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.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.