Shifting Chain Of Command

May 15, 2006
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GRAND RAPIDS — The business of home repair and improvement has a lot in common with lean manufacturing. Thirty years ago, the average do-it-yourself homeowner had a garage full of power tools, dozens of drawers, boxes and baby-food jars full of loose hardware, piles of miscellaneous scraps of wood in varying species and size, and a cabinet full of paints, varnishes, glues and solvents commonly used in household jobs.

Why did home repair buffs assemble these massive hordes of materials? Because they had to. Spending a Saturday morning shuffling trips to the lumber yard, the hardware store, the paint store and the power tool shop would kill any time set aside to complete the project.

But then all that changed.

Along came the “home center” shopping concept. Why not put the hardware store, the lumber yard, the paint store, the tool shop and a dozen other specialties under one roof? Now, with a Lowe’s or Home Depot store within a few minutes’ drive of most of America, homeowners can lay out their plans over their morning coffee and pick up all their supplies in one trip.

Supply Chain Solutions is like the home center of lean manufacturing.

Over the past five years the Grand Rapids-based firm has been perfecting the concept of the “supplier mall,” a one-stop source for manufacturers’ inventory and supply chain management needs.

“The concept of a supplier mall is that you’re trying to make these suppliers aggregate into a center where you can really optimize the value of product flow into the plants,” said Les Brand, CEO of Supply Chain Solutions. The mall concept answers a growing demand in the manufacturing community, especially for manufacturers who source materials from around the world, like West Michigan’s office furniture companies.

“As these supply chains get longer, the manufacturers really have a tough time. You’re working halfway around the world, you’ve got communications issues, they’re typically ordering way too much because of the timing. There’s no real consolidation at the sourcing points to bring in smaller quantities more often. Really, if you look at it as a pipe, you just turn it on and get the right quantities coming down the pipe, consistently,” said Brand.

Building that pipe began as a project to streamline Steelcase Inc.’s inbound supply chain. In keeping with the tenets of lean manufacturing, Steelcase wanted to keep its in-house inventory of raw materials to a minimum, relying on “just-in-time” inventory fulfillment to provide the necessary plastics, steel and textiles. Supply Chain Solutions set about finding the best way to do that.

What resulted was the “mall” facility in Ontario, Calif., near Los Angeles. At the facility, SCS coordinates shipments of materials from suppliers throughout the world, and warehouses them until they are needed by clients. By dealing with multiple clients in the same industry, they can benefit from clients’ overlapping needs, keeping their inventory levels down.

To illustrate how far the process has matured, Brand uses the example of an office chair with 120 components.

“We can put that through an inventory planning tool that will tell us exactly how many parts you need to order, when you need to order them, where you need to have safety stock to pull to produce that chair,” he said. “The logistics, the handling, the communications and information systems you need to have tied together: That’s really what we’re coming to the market with.”

Brand and his partner, Jim Ward, spun Supply Chain Shipping off the main company in 2003 in order to handle freight-related challenges. John Toles is president of that division. He has developed two related services in the California “mall” facility. For companies that bring smaller quantities of goods to the U.S. from Asia, SCS offers a shipment consolidation service, wherein they have their freight partners in China, for example, pack multiple clients’ orders into one shipping container. Not only do the clients save on shipping fees, but the goods all arrive together for processing at the SCS facility.

Therein lies Toles’ other innovation. Shipments coming into the country can be split up at the metering center. A portion of the shipment can be sent on to a Midwest or East Coast distribution center, while the remainder is distributed directly from the SCS facility in California. Grand Rapids Christian publishing company Zondervan Inc. has benefited from this service.

“What they were doing before was bringing everything in to West Michigan, then shipping it back out there,” he said, referring to California and other West Coast destinations. “So we’ve reduced their transit time by two weeks and cut their transportation costs in half by stopping part of it in California and then bringing the rest to Grand Rapids or Holland or wherever the client may be.”

After only three years of operation, the shipping division will generate $20 million to $25 million in revenue this year, Brand said. That could double next year. The company currently employs 113 individuals, a number that is also growing. The company is working with clients that would like SCS to establish operations in Seattle, St. Louis, Tempe, Ariz., and Atlanta.

In addition to its shipping and logistics support, the company also does consulting and technology design work, implementing customized software systems that allow companies to track and manage their supply chains. One of the strengths of the company, as Brand sees it, is the relatively low overhead SCS boasts, considering the scope of its operations.

“We have no real assets. We’re a planning and thinking organization,” said Brand. Agreements with clients support all of the physical infrastructure of the supply chain. “So if we sign a 10-year agreement with Steelcase, that supports the facilities and all the activities in those facilities — from designing the racking layouts, flow patterns, the RFID pieces that are needed to manage that. All of that is pretty much contracted. All of the carriers are contracted.”

Or, in other words, companies hire SCS to streamline their supply chains; SCS figures out how to streamline them and then hires other firms to do the heavy lifting.    

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