strategicinsight LOGISTICS NETWORK DESIGN
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
be contracted out to a third-party service
provider, which would be more economical and efficient than setting up and
running a facility on its own. ASICS
America opted to retain its current 3PL
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,” says 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 munici-
pality 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
United States. APLL recently began price ticketing and
labeling products for those customers as well.
To help ASICS reduce its inbound transportation costs,
APLL has started to ship some containers by intermodal rail
service from City of Industry to the Southaven DC. Jordan’s
group decides on 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 has also 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 of ASICS’
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 moved on to the next phase of its network redesign: building a new, larger DC near its original
facility. In April 2010, it broke ground for construction of a 520,000-square-foot DC in
Byhalia, Miss., 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 have the
capacity 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 peak periods.
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. Last year, sales
grew by nearly 10 percent—a strong showing in a recession.
This year, the footwear company expects sales growth in the
range of 13 to 14 percent.
As Jordan well knows, revamping 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 consolidating
operations into the Southaven facility 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.”
