New logistics strategy, partner cuts costs for midmarket manufacturer
UPS helps streamline Skirts Plus' new global logistics operations
By David Hannon -- Purchasing, 6/18/2009 2:00:00 AM
For any company, moving its entire manufacturing operation to a factory on the other side of the world presents a host of challenges. There are concerns of quality, oversight and cost. And as Tim Link can attest to, perhaps most important challenge is ensuring that product shipments get to the right place at the right time without a negative impact on business.
Link is the general manager of Skirts Plus, a five-employee Shakopee, Minn.-based manufacturer of fishing "skirts." Founded in the mid-1980s, Skirts Plus makes small, silicone-based skirts which are then sold to fishing hook or lure manufacturers that use them with their own products.
In the mid-1990s, the company decided to reduce its cost structures by moving its manufacturing to a contract manufacturer in Vietnam in a three-phased approach. Once the move was completed, the company's manufacturing costs were lower, but Skirts Plus had to ship all of its products by air freight to the U.S. which increased its logistics costs.
Because Skirts Plus' customers are other manufacturers that use its products to create finished fishing lures, timely shipments are a top priority. Under its previous supply chain model, Skirts Plus was flying frequent, smaller shipments overnight from Vietnam into a U.S. air facility and then smaller shipments would be flown direct to customers.
Recently Link, who manages the company's logistics processes, began looking for a way to get its shipments from the manufacturing site in Vietnam to customers in a timely fashion, but not break the bank with expedited air freight costs. What he discovered was that UPS offered a service program that would suit his needs with a mix of air freight and ground to keep leadtimes short and costs manageable.
Under the UPS Trade Direct service offering, the products leaving Vietnam to the U.S. are consolidated into larger air shipments, and then broken out at a central U.S. facility in Chicago. From there, orders are shipped mostly via UPS' ground network to customers to keep costs more manageable but delivery times consistent and reliable.
Among the immediate benefits Link realized in consolidating shipments leaving Vietnam were faster customs clearance and streamlined packaging and distribution. While its previous model averaged 25,000 skirts per shipment leaving Vietnam, today it is typically more like 200,000 skirts, around 1,050 lbs on average.
The move to UPS was not a huge leap of faith, says Link, because his company had been using UPS for its domestic ground shipments already. And while the added ground component does add slightly to the total delivery time, using UPS' automated shipping tools and customs clearance services streamlined the total shipping time. And the increased visibility brought about with the UPS tracking capabilities minimized lost or delayed shipments.
But at the end of the day, "We had an existing system that worked, so if we were going to move to a new provider, it needed to be one that saved us money," Link says. And the reduction of domestic air direct shipments have produced a fair amount of savings. In fact, Link estimates that Skirts Plus has saved as much as 18% on its shipping costs through the move at a time when all companies, large or small, are looking to reduce costs in all areas of their supply chains.
What's the lesson for midmarket companies? "What we learned was it was certainly worth taking the time to listen to a new provider pitch their idea," Link says. "It might not have been something we were interested in, but it turned to be a great cost savings for us."
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