Strategies to succeed in a period of Industrial Decline IV: The Road to Failure — The Supplier

The first rule of business: You succeed by meeting the needs of your customers.  The successful supplier understands the needs of his customer and develops skill sets to meet those needs. This is true of garment retailers and brand importers relationships with their customer — the consumer.  It is equally true of garment factories’ relationships with their customer — the retailers and brand importers.

The difficulty is that customers’ needs do not remain static.  We live in a dynamic universe where over time the world changes and our customers change.  We are the fashion industry and in our industry either you are in the forefront of change or you are on your way out.   

The rules may be the same for everybody, but the challenges facing factories and mills are different than those facing their customers. More importantly the reasons why retailers and brand importers fail to effect change are very different from the obstacles facing their suppliers — garment factories and textile mills.

 The greatest obstacles facing the customers are psychological:  Some companies are unable to adapt to change because their organizational structures have become paralyzed, unable to move forward.  Other companies fail because senior management has become controlled by their egos and are therefore convinced they need not change.

The suppliers — garment factories and textile mills — are different. The greatest obstacle facing them is cultural. 

To understand a psychological problem, you have to move into the minds of people. To understand cultural problems, you have to move into their souls.

The global garment export industry is predominantly Asian.  These factories and their owners whether Indian, Chinese or Indonesian, hold some defining traits in common.

  •  They are family businesses.
  • They developed from very small companies with very little capital.
  • Their owners succeeded through total commitment; working 24 hour days, often sleeping in the factory;  gambling their entire capital over and over again that the company would overcome the great challenges they faced every day.
  • To these people, the factory is almost as important as family.  Most live in corrupt societies where the factory is the difference between a dignified life and life as a total victim.
  • Their workers, technicians and managers must be 100% committed, not to the company but to the owner.  Decisions are made at all levels based on the understanding that this is what the owner would do when faced the same problem.

To complicate matters, most of these companies are currently undergoing the process of transition from the founder generation to the second generation.

It is these cultural factors that determine how companies react to change.

Suppliers recognize change, only when sales begin to drop.

Their first reaction is to find an answer to the problem.  However, to be successful, the problem must be external to the company, because the primary goal is to maintain the integrity of the culture, structure, and system as formulated by the founder and which has been so successful for the past decades.  To put it another way, if the problem is internal any answer must by definition presuppose that the current culture, structure and system as created by the founder, is wrong.

 a.    Sales are falling because the industry is in a state of recession

This is the perfect answer because the problem will eventually solve itself and therefore, management need not do anything.

 b.   Sales are falling because customers are no longer working with our country

This is a very good answer if you are located in Thailand, Jordan or Dominican Republic.  The bad news is that there is no solution.  The good news is that the company’s culture structure and system remains unchallenged.

  c.    Sales are falling because we are not taking a more proactive role in marketing.

This is everyone’s favorite, because unlike a where there is no problem and b where there is no solution, c shows that management recognizes a problem and is working towards a solution while still maintaining the founder’s integrity.

It is only after management goes through a, b and c  and fails, that some companies recognize that the problem are internal:  Our customers are buying, but not from us.

To put is another way:  They are not buying what we are selling.

Those few who reach this point are able to begin to look at the problem. 

  • Things have changed.
  •  We must understand the change.
  •  We must adapt, even if that means changing how we operate.

We live in the real world where there are many changes and solutions.  The following is but one example

Change

Customer costs are rising.

Customers cannot pass these increasing costs on to the consumer.

Customers must reduce overhead.

Customers will cut costs by reducing the number of suppliers to the bare minimum of Strategic Supplier

If you are not a strategic supplier, you are about to become no-supplier-at all

If you are a supplier in this position, there is nothing you can do (unless you can suddenly raise your annual sales volume from $20million to $200million)

Solution

Find a group of retailers and/or brand importers who have a need for your product and where with some effort you can establish a relationship whereby you become a strategic supplier. 

This does mean creating new core competencies, moving to new markets and most importantly changing the company culture, organization and system.

The terrible truth is that what proved successful for the past forty years has failed in year forty-one. 

 

Saving the past is nowhere as rewarding as saving the future

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