The Ethical Supply Line: Audits, Accountability, and Action. - Roger Mayerson

Speaker A: Welcome everyone to the Retail Corner podcast from Proxima 360. The purpose of our podcast is to bring a relaxing educational environment to discuss the current retail landscape, best of breed products and retail business best practices. You will always find us talking with business users, technical resources and retail experts on how they are and where they are headed.

Speaker B: Good afternoon everyone and welcome to Retail Corner. And I am here joined by my friend Roger. He is the senior vice president of apparel and soft goods over at Legility. Thanks for joining us sir.

Speaker C: Very good. Thank you for having me. Look forward to a good conversation.

Speaker B: Absolutely, absolutely. Just to kind of kick things off, um, can you walk me through your CV a little bit? Kind of, kind of tell me what you do over there at Legility and maybe how you got to that position.

Speaker C: Yeah. So how, how did I get here? That's the good question.

Speaker B: Step one.

Speaker C: Yeah. So basically um, my father had a vertical apparel company in Milwaukee, Wisconsin. And so I grew up from time, I was probably 14, 15 years old working in yarn bids. Eventually became a knitting machine mechanic and finally became uh, a uh, an engineer, industrial engineer where I was doing time studies and we had two factories plus we had a big knitting. It was a seven story building. So there was a lot going on. And um, I moved, eventually became chief industrial engineer of a company called Garand, known for grow animals in the, in the day, in the 70s. Uh, they still are part of the Walmart uh, brands.

Speaker B: Yeah, absolutely.

Speaker C: Yep.

Speaker B: That's a whole food source, like part of a food group for my children.

Speaker C: Yeah, yeah, we were the biggest apparel, uh, children's apparel company in the country.

Speaker B: Oh yeah.

Speaker C: We had 25 factories, 18,000 sewing machine operators.

Speaker B: So Gravels is huge.

Speaker C: A lot was going on in those days internally but I saw where things were going and that is slowly but surely including our company people started moving offshore. And uh, so I got into, move into the sourcing side of things. And when we first started going offshore we tried to do it the same way. We did things domestically in our own factories. Um, and so there were a lot of rules that we set up that the offshore facilities and vendors weren't used to. And so that became a big part of what I did. Um, eventually I had the opportunity to move to what was called Dayton Hudson Corporation, which was Dayton Hudson's, Marshalls, Marshall Fields, Target, Mervyn's and um, I was put in charge of our uh, private label division and trying to grow that starting at Mervyn's and then eventually moving over to Target. And we went from two people at Target that were in the sourcing department and one pattern maker to 12 years later, uh, we had almost 12,000 people working in the industry.

Speaker B: That's pretty quick. I mean, that's.

Speaker C: Yeah. So of those, like 1200 were directly, uh, employees of Target and Dayton Hudson. The rest were certified to be in factories doing quality and all that kind of stuff.

Speaker B: So given, given your obviously past experience and everything else like that, um, we could talk about anything in the retail industry. We could talk about anything from, from A to Z. It really, it doesn't, you know, it wouldn't phase you at all to have any topic thrown at you. But I'd love to talk about like, sustainability and transparency within inside supply chain. Because, I mean, like you said, you grew it from two to, you say, 12,000 people.

Speaker C: Well, we actually had 1200 people.

Speaker B: 1200 people? Um, yeah. So from two to 1200. And so that's pretty substantial growth. And so there has to be a need for that kind of service. And so with that sustainability and that transparency within the supply chain, um, like what's essential for companies to kind of make that recipe work, I think, you

Speaker C: know, visibility is number one. And having rules and everyone understanding what they are, what the expectations are, and then having a way of measuring those. And so, you know, we, I would say when we first started out in the 90s, when I first started with, uh, On Target, um, the big thing was corporate responsibility that, you know, the overseas operators kind of followed their own laws and their own rules and, uh, they didn't quite match our expectations of what a good, A good representative of the retailers would be. So we spent a lot of time training them, getting them to understand our expectations. And it was for their own good to have, uh, employees who were enjoying doing what they did and were treated fairly and well. And so it took, I'd say, a, uh, good 10 years from the time we started with the whole concept of corporate responsibility to the point where people understood they had to do it. A lot of times in the beginning where our vendors would have double books, they would pay below the minimum wage, but they'd have a set of books that showed that they paid above the minimum wage or they paid, they worked too many hours and they have another set of books showing.

Speaker B: One for the audit. And so patent, I'm guessing that you have to have audits, you have to have, um, the codes of conduct, everything in place for these suppliers. And finding out the double books and everything else like that is, uh, I would imagine, very difficult at times. How would you go about that how are you integrating those systems?

Speaker C: I would say the first thing was trust. We had to build trust in both directions. Uh, in the beginning they thought we would be taking advantage of them on um, both costs and on um, creating rules, uh, along the corporate responsibility road. But at the same time we had to develop a trust that when they were telling us things they didn't have two books that they would believe they would show us the right things that it took to be a responsible citizen in the industry. And you know, some guys were really good at it and really believed in it and they became our best vendors. And because the whole idea of trust just started with corporate responsibility, but then it included things like quality, you know, training of the operators, having the right equipment, having you know, the right internal rules and fair two way communication between the employees and the uh, and the vendors themselves and then us. It took quite a while to build that trust. But once we did, we found that the guys who were inherently trustworthy for corporate responsibility were also trustworthy in all the other areas that were important to us, including sustainability and.

Speaker B: Absolutely. Well I'm glad you mentioned sustainability because I mean, I guess we started at the, the top of the hill with, with corporate responsibility and everything else like that. But given the, given the market today and the market like the consumer today, more and more people are caring about where their clothes from, caring about their, their impact, caring about the workers that actually made the clothes and everything else like that. And so are you seeing the work that you've done with corporate responsibility over the last 20 years start to pay off with the consumer as well?

Speaker C: I think that what we see is happening is, well first of all the Internet made a big difference. The ability to communicate all the way down to the end use customer through a QR code where they can see information you want them to see, makes them more comfortable with you as a brand or as a retailer, that you're treating your vendors and the people who work for your vendors fairly. And so it's really as that visibility became easier to expose our end use customers, we started seeing where it our better customers, just like our better vendors all wanted to work together to make sure that we had a fair uh, you know, uh, supply chain that treated both the people who were in the factories fairly as well as the brands fairly well.

Speaker B: I mean that's across the board. I mean more information, more and more data is getting integrated across. I mean now you can literally tell the name of the person who made the product that's half a world away and six months ago and everything else like that. And so you can utilize, uh, those systems are becoming more and more integrated.

Speaker C: Yeah.

Speaker B: And that information is becoming more and more kind, uh, of easy to suss out. And so like we talked about audits and we talked about the self reporting versus the audit scores and everything else like that. And so is it become becoming, I was, I would assume it's becoming easier to match those two books. And are you seeing any sort of like meaningful improvements with AI or anything or how are we improving that?

Speaker C: That's a, that's a good question. So we have uh, a unique place in the market in that we have a platform that goes from the beginning where you're making plans of what it's going to take as far as supply and demand and matching those supply and demands up. And then having the ability to have profiles for our vendors and we're talking about vendors and suppliers all the way through multiple tiers using traceability as the engine, um, we're able to start scorecarding them on all the multiple requirements that we have for them. So by having a holistic view of our supply chain, it really helps us to determine who's the best vendor for a specific product or a specific delivery and um, measure them against multiple expectations. So we have a holistic report card that basically says um, what's their quality assurance level? What's the level of sustainability using? We're linked in with the worldly FEM facility environmental module. So we can measure every facility, every factory and how they rate against 10 different environmental factors. So that uh, comes into the reporting, we have the ability to do corporate responsibility assessments. Whether it's the assessment that our customer develops or we are also linked into the Worley SLCP standardized corporate responsibility assessment. And so that's made it much easier for our customers and for our vendors to be able to see, to measure on an even plane that they all have the same assessment and they all get measured against the same um, measurements.

Speaker B: So let's take a look at the bell curve. You've got some of your vendors over here that are just an F, for lack of a better term. They are failing all left and right basically. And so but they're producing a product, they've been uh, part of the vendor family for years and you want to keep them rather than just say let's find some place to source it. What kind of corrections are you seeing that are necessary for that F, uh, to bring them to an A.

Speaker C: So part of our uh, vendor management solution is the ability to automatically generate corrective action plans. So first of all we have multiple measurements from corporate responsibility, sustainability, all of that. The one big thing we're able to do in the platform is to get a holistic view across all those what we used to call silos. Used to be that the guy in charge of quality, that's all he did, he only knew quality. The guy in terms of sustainability, the guy who's in charge of uh, manufacturing practices. But what we've been able to do is take and build those together so there's a view across all those silos and everybody knows how the vendors are doing, including the vendors themselves. And then we generate these corrective action plans to allow them to continuously improve. So we'll have a, we'll come in and we'll do a self assessment in each one of these areas. We'll then do a third party assessment many times. Sorry about that. Ah, um, and that we'll get, we'll have third parties come in or our customers will somebody like a BV or an SGS and they'll validate the self assessment that are, that the factory has done.

Speaker B: Okay.

Speaker C: Uh, and then finally they'll get a score and they'll get a corrective action plan with the ability as they improve the different requirements, uh, on the different requirements their score improves. And now where we're coming from is on um, the AI front is the ability within our supply planning module to be able to automatically generate who is the best vendor for this specific product or this brand. Some brand may be that sustainability is an important thing. Like Patagonia, who's one of our customers. Obviously they're a leader in that area. So they want to make sure their vendors are leaders in sustainability and corporate responsibility. We have other customers who are selling to people like Walmart. And price is the number one thing. Using our AI engine we're able to multi source on multiple products and come up with who the recommended vendors should be based on all of the different variables.

Speaker B: I would imagine it's almost like March Madness or something along those lines. Where uh, if these vendors are, I'm sure there's a community of vendors that they're vying for that number one spot because I mean that's, that's where everybody wants to be. And so like when it comes to sustainability I want to make sure we're staying on track with sustainability. But when it comes to sustainability what are you seeing as the number one corrective action right now? Like what's the one thing that if I was a vendor watching this or if I was a buyer or I was a source, uh, procurement person. Like what am I, what's the number one analytic piece that I need to be looking at?

Speaker C: Well that's interesting because that's one thing that's been the biggest challenge over the last three to four years is the whole idea of uh, when you talk about sustainability, it used to be your tier one vendor who is manufacturing the apparel. But that has changed over the last three to four years with due diligence laws coming into place both in Europe and the US in that it's not just tier one anymore. It's is your cotton source, is that sustainable? Is it coming from sustainable farm? When you, then you spin the yarn, are you doing it in a sustainable way? When you're dyeing the yarn, uh, or the fabric, are you using sustainable dyes that can be reused? And so all that's becoming part of the big picture versus the way it used to be in a simpler day when it was only tier one. And so we have assessments done all the way downstream and those assessments then generate um, corrective action plans. And those corrective action plans can be from a sustainable viewpoint, from a corporate responsibility viewpoint, from a best manufacturing practices viewpoint. And so there's a lot of moving parts and that's why it's really important to have a platform that makes all of these things visible to all the players. So it's not just a little narrow silo, one guy worrying about if their quality is good. Everybody's worried about their overall uh, performance

Speaker B: because I mean we worked with a uh, a luxury good company that I mean they would take a, they would take a cattle, uh, hide from Ohio or something along those lines. And then it would go to China, it would go to Singapore, it would go to the Thailand, it would go to, it would go to Argentina and then back back up to Houston. I mean it's the most well traveled cow in the world. So. But they realized that that, that's, that circle, that system, I mean has a huge impact because I mean when you talk, oh well it's, it's ethically sourced leather. Okay, but is it, is it all the way around the world kind of thing? And, and people are starting to care, especially in the luxury good market, especially in ah, uh, kind of legacy pieces. People are caring about that. You can see a customer shift. And so yeah, uh, how are you guys uh, improving that communication between not only customer and vendor but our customer and store, but through the entire chain. What's the communication look like?

Speaker C: I think the traceability opened up the door to be able to see the whole supply chain from end to end. Nobody can do that before. There's been a lot of progress on that front to make sure that A, you know who the players are. So that's, that's the first thing. Obviously you gotta then B onboard them. So not only what's their name and address and who's the owner but like do they have all these, these um, things in place to ensure you that they're corporately responsible, you know, that they're, that they have a sustainable supply chain, that they, that they treat their people correctly, Minimum wage, minimum age, all of those that the processes in place ensure good quality because quality can't be inspected in by doing audits. Quality is performed through correct procedures and processes so that the good manufacturing practices is an important part of those measurements. And so in the end.

Speaker B: Cool. Yeah.

Speaker C: You know, you now have all this data and now you have a customer who says how can I trust you as a brand or as a retailer that you really are looking out for the people in the supply chain. And so that's where everything's moving towards a digital profile that you'll be able to see online through like a QR code and you'll be able to see data. And uh, we have customers currently who are already moving in this direction now we have customers who have, every item has a QR code. Today they use that for more marketing.

Speaker B: And in the European Union that's right around the corner that that is absolutely necessary. It's legally necessary.

Speaker C: Totally, totally. But now the problem comes down to who's setting the standards and that's where the EU is having a lot of problems now because there are individual countries that have their set of standards, their individual companies have their. But what should the standards be and what are you really trying to do to be able to give comfort to the customer? Because in the end that's what you're trying to do is you're trying to assure the customer in the use case countries that you have due diligence on your supply chain.

Speaker B: Right. So I mean you've kind of given us like I said, a holistic view of kind of what's going on and how things are communicating and how things are improving for both uh, both stores and ah, and the consumer. But I'm going to ask you kind of an off the book question but so how does, how does Legility fit into that global piece?

Speaker C: Okay, so Legility has multiple components in their platform. We're known for having state of the art planning solutions from demand planning, inventory, supply planning. So we're at the beginning of what it takes to be successful on the execution side because you have to have a great plan, okay, with a forecast that you can back up. Uh, but then you need to have supply that matches that demand and the supply has to be in one of these certified um, positions so that you feel comfortable that they're going to be able to provide on time at the right price, with the right quality and have the right sustainable footprint that meets your customers requirements. And that's. So what we have is a platform that takes you from the beginning, the plan through the execution to the delivery and making it visible to our customer who is the retailer or the brand and then to their end customer which is somebody buying a pair of shoes and wants to know where were these shoes made? And you know, are these people certified to be able to make shoes in a sustainable manner? That's where it's all going.

Speaker B: That's uh, it's kind of exciting like as a customer as well as a retailer because I mean uh, that level of information, it's almost uh, bringing in the farmer's market type mentality to a world market where you know where this is sourced, you know where it's coming from. But it's across the globe. And so it's more confidence when I'm buying something. It's more confidence uh, when I'm researching what to buy actually. So it's kind of a cool thing.

Speaker C: Yeah, really changes the relationship between the brand and the end use customer because now we have the ability to know what they bought because that'll be in the QR code. So now you know what the life of that product is and you can go out there and say you've had this shoe for five years, it's time to get a new shoe, we'll give you a discount and you know, we'll make sure that you have that relationship with us that's on going uh, forever.

Speaker B: Right, that's, that's kind of cool. So uh, we're bumping up against our time limit so but I wanted to make sure that I asked, I asked everybody the same question at the end of the, ah, at the end of a talk and I was just curious if you could go back to the very beginning in that seven story building and talk to that young man. What advice would you give him?

Speaker C: I think that more and more we want people who are employees, okay, People who are working in the responsibilities of let's say legility, that you have a holistic view of, uh, the supply chain you're not just looking at. I'm, um, a planner. All I care about planning. I'm a manufacturer. All I care is about manufacturing. I'm a diaphragm dye fabric. To really be successful, you need to have a view of the whole supply chain, understand how it's dependent on each components, dependent on each other, and make sure that you have the ability to, uh, ensure that it gets delivered on time with the best price, with the best quality. And that's the only way you're going to be able to do it, is have a platform that gives you visibility from end to end.

Speaker B: Makes sense. All right, perfect. Well, Roger, I can't thank you enough for enlightening us a little bit about sustainability and, uh, across the board, really.

Speaker C: Thank you very much, Dye. I appreciate the opportunity and look forward to the outcome.

Speaker B: Absolutely. Thank you, sir. See you guys next time.

Speaker A: If you would like to be featured on our podcast, please email us at podcastetailcorp Corner Live or visit our website, retailcorner Live. Looking forward to having you as our guest on our podcast, and thank you so much for listening.