specialreport 3PLS/LSPS
East Coast distribution to the UPS campus in Hebron,
Cutter & Buck is now able to reach all of its major corporate customers within two days, Martinez says. “That positions us to minimize freight cost and be much more
responsive than we could be out of Renton,” he says.
At present, the Hebron facility ships products for Cutter &
Buck that do not require value-added services such as embroi-
dery. That means nearly all of the shipments from Hebron go
to third-party distributors who handle further embroidery
and customization. Cutter & Buck continues to handle any
orders that include embroidery from the Renton facility.
STICK TO WHAT YOU KNOW
Like Cutter & Buck, Xterra Wetsuits is an apparel company
that found itself struggling with distribution problems
brought on by rapid growth. Established in 2001, Xterra
Wetsuits markets wetsuits to triathlon athletes. Its name
derives from its role as a licensee of Xterra, a separate company that sponsors off-road triathlons and trail runs both
in the United States and around the world.
In the early years, the company managed its direct-to-consumer business from a small warehouse in the San
Diego area. But as the company grew, fulfilling orders
became more vexing. To illustrate the kind of growth Xterra
has experienced, Brian Walters, a co-owner and former
president of the company, notes that when the current
owners acquired the company in 2007, sales ran to about
3,000 units a year. By 2010, sales had soared to 36,000 units
across 200 stock-keeping units. “That growth was difficult
to manage,” he says. (Current volume is closer to 30,000
units after the company shed its least expensive and least
profitable product line.)
Like Cutter & Buck, Xterra sought help from a third-party logistics service provider. “We wanted to be a wetsuit
company, not a warehouse company,” Walters says.
Xterra initially went with ProLog Logistics, a small San
Diego-based third party, hiring the 3PL to handle part of its
fulfillment operations. When Lakeland, Fla.-based Saddle
Creek Corp., a larger 3PL, acquired ProLog in late 2010,
Xterra stayed with Saddle Creek.
A SIMPLE SOLUTION
Walters credits Saddle Creek with helping solve one of its
biggest distribution problems. In the early days, he says,
Xterra took a kind of hybrid approach to fulfillment, han-
dling some orders on its own, handing off others to ProLog,
and turning over still others to a third party in the United
Kingdom. “We confused efficiency with simplicity,” Walters
says. “We wanted to be close to everybody. But we quickly
realized we did not have the systems to adequately manage
inventory and warehousing.”
Shortly after Saddle Creek acquired ProLog, Walters says,
it began working with its new client to consolidate its oper-
ations. One of the first steps was choosing a location for
national fulfillment. The problem was, while many of
Xterra’s clients are in California, most of its customers are
on the East Coast. After some consideration, the two decided to consolidate operations at a Saddle Creek facility in
Lexington, Ky., a location closer to most of Xterra’s customers. “That’s our center of gravity,” says Walters.
Once the decision was made, the two parties swung into
action. “Within a short time, we moved everything to
Lexington and got everything in one place,” Walters says.
Today, all of Xterra’s fulfillment is handled out of the
Lexington facility.
The arrangement has provided Xterra with a number of
advantages. For one thing, consolidating distribution operations at a single site allows Xterra to minimize inventory levels and the time it takes orders to reach customers. For another, it has led to a reduction in shipping rates. Saddle Creek
was able to use its market power to obtain better parcel shipping rates than Xterra could do on its own, Walters reports.
In addition, packaging specialists at the 3PL helped develop a Tyvek bag for the wetsuits that took up substantially
less space than the corrugated boxes formerly used, saving
on both warehouse space and shipping costs. Walters says
that a quarter of Xterra Wetsuits’ storage costs were for storing the boxes it used previously.
“They made us think about packaging in a different way,”
Walters says. “There was a lot of cost in making, shipping,
and storing the boxes.” He adds that the bag can also be
resealed, making returns easier for customers.
SUCCESSFUL RELATIONSHIPS
Cutter & Buck and Xterra Wetsuits are two examples of
what students of the 3PL industry see as a continuing trend
toward outsourcing important, but not core, business functions. The 2012 3PL study found that most often, firms out-source logistics activities that are “transactional, operational, and repetitive,” while keeping strategic, customer-facing, and IT-intensive operations close to home.
What bodes particularly well for 3PLs is another finding
of that study: The vast majority of shippers—88 percent—
view their relationships with 3PLs as successful. ;
