Global Logistics: Burton catches air in new markets
Teaming up with a new 3PL partner has helped Burton to clear a path for rapid growth, smoothed out shipment volatility, improved delivery times, and strengthened relationships with key customers in several unexpected ways.
By John Kerr, Contributing Editor -- Logistics Management, 1/1/2009
It was not a comfortable question for Raymond Campbell: “How come our competitors can get their sunglasses here three days earlier than us?” In fact, Campbell, the vice president of operations for Burton Snowboards, was getting more and more of those kinds of questions from his West Coast salespeople.
Burton, a huge name in snowboarding, had launched its multi-season products in the mid-1990s—“surf and skate” gear such as sunglasses and sandals as well as helmets and youth fashion T-shirts. The products would arrive from Europe and Asia at Burton’s East Coast distribution facilities and be picked, packed, and shipped from there to customers and dealers on the East and West coasts.
But it typically took anywhere from five to seven days to move the product by road to sports shops in California and elsewhere on the Pacific coast. Not infrequently, Burton would pay extra to have freight expedited. By contrast, a lot of Burton’s surf and skate competitors were based on the West coast and were shipping same-day and next-day.
That wasn’t the end of it. The operations chief also heard all about the problem from the warehouse staff in Albany and Champlain, N.Y. Every fall as snowboarding season ramped up, and for several months thereafter, the distribution centers would struggle to deal with the huge spike in demand. A 15-pallet shipment going to the Dick’s Sporting Goods chain effectively competed for attention with six pairs of sandals going to a California surf shop. “In a word, it was chaotic,” recalls Campbell. “The staffing issues were huge.”
Flash Point For Change
From the viewpoint of the Pacific-coast surf shops and big sports-gear dealers, Burton’s delivery problems were annoying. But from the business point of view at Burton, they were a significant obstacle to company growth. Although the company that Jake Burton Carpenter had founded in 1977 out of his Vermont barn now dominates most aspects of snowboarding, multi-season gear is where most of Burton’s growth has been in the last few years, Campbell says.
Sunglasses became the flash point for change. Low-volume items that command high margins, they epitomized the potential growth that Burton could envision. Early in 2007, the general manager of the ANON lines of sunglasses and goggles flagged the problem; a meeting was convened to kick-start a solution, with attendees including Campbell as well as Burton’s chief operating officer and the company’s vice president of sales.
The meeting concluded with a decision to find ways to get sunglasses to the Pacific coast as quickly as the competition could—and to ease the seasonal strain on the New York warehouses. Campbell left the session with a lengthy list of to-dos for himself and his director of logistics. The immediate task was to gather raw data with which to evaluate potential solutions. “The data included SKU counts by location, by volume, and by product family, along with growth forecast numbers, shipment costs and times, the distribution of customers, and a good understanding of what our competitors did in the sunglass market,” says Campbell. But, it was clear from the get-go that Burton would continue to outsource warehousing and other logistics functions.
“Owning a facility and trying to staff it up—that was not our core competency,” says Campbell. He opted to use World Wide Distribution (WWD), the warehouse, distribution, and transportation services provider that operates Burton’s three distribution centers in upstate New York and eastern Canada, as his lead logistics provider.
Using WWD’s recommendations about warehouse operating criteria and logistics performance specifications, Campbell and his team began to build a short list of third-party logistics providers (3PLs) that could service Burton’s West Coast clientele promptly and efficiently, providing everything from efficient warehousing functions to reliable shipment.
The selection process began with location and transportation routes that would put a West Coast distribution facility closest to retail customers. Burton already had offices for product design and sales and marketing in Irvine, some 45 miles south of Los Angeles, and the team had good data on where retailers were concentrated up and down the Pacific Coast and in Hawaii.
So the search centered on Central and Southern California, looking inland at hubs such as Fresno, close to Interstate 5, and the so-called “Inland Empire,” the busy urban centers to the east of Los Angeles. Campbell also looked at where Burton’s competitors had their facilities, reasoning that they had had good business reasons for their choices.
The choice soon came down to six contenders—a mix of regional 3PLs and large nationals that had the security cages, the accurate count-and-fill processes, and the careful packaging procedures for high-value, fragile product such as sunglasses. But several months after the decision had been made to open a West Coast facility, Burton’s chief operating officer urged that all of the company’s surf and skate lines should be handled by the new hub. That changed the evaluation criteria considerably—bulky clothing in particular expanded the footprint that Burton needed, and called for different storage and retrieval systems to handle different colors. And it immediately narrowed the list of contenders.
Toward the end of 2007, Campbell and his team had come to a decision. Menlo Worldwide Logistics, LLC, had experience with managing distribution of high-value, seasonal-demand product lines similar to Burton’s surf and skate gear. In fact, Menlo’s 500,000 square-foot multi-client distribution center (DC) in Walnut, Calif., just east of Los Angeles, already distributed goods to and had good relationships with many of the same sporting-goods stores that Burton was selling to—a major plus. The Walnut DC had excellent transportation corridors stretching in every direction, and an established track record with cost-efficient, timely shipping. And a review of total landed cost showed the location’s economics were very attractive.
“Are We Too Small For Them?”
Yet Campbell had questions. Menlo, part of the Con-way Inc. conglomerate, has operations on five continents.
“Were we too small for them? We wanted Menlo to be very honest with us,” says Campbell.
He adds that for all its size and scale, Menlo showed a keen interest in the privately owned sports-gear maker, making staff available to talk about the nuances of carton marking and documentation for particular customers and providing managers who could discuss performance criteria and service-level agreements.
The Burton team was also anxious about effective communication and collaboration across the country—especially since many of the business processes were still ad hoc at Burton, carried in managers’ heads or in note form somewhere. According to Campbell, Menlo’s managers quickly laid those concerns to rest, pointing out that they already worked with many companies with comparable levels of process discipline. They explained that the 3PL’s joint planning systems would help Burton to upgrade its systems, but without requiring an overnight overhaul or a big disruption of its operating methods.
“It was good for Burton to think about all this knowledge that would be available to us,” says Campbell. “That clarity and structure really appealed to us.”
Campbell’s team also had questions about the security of their products in a DC that was serving so many clients. Although the cost efficiencies of the multi-client approach were very appealing and it was clear that Menlo’s facilities gave Burton plenty of room for growth, Campbell sought assurances that there would be minimal risk of product or order process mix-ups in the warehouse racks or on the loading dock.
When Campbell and his team visited the Walnut DC for a site tour early in 2008, they saw for themselves that Burton would have dedicated space and the proper processes that would obviate any such problems. They also liked the fact that they were getting an authentic feel for the DC’s operations.
“As we walked through the facility, it wasn’t just the plant manager who was describing what was going on—it was the guys and gals who were doing the hard work,” recalls the Burton operations chief. The comfort factor was there. “The multi-client approach dovetails well with Burton’s winter business cycle,” says Campbell. “It will enable a partner like Menlo to find counter-seasonal clients, thus off-setting fixed costs for us and the other clients.” Burton signed a 12-month renewable contract for 70,000 square feet of the Walnut facility, expandable when required.
Early in the summer of 2008, Burton began diverting purchase orders for its ANON sunglasses, Analog, Gravis, Burton Apparel, and Channel Islands non-surfboard product lines to the Walnut, Calif., facility. There are no Burton employees there; staffing is handled by Menlo. Employees tend to rotate from client to client within the warehouse, with a small core group assigned to one section of the warehouse and temp workers being used as needed, depending on seasonal needs. Says Campbell: “With this arrangement we do have some flexibility with product flow, and that helps from a resources perspective. If we have a heavy receiving or shipping peak, we can leverage resources from other facility tenants and quickly ramp up or ramp down and not have a base team or large temp pool sitting idle.”
Burton trained the Menlo DC staff to properly handle and package its products; for example, a few of the company’s product managers went to the facility and walked the Menlo team through the processes of checking for and preventing against scratches on sunglass lenses. Burton then asked its sales reps to check with their key retailers to find out how the sunglasses looked when they were unpacked.
Sunshine in a Box
According to Campbell, Menlo understood the importance of proper handling and packaging—just one of the indicators of how the right 3PL can add value. In fact, the logistics provider already had its own sophisticated system for packaging—what it calls “sunshine in a box”—which it was using with other clients.
The “sunshine” tactic owes everything to Menlo’s interactions with the small “pro” shops where the person receiving and unpacking shipments is almost never a warehousing professional. He or she is typically a keen enthusiast of the sport—someone who will be selling in the shop more than handling back-office functions. Menlo had determined that by presenting and packing goods with finesse, it could help those individuals as soon as they open the box.
“It’s not just about stuffing as much as you can in the box—it’s about presentation, so the product looks nice,” explains Chris Davis, director of business development at Menlo.
Burton is also tapping into a new program launched recently by Menlo to help companies expand and grow quickly in new markets. The program offers customers strategically located warehouse space with close proximity to major West and East Coast ports and inland rail intermodal hubs for efficient handling of imported products. It also provides shared personnel, systems, and operations support that are leveraged in a multi-client environment.
Through this program, customers can establish distribution operations quickly and, as business grows, scale them at a competitive cost.
So far, Burton has been leveraging Menlo’s joint planning session (JPS) to define projects, key dates and deliverables. What both parties learn will help to facilitate quicker product ramp-ups in the future.
Dude, What’s the Benefit?
So with its West Coast presence now established, what results is Burton seeing? Given big variables such as the economic downturn and a snow-sports season that has started late, it is hard to draw direct quantitative correlations with the previous arrangement. But the company now easily matches the 1-to-3 day shipment turnarounds typical of its surf-and-skate competitors, and the Walnut site has no problem handling the little orders—six pairs of sandals for one shop, two boxes of sunglasses for another—that are typical of the order patterns of the small West Coast sports shops.
As far as Burton is concerned, no news from its retailers is good news. It’s easy for them to place new orders as well as re-orders and to get deliveries within three days. Order management and documentation are effective, and orders are more accurate, helping Burton minimize the inventory it needs to keep at the Walnut DC. And the complaints from Burton’s own West Coast salespeople have pretty much dried up; the general manager of the sunglasses line—who galvanized the West Coast initiative in the first place—no longer needs to rush goods by air and has become one of the biggest supporters of the new arrangement.
More importantly, Burton can now latch onto the cultural dynamic of the West Coast. Where previously products shipped from upstate New York had something of an alien “vibe,” now goods coming out of a California center have more affinity for Pacific retailers. In essence, Burton now signals to key customers that it is serious about being a great surf and skate brand as well as the big name in snowboarding.
And what about Burton’s core winter recreation products? Order management and logistics operations have gone from chaos to kudos. Now that the company is using WWD’s East Coast warehouses to handle only its snowboard brands, all activities, from receiving to shipping, now run predictably using the long-time warehouse management system.
Re-order turnaround times have improved; reverse logistics are no longer backlogged. And Burton has been able to operate with fewer staff on the East coast—and there is logistics capacity to spare.
It’s clear that after just a few months, Burton’s association with its newest 3PL partner is paying dividends. It has certainly cleared a path for rapid growth in new high-margin product lines, smoothing out shipment volatility, speeding delivery times and strengthening relationships with key customers in several unexpected ways. But it’s a fair bet that the partnership will help Burton in many other ways.
There are already indications that Burton’s business systems are becoming more disciplined in the process of working closely with Menlo’s systems. Order management works more smoothly and Campbell’s team have far better visibility of their supply chains.
Long story short: Burton’s 3PL relationship has not simply streamlined deliveries of its sandals and T-shirts. It is helping make Burton a much more competitive company in the long run.
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