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.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.