to invest in capacity in a new region.

A regional supply chain can still have problems at ports of entry. VF sources many US bound items in Central America; the woeful performance at US ports is still a problem. However, VF is mitigating this by continuing to diversify their supply footprint, making earlier commitments on raw materials and inventory purchases, leveraging their existing relationships with carriers to secure additional capacity and equipment, ship into more ports, hiring more carriers, and even chartering full-size jetliners when appropriate.

A Digital Supply Chain Transformation

The digital platform VF is transitioning to run their supply chain is SAP’s S4 HANA as the transactional backbone; Blue Yonder is being implemented for assortment planning, allocation, and retail planning; and they are implementing a solution from o9 Solutions for end-to-end supply chain planning. They are looking to take their global end-to-end demand for both wholesale and retail operations, flow that into the o9 solution, and then build one plan across their entire supply base. “We will build one demand signal and produce one supply plan,” Mr. Bailey said. The supply plan will include the procurement plan for their raw material supplies (Tier 2) needed for their finished goods suppliers (Tier 1). “There will be no emails or spreadsheets. We will manage by exception only. There will be one view of inventory across the entire distributed network.”

Some modules of o9 and Blue Yonder are live. “We plan to have one of our biggest brands live by the end of the fiscal year – April of next year.” VF also leverages Infor for production planning and Infor Nexus for supply chain visibility.

VF has also worked to improve their go-to-market process. The old product development process involved shipping prototypes back and forth. That was too slow and inefficient. They have moved to 3D applications that create virtual representations of new products. These 3D renderings can also be used to improve the selling experience for consumers. Products and future products can be shown in showrooms and for other consumer experiences as well. Digital product creation will allow the company to pursue faster revenue growth with quicker responses to changing consumer demand and margin expansion through more targeted assortments. VF is using Visulon for line planning and Browzwear for digital product creation and PTC’s product lifecycle management solution to generate bills of materials (BOMs). BOMs are critical for sourcing and manufacturing.

Supporting Ecommerce and Omnichannel

COVID accelerated a long-term trend toward consumers buying more goods online. During COVID, VF responded to COVID-driven consumer behaviors by adding new omnichannel capabilities like buy-online, pick-up-in-store and ship-from-store. To achieve this, VF has invested in their logistics infrastructure.

To support digital sales, distribution centers increasingly need to support pick-and-pack, rather than shipping pallets. To improve efficiency, they have begun to install warehouse robots from Locus robotics in North America and Europe. This increases worker productivity and helps the company deal with the difficulty in finding workers who want to work in warehouses.

VF has built a highly automated distribution center (DC) in Barden, England. This is a 750,000 square foot BREEAM certified (environmentally friendly) warehouse with the capacity to process 200,000 units a day, and the ability to store 6000 pallets. This one distribution center can service 90% of the UK with shipping that occurs in two days or less. Rather than having workers roam the warehouse picking goods, this is a goods-to-person model where goods flow on conveyors to workers at stations.

There will be 18 ecommerce (goods-to-person) stations, 24 stations to support ecommerce orders that require value added services, and 72 stations to support the wholesale channel. The conveyor system is a marvel with 20 diverts to ensure the right goods flow to the right station. TGW is their material handling supplier and Manhattan AssociatesMANH
is the warehouse management system supplier.

VF is also building a new distribution center in Ontario, California. This highly automated DC will go live in the second quarter of 2023. This will be about a 1.2 million square foot LEED gold certified facility. This DC will have a storage capacity of approximately13 million units with the ability to process 650,000 units per day across their wholesale and ecommerce channels. Boxes will be taken from the back of a truck and inducted onto a conveyor. Those goods will not be touched again until they arrive at a pick/pack station. Accomplishing this level of automation will be achieved using 38 robotic cranes, 304 robotic shuttles for product storage, 28 goods-to-person stations, and 5 high speed ecommerce lanes. Vanderlande is their material handling supplier and Manhattan Associates is their warehouse management system supplier.

It is worth noting that the plans to build these DCs were already in place before COVID. Building highly automated warehouses takes time. There is no way the DC in England would be operational today if this had not already been part of the gameplan. In terms of their fulfillment capabilities, Mr. Bailey explained, “the only thing COVID accelerated was ship from store.”

Their digital investments have also helped. Because there is now one global view to inventory, the right warehouse can be leveraged to support order flows.

Conclusion

COVID has hurt many of VF’s competitors far worse than them. The company began investing in agility and digitization before the epidemic began. Finally, a trend toward wearing more casual clothing has been accelerated by the epidemic. That of course, works to VF’s advantage as well.