The whole world finds it difficult to predict the after effects of the ongoing pandemic on businesses in the long run. It’s certain that the revival of destroyed supply chains would become a perplexing problem and it would take more than regular efforts, collaborations and financial manoeuvres to develop a strong, purpose-driven supply chain. The fashion and textile industry would also see the use of digitalisation of the processes more than ever to establish a balanced ecosystem amidst social distancing norms that are set to rupture the traditional ways of doing business. Daniel Harari, Chairman and Chief Executive Officer, Lectra has always been rationally vocal to suggest the fashion industry the possible solutions of global back-breaking challenges, and amidst COVID-19, Daniel has yet again spoken to Apparel Resources to discuss financial solidarity plans for the industry, need of digital transformation, ‘next normal’ longevity, CSR activities and Lectra’s take on the overall scenario.
AR: Lectra is one business which has strong foundation and has always overcome strongly through any financial crisis. How does Lectra see COVID-19 outbreak for its business prospects?
Daniel: The COVID-19 epidemic and its consequences have affected the company’s revenue and its operational results. However, Lectra has a particularly solid balance sheet, thanks to high net cash – €124 million as of 31 March 2020, and an economic model that has proved successful. Notably, this model is based on recurring revenues that cover 90 per cent of its cost.
We have paid particular attention to the health of our employees, but without ever forgetting our customers. Thus, we made sure to maintain, from the first day, the continuity of the entirety of our activities. We continued producing the equipment as well as consumables and parts, and delivering around the world. The after-sales service for our solutions was also fully maintained and will continue to be for those of our clients that are still in operation.
AR: What changes do you predict in fashion retail industry as well as the apparel manufacturing sector post COVID-19?
Daniel: The crisis hinges on three steps: lockdown, reopening and a new equilibrium. This industry, like many others, will probably go through a phase of consolidation and restructuring. In particular, depending on the macroeconomic environment, companies could be obligated to temporarily reduce their investments and operating expenses.
The true challenge for the fashion industry will be the successful transformation from an outdated, weakened and value-destroying supply chain into a purpose-driven demand chain. COVID-19 might be seen as the shock the industry needed to reset, reshape and unlock value at each step of the value chain: design, product development, sourcing, production, logistics, and retail. Companies will need to rethink organisational structures and supply chains for more agility and transparency, scale up new approaches around the pull model, produce season-less design and provide in-season retail which means shorter creative and production processes in a more integrated and local demand chain.
Also, innovation and collaboration will be key assets in the ‘next normal’ world. Those able to leverage them will probably be among the winners.
AR: People have enough time to learn something new due to the lockdown period. In such times, as we know, Lectra has started a series of webinars, customer training programmes, etc. What was your idea behind taking these initiatives?
Daniel:Our priority is supporting our clients, being as close to them as possible during this unprecedented time and this whether their needs are linked to remote work during a lockdown period, or reorienting their production line to manufacture masks and protective clothing to participate in the fight against COVID-19, or resuming their activity.
In order to provide value to our customers, we have put in place webinars aimed at decision-makers to help them prepare for tomorrow. We are also conducting online training sessions for users of our solutions so that they can master them even more.
AR: What are the CSR activities from Lectra in these tough times when the world needs supporting hands?
Daniel: We want to first highlight the incredible efforts that many of our clients have deployed to reorient their production equipment towards manufacturing protective masks and clothing. It is positive actions like these that will help protect medical personnel and the general population from this virus. Lectra is thrilled for the opportunity to help its customers that would like to follow this example and pivot a part or all of its production to the manufacturing of these products that are now necessities.
As an act of solidarity, we also quickly made our experts and the machines in our showrooms available voluntarily to support in the production of protective equipment. At the end of April, we had contributed to the production of 18,000 gowns and more than 200,000 masks at our French site. And, since the beginning of May, our showroom in Atlanta in the United States is also in action and has already cut more than 6,000 gowns.
AR: France is one of the most impacted countries in Europe. Is your Government helping to safeguard the apparel technology industry? If yes, what are the measures?
Daniel: The French Government called on textile companies to contribute to the production of masks and protective clothing.
No specific plan for the textile industry has been proposed at present. However, many plans have been implemented since the beginning of the lockdown. The most important consists of enabling companies to put their employees on partial unemployment. Thus, the State covers a large part of the salary for those people who cannot work, whether that be at their normal workplace or from home. This initiative should help companies survive this crisis. They are also guaranteeing loans and helping on short-term financing.
While we have put in place measures to reduce Lectra’s general expenses, we have decided not to use the partial unemployment arrangement and not to ask for help from the French Government. We made this decision based on the solidity of our financial situation, our capacity for resilience and our mid-term perspectives.
AR: Department stores have been the most visited stores during COVID-19 and it is viewed as the next big phenomena. Will department stores be able to continue to pull crowd even after COVID-19?
Daniel: Like all non-food stores, department stores (Printemps, Galeries Lafayette) were closed during the lockdown period and are still closed. Starting 11 May, all shops but the large department stores were able to open as long as they respect security measures (in particular, social distancing), which limits the number of customers per day.
AR: ‘New Normal’ is an often used phrase in all discussions and webinars in context to the post effect of COVID-19. Please define what this ‘new normal’ according to you is.
Daniel: It’s difficult to evaluate the scope of the ‘new normality’ and even its longevity. However, without speaking of the day after tomorrow, starting tomorrow, numerous things will and have changed.
Social distancing, hygiene measures and wearing masks (obligatory or not, depending on local regulations) collectively impact the work of teams onsite. The norm, for many months or on a long-term basis, is towards the generalisation of alternating physical presence and remote work when possible.
This leads to a massive reliance on solutions for digitalisation and collaboration, and this will be at all levels of the value chain and company’s production processes as well as their ecosystem. The ideas of collaboration and the extended enterprise will become crucial.
Another element of this new normality is the visibility that decision-makers will have on the evolution of their activity. A consequence of the uncertainty regarding the future will be the freezing or postponement of investment decisions. However, this absence of visibility will become the norm. This new situation will be accepted by all as a long-lasting and tangible fact. Henceforth, the necessity to continue to advance will revive investments.
Behind the resilience that the crisis we are going through has imposed on us, the need to gain in agility will be crucial for our industries. The evolution from principles of mass production towards those of on-demand production will accelerate. What’s more, this new normality will take root as a profound change in our economy. We will all – public authorities as well as companies – need to make choices, such as short cycles and nearshoring. Thus, all of our supply chains will have to be rebuilt in order to be nearer and more agile.