Distributed Logistics Makes Customers More Likely to Hold on to Their Goods
By Jim Tompkins
CEO, Tompkins International & MonarchFx
Travis’ Instagram post turned Brian splenetic.
While Brian was happy that his brother was at the World Professional Football Championship watching his favorite team, Brian wasn’t happy with the gear Travis wore – the same throwback Los Angeles jersey that Brian bought Travis from Football Fanatics Emporium, the one sitting in the box at Travis’ neighbor’s house in San Francisco because it had arrived a day later than the Los Angeles retailer’s website pledged – hitting Travis’ door when Travis was waiting for his flight at the San Francisco International Airport.
Thus starts the tale of how Football Fanatics Emporium, which had not availed itself of a distributed logistics system and flow model forecasting algorithm, lost a customer and gained a return – not a winning formula in the new world of e-commerce, where anywhere from 8 to 30 percent of orders wind up Elvis Presley’ed – “Return to Sender.” Time is not your friend when it concerns the stickiness of a sale.
At halftime, Brian texted Travis.
“You know that jersey you’re wearing? I bought that for your birthday, man.”
Travis was only mildly annoyed, akin to the feeling he had when Football Fanatics Emporium texted him a delivery notice that Brian’s package had arrived – right before Travis entered the TSA line at the airport. After all, he was at the big game. The deal he had brokered years earlier for bankrolling his employer, the Nika Energy Services oil company, had paid off.
Not only was the company a success, but Atlanta-based financial giant Aurelius Investments LLC rewarded him with a ticket to the game, where they had a suite at Atlanta’s new $1.2 billion stadium. So although it meant canceling the triplets’ annual tradition of brother-sister-brother meeting up somewhere for a birthday party the day of the big game, Travis chose the ticket.
And he was happy to be there – although not as pleased that he was wearing a jersey he bought at the stadium instead of the birthday present from his loving brother.
“No problem,” Travis texted back. “I’ll just return it, and you’ll get the money back. Buy me something else later.”
“Sure thing,” Brian replied. “And I’m never shopping there again, that’s for sure.”
Like a growing segment of shoppers, Brian had found “there” via his smartphone. The music industry executive always had problems getting things done in time. The advent of e-commerce and almost standard two-day delivery had saved him often over the last few years. So at lunch three days before Travis’ flight to Atlanta – hey, with two-day shipping Brian was giving himself a day’s grace! – he logged on to the free WiFi at Pulled Smoke, a Nashville barbecue joint. As he waited for his dry-rubbed ribs, he searched for football gear on his smartphone. Football Fanatics Emporium in Los Angeles (not that retail location matters much in e-commerce) offered online ordering, free two-day shipping to San Francisco and had the “Hacksaw” jersey he wanted, a throwback to Travis’ favorite player, the top linebacker on the 1979 L.A. team that also made it to the world championship.
So Brian clicked and bought.
Two days shouldn’t have been a problem. The emporium’s Ontario, California, warehouse was less than a day’s drive to Travis’ house. Heck, Travis hit I-5 from Frisco to L.A. three or four times a year to see his team.
The Ontario DC had plenty of stock, and the 3PL facility planning engineers designed the site to handle what they thought was its maximum necessary capacity. Unfortunately, even the best cannot predict the future.
The site had a robotic material handling system that could pick, sort and pack 50,000 units per hour. Unfortunately, an unexpected rush of orders necessitated 65,000 units per hour to meet the two-day delivery window.
In an information-technology world that has placed more power in the hands of consumers than ever before, where your customers can order, cancel shipments, research and change their minds with a click on a touchscreen, flexibility is a competitive advantage. Some robots are harsh taskmasters, and once products entered this nonflexible pick/sort system, human hands couldn’t interfere to handle any overload.
So Brian’s order went from the website into the ERP (enterprise resource planning system) down to the 3PL’s warehouse management system (WMS). At the back of the queue, it didn’t make the cutoff to get out the door Monday night, the day it was ordered. But once Tuesday came, the robots picked, packed and shipped the jersey. Just in time for two-day delivery Thursday to Travis’ house – as he sat on the tarmac at the airport.
Contrast that with Liliana, who selected Travis a Los Angeles team blazer from New York City’s Gridiron Legends specialty store. A corporate lawyer in Manhattan, Liliana also ordered off her smartphone while sitting in La Havana Cuban Rotisserie, feasting on black beans and rice and cassava salad.
Like Football Fanatics Emporium, Gridiron Legends’ website sent Liliana’s order to its ERP. But since the company expanded beyond the Jamaica Village Shopping Mall into e-commerce, it had deployed a distributed logistics system through MonarchFx. The ERP sent the order into its automated distributed order management (DOM) system, MonarchFx’s version of an Order Management System (OMS).
Beyond Gridiron Legends’ warehouse in Newark, New Jersey, MonarchFx had pre-positioned the retailer’s stock across the continent. The DOM, which checks e-commerce orders to determine the best fit of inventory and location across the entire distributed logistics system, determined that the blazer was in stock in Dallas, Texas; Atlanta, Georgia – and a few hours south of Frisco in Chino, California.
Like its Football Fanatics Emporium competitor, the Chino site was dealing with a surge of championship-related football orders. But MonarchFx designed its fulfillment centers to use Tompkins t-Sort Robotics. Flexibility, a key to the world’s first portable automated sortation system, allowed the Chino managers to add a shift of temporary workers.
The t-Sort can be deployed in 30 percent of the floorspace of a traditional sorter, handle volumes that reach millions of units a day, and add a new robot in seconds without any downtime. But unlike some robotic sorters, t-Sort’s ability to integrate human workers into its operations means fulfillment centers don’t have to invest more capital for unexpected temporary demand spikes.
So the blazer Liliana chose for Travis was sorted, packed and shipped about an hour after her Monday order. The apparel went to UPS’ local sortation hub, which trucked it to its San Francisco operation Tuesday for arrival Wednesday at Travis’ condo.
So on Thursday, the TSA agents at the San Francisco airport commented how snappy Travis’ new garb was.
The same process played out for all the triplets’ other gifts, as luckily, all the e-commerce retailers Travis and Liliana chose had partnered with MonarchFx. Historically, those two had little trouble doing things early and meeting deadlines – especially compared to Brian. But the new world of retail made things so … easy to wait.
Knowing Liliana’s love of Broadway, Travis found her a pair of high-end brass opera glasses trimmed with Mother of Pearl from historyboutique.com. Travis bought audiophile Brian an MP3 mixing deck – think of an old school mixing deck for turntables updated for 21st century music delivery systems. Brian got Liliana a collection of Broadway musical CDs, while Liliana returned the favor by giving him a set of top-of-the line audio speakers.
All orders through MonarchFx’s distributed logistics system trigger a replenishment signal through the Distributed Inventory Flow Forecasting model (DIFF). The flow model combines a business’ one-year sales history with ideas about the next three months, including sales and promotions. Unlike economic order quantity (EOQ) and other ancient supply chain management tools, the proprietary algorithm can set an effective initial allocation in multiple fulfillment centers across the continent without tripling or quadrupling the inventory required.
In fact, with MonarchFx, historyboutique.com’s move into e-commerce had increased sales 9 percent over the first eight months. The boutique, which also sold a lot of historical apparel, used to get back about 10 percent of its orders. Since its partnership with MonarchFx, the company’s returns had dropped by 5 percent. Gridiron Legends saw similar results with a sales boost of 6 percent, and its 30 percent return rate had dropped by 10 percent – equivalent to a 3 percent lift in sales.
Modern customers can be demanding and finicky. Quick, affordable delivery can help. And distributed logistics is the nontraditional supply chain way to spread your inventory continentwide without drowning your system (and your capital expenses) in nine months of safety stock, all while meeting ever-changing customer demand, bringing them back for more sales and fewer returns.