ASICS America's single distribution center couldn't keep up with surging demand for its athletic shoes and apparel. Changing its distribution pattern and adding another warehouse helped the company manage both current sales and future growth.
Back in 2008, ASICS America was having trouble keeping ahead of
demand for its athletic shoes and apparel. Sales for the North American
branch of the Japanese manufacturer were growing by 21 percent annually,
which turned out to be both a blessing and a curse. While the gains in
revenue and market share were welcome indeed, the strong sales performance
also caused ASICS' single U.S. distribution center (DC) to reach
capacity. That resulted in service slowdowns and raised concerns about
the company's ability to handle future growth.
"We realized a year ago that with the growth we were having as a company,
our current distribution model was not going to support the business
in the next couple of years," says Gary Jordan, chief supply chain
officer for ASICS America.
Clearly the manufacturer needed more distribution capacity, and soon.
Before it could act, Jordan and his colleagues needed to answer two questions:
How could the company quickly get a handle on current growth?
And what would be the most cost-effective way to develop capacity to
support future expansion? To answer those questions, ASICS America
conducted an analysis of its distribution system. The results of that exercise
led the manufacturer to have some of its orders bypass the DC;
expand the use of its third-party logistics (3PL) provider; and
build a second distribution center. Here's a look at what ASICS America has
accomplished so far and its plans for the future.
Stretched to the limit
ASICS was founded in 1949 in Kobe, Japan as a manufacturer of basketball
shoes. Its name is an acronym for the Latin phrase anima sana in corpore
sano, which translates to "a sound mind in a sound body." Today
the company makes athletic footwear, apparel, and
accessories for a broad spectrum of sports, and its
worldwide sales total around US $2.4 billion. ASICS
America, which serves the United States, Canada,
and Mexico, is based in Irvine, California, USA.
ASICS America uses contract manufacturers in
China, Vietnam, and Indonesia to make its shoes and
clothing. Those items are shipped in ocean containers
to the ports of Los Angeles and Long Beach. On average,
the company imports 2,200 40-foot-equivalent
containers each year into the United States.
Back in 2008, the company's U.S. supply chain was
fairly straightforward. The logistics service provider
APL Logistics (APLL) unloaded ASICS' ocean containers
at its Torrance, California, facility. It then
reloaded most of the merchandise into 53-foot trailers
for over-the-road shipment to ASICS' 350,000-square-
foot distribution center in Southaven, Mississippi. That facility, located
near Memphis, Tennessee, handled orders for most of ASICS
America's 3,000 retail customers in the United States.
At that time, Southaven carried about 23,000 stockkeeping
units (SKUs) and typically held about US $100 million of inventory.
APLL also handled about 6 percent of the imported
goods as "DC bypass shipments," which skipped
Southaven and went directly to a customer. These
generally were full container loads of product destined
for customers on the West Coast, Jordan says.
ASICS had anticipated and prepared for rapid
growth, spending millions of dollars in 2005 and 2006
to retrofit the Southaven facility and boost throughput
to 50,000 units per day. But even so, the 21-percent
sales growth in 2008 was taxing the company's
distribution capacity. That year, Southaven was shipping
70,000 or more units daily and had even
seen volumes as high as 110,000 units per day. "We had reached a point where
we were not going to get any more out of [that distribution center]," Jordan says.
At the same time, ASICS America was coming under another sort of pressure.
Retail customers had begun requesting value-added services,
such as garment-on-hanger shipments, which the
Southaven facility could not accommodate. Moreover,
bricks-and-mortar retailers that also engaged in online
sales were asking the manufacturer to ship individual
orders to customers, but the current facility wasn't
designed to support a direct-to-consumer business. In
short, capacity constraints were not only slowing
down order fulfillment, they were also preventing
ASICS America from serving new customers and markets.
"We couldn't handle that type of business out of
our current distribution network," said Jordan, "and it
was limiting our sales opportunity."
A two-part plan
When it became clear that the current distribution
strategy was no longer adequate, an in-house team at
ASICS America began an analysis of the company's
distribution network, poring over data for sales, shipments,
order types, frequency of orders, and SKUs. The team recommended shifting
some distribution operations to the West Coast to provide relief for the
Mississippi DC. But it also determined that ASICS
couldn't handle that task on its own, largely because
it didn't have the ability to provide the kind of service
customers on the West Coast needed for their particular
order types, Jordan says.
At that point, Jordan brought in the supply chain consulting firm Fortna
Inc. of Reading, Pennsylvania, USA to get a second opinion on how best to solve the
capacity problem. Fortna had worked with ASICS America previously on the upgrade
of its Southaven facility a few years earlier. After reviewing the data
the project team had collected, Fortna sought and
reviewed such additional information as customer
types and ordering profiles, inbound container and
transfer costs, the third-party logistics provider's capabilities,
and information system capabilities. The consulting
firm also studied the cost of handling different
order types at the Southaven facility versus handling
them in California.
In 2009, Fortna made two recommendations: handle
more cargo at the West Coast instead of shipping
it to Southaven, and construct a second distribution
center close to the Southaven site.
Fortna's analysis indicated that establishing a West
Coast operation to break down imported containers
and build mixed loads for shipment to customers in
the western United States could save ASICS America millions of dollars.
The manufacturer decided to move quickly on that recommendation, setting
a target of diverting 20 percent of its incoming merchandise
directly to customers.
The task of handling those shipments would fall to
a third-party logistics provider, a more economical
and efficient option than setting up and running a
facility on its own. ASICS America opted to retain its
current provider for the new assignment after Fortna
determined that APLL's prices for the required services
were in line with the market. The fact that time
was of the essence also encouraged the footwear and
apparel maker to expand the existing relationship.
"We realized that our sales-growth projections did not
allow us the time to do a full [request for quotation
from other 3PLs] on this," said Jordan. "That played
into our decision to leave the business with APL
Logistics."
To accommodate the new plan, APL Logistics shifted its
work for ASICS to a multi-tenant facility located in City of
Industry, a municipality in California. There the 3PL breaks down some of the
inbound containers to create mixed loads and runs a pick-pack operation that serves
retailers in the western region of the United States. APLL recently began price
ticketing and labeling products for those customers as well.
To help ASICS reduce its inbound transportation
costs, APL Logistics has started to ship some containers
by intermodal rail service from City of Industry to
the Southaven DC. Jordan's group decides the routing
before containers arrive at Los Angeles or Long Beach. "During the in-transit
period, when the shipment is on the water, the determination is made
whether the container stays in the City of Industry
facility, goes over the road, or goes intermodal,"
Jordan explains. He expects to eventually move about
half of the Mississippi-bound containers by rail.
Diverting shipments at the West Coast does not
save money on outbound freight because ASICS
America's retail customers generally pick up their
shipments at the City of Industry facility. The primary
benefit of that system is that it has helped the company
manage rising freight volumes. So far, ASICS
has reduced the volume of merchandise moving
through Southaven by 14 percent, keeping throughput
there manageable. It also has reduced overall handling
costs because more shipments are going directly
to customers as full container loads. In addition, the
cargo diversion improves customer satisfaction
because more customers get their orders shortly after
the ocean vessel arrives rather than having to wait for
them to be processed in Southaven.
Prepared for the future
Now that the West Coast operation is up and running,
ASICS America has begun work on the second
recommendation for a revamped supply chain: a new,
larger DC located near its original facility. In April
2010, it broke ground for construction of a 520,000-square-
foot DC in Byhalia, Mississippi, about 20 miles
from the current distribution center. Fortna will oversee
design, procurement, and installation of the material
handling systems for the new building.
The Byhalia facility, slated for completion in April
2011, will be designed to handle 140,000 units per
day in a single-shift operation. It will focus on shipping
footwear, while the Southaven location will distribute apparel and accessories
and store additional footwear during high-volume months.
ASICS America will also have enough land on the 38-acre Byhalia site to
accommodate future expansion. That expansion may happen sooner
rather than later, judging from the way sales have been going. Sales growth last
year tallied just under 10 percent—a strong showing despite the
recession. This year the footwear company expects sales growth in the
range of 13 to 14 percent.
As Jordan well knows, changing a distribution network requires more than
simply building and staffing facilities. Although the need to change ASICS
America's distribution network was obvious, he notes, it wasn't easy to get
everyone to support the project. That's because ASICS America had previously
operated two DCs before it consolidated into the single
Southaven facility back in the early 1990s; many
members of the distribution staff had painful memories
of the difficulties involved in managing multiple
facilities and balancing inventory. By promising support
during the transition, Fortna was able to convince
them that the project's goals were achievable,
Jordan says.
Based on his experience, Jordan has some advice for other supply chain
executives who are considering a distribution network redesign: engage someone
outside the company to evaluate the options and to make recommendations. "You
need a fresh set of eyes," he says, "because you don't want to allow tribal
knowledge to limit your vision or thinking."
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
Jason Kra kicked off his presentation at the Council of Supply Chain Management Professionals (CSCMP) EDGE Conference on Tuesday morning with a question: “How do we use data in assessing what countries we should be investing in for future supply chain decisions?” As president of Li & Fung where he oversees the supply chain solutions company’s wholesale and distribution business in the U.S., Kra understands that many companies are looking for ways to assess risk in their supply chains and diversify their operations beyond China. To properly assess risk, however, you need quality data and a decision model, he said.
In January 2024, in addition to his full-time job, Kra joined American University’s Kogod School of Business as an adjunct professor of the school’s master’s program where he decided to find some answers to his above question about data.
For his research, he created the following situation: “How can data be used to assess the attractiveness of scalable apparel-producing countries for planning based on stability and predictability, and what factors should be considered in the decision-making process to de-risk country diversification decisions?”
Since diversification and resilience have been hot topics in the supply chain space since the U.S.’s 2017 trade war with China, Kra sought to find a way to apply a scientific method to assess supply chain risk. He specifically wanted to answer the following questions:
1.Which methodology is most appropriate to investigate when selecting a country to produce apparel in based on weighted criteria?
2.What criteria should be used to evaluate a production country’s suitability for scalable manufacturing as a future investment?
3.What are the weights (relative importance) of each criterion?
4.How can this methodology be utilized to assess the suitability of production countries for scalable apparel manufacturing and to create a country ranking?
5.Will the criteria and methodology apply to other industries?
After creating a list of criteria and weight rankings based on importance, Kra reached out to 70 senior managers with 20+ years of experience and C-suite executives to get their feedback. What he found was a big difference in criteria/weight rankings between the C-suite and senior managers.
“That huge gap is a good area for future research,” said Kra. “If you don’t have alignment between your C-suite and your senior managers who are doing a lot of the execution, you’re never going to achieve the goals you set as a company.”
With the research results, Kra created a decision model for country selection that can be applied to any industry and customized based on a company’s unique needs. That model includes discussing the data findings, creating a list of diversification countries, and finally, looking at future trends to factor in (like exponential technology, speed, types of supply chains and geopolitics, and sustainability).
After showcasing his research data to the EDGE audience, Kra ended his presentation by sharing some key takeaways from his research:
China diversification strategies alone are not enough. The world will continue to be volatile and disruptive. Country and region diversification is the only protection.
Managers need to balance trade-offs between what is optimal and what is acceptable regarding supply chain decisions. Decision-makers need to find the best country at the lowest price, with the most dependability.
There is a disconnect or misalignment between C-suite executives and senior managers who execute the strategy. So further education and alignment is critical.
Data-driven decision-making for your company/industry: This can be done for any industry—the data is customizable, and there are many “free” sources you can access to put together regional and country data. Utilizing data helps eliminate path dependency (for example, relying on a lean or just-in-time inventory) and keeps executives and managers aligned.
“Look at the business you envision in the future,” said Kra, “and make that your model for today.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.