For Under Armour, Supply Chain Is Key To Becoming a $10-Billion Brand
It's not easy taking on two of the world's best-known brands, but just walk through any airport or suburban mall or city street in the U.S. and you'll see scores of men and boys (not quite so many women yet, but it's coming) bedecked in Under Armour's trademark interlocking U's that's becoming as ubiquitous as Nike's swoosh or adidas' telltale trio of stripes.
No wonder the Baltimore performance apparel, footwear and accessories brand, which grew from a bare-bones idea hatched in CEO Kevin Plank’s grandmother’s basement in 1996 into a virtual cash-cow behemoth 18 years later, has notched 17 consecutive quarters of 20 percent or greater growth — an astonishing (and enviable) achievement. Under Armour is aiming to join the exclusive club of athletic wear companies — led by "a certain $20-billion company in the Pacific Northwest" — that have crossed the $5-billion annual revenue mark. As Bill Nienberg, Under Armour's vice president of global merchandise and sales planning, says, "We're a $10-billion brand that just happens to be doing $2 billion of business."
Yet much of Under Armour's stunning success has come despite operating with processes and procedures insufficient to ensure the company's future growth. In 2011 the company made a significant investment in its supply chain planning division, implementing Logility's Voyager (check) software to get a handle on demand planning, forecasting, inventory optimization and supplier relationships.
Supply chain as force multiplier
Every supply chain strives for speed, control and predictability, and Under Armour's investments are helping to create by 2016 a fully integrated global supply chain organization, says Nienberg, who describes the brand’s supply chain as a “force multiplier.”
At Logility's March conference, Nienberg spoke in no uncertain terms of how essential an efficient planning business has become to the heart of the Under Armour brand. "If you ever doubt the importance of our demand and supply systems work at Under Armour, go back and listen to no fewer than the past seven investor calls where the Logility implementation is called out by name or we indirectly refer to the benefits of demand planning improvements," he notes.
Indeed, the deployment rescued Under Armour from spreadsheet purgatory. The company had been working off of more than 78 spreadsheets, writing queries from SAP's Business Warehouse, pulling out data and creating macros. Planners, all 20 of them, were required to review the documents line by painstaking line at the style/color level, sometimes even by inventory segregation for the retail or ecommerce businesses. This lack of visibility prevented Under Armour from clearly communicating production plans to its 65-plus factories or informing executives about what the inventory position was expected to be by year's end.
Today Voyager serves as a central repository for all of Under Armour's supply chain information, enabling stakeholders to see data on apparel and accessories (some factories make both) in a single view. The software, with its intuitive web interface, also helps the brand manage multi-tier vendor minimums — a big deal for any apparel business. "Being able to understand multi-tier logic and plan and manage those production resources was a key requirement for us," says," Ryan McGarry, director of planning systems.
Under Armour's sales team "loves to sell the crap outta stuff," as McGarry puts it, but burdensome lead times often put a damper on their enthusiastic efforts. "The worst thing with long lead times is having to tell the sales guys that we can't service that demand — or if we can, it'll be 60 days later," he explains. Now that the company has a heads-up on demand spikes within lead times, UA is better equipped to react and offer an alternative solution — or perhaps even pivot and pursue a different sourcing strategy to get to market more quickly.
Fast, done, nimble
If the brand's latest motto is "I will," then the brand's internal mantra just might be "I will move quickly."
"This is the fastest company I've ever worked for, around or with, " says Nienberg. "The word of the day is ‘done, done, done.’ Make fast mistakes. We're taking on industry goliaths, so we have to be fast and nimble."
Beyond being a fast mover, Under Armour is relying on Voyager to solve mission-critical problems. For one, using the software to simulate multiple scenarios has helped to solve how the company manages finished goods at the factory with different minimums, and now Under Armour is setting its sights on more efficiently packing those goods into the right case packs, for example, with the ideal mix of smalls, mediums and larges, says McGarry.
Naturally, with increased supply chain visibility comes improved and quicker decision making. Planners now are using their time more effectively, too. Before greenlighting Voyager, planners spent a considerable amount of time investigating a shortage or excess, only for the problem to have disappeared by the time they fully reviewed it. McGarry's team built in a host of customized alerts at the right thresholds to be actionable for planners.
Instead of wrangling a tangle of spreadsheets, supply planners now have diversified responsibilities. Under Armour shifted three planners exclusively to tier two planning duties so they negotiate with fabric mills and trim suppliers. “They’re actually really aggressive on us to get a new supply planning model up and running for tier two supplies,” notes McGarry, “which is something we’re working on for the future.”
Tier-two planning is becoming a larger concern industry-wide, says McGarry, and increasingly benchmarked in industry studies. While 70 percent to 80 percent of organizations have visibility, communication and planning with their tier 1 suppliers, those figures drop off sharply when the discussion turns to tier two. “We’re trying to take our finished goods supply plan and roll it directly into our tier two supply plan to make sure they integrate,” McGarry explains. “We’re trying to ensure that our inventory optimization software that tells us the right level of stocking we need at those tier two suppliers is accounted for and that we’re on our way to becoming one of the best planning supply chain networks.”
Happy suppliers, happy life
If you ask company executives what they appreciate most about going live with Voyager, they'd point to the ability to finally link supply and inventory to demand fulfillment. "We're able to paint the picture of why we're not going to be able to service something," explains McGarry. "This supply is going to be filling these pieces of demand, therefore these demands won't be able to be serviced. It provides a long-term view for our suppliers."
For their part, Under Armour's suppliers seem to appreciate the company's new and improved modus operandi. McGarry recounted how when chief supply officer Jim Hardy met with all of the vendor partners at the end of 2012, they complained that Under Armour was difficult to work with, and how adidas and "those people in Oregon give us so much visibility." Fast-forward to Hardy's most recent supplier tour in early 2014, and vendors were singing a different tune. Now they described Under Armour as the "best organization to work with" because of the visibility that Logility affords. "It's like we're finally doing something right here," McGarry says.
And because they have greater visibility, suppliers have stopped buffering their lead times; the average has dropped from 146 days to about 125. Vendors removed that extra 10 percent to 20 percent of additional time because now there’s greater trust both ways in the relationship, says McGarry.
While the brand has conquered constraints around style/color minimums, there’s plenty of work to be done around other forms of constraints as each season rolls around. One of Under Armour’s polo shirts is manufactured in Peru and features a double-knitted collar that’s made on only one machine that can churn out a maximum of 70,000 such collars monthly. That limitations must be factored into the planning process, McGarry says. The planning is starting to work with the sourcing operation to determine how — as they are going through the design process, working with factories on prototype and costing — come up with practical plans to manage constraints.
The feedback loop, important to any growing business, is especially near and dear to McGarry’s heart, he says. “Now that we have demand planning up and running, we want to tell demand the feedback from supply,” he adds. With the right data hand, they can explain why demand planners can’t shift their forecast away from product X, for example, and into product Y — because, well, product X was already purchased and paid for. As of now supplier projections match demand accuracy approximately 15 percent of the time but that number is steadily climbing, McGarry says.
Next-gen collaboration
Syncing up so many parts of the Under Armour enterprise requires a strategic focus on collaboration, and Nienberg notes that “the best form of collaboration doesn’t just happen — it’s engineered.” Four-dimensional or next-generation collaboration, a core competency at Under Armour, is what his team “brings to the party” and a key component of how the brand aims to be stronger, he adds. Going forward, the company will pay particular attention to prescriptive analytics, which model potential outcomes, an area where the brand is just now barely scratching the surface.
It’s also important to demystify planning for all of the cross-functional partners who are coming on board. Just as Haley’s Comet was interpreted through the ages in the immediate context of each distinct culture and time, often as a nefarious harbinger of doom, planning is often seen as just another burden to tackle, or perhaps even worse, as a new project to further bog down already taxed enterprises, says Nienberg.
Data, Nienberg says, is both the Holy Grail and the language of collaboration. “Most organizations are not prepared for the level of planning that sales and operations planning forces on them,” he concludes.