Last fall, Bailey International set the growth of alternative warehouse locations, as a strategic initiative. The idea was to expand westward in order to better serve its customers on the West Coast. This expansion would allow Bailey to save itself—and its customers—time and money. A site in Reno, Nev. was chosen and the move was given the green light. But this move required the shipment of more than 50,000 products a distance of more than 2,000 miles, all without disrupting operations at its Knoxville, Tenn. location. This is no small task for any company, but here is how they did it.
Before a single product could be packed up and sent, Bailey had to analyze the market to figure out what additional customers they could serve and what the potential for growth was for the company. A competitive analysis was conducted to look at Bailey’s market penetration in each state. The company then came up with a strategy on how best to enter into the West Coast market against their competitors.
At this point, Bailey looked at logistics to determine what products would be made available first at its Western location. To do this, the company examined what products were already selling well on the West Coast, as well as what products were sold the most from its Knoxville location. The company’s purchasing department came forward with a list of additional products they believed would interest customers on the west coast. These three analyses were used to decide which products would be initially available.
Expansion is not cheap. Shipping products from Knoxville to Reno cost Bailey tens of thousands of dollars, with additional operating expenses totaling hundreds of thousands of dollars. So in an attempt to save money, Bailey compared the costs of managing its own location with that offered by a third party logistics provider (3PL). The decision was made to use a 3PL as a distributor, because that would provide Bailey with greater speed and flexibility.
“Using the 3PL group, we were able to cut our setup time down by months,” said Ken Baker, Chief Operating Officer. “This allowed for us to plan for a greater positive impact for our customers this year, as well as a positive financial boost for Bailey.”
To keep the Bailey and 3PL teams organized and on the same page, Bailey began weekly meetings between its logistics team and the 3PL team. Additionally, Bailey’s entire strategic planning team met approximately every other week to focus on material planning, logistics and software development.
But connecting with a 3PL group wasn’t as simple as signing a contract and shipping off its products. Bailey had to change its IT systems to accommodate the computer interface of the 3PL. Baker said that was something he’d wished they’d started on day one of the project. Adapting the interface to work with the 3PL and adding additional branches into its system to accommodate the inventory took longer than had been expected. To ensure the system was working properly, Bailey spent a couple weeks testing its communication with the 3PL.
The 3PL group also provided Bailey greater operational flexibility. As the business grows, it can grow its space utilization without the cost of additional leasing. Cost also played into the decision to base the warehouse in Reno. Salt Lake City, Amarillo, Tex., and Denver were also considered, but Reno provided three advantages: One day service into most of the California market, lower inbound freight expense and optimized two-day shipment coverage for freight throughout the Western region.
During the project, Bailey’s Knoxville location remained open. In order to keep its daily production and distribution on track, the company hired two temporary employees to work after hours for four weeks, preparing and shipping products out west. A subset of its own staff was also asked to work this second shift. Bailey also worked closely with FedEx, its main freight provider, to load trucks after normal business hours and handle the unusual transit requirements.
“I had expected the stocking activity (preparation, shipping, unloading and stocking) to take longer than it did,” Baker said. “The team finished one week earlier than planned, due to a lot of hard work and good organization from our team and the team at our 3PL.”
The new distribution center will begin shipping on July 1, 2013 and will carry approximately 10% of Bailey’s total inventory. This percentage is expected to grow as the West Coast market expands.
Bailey International LLC