Haier America Inc.’s focus on their customers led them to take advantage of an opportunity to optimize their distribution network and deliver substantial savings while improving customer service.
Looking back over the relatively short timeline, Paul Boddorf, VP of operations for Haier America, says, “We previously had distribution centers in New Jersey and Los Angeles. We were looking for a third DC in the Southeast U.S. to better serve our customers.”
Those customers include Wal-Mart Stores Inc., Target Corp., Lowe’s Cos. and other big-box retailers. Commenting on the change, Boddorf says, “It has certainly given us the opportunity to serve our customers with better transit times on the outbound.” There’s cost and there’s time, he comments, and both are important to Haier and its customers.
The project started when the 10-year lease on Haier’s New Jersey DC was about to end. Haier did not want to renew, recalls Chuck Wethington, director of operations for Kenco Group Inc. It was a good opportunity for Haier to reexamine its network, which led to a series of key decisions.
One was that Haier no longer wanted to manage its New Jersey DC itself. It immediately needed a third party logistics service to take over the operation along with the move to a new facility. That had to happen by mid-2012. The next major milestone was to have the 3PL take over operations at the outsourced DC in Los Angeles — that needed to happen by the end of 2012. And the third step was to open and manage a third DC — which happened at the beginning of 2013.
Haier put out an RFP and talked to a number of companies, says Boddorf. In the end, they wanted to have one 3PL to manage all three locations. This provided cost and operations synergies and consistency — consistency in billing, point of contact, warehouse management systems, etc.
Haier had examined its customer base to see where its customers were located and determined that, based on the geographic mix, the Northeast and LA sites would remain and it needed a southern DC. After Kenco was selected, Wethington recalls, it used the Haier data to run its own network model to verify the results. Haier had already looked along the coast at locations near their customers and, in addition to the southern DC option, Kenco modeled the network with a fourth DC in the Midwest. That option wasn’t justified at this point, says Wethington, so the focus was on finding the right spot in the Southeast.
“We looked at several sites and decided on Savannah because of the cost and the port and the ocean rates we were able to get into Savannah,” says Boddorf.
They looked at locations including Jacksonville and Charleston. Wethington comments that in his experience doing site visits for a DC, he typically does not see anyone from the regional economic development authority. He encountered an exception in Bryan County outside the Port of Savannah. They not only showed up for the site visit, he recalls, they had already lined up cartage companies and drayage costs. “They were aggressive and had all the information we needed,” he says.
Splitting inbound volumes between New Jersey and Savannah had no significant impact on inbound costs, both Boddorf and Wethington recall. So, attention turned to the landside and to outbound transportation. The shorter line-hauls to reach customers in the Southeast and as far as Texas and up into Missouri improved on both cost and transit times under the new network configuration.
Bryan County understood Kenco and Haier’s needs relative to the DC operation. Though the proposed site was not adjacent to the port, they had worked to provide cartage services and rates that would keep them competitive with facilities adjacent to the port. Kenco was familiar with Georgia. It already operated a facility in Covington, Georgia, so Wethington says they knew the value of training incentives the state could offer and they valued the proximity to Georgia Southern University. “We knew that we’d have an available workforce. That was really a big part of us wanting to go to Savannah.” Wethington continues that they were also aware that the workforce in Savannah and Bryan County would be equal on quality.
Savannah has been innovative, notes Wethington, and has one of the “most efficient gates” of any port operation, he says — it’s really fast. The port is willing to do whatever it takes to make the operation successful, and they look for additional continuous improvement opportunities.
“Being an owner-operator port on a single terminal provides our users a number of advantages,” says Greg Van Brunt, regional sales manager for international trade for the Georgia Ports Authority. Drayage operators do not have to jockey between different terminals to pick up containers at Savannah, he points out. Savannah operates on one IT platform, which has allowed it to take advantage of RFID and Optical Character Recognition Camera technologies that speed cartage operations, allowing local cartage to achieve over five turns per day at the port. And, he adds, as a state entity, the Georgia Ports Authority is required to invest any profit back into its terminal, ensuring continued best-in-class operations.
When it came to weighing the options of being adjacent to the port or in Bryan County, Wethington says when they went to Bryan County, “It was really impressive how prepared they were to present the distribution facility in the best light. And they knew what our concerns were. They knew what they had to offer. They thought it was superior, and we agreed.”
Asked about making the alliance work, Boddorf concludes, “Do your homework. Make sure that you have a strong 3PL partner. And, make sure, ultimately at the end of the day, that what you’re trying to accomplish is to reduce cost and increase efficiency and increase your customer service.”
Wethington adds that he believes the alliance works because, “There seems to be a good cultural alignment between all four organizations [Haier, Kenco, Port of Savannah and Bryan County]. We’re all focused on the same goal, and that’s providing a world class network to Haier. It was just clear from the start that everyone was willing to please and to make sure that Haier was taken care of. Ultimately we knew that their success was all of our success. We all partnered very well and made things happen very quickly.”
By Perry A. Trunick, Editor in Chief of World Trade 100
