The global retailer re-launched in North America and built a new multi-channel supply chain from the ground up with the help of its existing 3PL partner.
When Hermes-OTTO International — a global trading and sourcing company specializing in fashion, home living, and leisure products — sought to re-launch its Bombay Company brand in North America, the logistics team faced a tough decision: Should they stay loyal to one third-party logistics (3PL) provider or spread the risk among multiple players?
In order to make this fresh start in the multi-channel age, Bombay needed a provider of fulfillment and distribution services with knowledge, experience, and assets that could support rapid growth. The new distribution network had to be built from the ground up, and it had to meet high customer expectations from the first day of operations.
“Insourcing was not an option,” says Uwe Bald, vice president of international business development at Hermes-NexTec LLC. “We evaluated the strengths of our existing 3PL, but considered several other players capable of supporting our new multi-channel distribution strategy.”
As with most cases of this kind, the shipper was confronted with profound risk/reward decisions. They could sever ties with their existing 3PL and build a relationship with another from scratch; they could hire multiple 3PLs to handle different parts of their business; or they could turn to an existing partner and expand services and build on past success. For Bombay, the choice was simple.
Brand rebirth
The Bombay Company closed its retail operations in 2008, but the brand still proved resilient enough to attract the attention of Hermes-Otto International. Purchasing Bombay’s U.S. license appeared to be a good idea, and the deal was signed in September 2012.
Having retail partners like Bed Bath & Beyond and Burlington Coat Factory helped get Bombay back in business by giving its licensed products a brick-and-mortar platform, augmenting fulfillment direct to consumers via e-commerce and direct channels. These channels also include international e-commerce retailers QVC and Joss & Main.
But complicating matters was the fact that Bombay was seeking a lead logistics provider capable of meeting high performance requirements extending across a wide range of products. “We ship items as small as candle holders and as large as beds, which are sold through e-commerce channels driven by holiday peaks, ‘deals of the day,’ and TV specials,” observes Bald. “There’s also a consistent stream of orders from regular customers.”
Bald says that the wide range of product characteristics, from heavy weight to fragile, had to be considered when evaluating a 3PL. “You must remember that our products used to be packaged for B2B distribution,” says Bald. “Now we had to find ways to repackage them for B2C fulfillment in some cases. At the same time, we had to improve the inbound packing where possible in order for it to meet the requirements for B2B and B2C fulfillment.”
Expanding existing contract
Kenco was Bombay’s sole logistics provider when plans were afoot for the re-launch into North America. The provider executives knew and understood that they would be asked to demonstrate their ability to grow with the shipper — or be replaced with a competitive 3PL.
“It is generally our assumption that existing and potential customers will assess multiple 3PLs when their needs change,” says Judy Craig, vice president of sales at Kenco. “We didn’t ask Bombay who they were evaluating, but the process must be transparent.”
Rather than go through another RFP process, however, Bombay asked their existing 3PL to detail a new pricing arrangement and customize the existing contract. Both Bald and Craig agree that a long-term, valued relationship was the foundation for the deal. They dismiss “price point hunting” — going with the lowest bidder — as a tactical error when making a decision of this magnitude.
Bombay did not demand that its 3PL customize it warehousing, either, because new supply chain configurations are changing the industrial landscape. Indeed, industry analysts note that technological advances in fulfillment are affecting the demand for warehouse space, influencing not only building size requirements, but also the location and build-out of the facilities.
“For a company like Bombay, the need for regional expansion is not necessarily a ‘big box’ solution,” says Bob Silverman, executive vice president for Jones Lang LaSalle. “Having the right space in the right location is far more critical.”
The arrangement found the 3PL developing an optimized fulfillment network, importing products from China and Asia into its Chino, CA, distribution center. Handling up to 400 SKUs, Kenco now receives Hermes volume forecasts and fulfills all Bombay products as needed to retail stores throughout North America and direct to consumer homes in fulfillment of e-commerce orders. The 3PL handles returns for the retailer.
“The reverse loop is very important to us,” says Bald, “because furniture returns can be very costly. We needed a 3PL with a special concentration in reverse logistics.”
At the same time, reliable forward logistics had to be assured with push into the region. “We expect and require our 3PL to provide same-day shipping for about 90 percent of all B2C orders, and to do so with a high level of inventory accuracy,” says Bald.
Lessons learned
According to Bald, there was one clear logistics management lesson from the re-launch. “For us, it meant remaining loyal to our 3PL until they failed or disappointed us,” he says. “And that did not happen…fortunately for both of us. We’re very happy with the way things are going, and the network worked fine from the beginning.”
Bombay says that with their new multi-channel strategy, they made changes in 20 percent of their core processes. These include delivery, quality control, and returns. Furthermore, they made changes in 15 percent of their supporting processes, including exception handling and cycle count — counting on a cyclic schedule rather than the traditional inventory process, which occurs once a year.
Meanwhile, their 3PL partner has a supply chain design capable of handling B2B and B2C volume spikes, while providing stable B2B and B2C freight and packaging rates. “Customer satisfaction rose by 17 percent on average for the areas that were improved,” says Bald, “and that is a direct reflection of our logistics management.”
By Patrick Burnson, Executive Editor for Logistics Management and Supply Chain Management Review magazines and web sites. You can reach him directly at pburnson@peerlessmedia.com.
