If you are a business owner in the manufacturing or retail industry, you already know that your supply chain can make or break your business.
Imagine you’re a clothes manufacturer and you just got a massive order for a hundred thousand shorts for a summer camp. Awesome news, right? But hold your horses—what if your fabric supplier drops the ball? Production delays, missed delivery dates… utter chaos!
This is just one of many supply chain horror stories. To avoid clogs in your operations wheel, every business needs a rock-solid supply chain to keep things humming smoothly.
lululemon’s supply chain? It’s like a well-oiled machine. At the end of the 2023 fiscal year, the company reported a revenue of $9.6 billion and has 711 company-operated stores worldwide. These are clear testaments that lululemon’s supply chain strategies are top-notch, rake in the numbers, and meet customer demands promptly.
This fashion powerhouse started with yoga pants that wouldn’t turn sheer at the worst possible moments—because, let’s be real, no one wants an accidental “peekaboo” during their downward dog. Today, lululemon’s not just that little Canadian yoga pants brand. They have metamorphosed into a multinational retailer of an increasing range of athletic apparel, accessories, shoes, and leisure wear.
Because of this expansion, lululemon’s target market (link lululemon target market) is now beyond female yogis; it includes women, men, and youth involved in a range of athletic activities and those who want more comfortable clothes for work and leisure.
This global growth and target customer expansion come with a whole new level of supply chain complexity. Imagine trying to coordinate fabric sourcing, manufacturing, and shipping to stores worldwide…while making sure those products stay in style and stock!
Let’s unroll the mat and see what challenges lululemon’s supply chain contorts itself around
What is the supply chain for lululemon?
lululemon’s supply chain covers everything from product ideation in their R&D labs to getting those products into your hands. We’re talking research and development (yep, not as boring as it sounds), manufacturing, logistics, and getting products to stores or directly to you. Let’s break it down:
- Research and development
- lululemon suppliers and manufacturers
- Logistics
- Distribution centres
- lululemon stores and website
- Third-party sales
Research and development
I know, you have seen research and development in every company’s supply chain process and you may be thinking of skipping this section but, don’t scroll past yet. lululemon’s R&D is not like every other one out there; their research and development team comprises individuals who understand the importance of keeping fit by getting involved in physical activities.
And the good part? They are professional scientists, engineers, designers, and tech masterminds. Yup, they’re double-qualified to whip up those must-have pieces that fly off the shelves. They also take consumer feedback seriously when developing new designs and fabrics or improving existing ones.
Ever heard of the amazing bra made from the exclusive Light Ultralu fabric? It’s a marvel of engineering, offering support for high-intensity workouts and lounging. And it feels like you’re wearing… nothing. Talk about ensuring that customer needs are adequately met!
lululemon’s R&D wizards have two main tasks:
- Creating innovative apparel designs with unique features that offer support or compression.
- Developing fabric blends to support these designs.
The team focuses on how you feel when you wear lululemon so they have developed different sensation categories such as tight, hugged, held-in, naked, and relaxed. They also focus on what you expect your athleisure wear to do for you such as protection against harmful ultraviolet rays, anti-stink, stretchy, and sweat-wicking.
Professional team? Check
Utilizing customer feedback? Check
Improving or creating unique fabrics and designs? Double check!
lululemon suppliers and manufacturers
Suppliers and manufacturers are the unsung heroes of the apparel industry supply chain. lululemon designs and develops its products, but for mass production, it rely on trusted suppliers and manufacturers from around the globe.
Some of these suppliers and manufacturers have worked with the brand for years while others are changed from time to time based on several factors including fluctuations in demand, inability to keep up with the company’s requirements, or other supply chain issues.
Currently in 2024, lululemon sources its raw materials and finished goods from several countries in the Americas, China Mainland, and Asia Pacific. These places are favored due to the availability of raw materials, cheaper labor, or closer proximity to the market.
Logistics
Logistics is crucial. How else do those comfy yoga pants get to you? lululemon uses international, regional, and local logistics companies like DHL, XPO Logistics, Bleckmann, and FedEx to ensure effective and timely delivery of products.
These partners share Lululemon’s commitment to reducing their carbon footprint while delivering your gear on time. The earth and your running shoes thank you.
Distribution centers
At the heart of Lululemon’s logistics network are its distribution centers (DCs). These centers are strategically spread out across Canada, Australia, and the United States, aggregating products from suppliers before shipping them to stores or directly to you. The verse locations of DCs show lululemon’s commitment to ensuring that their products get to stores and consumers within the shortest possible time.
Currently, in 2024, lululemon has 8 distribution centers—one owned and the rest leased which it directly operates. The brand plans on opening an additional distribution center in Brampton, Ontario by 2026. Talk about planning ahead!
How lululemon manages its distribution centers directly and through third-party logistics providers to warehouse and distribute its products is a good tip for other businesses to imbibe as a means of boosting the efficiency of their supply chain.
lululemon stores and website
lululemon stores are part of the endpoints in the company’s supply chain process; they are where the magic happens. The stores are usually strategically located in areas with easy access, considerable foot traffic, and enhanced visibility such as fitness studios, malls, tourist destinations, and downtown areas.
Currently, in 2024, lululemon has 711 company-operated stores. And here’s the kicker—the stores turn into yoga studios at night. Yep, yoga at the place where you bought your yoga pants. Love it.
Aside from yoga, the brand incorporates other community-centered and fitness-related activities such as talks, workshops, and group fitness activities. This approach is novel and unique as it tells people,” Hey, we are not just about taking your money, we are here to ensure your overall well-being.”
And their website? One-stop, stress-free shopping 24/7. Find what you need, anytime you want.
Third-party sales
Aside from company-operated stores, lululemon’s supply chain also includes third-party stores and other partnership agreements through which individuals or groups can access the company’s products such as the lululemon strategic sales (link lululemon strategic sales) programs.
As of January 28, 2024, lululemon had 39 retail locations which are operated by third parties under license and supply arrangements. Through the strategic sales program the brand partners with several retail outlets, companies, and schools to sell their products.
This B2B approach is a wonderful supply chain strategy that keys into leveraging the larger sales volumes that result from B2B models aiding lululemon to get their products to more people. Smart move!
Lululemon supply chain challenges
- Evolving consumer behavior
- Fast Fashion… But Make It Ethical?
- Global supply chain disruption
- Delays from suppliers and manufacturers
- The increasing cost of production and inflation
Evolving consumer behavior
Evolving consumer behavior is one of the challenges that can adversely affect the supply chain of lululemon. When the brand began, it focused mainly on the retail of yoga pants to females. However, it is common knowledge that to participate in yoga, you equally need a top. Thus, the brand began retailing tops alongside their pants. They also ventured into the sale of yoga mats.
Although the aforementioned has been an intrinsic part of lululemon’s branding as a provider of premium yoga wear and accessories, to keep being profitable and attract more customers, the brand had to evolve by considering consumers who may no longer be interested in yoga due to changes in preferences. Now? lululemon caters to everyone—from swimmers to hikers to folks who just want comfy clothes.
The pandemic shifted how people shop and work out. Home workouts? Check. Online shopping? You bet. To tackle the issue of working out at home, lululemon acquired a company, MIRROR, in July 2020. The company produced a fitness interactive gadget that enabled individuals to have an interactive workout session in the comfort of their homes.
Although lululemon discontinued MIRROR in the last quarter of 2023, they did not leave customers who enjoy working out at home hanging. They promptly went into a partnership with Peloton in November 2023 to ensure their customers continue staying fit without missing a beat.
Another evolving consumer behavior is seeking out easier ways to shop; say goodbye to the old official shop opening and closing hours and say hello to 24/7 stressless shopping on the lululemon website where you can easily snatch up all the products you want. Apart from the company’s official website, the brand partners with several online marketplaces such as Zalando, T-Mall, JD.com, Lazada, and SSG.
The push of a considerable number of individuals towards wanting functional clothes that can serve more than one purpose has made lululemon to constantly innovate its product lines with new fabrics, styles, color palettes, and other features that enable its products to serve dual purposes of not just sweating, but also going about other daily activities. Hello, multifunctional fashion! The brand’s Anti-ball Crushing (ABC) pants is one example here.
These proactive steps taken by lululemon show that the brand is willing to rebrand itself and its products to meet the changing needs of consumers while providing them with top-quality apparel and other accessories.
Fast Fashion… But Make It Ethical?
Consumers are getting more conscious about the environmental impact of their clothing. lululemon is trying to reduce its footprint, but let’s be real – making sustainable choices in a global supply chain is expensive and complex. From sourcing eco-friendly materials to reducing waste and emissions, there’s always room for improvement.
The athleisure world moves fast. Like, really fast. New trends pop up faster than you can say “downward dog.” And customers want those trends now. That puts pressure on brands like lululemon to keep up with the speed of fast fashion, but without sacrificing their commitment to ethical sourcing and sustainable practices. Tricky balance, right?
Climate change is messing with the supply chain. Cotton cultivation is taking a hit from weird weather patterns and harsher climates and cotton is an essential raw material in the supply chain of lululemon. A reduction in the availability of cotton could disrupt the operation and productivity of the company’s contract manufacturers. This in turn results in increased cost of production and impact the types of apparel products that will be available to consumers.
As a means of combating climate change, Governments, scientists, and environmentally conscious individuals are urging companies to go green. In August 2023, Lululemon was urged by groups of concerned athletes through EcoAthletes and Action Speaks Louder to decarbonize its supply chain to help save the environment and curb climate change.
Since lululemon operates in different countries, the brand has to adapt its operations to suit the laws, regulations, and requirements in the different countries where it operates. These can pose a significant challenge to the supply chain, especially as regards changing the way the company sources goods, power its stores, transports goods, and manages waste.
lululemon has however shown considerable commitment towards mitigating supply chain issues that may arise due to environmental challenges. For instance, in June 2022, the brand joined H&M Group as one of the backers of a $250 million fund aimed at accelerating efforts to cut carbon emissions in the fashion industry’s supply chain.
The fund is geared at ending the use of fossil fuels such as coal in manufacturing, developing next-generation materials for production, expanding the use of renewable energy sources such as wind and solar as well as improving energy efficiency.
lululemon has faced some backlash over working conditions in some of the factories where its products are manufactured. The brand has however shown its commitment to the living standards and livelihood of the many individuals who work tirelessly in its supply chain especially farmers and factory workers. This led to the creation of several initiatives by the brand including the Responsible Supply Chain Disclosure, Impact Reports, and Maker Wellbeing.
Another move by the brand towards sustainability and a circular economy is the launch of the Like New Initiative in May 2021. Through this initiative, you can trade in your gently used lululemon products for an e-gift card. These products are then sold to other consumers at a cheaper rate. So, instead of letting those leggings gather dust at the back of your wardrobe why not trade them in today and contribute to sustainability? It’s a win-win for you and the planet.
lululemon has partnered with several companies such as Mylo, LanzaTech, and Genomatica to further push for sustainability and environmental protection by using alternative raw materials for its products. The brand partners with Mylo to produce mycelium-based leather: LanzaTech to produce polyester made from recycled carbon emissions; and Genomatica to produce plant-based nylon.
Global supply chain disruption
COVID-19 threw a wrench in global supply chains. Container shortages, port delays, and border closures wreaked havoc. The initial border closures and subsequent shutdown of the global economy due to the pandemic meant that goods could not be transported between countries and even within countries. This resulted in the short supply of a wide range of items ranging from raw materials to finished products.
The surge in demand for fitness gear made it even more complicated for lululemon as more people shopped online for gear to keep fit with while locked up at home. The brand jumped on this opportunity to delve into providing virtual fitness content. Talk about making good use of opportunities!
The gradual reopening of borders and businesses presented some respite and additional challenges such as inadequate vessels for the transportation of products, port congestion, and longer shipping time. Even after the gradual reopening of borders and businesses, the brand still faced challenges as some of its suppliers in Vietnam could not operate due to the pandemic.
lululemon coped with air freight, alternative suppliers, and supporting current suppliers to keep producing in safer environments. They’ve adapted like champs.
Delays from suppliers and manufacturers
lululemon leans heavily on external suppliers and manufacturers. Although the brand develops and designs its products, it signs contracts with manufacturers to mass-produce the inventory that it sells. Very few textile companies produce the brand’s exclusive fabrics due to the technically advanced nature of the fabric blends.
In its 2023 annual report, lululemon specified that it does not have a long-term contract with the majority of its suppliers and manufacturers. No long-term contracts mean no guaranteed supply and any delay from suppliers and manufacturers can disrupt product availability at stores and to consumers. Ouch!
To tackle supply chain disruptions due to delays from suppliers and manufacturers, the brand may need to implement vertical integration in its supply chain by beginning to manufacture most of its products in-house. In this way, lululemon will gain more control and consistency, mitigating the challenges of delayed supply.
The increasing cost of production and inflation
Another supply chain issue lululemon faces is the increasing cost of production and inflation that continues ravaging the world. A significant portion of lululemon’s products are produced in South Asia and South East Asia. Initially, this region was a choice of production location due to the cheap cost of production.
In recent times, however, there has been an increase in the costs of labor and other costs of doing business in the countries within this region. This has led to a significant increase in the costs of producing lululemon products. For instance, monthly income in Mainland China in 2015 was around $674 but currently in 2024, it’s about $1393.
Some of the fabrics used in the brand’s products include synthetic fabrics whose raw materials include petroleum-based products, silver, and natural fibers such as cotton. Therefore, factors such as consumer demand, speculation on the commodities market, and the relative valuations and fluctuations of the currencies of producer versus consumer countries could cause raw material costs to increase.
Trade relations, sanctions, inflationary pressure, geopolitical or economic conditions, and other factors that are generally unpredictable add to the mix and could increase the cost of production. But despite these hurdles, lululemon’s sales remain strong. Their shift to sustainable materials is a savvy move.
lululemon supply chain strategies: Flexibility & innovation
lululemon uses several strategies to ensure the smooth running of its supply chain like a well-oiled machine. Right from the ideation stage of its supply chain, the brand employs strategies that enhance the effective functioning of its supply chain.
One of the strategies used by lululemon is the development of innovative designs and fabric blends which they patent. This strategy protects the brand from competitors who want to replicate its designs or fabrics. Since the designs and fabrics are patented, no competitor can have access to them. This eliminates the demand for such designs or fabrics thus easing pressure on the brand’s supply chain. Talk about protecting your ideas and ensuring regular supply. Smart, right?
lululemon is not putting all their Lycra in one basket. By working with suppliers in multiple locations, they’re reducing their reliance on any single source. They’re all in on sustainability, partnering with like-minded manufacturers, logistics partners, and raw material producers.
Another strategy lululemon uses is deploying alternative means of transporting its products within the supply chain such as air, water, or land. Depending on the location where the brand’s products need to be, the brand employs an appropriate transportation system to ensure that the products get delivered on schedule. What’s your strategy for prompt product delivery?
lululemon also uses third-party stores, digital media, sales partners, micro-influencers, and brand ambassadors to enhance its brand presence as well as the accessibility of its products to a wider market. This strategy ensures that more individuals, teams, or corporate entities that want to buy the brand’s products can easily access them through several platforms that are available either directly from the brand or any of its partners.
lululemon has hopped on the AI bandwagon, optimizing everything from product creation to e-commerce and inventory management to avoid stockouts. This has been clearly beneficial as the brand reported an increase in the net revenue generated through e-commerce by 17% in its 2023 annual report.
All the strategies employed by lululemon in its supply chain are propelled by the brand’s Power of Three X2 initiative which is centered on giving you the best experience, product innovation, and global expansion. This indicates that although lululemon deploys several strategies to mitigate the supply chain issues that may arise, they have a grand plan that ties every strategy back to the Power of Three X2 initiative.
Takeaways
Lululemon’s supply chain might face challenges, but they’re smashing them with innovative strategies and a relentless commitment to growth, efficiency, and meeting guests’ expectations. Therefore, it is not surprising that the brand continues to be one of the preferred athleisure brands worldwide.
If you’re an entrepreneur, take notes! lululemon’s strategies could be your blueprint for a rock-solid, crisis-proof supply chain as they offer some valuable lessons for your business:
- Growth = Complexity: Expanding your business is exciting, but it puts a strain on your supply chain. Be prepared to adapt and invest in solutions that can handle the increased demand.
- Consumer satisfaction key: Consumers want to know that you care about what they want as much as you care about the cheques they cut or the transfers they make to your business. Absorb and implement consumer feedback as often as possible.
- Sustainability matters: It’s not just a buzzword, people! Integrating sustainable practices into your supply chain can be a major selling point. Plus, it’s the right thing to do. Your yoga instructor would approve.
- Flexibility is your friend: The business world is unpredictable. Building a flexible supply chain that can adapt to changes is crucial for long-term success.
So, next time you’re rocking those Lululemon leggings, take a moment to appreciate the supply chain gymnastics happening behind the scenes. And hey, maybe give your own business’s supply chain a little stretch while you’re at it.
