Photo: Levi Strauss
Levi Strauss COO says partners helped it get through the pandemic
Liz O’Neill, chief operating officer for Levi Strauss, said that the denim brand was able to rely on its supply chain partners to help the company through challenges that arose as the novel coronavirus pandemic hit last year.
Levi’s COO told attendees of the National Retail Federation’s “Retail Converge” conference yesterday that established relationships, most going back 10 years or more, had already created a trust with vendors that allowed management to brainstorm solutions and come up with ways around some of the disruptions that took place.
She spoke of the “real threat” that Levi’s and its partners faced and doing “the right thing” by them. “We paid for our orders in full” and “committed to using all of the raw materials that had been procured on our behalf for future orders,” she said.
Levi’s found itself having to work out its issues during a time when demand and supplies moved from virtually non-existent to robust.
Ms. O’Neill pointed to the “surgical dynamic” of matching supplies to demand. Material sourcing was an issue for a company so reliant on cotton, and Levi’s found itself suggesting alternate product materials to enable the brand to deliver for its wholesale customers.
“We were kind of all in it together and they were like, ‘Yep, if you know you can make it out of something else, we’re okay, we’re gonna take it’,” she said.
Ms. O’Neill said that the creativity necessitated by the pandemic is a quality Levi’s is looking to continue to nurture going forward. Whatever form it takes, she was clear that it needed to be rooted in the core principles the company was founded on.
Digitization, she said, is part of the reason that Levi’s believes it is an even stronger company now than before the pandemic hit.
“Our goal is literally to digitize the end-to-end value chain,” she said. That encompasses product design and development, sorting and planning, and selling in.
Ms. O’Neill said the process, which requires both a cultural and technological shift, will make Levi’s a more responsive organization with faster speed to market, from ideation to finished product. She spoke about the benefits of improved forecasting and planning using predictive analytics powered by machine learning and artificial intelligence.
This “also helps our teams to get out of the sort of ‘heads down,’ repeatable work or repetitive work, and do more strategic work, more ‘heads up’ work,” she said.
Discussion Questions
DISCUSSION QUESTIONS: What do you take from Levi Strauss’ response to supply chain challenges created by the pandemic? Do you think Levi’s business model, which is engaged in traditional wholesale relationships and consumer-direct selling, provided any added benefits or drawbacks when compared to other companies with a more limited scope of operations?
Poll
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This is a terrific example of how true partnerships lead to better outcomes. Not only did Levi’s treatment of their partners help them navigate the impact of the pandemic, but they even further strengthen their relationships. A critical characteristic of Levi’s business model is flexibility underpinned by solid decision making informed by data. It’s not hard to see why this brand endures.
I couldn’t agree more, Mark. Levi’s is one of the only major retailers to have mastered the hyper-flexibility business model, although more are beginning to work on it.
Levi’s weathering of the supply chain storm exemplifies two modern-day retail truths: Relationships still matter in retail, and business model diversification is a powerful hedge against obsolescence.
Sounds like a textbook case of real, true, genuine partnership. Buyer/seller relationships can sometimes be downright adversarial when it’s all about negotiating price and timing. It sounds like Levi’s benefited from years worth of solid partnering, rather than having to pivot as a result of the pandemic. The pivoting was done in tandem, as mutual best interests were explored and executed. And now the relationships are stronger than ever. Perfect.
The days of enmity between seller and purchaser should be over. Pay on time or early. Pay in full. Cancel few if any orders after they have been produced. Engage in collaborative planning (remember CPFR?). Diversify sources.
Levi’s is on the mark and the pandemic triggered the brand to respond to supply chain challenges in the best way – engaging with their partners to solve the challenges together.
The retailer/supplier relationship is the backbone to any successful brand and once it moves it becomes a true partnership, all parties are invested in the success of the product.
When your suppliers are truly on board with you, you can help navigate each other through anything. From digital transformation, transparency, sustainability, and unforeseen pandemics and shifts in the market, you partner together to transform into new ways of working. For example, if you onboard digital product creation for speed to market, your suppliers will invest in the same technology and take the ride with you. This is a partnership.
Levi’s is open to flexibility, it iterates as it goes, and it shares its knowledge to others in the industry on saving the climate.
The Levi’s business model is exactly what brands should be working towards.
This is the exact type of relationship I think so many retailers are afraid to have with suppliers because of how competitive the landscape has become. Kudos to Levi’s for strengthening relationships and investing in them. With shipping delays getting worse, improving the reliability of the supply chain is becoming even more crucial, so this was as much a proactive move as it was reactive. A great example of thinking strategically.
I think Levi’s consumer-direct selling model provided them a solid understanding of what would be acceptable to their consumers (by way of material substitutes) which gave them the confidence to make commitments to their supply chain partners and to gain their trust and loyalty.
Strong partnerships with subject-focused SMEs are vital in retail. As the old adage says, “If you want to go fast, go alone. If you want to go far, go together.”
Traditionally the most successful retailers were the ones who had the best “location, location, location.” Going forward it will be the one with the best ecosystem of partnerships. Levi’s, CVS and Target are living proof that the the whole is greater than the sum of its parts, and that it is far more cost effective for a retailer to leverage partners to bring in new products, new tech and new customers than to try to do that all on their own.
What I take from this is that working together is better than an overly aggressive approach where one side, usually the retailer, seeks to extract all they can from the other, usually the supplier. Such relationships may produce short term gains, but they are not good for the longer term. Sadly, some suppliers have been abused during the pandemic and there will be fallout as and when things normalize.
The winners partner for the long run. The pandemic created opportunities for stronger relationships in the value chain. Providers with short term glasses on missed the incredible strengthening of its value environment and eco-system. Harmonized revenue models such as Levi Strauss’ added complexities of course; but multiple channels is the name of the game going forward.