A $550M Boston-based small appliance manufacturer-wholesaler serving big box retailers, growing at >15% annually, wanted to proactively build a plan for their U.S. distribution network going forward. Their current network was limited to a single 3PL operation in the LA market (primary building was 300K ft2). All products distributed in the U.S. are manufactured overseas and move through the ports on Long Beach and/or LA.

Process & Results

Gathered data and interviewed customers (internal & external)

Determined geographic distribution of customer volume as well as service-level requirements

• 50% of volume was destined for locations east of Mississippi River
• Customers were "living with" current 6-8 day average order lead-times
• Eastern U.S. customers were getting average 9-10 day order lead-times

Determined other influencing factors:

• Risk factors (geographic, partner financial capacity, etc.)
• Information Systems (limitations from current legacy systems)
• International sourcing stability (future volume through U.S. west coast ports

Early hypothesis was to consider adding 2nd, midwest-located 3PL distribution point

• Gathered benchmark data for 3PLs operating in midwest locations

Developed a baseline model of the current, single-node network and "grew" that platform model based on business volume growth over next 5 years

Developed a two-node model and compared that to the baseline model to assess potential benefits

• Developed iterative to evaluate client operational ownership impact
• Developed iterative to evaluate use of two 3PLs versus one to operate both locations

Recommendation was to evolve network into a two-node network in their fiscal 2011, using two different 3PLs to operate it

Final Results

Four-walls/operating expense savings totaled >$7M (5 years)

Transportation expense savings totaled >$52M (5 years)

• Increased inbound international transportation
• Reduced outbound (DC to customer) expense 

Reduced order-cycle time (lead-time) for 50% of customers by 3-5 days

Reduced business continuity risk from geographic events and financial stability of a single 3PL

Recommended company launch a full review of their technology platform to assess ability to buy/build across multiple locations

Other Results

Benchmarked current 3PL's rates in LA market and determined them to be market-advantaged

Created a baseline contractual agreement/document between my client and their current, single 3PL (none had ever been developed/executed)

• Included a simple Service Level Agreement (SLA) focused on 4-5 service metrics