Last Updated 28 Jan 2021

Marche shoe district

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Logistics Is simplified by the geographical concentration of firms in the district and the personal knowledge and trust that characterizes relationships amongst district entrepreneurs. Flexibility by the small firms' supply network enables the ups or downs of fashions to be met. Since asses, however, the district network has had to come to terms with an outsourcing trend to low labor-cost countries that is always a threat to mature and labor-intensive industries in developed countries. As a result, production of low-cost shoes has been outsourced almost fully, first to Eastern Europe and then to the Far East.

In low-price product ranges, district companies retain only high-value activities of design, marketing and distribution in the Macerate district. Outsourcing has also affected the core district products In medium- to high- quality footwear. Here, however, foreign partners are Involved In only less complex tasks to preserve Italian style and quality. The result Is an Increasingly widespread network. Processed leather is brought into the district after initial processing in Asia eastern Europe for further processing (mainly to Romania and Albania for sewing and hemming).

Prepared leather is returned to the district for finishing and assembly. Such partial outsourcing - called outward processing traffic - preserves he high-quality standards of district shoes, whilst cutting down on costs. This makes logistics a critical activity. Transportation costs per unit have increased, and responsiveness has been put at risk. This is of particular concern to a business that is linked to fashion, where season collections and sales campaign deadlines cannot be missed.

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Whilst offshore sourcing has led to significantly longer lead times, increasing inventories and lot sizes are not an effective answer. Most district firms offer differentiated products based on fashion trends, and therefore loud face a high risk of markdowns at the end of season. Therefore, firms normally order only 25-30 % of requirements for a seasonal collection from their suppliers and the basis of forecasts, and these are mainly carry-over models and "classic" leather. Orders for the rest of the collection are made in line with incoming orders from fashion fairs, distributors and boutiques.

The new international network (including a sales network that is extending progressively towards Asia) has become so complex that even large companies find it difficult to manage. Leading district firms are tackling logistics issues through increased information processing capabilities and through advanced services from logistics service providers. In order to manage a production network pning from nearby district suppliers to Eastern Europe (mainly for shoes) and China (for clothing), Forward has installed SAP-OAFS (Apparel and Footwear Solution).

This new ERP system has allowed the company to improve visibility over production planning an tighten control over suppliers. Forward has outsourced outbound logistics, and is considering a logistics platform to handle information exchange for districts abstractors and foreign suppliers to reduce costs, an RIFF system to improve responsiveness to European customers and a logistics network to support its strong selling presence in China.

However, most district companies are not large enough to become attractive propositions for IT or logistics service providers. Whilst they can't afford to lose outsourcing opportunities, theses small firms risk being unable to manage the more complex networks that result. Moreover, most district entrepreneurs do not fully support the potential advantages of sharing outsourced services. Since they lack the accounting tools for getting a complete picture of logistic costs, the do not perceive logistics as a competitive weapon.

They care only about emergencies when a rush order is required or when a planned delivery is late, but dealing with such emergencies becomes more difficult when distant foreign partners are involved. Developing the infrastructure, the skills and the mind-sets, in order to manage such a radical change in international supply chain management, is probably the biggest challenge district companies will face in the next 5-10 years.

Marche shoe district essay

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