Johnson Stephens Consulting assisted our client, a manufacturer and wholesaler of design-led gifts and lifestyle products, which supplies retailers such as Nordstrom, Bloomingdale’s, Crate & Barrel, Macy’s, Walmart, Target, Williams-Sonoma and numerous others, with the selection and implementation of a third party logistics provider. At the start of the project, their internally operated, low ceiling height distribution center provided no internal or external expansion path for needed capacity growth. The company also shared the facility with a sister organization which decided that the client should exit the facility in order to provide for the sister company’s business plan. In addition, the client acknowledged that many of the distribution center’s current work methods were not optimal, had little to no MHE technology in the facility, and customer service levels of 4 to 6 days for order picking cycle time were not acceptable. Their objective was to find a logistics partner who could migrate their distribution operation into a different space, create a more efficient layout in a high bay facility, utilize more automated MHE systems, and operate in a manner which minimizes labor while improving service levels to customers such that an order cycle time of 2 days or less would be attained (measured as order dropped to order shipped).
After tours with the three finalists, Johnson Stephens developed a decision support matrix which examined pricing and evaluated 3PLs based on service levels (order cycle time – picking, packing, shipping), labor measurement, average receipt-to-put-away time, inventory accuracy, on-time loading, associate training, transition management, continuous improvement, and IT capabilities. A weighted sorting exercise was conducted based on these factors. From 12 major 3PLs, Barrett Distribution was selected by our client. JSC participated in negotiating and finalizing the 3PL contract on our client’s behalf and provided full implementation and transition assistance for the relocation to the 3PL. First year operating savings (vs. internally operated DC) was $250k+ (% to sales: 140 basis points saved) with 97%+ service level agreement (SLA) order cycle time attainment.
How We Did It
Johnson Stephens collected storage volumes, workloads, and descriptive data about receiving, picking, VAS, and shipping processes/requirements. JSC conducted interviews with the client’s senior management team to understand what types of pricing structure and risk management arrangement they desired with a 3PL partner, and to ascertain the desired level of service level agreement (SLA) standard. JSC assessed the 3PL market to assemble a list of pre-qualified providers and developed the detailed Request for Proposal document. After the bidding process, JSC created a 3PL Bid Summary & Scoring matrix to narrow the field to three finalists. After selection of Barrett Distribution, JSC was retained to implement and manage the relocation and transition to the 3PL facility. Our client required intensive assistance, as the company had only two management resources committed to supply chain distribution functions. The JSC team organized, regulated, and managed the picking, loading and transportation of 75 trailers of the client’s merchandise to the Barrett DC. JSC resources were also stationed at Barrett to assist in monitoring the implementation of the new MHE layout, and facilitate timely and efficient putaway of transferred merchandise, new receipts, and orders. During this 4 week transition, new product was received only at the 3PL facility, but customer orders were picked and shipped from both facilities. This phased transition, during an off-peak period, was accomplished on-time and with no adverse impact to customer service.