Monarch Brands Supply Chain Management and Risk Mitigation Strategy

Inventory Supply Chain Management

At Monarch Brands, our product passion and market knowledge enable us to become the unbreakable first link in our customers’ textile supply chain.

While managing the supply chain, the sourcing department is in lockstep with Monarch Brands’ strategic synchronization principles. During the COVID-19, while many reputed companies failed to keep up on supply, Monarch Brands kept delivering its promise every day. The farsighted policy of the management at Monarch Brands and our strong partnership with global partners made this possible.

We partner with reputed mills around the world. (for more on our safeguards against inhumane manufacturing please read our Ethical Sourcing Overview post). Using global sourcing experience and boots on the ground, we leverage product knowledge to diversify production sites across multiple continents. As we navigate ever-increasing competition in the marketplace, we are secure in knowing that we do not rely on sole-sourcing or single regions/countries for our products.

Monarch Brands Reordering Process Flow

While designing our supply chain model, we ensure enough goods are in-stock, in-transit, and on-order with suppliers. We follow an inventory model of 2-2-2, which means we keep two months stock in our warehouse, two months equivalent stock on the water, and another two months equal supply on-order with suppliers. As a result, inventory and order flow is smooth, and Monarch Brands is always well stocked with regular items. Moreover, there are many staple SKUs e.g., cotton rags, knitted rags, microfiber cloths, utility cloths, kitchen towels, etc., which we overstock to keep extra months of stock in our inventory. Importantly, we take seasonal production disruption overseas in mind while ordering.

A – Trigger point for Reordering. For example, my reorder point is set at 1200 cases considering 200 cases per month sales and six months in the total supply chain. If quantity A falls below 1200 cases, we place a new order.

B – Safety stock. In our case, it is two months of sales in hand.

C – The maximum qty in the supply chain. In this example, our six months of inventory is 1200 cases. The reorder point triggers at point A. We place new orders if stock falls below 1200 cases.

D – Lead time. Our lead time for production is 60 days, and the transit time is 45 days. So, our lead time is 105 days or 3.5 months.

E – Reorder Qty – our Reorder qty is to fill up the maximum number of months in the supply chain.

Inventory Disruption By Known World Events

China closes for almost a month, from the middle of January to the middle of February every year for Chinese New Year (CNY). There will be disruption in production and shipment before and after the CNY (based on previous experience). We re-align our ordering pattern during Q4 of 2019 to tackle production disruption due to CNY of 2020 to have enough goods on the water before the CNY and immediately after the CNY. When China went into lockdown during the mid/end of January last year, most of our goods were on the water. These were all scheduled to arrive by late February or beginning March.

Inventory Disruption By Unforeseen World Events

When the USA started to lockdown during the middle of March, the demand for some products sky-rocketed, we saw increased demand for all our cleaning materials. We were fortunate enough to keep supplying goods to customers when others failed. By March 2020, seeing the increased demand for cleaning items, we ramped up our ordering pattern to Chinese vendors, and fortunately, by that time, factories have started resuming production. The Covid-19 crisis didn’t impact our supply chain.

COVID-19 has disrupted supply chain management across all aspects of the textile production process. The cost of cotton, oceanic, and domestic freight have risen exponentially due to increased demand and manpower shortages.

Supply Chain Risk Management and Risk Mitigation Strategy PPRR Model

We subscribe to the Risk Management PPRR model which factors in the following best practices.

Prevention – Take precautionary measures for supply chain risk mitigation.
Preparedness – Develop and implement a contingency plan in case of emergency.
Response – Execute the contingency plan to minimize the impact of the disruptive event.
Recovery – Resume operation and get things moving to normal as quickly as possible.

Critical Risk Mitigation Strategies

Moving production sites near to the place of consumption
Geographical diversification of production sites
Increased level of in-house inventory

For Monarch Brands, like many USA-based importers, it is impossible to move production sites to the consumer. Most goods come from Asia. Widespread textile production simply is not available in the US or neighboring countries. While we only purchase from reputed mills overseas, the cost of production in Asia is unmatched globally.

Also, no matter how much we wish to spread our production to different geographical locations, it is not realistically possible for all items. Some items are country-specific. Microfiber cloths and mops are an excellent example in this case. Microfiber cloths originated in South Korea, later, production and technology shifted to China. With enormous subsidies and production capacities, resulting in unmatched economies of scale, China offered historically low prices on microfiber cleaning items, which have forced many South Korean companies to shut down. The world is now solely dependent on China for bulk microfiber cloths and mops production. Therefore, when the US imposed an additional 15% tariff on bulk microfiber products from China in 2020, most of the microfiber customers kept buying from China. There simply is no alternative available for massproduced microfiber products.

Cotton production for our wholesale white towels, while primarily based in the Middle East and Asia, is more diversified. We are able to shift production between India, Pakistan, and Bangladesh for all of our core product lines. Our sourcing department includes Indian, Bangladeshi, and Chinese nationals who have intimate knowledge of the industry. We are able to quickly shift production to mills that are operating without delay.

The last parameter to Risk Mitigation Strategy was to increase the in-house inventory, which is also not feasible financially for many companies. Operating cash flow is bottlenecked with an increased level of stock. However, with our re-order model in-play, we are able to mitigate any unforeseen country-specific events.

Therefore, the Risk Mitigation Strategy at Monarch Brands is a delicate balance between inventory management and the diversification of production sites where available. I am proud to say that, by following our strategic synchronization principles, we have built a resilient supply chain at Monarch Brands. We’re ready when you need us.

If you would like to learn more about supply chain risk mitigation, please reach out directly to Tapash Bhattacharjee.