Sensemaking VF Corp’s New Sourcing Home

Monday’s news brought criticism aplenty from peers across the industry. The Hong Kong vs. Singapore argument has indeed hit very close to home. Global trade uncertainty dating back to 2016 between the world’s two biggest economies has caused many to ask the question, “Does it make sense to stay in Hong Kong?”.

But in a prolonged tit for tat trade battle staying steady and avoiding rash decisions has proved to be the best course of action. It was only several years prior that we witnessed a number of influential retailers set up sourcing headquarters in Shanghai and in effect doubling down on China, but rising labour costs and the development of offshore capabilities brought businesses back to Hong Kong in pursuit of a more balanced footprint.

2020 has brought insecurity out in each and every one of us, China’s increasing grasp on Hong Kong’s diplomacy combined with continuing global fallout with the nation of 1.3 Billion has taken the questioning around “Hong Kong as a Sourcing hub” to the next level.

However, the catch22 of the situation brought about by 2020’s events was a complete lack of mobility and therefore resulting in an inability to really act on an exit from the city. This, coupled with Hong Kong’s as well as its citizen’s handling of the pandemic made “Asia’s World City” quite an idyllic situation to operate and reside in through the course of storm.

So when Monday’s announcement from the conglomerate arrived it left an instant feeling of shock, equivalent to that of a fire alarm awaking you in the midst of a deep sleep. 

Those around me and myself included hit critically at the decision;

“Singapore lacks the talent”
“Why make a move that’s as non-sensical as being in Hong Kong”
“Rushed decision making”
“Singaboring” (I agree, Hong Kong in my totally biased opinion is more interesting)

My stance on the “if not Hong Kong, then where” conversation has been toward the move away from centralised hub sourcing and more production country ownership / leadership. At the start of the pandemic the Spire research team (a.k.a. me) ran a survey with regional leaders asking about confidence in Hong Kong followed by alternatives. 


And the kicker question… Where if not Hong Kong?
 

After working with offshore offices in Vietnam, Bangladesh, Sri Lanka and India it is clear the talent outside of Hong Kong has developed into a more than acceptable alternative to the city’s once rock solid pool of industry professionals. For decades overseas leaders have been engaging in a knowledge transfer that has seen the development of individuals in economies where the garment & hardgoods industries gather much more of the talent spotlight than in the service dominant economies like Hong Kong and Singapore.

In short… the offshore’s rising levels of talent, agility and increased flexibility due to supply proximity as well as lower costs framed my initial doubts behind VF’s Singapore move. (what a sentence aye…)

Where I think we’ve got it all wrong, a history of boldness

VFC isn’t looking to copy & paste Hong Kong into the Lion City. Their new supply chain organisation certainly isn’t going to be like for like with the one of present. The learnings of 2020 have called for a reinvention to the sourcing entity. And the Singapore move may stand to rewrite the dictionary definition for what a reinvention looks like. Observing of VF’s past decisions helps to clarify not the specifics, but the mindset and attitude behind the relocation.

Boldness comes with the territory when one is in the business of buying & selling major brands, VF Corp’s constantly shifting portfolio creates an almost seasonal calendar of transformation. The supply chain is in near routine flux on the continuous lookout for synergies among brand owners across the group. The split of the denim business, now known as Kontoor was at the time a major happening that has served the Kontoor business, as well as the VF business fairly well. Splitting a no longer core denim business combined with the acquisition of Supreme in 2020 makes sense in a time where brand exclusivity = value. Recent actions by the giant have set a grandiose tone, considering this the bold nature of Monday’s announcement was of no surprise.

From a talent standpoint, VF’s Human Resources organisation has been one of the more progressive businesses in the industry, launching initiatives aimed at bolstering empowerment and enablement. They levelled out annual leave across the entire organisation from an Associate to the top of the pyramid at a VP level, no matter your title or status you were entitled to the same work/life harmony from a structural standpoint.

Orchestrating a move at such a scale (VF has been one of Hong Kong’s largest apparel employers) is far more complex than blocking days out in a diary. The enterprise prides itself on operational excellence and a firm belief in process, the giant leap to giving more holidays no doubt can quickly be calculated in lost productivity terms in a business that measures very well.

So, bold thinking and challenging some, but not all of the industry’s norms has kept their brand in favourable stead across talent circles. Powerful ideas thinking backed by bold execution.

The power of a blank sheet of paper

Making the move to Singapore makes sense if the corporation is looking to take advantage of an empty writing pad to draw upon.

A radical decision enables radical newness, something that perhaps only could have occurred with the breaking of old chains that sit in existing and well-established frameworks as well as cultures. Singapore is a reinvention and VF’s got the brainpower, culture of change and resources to set the tone for other global sourcing organisations. And this is where the power of imagination gets exciting.

Technology’s slow crawl into the supply chain received a much-needed kick of encouragement in 2020 and the 1̶0̶ ̶y̶e̶a̶r̶s̶ 12 months of progress towards digital enablement may have very well been the double-edged sword resulting in the dramatic shift out of Hong Kong. Perhaps the industry-wide shared vision of a digitally and partner empowered supply chain run by an effective, but lean organisation saw its feasibility realised by leadership through the forced changes of last year.

If VF does indeed have a blueprint for this model then the logic behind a new city with a more stable outlook in closer proximity to supply chain partners checks out. We’ll soon be able to assess if this is indeed the case based on the talent transfer out of Hong Kong, whether or not the CIO office is kept intact and how their new job descriptions read in Singapore. Tech Heavy is my guess

Commending bold action

In the opinion age, any major decision is met with its share of criticism and doubt. So it is of no surprise that for an industry hit hard in a city currently facing its toughest tests on the global stage that the feedback trends more towards a cynical viewpoint and for the first year or two we may very well be saying “I told you so”. 

But progress happens incrementally and when VF Corp hits the two-year mark we may be witnessing the flower’s bloom. If the group does happen to redefine the sourcing organisation, let’s hope that it’s one well-positioned towards solving the industry’s greatest challenges.

What happens to the rest of us

The industry is still reeling from the news and many good people will be in need of work following the outset of this situation potentially to the advantage of employers in Hong Kong. Some onlookers view this as the beginning of the end for Hong Kong’s reign as the Global sourcing hub. Earlier this week I witnessed a vocal individual on LinkedIn calling this a “nail to the coffin” for the city, that individual may very well be correct, but if we’re to fall into the trap of collectively adopting this mindset then we’ll be sealing this fate. 

A shot of adrenaline

In the closing stages of WW2 in the theatre of the South Pacific the United States Rangers engaged in a dramatic rescue of POWs based in the Phillippines, the camp raid at Cabanatuan. The marines trekked, hacked and slashed their way through the jungle to engage in one of the most theatric (and underrated) missions of the entire war’s duration. Rescuers carried POWs out through the jungle toward freedom, literally high on speed.

VF’s announcement to depart is our shot of adrenaline

The reverberating echoes of this decision have unsettled us, shock and awe. What a wake-up call to 2021. Without a doubt a sourcing ecosystem will spawn in Singapore, attracting more Hong Kong incumbents to take advantage of a VF blueprint, however no destiny is ever sealed. Opportunities exist in the gaps soon to be left behind by the influential apparel behemoth. 

What brain drain?

Yes, we’re losing one of the most progressive supply chain and talent organisations, but the shock to the system nullifies any loss of knowledge. Information and Ideas are in plentiful supply everywhere, it is action that is truly is in demand. VF’s move forces us to take action on our reflections and to fight harder for what we have as well as to see what Hong Kong’s got to offer. We may well end up in another city, but the best thing for the industry is to lose a step every once in a while in order to leap forward. It is in my view that the awareness of Monday’s announcement will send all of us into a stage beyond reflection because last year already brought out the sensitive side. Urgency in action.

The actions taken by organisations in 2020 were necessary, if you’re still here you’re still surviving. That’s a victory worth patting yourself on the back for. 2020 was about holding on and hoping like hell the wave didn’t knock you overboard.

We now need radicalisation beyond looking at the dollar cost and for someone to play the game in favour of the long term rather than next quarter’s dividend. We can’t afford much more of last year.

How far can you run on adrenaline?

It’s anybody’s guess, but now we’ve got momentum, a mindset momentum. Every, single, one, of, us.

If you were to survey everyone in your office you would undoubtedly find VF’s supply chain to be a second-degree connection at the minimum. You’ve either worked for em, supplied em, interviewed with em or hired from em.

This news has hit everyone, let it be the rallying call to your troops. If 2020 was the wake-up call, 21’s the 3 pointer buzzer-beater. 

Hippos moving ponds

Any time a Hippo shifts out of one watering hole in favour of another, feeder insects and birds follow with. But fish below the surface also need to feed, fish without two legs to stand upon are destined to stay in the same body of water looking for new hosts. VF Corp is a big, big Hippo and they’re a resource for a large ecosystem. Hong Kong’s sourcing industry is soon to experience an increased bandwidth from this ecosystem, hungry to feed. 

Grabbing the mic

There’s no one playing the headline act, but the venue’s still packed. The industry is looking for voice and a champion. Maybe Hong Kong’s sourcing days are numbered, but it’s not yet fact and the numbered days would amount to a large digit total. The city and those employed in the sector need a collective of champions to grab the mic and voice for more. 

– 444,729, the number of individuals employed in the industry category of Import/Export trade and Wholesale.
– 83,298, the number of individuals employed in the industry category of Manufacturing.

500,000+ out of a total employment count of 2,700,000. Worthy of representation. An industry in need of subsidization, a talent pool in need of protection.

No Fate is Sealed

Perhaps VF Corp sets the tone or perhaps they don’t. Perhaps they high tail it back to Hong Kong in 5 years, or we all end up joining them. Every decision is a calculated risk and the twists and turns of the environment around us may change the narrative. But the glass half full approach to this week’s non-vanilla and radical news is to look at the opportunity to drive a progressive narrative, not necessarily around geography, but around being bold. 

The tone has been set, action has been taken, its now your move. Make it count, make it radical. 

Hats off to VF Corp and hats off to all of those who aren’t going with, they’ll be looking to the rest of us for support.