BRG Sports wondered whether reducing its number of distribution centers would let it cut costs but still improve customer service. The company conducted a software analysis to find out.
When companies grow through mergers and acquisitions, they inherit a network of plants and distribution centers (DCs). Although the plant and DC locations may have made sense for the original businesses, they may not provide an efficient supply chain flow for the amalgamated enterprise.
That was the case for BRG Sports Inc. (formerly Easton-Bell Sports Inc.), which ended up with a network of a dozen distribution centers when Easton-Bell was formed through the merger of two sports equipment companies.
Four years after that merger, the sports equipment manufacturer decided to analyze its network and develop a plan for a more streamlined supply chain. It seemed likely that the company could reduce costs by rationalizing the number of DCs in its network, but could it do so and improve customer service at the same time? After a yearlong, software-based analysis of its network, BRG found that it could achieve that objective if it redesigned its distribution network around a primary DC located in the center of the United States.
A cumbersome network
The forerunner of BRG Sports, Easton-Bell Sports Inc., was created in 2006 with the merger of two companies, Riddell Bell Holdings and Easton Sports. Featured brands back then were Riddell football helmets and protective equipment, Bell bicycle and "power sports" helmets, and Easton baseball and softball equipment. In 2014 Easton-Bell became BRG Sports when it divested itself of the Easton businesses. That move also resulted in a shift in its headquarters from Van Nuys, California, to Scotts Valley in the northern part of that state. Today, BRG Sports retains the Bell, Riddell, Blackburn, and Giro brands, focusing on action sports and football helmets, protective gear, apparel, and accessories.
Back in 2010, executives at Easton-Bell began to wonder whether the supply chain network resulting from the merger of Riddell Bell and Easton Sports was too cumbersome. At that time Easton-Bell operated 12 distribution centers throughout the United States to serve its customers, which ranged from large retailers like Wal-Mart Stores and Dick's Sporting Goods to small specialty bicycle shops. It also had a growing e-commerce business that sold products online and shipped them direct to the consumer's door. "There was a lot of duplication in our logistics network," says Lewis Hornsby, vice president of global logistics and fulfillment and general manager of BRG Sports' Rantoul, Illinois, operations.
In addition to manufacturing sports equipment in two plants in the United States, one in Illinois and the other in Ohio, the company imported a large portion of its products from overseas. Most of the imported goods were sourced from Asia, primarily from China, Taiwan, and the Philippines.
With such a far-flung supply and customer base, the question before Easton-Bell was this: Could it lower costs and improve customer service with fewer DCs? To arrive at an answer, the company engaged Atlanta-based Competitive Insights Inc., which provides analytics as part of its cloud-based integrated business planning solutions.
A year's worth of data
Competitive Insights began the project by creating a financial picture of Easton-Bell's current supply chain flows. It developed a cost baseline by gathering data from all three Easton-Bell business units at that time (Easton baseball, Riddell football helmets, and Bell cycling and helmets) over a period of one year. Taking a one-year "snapshot" of activity ensured that the model incorporated all of the network's "ebbs and flows and seasonality," Hornsby says.
The information gathered for the analysis included the costs of inbound shipping, both domestic and international, as well as the costs for outbound deliveries, plus data on manufacturing and labor expenses for operating a plant or DC in each area of the country. The analysis even included such costs as electricity, property taxes, and facility maintenance. "The analysis ran the gamut of everything that had a material impact on the supply chain's costs of doing business," Hornsby recalls.
Most of the cost data came from the company's SAP enterprise resource planning (ERP) system. Analysts also pulled some data on transportation costs from a transportation management system (TMS) and got some inbound cost data from the company's freight forwarder.
Once the analysis had painted a cost picture of the current operation, Easton-Bell and Competitive Insights began examining various scenarios to determine the impact of a different supply chain makeup on operating costs and customer service. The analysis also took into account the impact of a network change on key customers like Wal-Mart Stores. After considering more than 20 different scenarios, the analysis determined that Easton-Bell should operate just one main distribution center somewhere in the middle of the United States.
The modeling exercise also indicated that the company should build an entirely new facility rather than repurpose or expand an existing one. "The majority of our facilities were old and somewhat antiquated," Hornsby explains. "We were competing with 25 or 30 competitors that could take and ship orders faster than we were. We had to step up our game, and this was the way to do it."
Texas or Illinois?
As for where to locate the new DC, the company was faced with a choice: It could either establish a new facility in Dallas, Texas, or in Rantoul, Illinois, where it already had a plant that made bicycle helmets and full-size collectible football helmets. Although the analysis indicated that the Texas location offered lower overall costs, the company made a decision to build the new DC in Rantoul in order to hold onto experienced employees who had specific knowledge in core areas, including manufacturing. "Expertise was the key," explains Hornsby. "We had 350 employees [in Rantoul] with an average of 17 years of experience apiece. When we made the announcement about where we were going to build and I was asked why, I said there were 350 reasons why we should build in Rantoul."
In August of 2012, Easton-Bell broke ground on a new 800,000-square-foot facility in Rantoul; construction was completed 14 months later. The new building was designed to support a product flow with supplies received at one end of the building and merchandise shipped out at the other. According to Hornsby, the new DC can hold about 44,500 pallet positions and thousands of stock-keeping units (SKUs). Although receiving is handled manually, the DC takes advantage of automated equipment to facilitate and speed the picking, packing, and shipping of orders.
The network consolidation will enable BRG to improve transit times, minimize duplication in the supply chain, and reduce costs. For example, the Illinois location allows the sports equipment maker to avoid the longer transit times associated with all-water shipments from its Asian suppliers to the U.S. East Coast. Now it unloads cargo on the West Coast and moves it via intermodal rail to Rantoul. And by serving most of its customers from one central location, BRG will be able to get better rates on outbound shipping as well.
All of these changes have an impact on service. "There was a huge customer service benefit," Hornsby says. "By shipping out of the central part of the [United States], you can reach 95 percent of the country with ground or normal transportation within two to three days."
Although the software analysis suggested that a single distribution center would minimize costs while maximizing service benefits, BRG decided to retain a second facility. In addition to the new DC in Rantoul, the company is keeping a smaller distribution center at its Elyria, Ohio, plant, which makes football helmets.
Complete data is critical
What advice would Hornsby offer to others who are considering a similar project? The BRG supply chain executive said companies should make sure they have a wide-enough range of data to capture any seasonality. He noted that when Easton baseball products were part of the company's portfolio, there were sales spikes during the spring and fall. These sales spikes had to be taken into account to get an accurate picture of the company's distribution network needs.
Hornsby's second piece of advice would be to make certain that the financial model encompasses all cost factors, from property taxes to snow removal, associated with every facility. "Don't scrimp on the data range," he recommends, "and be sure to capture every cost you can imagine."
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
By the numbers, overall retail sales in August were up 0.1% seasonally adjusted month over month and up 2.1% unadjusted year over year. That compared with increases of 1.1% month over month and 2.9% year over year in July.
August’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.3% seasonally adjusted month over month and up 3.3% unadjusted year over year. Core retail sales were up 3.4% year over year for the first eight months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023.
“These numbers show the continued resiliency of the American consumer,” NRF Chief Economist Jack Kleinhenz said in a release. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling. Households have the underpinnings to spend as recent wage gains have outpaced inflation even though payroll growth saw a slowdown in July and August. Easing inflation is providing added spending capacity to cost-weary shoppers and the interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
A new survey finds a disconnect in organizations’ approach to maintenance, repair, and operations (MRO), as specialists call for greater focus than executives are providing, according to a report from Verusen, a provider of inventory optimization software.
Nearly three-quarters (71%) of the 250 procurement and operations leaders surveyed think MRO procurement/operations should be treated as a strategic initiative for continuous improvement and a potential innovation source. However, just over half (58%) of respondents note that MRO procurement/operations are treated as strategic organizational initiatives.
That result comes from “Future Strategies for MRO Inventory Optimization,” a survey produced by Atlanta-based Verusen along with WBR Insights and ProcureCon MRO.
Balancing MRO working capital and risk has become increasingly important as large asset-intensive industries such as oil and gas, mining, energy and utilities, resources, and heavy manufacturing seek solutions to optimize their MRO inventories, spend, and risk with deeper intelligence. Roughly half of organizations need to take a risk-based approach, as the survey found that 46% of organizations do not include asset criticality (spare parts deemed the most critical to continuous operations) in their materials planning process.
“Rather than merely seeing the MRO function as a necessary project or cost, businesses now see it as a mission-critical deliverable, and companies are more apt to explore new methods and technologies, including AI, to enhance this capability and drive innovation,” Scott Matthews, CEO of Verusen, said in a release. “This is because improving MRO, while addressing asset criticality, delivers tangible results by removing risk and expense from procurement initiatives.”
Survey respondents expressed specific challenges with product data inconsistencies and inaccuracies from different systems and sources. A lack of standardized data formats and incomplete information hampers efficient inventory management. The problem is further compounded by the complexity of integrating legacy systems with modern data management, leading to fragmented/siloed data. Centralizing inventory management and optimizing procurement without standardized product data is especially challenging.
In fact, only 39% of survey respondents report full data uniformity across all materials, and many respondents do not regularly review asset criticality, which adds to the challenges.