Surf and sportswear brand Billabong has “dramatically” slimmed down its supply chain to increase its importance to its highest quality vendors and cut product lead times by up to 30%, its CEO has announced.
Revealing a post-tax loss of AUS$1.6 million for the half year leading up to December, Billabong CEO Neil Fiske revealed a significant shake up of its global sourcing operation to cut costs while accelerating production and deliveries, with oversized inventories identified as a major contributing factor for the loss.
Fiske explained the vendor base has been “narrowed dramatically” and will continue to be, while its sourcing team in Hong Kong has been revamped and given overall responsibility for global sourcing with “true category experts” taking charge of big ticket areas of spending.
These changes, and others, such as adopting new procurement and purchasing software, increasing its on the ground presence with major suppliers, are expected to save $20 million a year by 2018 and reduce product lead times by 20-30%.
Discussing the initiative, which the Gold Coast-based company is calling 'concept to customer' and is closely aligned to its efforts to increase online and mobile orders, Fiske said: “This will greatly reduce the amount of product bought blind without firm orders in hand, which will both lift margins and lower mark-down and grow sales to better inventory match customer orders. These process improvements are closely linked to the changes we are making in global sourcing and supply chain planning."
On the environmental and social compliance front, the company reported that it had carried out independent third party audits at 60 of its tier one suppliers by January and expected to have audited every first tier supplier by June of this year, moving onto tier two suppliers in 2017.
Explaining the internal benefit of keeping a close eye on its suppliers, Fiske said: “An important part of our sourcing initiative is raising quality while ensuring social and environmental compliance among our supply chain partners. This of course becomes easier as we narrow our vendor base to fewer, higher quality suppliers.”