Resilient purchasing strategies in retail: Interview with Fabian Knoth from AWG Mode

Fabian Heinrich (00:00)
Welcome to another episode of Procurement on Plug, the podcast of Marcanis. Today I'm especially forward to Fabian Knot, the shopping manager of AWG Mode. Many may know the AWG Mode market. He makes sure supply chains run behind it. And yes, Fabian, welcome to our podcast.

Fabian Knoth (00:26)
Fabian, thank for the invitation. I am very to a conversation with today on subject of chain and I am curious what great questions you me.

Fabian Heinrich (00:38)
It's always exciting how you up in procurement, how you a sales manager. Maybe you start You're an old rabbit now, I may How did your journey start? Was it life goal to into procurement and a sales manager? Or maybe you could do little bit

Fabian Knoth (01:01)
I So my journey into the textile industry began... After my graduation, I a classical training for a retail salesman at Breuninger in Leipzig. One of the top fashion companies in Germany. Today, a lighthouse function. We class on how to up of to analyze and to approach customers. I had a lot fun there. I was to after two a years.

I a department manager who young employees and potential leadership. I talked and he me to the LTT Nagold. I textile business with everything that the chain, where do I raw materials, where can I manufacture was then also in India I the production sites there, first touches also with the topic of the topic of work, workplace, does it created, child labor, were all topics that we there on site, which also had a great place value And after that time, after the studies I decided to shopping.

I was to a five-week at Breuninger. I my way to my roots. After my studies at Breuninger, I was to my training and further training for the purchasing company. It a very exciting and challenging time. I a lot there and a very good mentor who confirmed me to further and to continue.

And was then firmly anchored in shopping and could in the textile industry actually nothing else to imagine. That was the basic train. Then I said, training or further education was for me. How does the whole issue of procurement We had many private label providers or partners with whom we in Germany.

But what the other side? The whole supply chain, which is is today. I three and half years in a sales company. I fully-staffed, from production to to sales. I basic of the supply chain, which I calculate everything that is part of

Fabian Heinrich (04:10)
I think that's also interesting to hear because in the textile industry, are with the sales end. You have to the delivery times, and with private label, the procurement is different from the other services.

Fabian Knoth (04:35)
Absolutely. We also what the AWG is doing We create everything ourselves. We design ourselves. We for the suppliers for production. We discuss with them what yarn strengths should how the text should be woven or knitted, which colors the supplier should So we very close to product and that is also the exciting thing.

On the one hand, responsible for or procuring data and so that the truth is there On the other hand, the level of the product, so that you whole value chain detail.

Fabian Heinrich (05:27)
Yes, very exciting. been a few years since you've supply chain. How has that changed over the last 10-20 years?

Fabian Knoth (05:40)
think it become much more The choice of right partner is becoming more and more The topic of and cooperation is much more important than it 10 or 15 years ago. You could change suppliers, but that is difficult There are fewer production sites in the East or in Turkey, Greece, where we also very much on the road in area Niersoos.

And that the topic of trust, but also up bond. Very important, because otherwise will no longer to your production times today. If you have no good relationship and they don't know, okay, are orders, we have a binding partnership, we have annual talks, we take care of each other to improve the process in the community.

Fabian Heinrich (06:24)
you.

Fabian Knoth (06:41)
Then you up somewhere in in the production and then you actually lose because the goods are not on time with you on This is the topic with which logistic I work together I can't in the season, but I need a binding forecast planning, binding contracts. As far as that is still possible today, was easier

But today have to for every container place, as if you the last to your goods to Germany.

Fabian Heinrich (07:20)
Even the logistics of Asia or wherever you manufacture it and with the partners became a challenge because you don't to the container anymore.

Fabian Knoth (07:31)
Absolutely.

It all started in 2020, when the first Corona lockdown in place. But since then, topic of transport transport path has much more It is almost easy to a supplier who within a short time, but a container within two weeks without having the right connections and planning is extremely impossible.

Fabian Heinrich (08:03)
Did you internal or strategies in Because it's so difficult to containers or logistics, we have a category buyer transportation or something like that? Or how since 2020?

Fabian Knoth (08:26)
What we have is a tracking tool collaboration with our logistic. That means we know from which port which transport times today have to We internally set a cost calculation for every country of which means from the country by truck, ship or flight. And we have a but a transparency for all the customers that my team, so that everyone can calculate for what does product XY cost in country A, what does it me in country B, what costs are added and what do I the end for the product in my warehouse. And so we go through each order individually. So very multi-layered and

Fabian Heinrich (09:17)
Mm-hmm.

Fabian Knoth (09:25)
But otherwise we it today because the costs are on one or the other side. And end of the day we because of all the conditions that affect whether it is the wages and side costs that in the Far East, whether it our minimum wage, which in the last three or four which will rise to these costs back through better raw material. church.

Fabian Heinrich (09:58)
I think these challenges that are many industries, but of with you with the delivery chain towards Asia, think that's another number. mean transport is one key challenge. What else there that changed to positive or negative in the last 10-20 years?

Fabian Knoth (10:27)
What was in the five years, and also for ABG, is topic of working conditions, which we have set The whole topic of how sustainable my supplier is.

Fabian Heinrich (10:43)
And of transparency.

Fabian Knoth (10:50)
That is another point that comes mind. Through digital media you are much faster in focus when something is being than it was before. Then came such misfortunes as the Rana Plaza in Bangladesh, where 1,000 people died And there, was also to the procurement and to act of textile companies. In the it I would not say a smear.

We have that they do not everything for cheap and child labor in the East and cares that it good for and that they reasonable wages. The topic has changed enormously and today we say that there are still black sheep, but we are so clean. I can only for AWG how you can that because we are today with no suppliers anymore, no BSC.

Fabian Heinrich (11:25)
you.

Fabian Knoth (11:50)
CDI contract, which did not our Code of Conduct, which does an eco certificate etc. And these were the big challenges. They ten years ago, but with the whole topic of LKSG and the pre-sale processes, which already in room, this in the purchase. Because I can't XY anymore because I don't know where the stuff from at end of the day.

Fabian Heinrich (12:29)
I mean, LKSG was probably the trigger event where everyone started, but it sounds like you're saying that the textile industry is already a trend or a consciousness.

For more sustainability, apart from the LKSG, the working conditions and so on. And because of the purchasing has changed, how to proceed, how to work closer with who perhaps check, develop and so on.

Fabian Knoth (13:04)
It was a very clear focus shift. It is still about the right product, but not about every price. The frame conditions are

Fabian Heinrich (13:06)
Yeah, So a shift from availability in transport and area to sustainability and quality.

Fabian Knoth (13:29)
Absolutely. And that is also what the company ABG very well. We are a family company. We have a portfolio of what the whole family is basically. From baby-child support to sports home textiles. And of course the quality fit into the family. And that also to the awareness that I in the I want to with a conscience for the whole family.

Fabian Heinrich (14:05)
Yes, that's absolutely correct. It's when you at the way you work in the shopping. I mean, the challenges and the complexity. It's always the question, either I up a big team or I solve with digital tools. What do you it?

Fabian Knoth (14:29)
We tried to the knowledge to several heads who are company and act because they the players on the other side for years, for decades in

Fabian Heinrich (14:40)
Mm-hmm.

Fabian Knoth (14:44)
We supported the thing with an Excel table, which is course very difficult to maintain, which is prone to where you different standard and different status quo or not make accessible as it might be necessary. And then for a solution how we whole topic digitally.

To name a very important building block, which is the whole topic LKS G1, is important to this overall portfolio as small as to get relevance on side. Relevant topics that may not fit yet, that may not quite conformed able to because you are a major, important partner in the production.

So we said we wanted at one point, digitally from any point and three years ago started looking a partner.

Fabian Heinrich (16:03)
In the it's a bit like you said, like 10-15 years ago in the sales, the salesmen said, a central sales would be not bad, especially with the leads and the whole accounts, and then you started CAMs, a sales force and whatever else exists. But in the it's the that's I it a SAM suite, because then I course different challenges and complexities, but also the supplier.

And that seems to the much more important topic for How can I these few supplier partnerships, my conversation notes, track generally assess and track Of course, I all in one automated system and can then on the relationship with the I think that's also very important.

Fabian Knoth (17:06)
you have the opportunity to

have through the Siewtube to for such a conversation in I did my risk analysis maybe half year ago, now back to the East, look at who I visit, who are my active suppliers, go the list, look at what I evaluated how I today, maybe an update, say okay, last half year it good and was bad, what are my points that I can prepare in the tool, does not an extra catalogue or buy a notebook or whatever, but has the whole thing in his pocket, can call and discuss can things together with him, say okay, to that point we want to the topics by setting deadlines, by sending out requests again.

And these are already advantages, because we also suppliers that do not only with one but there are four or five buyers and all have the same knowledge level because I up to date available in the Volca.

Fabian Heinrich (18:20)
And I mean, you're like that, mean, a lot has happened in last five years. of the trends and developments that you have now and challenges that started 2020 with Covid. If you another five years, what you there? Let's changes for the procurement of you or maybe for future challenges?

Fabian Knoth (18:45)
There are two points that need to be raised here. One is the topic of Turkey-Greece. How will the creation develop How will Turkey open or close?

Fabian Heinrich (19:00)
because say textile industry, there so much exposure to Turkey and Greece.

Fabian Knoth (19:07)
Yeah. We still a very strong market for production. You are not to the long transport routes. You have a production time of 4 to 6 weeks, similar to the Bangladeshi, but you goods shipping within 7 to 10 days maximum. Do you the order in your house in the East you to between 60 and 90 days for a shipping route. You can't even capture

You can fly like a Chein or a Timu, but we on a completely different platform and with completely different challenges. And not in the amounts we need as large medium-sized company. That's it's a challenge that we have to closely monitor. There is also a distribution going on eastwards, to Uzbekistan, Bulgaria, where it is now being and only the head offices in Istanbul or in Thessaloniki.

And on the other side it show what happens with Vietnam, what happens with China, what happens with Bangladesh, how strong is the American there on site or not anymore. Vietnam was very strongly influenced. Now it show what with the cells there on site, where the wage situation is moving. And then would course be a huge success if this the through the Red Sea is opening up again, because you a lot of and time if all back again. I issue of raw material as a challenge in the procurement itself.

The topic, was also in the past, you in China or Asia if you 10,000 parts. This has also relaxed significantly. You can significantly smaller amounts with your partners. It show how many of them are strong in five years, who can survive there, how high the demand for textile will decrease in the quantities. We can in Germany, the numbers are in sales and that will also something with the overall market. It remains exciting to observe.

Fabian Heinrich (21:40)
Yes, the flower is actually from a challenge that you described. I take it with me.

Geopolitical topics like Turkey and Greece, this is developing because it already very strategic market for you in the textile industry, that you have the country road with the short delivery times and the short production cycles and of then on a global level China how they continue to or make money or then also in the sense with the USA, the on Bangladesh.

The other topic you mentioned, transport routes, the Sea, in what way different transport routes will to Zölle, that has an influence the whole world politics plays a role in you will to with the procurement in the next five years. On the technological level, AI and such topics, see anything where you can much better or do see opportunities where the purchase can develop in terms of all the technology?

Fabian Knoth (23:00)
We have already done with We have much more and lot to recover from regarding the planning, the collection framework plan, limit control. Here we also at the AI in whether that be something for us. With a branch company with 250 locations, topic of stock management

I think it is important to this in a or long to the last percentage points out. I everything by hand anymore, but I like AI-supported products on board. This is already very important. Otherwise, product management we would be happy to with Clot 3D or assist to see how I in the design creation even more digitally. How can I of to the whole topic of pre-production, sample, photo pattern, etc. pp, minimize the number of for a photo pattern, is from Bangladesh to Germany and then back. Color lab dips I might not to send because I everything digital, then how the product looks.

In the right color, I it all myself and don't to a real product because I the technology, because we are still far from the reality of how the fabric looks, it's still bit too plastic and not a company from the fashion industry.

But we see over the last few and We have make that we can a exchange with We have started, but we still to work it.

Fabian Heinrich (25:14)
I think that's a good closing word for many stores.

The close exchange with the suppliers is the key. With I can any geopolitical crisis or any Black Swan event, as we say, if I in a close partnership. As you mentioned, he also a of technologies, new automations or design Of course, order optimization.

And the optimization of is still an issue. These are the last improvements. You can artificial intelligence more more. But I think, especially for our listeners, was super exciting to insights into the textile industry. How does it in the textile industry? What the challenges? What changed? And yes, I think very exciting insights, especially into the geopolitics, which, as you have seen, has lot of on the production of textile. So thank very for being I was very happy, Fabian.

Fabian Knoth (26:28)
Thank much. an exciting exchange. I would if we could again on another topic. Otherwise, we will stay in touch. And the listeners, have fun listening and exchanging

Fabian Heinrich (26:49)
If you for a moment, you have to after the stop of the recording.

Fabian Knoth (26:57)
Yeah.