Posted By Administration,
Thursday, July 10, 2014
Updated: Wednesday, July 9, 2014
| Comments (0)
by Scott Weiss, Port Logistics Group
Designing and manufacturing a great product with high demand while allowing your company to make a fair profit is challenging enough. Getting your product to market at the right place and at the right time involves many headaches and logistical challenges that can often be overwhelming so here are five signs that it might be time to make a change:
1) Too Many Chargebacks. Two weeks before Black Friday you sent out 10 truckloads of product to your biggest retail customer. Margins for the order were tight but you made it up in volume. 45 days later you receive an $80,000 chargeback from your customer for non-readable labels and late ASN's. This not only wiped out the profit from the order but gave you a loss. You can have the greatest product with the highest demand; however, if you are not able to properly follow the complex retail routing guide requirements set forth by your retail customer, you may receive a high dollar amount of chargebacks and/or invoice deductions that will directly reduce your bottom line margin and future orders from the retailer. Your inability to follow routing guides will also put you at a great disadvantage versus your competition. If both you and your competitor make a great product with equal demand, but your competitor complies better with outbound shipping requirements than chances are their product will be on the store shelves to sell before your product.
2) Running Out of Capacity. Your DC is 100,000 square feet and can hold approximately 6,500 pallet positions of product. You had a record Q1 and your biggest retailer has doubled their orders for Q2. They have also asked you to increase your safety stock by 30%. Suddenly you are placing pallets illegally in the aisles and product in containers in the yard. The customer does not care about your space problem. Operating your own DC means you have to have a facility that has enough size to handle your peak season inventory while making sure labor is managed efficiently. The saying that you have to "build the church for Easter Sunday" applies here. An optimal capacity level to operate a DC is 85%. Any level above that means that you might be storing product in a suboptimal manner which translates to inefficient productivity, hire costs, and opportunity for errors. Additionally, chances are your company wants to continue to grow so your peak inventory of today may not be the peak inventory of tomorrow and soon enough you may be out of space.
3) Too Much Space/Seasonality. You are a leading footwear company that has two peak seasons for initial orders: January/February and June/July. During these months inbound volume spikes substantially. The other 8 months are replenishment inbounds and volume decreases by 50%. In a perfect world, we would all have steady inbound and outbound volume 12 months out of the year but a footwear consumer does not care that you need to be busy 12 months out of the year. They only care that you have that size 6 in hot pink at the store to buy the night of their dance. And if it is not in stock, they will buy from your competitor. The reality is that most customers have seasonal business with inventory dropping at certain times of the year while peaking a few months out of the year plus there is that planned future growth. This is a very delicate balance that is a real challenge to manage. So the worse thing than having not enough capacity is too much capacity as you have to pay for the entire space 12 months out of the year while making sure you maintain a core labor force that understands your processes and business.
4) Speed to Market. Your factory ran late with product. The steamship line rolled your container by 1 week due to capacity constraints. The ports are renegotiating their contracts and the terminal is slow to unload the container at the arriving port. It is peak season and there is a 6 hour wait at the terminal to pick up your container. The DC is at capacity and the container sits at the warehouse door and does not get unloaded for 5 days. The global supply chain is a series of events that take place along the way. All it takes is for one of these events to be delayed and your orders are at risk. Your customer does not care about any of these events.
5) Poor Inventory Control and Visibility. Your product arrived at the DC three months ago but now the order picker cannot locate it. The truck arrived at the retailer's DC but no ASN was sent to alert the retailer of the arrival. A consumer ordered a blouse from your website 5 days ago and called your customer service number to complain she never received it. Owning or leasing your own physical DC is just one piece of the equation. You really need to be all in and being all in requires a substantial investment in people, processes, and systems.
As Vice President, Business Development, Scott Weiss works closely with apparel, footwear, and housewares manufacturers of all sizes to ensure compliance with retailer routing guide requirements. Port Logistics Group is a market leader in gateway port logistics services, operating over 5 million square feet of warehouse space. Services include port drayage, import deconsolidation, warehousing and distribution, retail compliance, local transportation, and store delivery in key port locations of Los Angeles/Long Beach, New York/New Jersey, Seattle, and Savannah. Scott may be reached at email@example.com or (562) 977-7620.
CLICK HERE to return to the JULY 2014 RVCF LINK