Footwear Insight

THE FOOTWEAR EYE By Bob McGee I t's been brewing since the beginning of the global COVID-19 pandemic and has been building momentum ever since. Industry insiders who have first- hand exposure to its ever-changing variables and reach admit they've never seen anything like it before. And these experts remain unclear about when the eye of the current Supply Chain storm may finally pass by the footwear, apparel, and textile industries. The best bet right now is sometime in the latter half of 2022. Undoubtedly, some vendors, retailers and consumers will go relatively unscathed by the Supply Chain crisis due to actions and decisions they made early on, including shipping, and buying early. But many will not. The supply chain, shipping and logistics storm, which has battered many industries since the pandemic commenced, increased in velocity during the Summer of 2021 with container shortages, port logjams, surging shipping costs that have forced some brand to resort to air freight and finally a shutdown of key sourcing Asian sourcing factories due to virus spread among workers in Vietnam. These factors are likely to result in shipping delays for holiday and Spring/Summer 2022, late and/or limited deliveries to retailers, possible product shortages on key items and higher costs for consumers looking to snare the season's hottest products. On the upside, limited inventory availability should help vendors and retailers alike attain strong merchandise margins and limit the need for promotional pricing activity. "You can't compare this to anything. The 2015 West Coast port strike, for example — that caused headaches. This is nothing close or comparable," proclaimed Peter Hohensee, VP of Global Supply Chain for Rack Room Shoes, speaking at the recent Footwear Distributors and Retailers (FDRA) Supply Chain Conference. Mike Piza, SVP of Corporate Business Development for Apex Global Logistics, says he's never seen international supply chain logistics "so fragile," adding solutions to all the issues are likely to take 12 months or longer. Problems beyond the rising costs of ship- ping containers bubbled up as the summer season faded. In early September, publicly traded Yue Yuen Industrial, whose branded footwear clients include Nike, Steve Madden, and Adidas among others, disclosed that its Q3 manufacturing revenues "will be significantly impacted" by conditions in the market, in- cluding factory shutdowns and rigorous pandemic prevention measures. The Vietna m Tex tile a nd Appa rel Association (VITAS) subsequently confirmed that 35 percent of the country's textile and garment factories were shuttered with their respective footwear and apparel production suspended. Most im- pacted were small and mid-sized contract op- erations who couldn't fulfill orders, deliver goods on time, or had their orders cancelled, according to vnInterna- tional. Once garment and textile factories re- open, they are likely to see a 35- to 40-percent reduction in available employees. Already, they have faced higher transportation costs moving materials from south Vietnam, where the pandemic outbreak is more widespread, to facilities in the country's northern region. "Raw material suppliers are closing down too," confirmed Jung Yoon, VP of Accessories, Footwear Production and Sourcing for Michael Kors. [These problems] are definitely going ANALYSIS A Perfect Storm No End in Sight for Supply Chain Issues 10 • Footwear Insight ~ September/October 2021 footwearinsight.com Shipping delays, late deliveries, product shortages and higher costs for consumers. How brands are coping.

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