As the omnichannel revolution sweeps through the retail world, fashion brand Levi Strauss is embarking on bold new initiatives to keep up with the times. It’s Torsten Mueller’s job to ensure Levi’s has the right supply chain foundation in place to support them.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Levi Strauss & Co. may have made its mark on the fashion world with denim work clothes, but it has continuously moved with the times, updating and expanding its product line to reflect changing consumer tastes. Founded in San Francisco in 1853, Levi’s today manages a worldwide supply chain that, due to Covid-19, recently had to adapt to changes in customer shopping preferences as well. Sales remained strong during the pandemic—after all, homebound consumers still needed comfortable clothes—but the shift from store-based sales to online purchasing led the company to enhance its omnichannel distribution capabilities and accelerate its digital transformation.
Overseeing that transition while managing distribution for a large swath of the world is Torsten Mueller, the company’s vice president of distribution and logistics for Europe and South Asia-MEA. Mueller has been responsible for the operational and strategic development for all assets in the EMEA (Europe, Middle East, and Africa) region since 2017. Last year, he was given additional responsibility as managing director, Levi Strauss Supply Chain Services & Operations GmbH.
An accomplished senior executive officer with international expertise across three continents, Mueller leads distribution projects, develops logistics strategies, and manages Levi Strauss’s European network strategy. He recently spoke with DC Velocity Group Editorial Director David Maloney about the company’s transformation and provided an inside look at its new automated distribution center in Germany that’s scheduled to open in November 2023.
Q: Levi Strauss is a 168-year-old company. How do you continue to reinvent the company and develop products that are relevant to consumers?
A: We continue to lead the industry through product, innovations, and bold marketing, putting the customer at the center of everything we do and placing us at the forefront of retail innovation. We are driving deeper connections to our consumers than ever before through our products, marketing, and digital and physical experiences. We are seeing increased demand for our iconic products, while building new icons and establishing denim trends. We continue to build out our omnichannel capabilities to make the shopping experience more seamless, convenient, and safe. We are leveraging AI [artificial intelligence] to continue to accelerate our digital transformation within the direct-to-consumer channel. We still have plenty of opportunity to amplify our reach and grow our share across geographies, categories, genders, and channels, increasing our flexibility and resilience.
Q: How do you view the current apparel market?
A: Our second-quarter performance was better than we expected, reflecting broad-based strength across our business as we continue to see recovery from the pandemic. In addition to seeing strong denim and casualization trends, we are also benefiting from the ongoing execution of our strategic initiatives. And we are excited to see consumers returning to our stores as markets reopen, with sequentially improving traffic trends.
Q: Many retail stores closed or operated on a limited basis during the pandemic lockdowns. How did that affect your customers’ buying patterns?
A: While the pandemic continues to impact our business, we are encouraged by accelerated revenue recovery in the quarter, with all regions and channels growing versus the prior year.
We are ready to serve our consumers where and when they want to connect with us, and we continue to build out our omnichannel capabilities to make the shopping experience more seamless, convenient, and safe.
E-comm growth rates accelerated sequentially from Q1, reaching 42% versus the second quarter of fiscal 2020. Net revenues through all digital channels grew 75% versus the second quarter of fiscal 2020. This was driven by strong performance across all regions. And our digital penetration as a percentage of total sales was approximately 23%.
Q: Higher e-commerce sales mean higher online returns. How have you addressed that in your operation?
A: We have made significant progress in optimizing our return capabilities in both Europe and the United States. As consumers are increasingly expecting a seamless returns process between online and offline, we are working to meet consumers where they are, ensuring they have the best experience end-to-end with our brand.
We launched a “Happy Returns” program that allows consumers to return merchandise at more than 2,500 drop-off locations without any packaging or packing slips required. We also piloted several other initiatives. A contactless returns initiative enables consumers to skip the line and return products with minimal interaction with our store teams. We also piloted a local pickup program in the Bay Area using [the post-purchase e-commerce platform] Narvar. It allows for consumers to schedule an at-home next-day pickup for a Levi.com return.
Q: Levi’s, like many companies, is undergoing a program of digitalization. How is it progressing, and can you share your priorities for that initiative?
A: We’re using digital, data, and AI to dramatically improve the consumer experience and deepen connections—leveraging every touch point to better connect and engage with our fans. Through data and AI capabilities, we've created a more cohesive and personalized consumer experience on our app and with our loyalty program.
We’re also now using AI to forecast the initial demand for each product next season. Results from our first-wave test showed that AI-driven demand forecasting improved accuracy, so scaling it should enable more precise inventory investment. It should also lead to a reduction in markdowns and clearance items, prevent waste, and enhance sustainability, all of which improve our margins. This will be powerful in combination with AI’s ongoing contribution to our pricing and promotion efforts.
Q: Have you had difficulty finding workers for your distribution facilities? What have you done to attract and retain new talent?
A: We mostly work with a 3PL [third-party logistics service provider] in Europe, who manages the staffing process. While it is an overall challenge to find good workers, we have been fortunate so far in that we have been able to meet demand and fill open positions. In general, our 3PL successfully uses a mixture of temporary contracts, full-time equivalents, and agency work staff that helps us to find the right mix.
For the Levi Strauss team, we rely on a mix of offers and tools that help us retain talent. For example, we emphasize our competitive contracts, [our stature as] a great company to work for, and [our ability to offer an] attractive career path and a chance to work on interesting and challenging projects.
We have been very fortunate with the team we have working for us in Europe and Asia/Africa.
Q: Your area of distribution responsibility spans three continents (Europe, Asia, and Africa as well as the Middle East). Do you approach distribution differently depending on the market?
A: Our approach is sometimes different, as we are trying to meet the customers’ and commercial teams’ requirements and they vary from channel to channel and from country to country—for example, with value-added services, delivery requirements, and so on.
In the meantime, we are trying to standardize as much as possible, such as with inbound freight, delivery times, etc. We are a service-driven organization, and as such, we focus on maintaining the flexibility to respond to the market’s needs.
Q: You are building a new omnichannel distribution facility in the Münsterland region of Germany. What led to the decision to build this new DC?
A: We are creating this new facility in response to Levi Strauss’s growth over the past four to five years and our need for additional capacity. We also wanted to operate a true omnichannel facility in the heart of Europe—to be precise, we wanted to be able to serve all or most of Europe from this new building, with the exception of the U.K., due to Brexit.
Our operations there are due to go live by the end of 2023. The facility will provide 1,450,000 square feet of distribution space, with the option to add another 430,000 square feet. It will have a throughput capacity of 55 million units per year.
Q: I understand the facility will be built in two phases. Can you explain why you’re doing it that way?
A: We are building in two phases so that we’ll be able to scale to demand and adjust our volumes accordingly. We also wanted to be able to leverage the experience [gained in] phase one when we go to choose the material handling systems for phase two.
Q: What technologies will be used in the new facility, and why were they chosen?
A: We will be using goods-to-person equipment [TGW’s FlashPick order fulfillment system], as all of our research indicated that this would be the most flexible equipment for the truly omnichannel facility we’re looking to build. Furthermore, we will be using a mix of shuttles and cranes to “flex” volume as needed. The design includes equipment that will be RFID-enabled to help us keep up with developments in the market and realize efficiency gains.
Q: Why did you select TGW as your design and material handling partner?
A: We went through a very stringent and months-long review and bidding process. Of all the offers we reviewed, TGW’s was the clear and convincing winner.
With TGW, we found a partner that offered the best technical and performance-driven solution. It also provided competitive pricing and the best cost/benefit equation. TGW has a great team to work with, one with lots of expertise. Plus, the company’s corporate values align with Levi’s.
Q: This facility has been designed with sustainability in mind. Can you tell us why that’s important to Levi’s and describe some of the eco-friendly features that were incorporated into the design?
A: Levi Strauss has been, and will continue to be, a leader in sustainability across all functions. With a project like this, we have a unique opportunity to make a statement about the importance of sustainability to our business. We will be applying for LEED [Leadership in Energy and Environmental Design] platinum certification for the facility.
As for sustainable design features, the facility will include geothermal heating and green roofing, and will be built in accordance with cradle-to-cradle construction principles by a developer from the Netherlands.
We are not only looking at sustainability, but also at employee well-being, and we will be applying for WELL certification for this new building. [The WELL building standard is a roadmap developed by the International WELL Building Institute for creating and certifying “healthy” buildings.] Our goal is that our associates will really like coming to work because this is a good place to work and a place to be proud of.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”
Economic activity in the logistics industry continued its expansion streak in October, growing for the 11th straight month and reaching its highest level in two years, according to the most recent Logistics Managers’ Index report (LMI), released this week.
The LMI registered 58.9, up from 58.6 in September, and continued a run of moderate growth that began late in 2023. The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
October’s reading showed the fastest rate of expansion in the overall index since September of 2022, when the index hit 61.4. The results show that the industry is continuing its steady recovery from the volatility and sluggish freight market conditions that plagued the sector just after the Covid-19 pandemic, according to the LMI researchers.
“The big takeaway is that we’re continuing the slow, steady recovery,” said LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. “I think, ultimately, it’s better to have the slow and steady recovery because it is more sustainable.”
All eight of the LMI’s indices grew during the month, with the Transportation Prices index showing the most growth, at nearly 6 points higher than September, reflecting increased activity across transportation markets. Transportation capacity expanded slightly during the month, remaining just above the 50-point threshold. Rogers said more capacity will enter the market if prices continue to rise, citing idle capacity across the market due to overbuilding during the pandemic years.
“Normally we don’t have this much slack in the market,” he said. “We overbuilt in 2021, so there’s more slack available to soak up this additional demand.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."