Global Logistics: Harry & David’s sweet global solution
“We are very vertically integrated, and grow almost all of our own fruit. But if we don’t have baskets to put them in we simply won’t have the tools to build our premium gifts.” —Jeff Brady
April 01, 2014 - LM Editorial
The big challenge for a seasonal shipper is, well, that it’s seasonal. For Harry & David, the iconic multi-channel specialty retailer of pears and other gourmet food offerings, those challenges are multifold.
The company not only deals with a highly perishable assortment, but it manages transportation and logistics from a headquarters tucked away in the Northwest where shipping options can occasionally be few, inconsistent, and expensive.
However, for a seasoned transportation and logistics executive, that’s when it’s time to draw on the benefit of a longstanding relationship. While some shippers view transportation services as merely a transactional commodity, others, like Jeff Brady, say that existing logistics services partnerships should open the door to more strategic opportunities.
“Relationships truly matter,” says Brady, Harry & David’s director of transportation and logistics.
The company is what Brady calls “a large-scale shipper,” moving in excess of 7 million packages a year with FedEx, its preferred partner for domestic transportation. In fact, about 70 percent of its more than $50 million transportation spend a year goes to FedEx.
“We’re very ingrained strategically with them,” he says.
Harry & David had no issues delivering its final product—notably its trademark pears—to homes and offices. However, the company’s challenge was with obtaining baskets and other auxiliary products associated with that fruit. It had a piecemeal approach that blocked efficiencies and created additional expenses with inbound deliveries of baskets and other materials, much of it sourced in the Far East.
According to Brady, there was a scattered approach to domestic inbound freight through a network of ocean carriers. Once those ocean containers reached the U.S., inbound deliveries to warehouses and distribution centers were often inefficient, using multiple truckloads with scores of different carriers. Vendors were not organized, often arranging deliveries on their own, with little strategic direction.
Brady decided it was time to better leverage its pre-existing relationship with FedEx. Through FedEx Trade Networks, the parcel giant’s freight forwarding arm, Harry & David gained efficiencies and better managed overseas vendors, resulting in improved operations and a 25 percent savings in overall inbound transportation spend. Here’s how it happened.
The 80-year-old Medford, Ore.-based premium fruit distributor is probably best known for its Royal Riviera pears, considered the Rolls Royce of the variety.
However, the company also distributes many other varieties of products, including the Cushman’s Honey Bell brand of oranges, Wolferman’s Gourmet baked goods, Harry & David wine, fruit baskets, and holiday gift towers. Harry & David has grown into a half-billion-dollar retailer, with a vast majority of its revenue captured in the fourth quarter in its current model.
But the Harry & David success story is not just about delivering to homes and offices, it’s about how it found the right blend of services to create a flexible supply chain. While its fruit is grown largely domestically, some baskets and other components are sourced overseas, mainly in the Far East.
“We are very vertically integrated,” Brady explains. “We grow almost all our own fruit, but if we don’t have baskets to put them in we simply won’t have the tools to build our premium gifts.”
About a year ago, Brady and the supply chain team set out to solve the challenges in their global supply chain operations. “We knew we were very good at managing domestic, small parcel deliveries,” he says. “However, we were not nearly as efficient in the overseas shipment arena.”
The reason, says Brady, was simple: The company was not a frequent or high volume ocean customer, moving only several hundred containers a year from Asia; and, in turn, the lack of leverage with ocean carriers was hurting the cost metrics associated to Harry & David’s total inland transportation costs.
Harry & David went to FedEx Trade Networks, the freight forwarding division of FedEx, in the spring of 2013 and inquired how they could better leverage their existing relationship.
“We asked them what they could do for us because we don’t have a lot of volume on ocean containers and we’re not going to be very meaningful to a steamship line,” says Brady.
FedEx Trade Networks performed what Brady called “a deep dive” into Harry & David’s overall supply chain, its traffic lanes, volumes, including a cost analysis, and suggested using its Global Order Logistics, its service for purchase order management that helps manage import container flows and enables the business partners to collaborate.
“From a business process perspective, that enabled us to have a tool so our purchasing team could track containers from port of origin [Asia] all the way through our internal business partners such as procurement,” Brady explains.
With the Global Order Logistics system implemented, Harry & David immediately saw greater visibility for his transportation and logistics operation as well. But there was more: Harry and David’s vendors began a more organized procurement process, and they were able to begin booking their shipments directly through Trade Networks.
“From an execution perspective, this has been very beneficial to our world in our various departments,” says Brady. “FedEx now handles all of the various customs and import matters, and that gave us an end-to-end solution with visibility in to our partners and to ourselves. It even empowered vendors to book the loads themselves.”
According to Brady, that helped Harry & David begin to start measuring compliance of its vendors—an important element that was missing in the past. Manual entry of vendor data gave way to automated input, which led to better management of those vendors. “It gave us more control around managing those vendors,” Brady says. “It was a great win for purchasing as well as for the transportation and logistics department.”
The intermodal link
Harry & David utilizes two year-round DCs, one in Medford, Ore., and the other in Hebron, Ohio. To prepare for the holiday rush, it adds seasonal shipping facilities in Pennsylvania, Missouri, and California, and, this year added two additional DCs in other targeted geographic hot spots.
When those containers of baskets arrive via ocean, they largely enter through the port of Tacoma, Wash. In the new arrangement, FedEx Trade Networks helped Harry & David improve its distribution facilities for cross docking and transloading by further consolidating into both full container loads (FCL) and less-than-container loads (LCL), creating further efficiencies by allowing multiple shipments to be combined into full truckloads—and avoiding the more costly and inefficient less-than-truckload (LTL) moves.
Aside from utilizing more truckload freight, Brady and the logistics team introduced intermodal rail into its supply chain for a portion of its inbound domestic network from Tacoma to Hebron last summer. They looked to utilize two rail lines—BNSF and Union Pacific—with a couple of containers a week going to Ohio and a few additional going to Medford.
However, Brady says that he didn’t have the time or desire to start negotiating rates with two different railroads. Again, being an infrequent small volume rail shipper, he felt that he didn’t own the negotiating clout he needed to with the Class 1 railroads. “So we dovetailed that in with the FedEx relationship,” he says. “This piece is now mission critical for us, but at end of day, it’s such a small piece of the overall puzzle.”
Brady says that he’s “very happy” with the intermodal service and its lower cost, compared to long-haul trucking. “We got the benefit of cost, and we got bandwidth internally freed up to focus on those bigger pieces,” he says “When you leverage a preexisting relationship, all that does is strengthen the relationship.”
Brady and Harry & David are just about a year into the transformation. Besides the greater efficiencies from its ocean carriage and inland transportation network, logistics and transportation operations are now benefiting from greater compliance from vendors and more efficient use of its own internal resources—thanks to greater efficiencies realized through its forwarder.
“I gave them the car keys because they can drive the car better than we can in this case,” says Brady jokingly, adding that he still owns the car and manages how it’s used. In fact, he meets at least quarterly with FedEx Trade Networks representatives to monitor issues large and small.
“They know the opportunity and need for continuous improvement, and we will drive Harry & David to greater levels of growth and success due to that commitment on both sides.”
Brady’s goal through this process is to make the system more user friendly from a vendor perspective. He would like to establish better tracking and tracing and improve dwell times at transloading facilities. “I couldn’t be happier where we are right now, but I want to squeeze that last bit of juice from the lemon.”
Another further opportunity, says Brady, is to drive some additional costs out of its supply chain by single-sourcing LTL freight. Harry & David currently utilizes multiple LTL providers, spending about $1 million per year. On the truckload (TL) side, the company uses more than 30 carriers and spends upward of $10 million per year. “That’s too many TL carriers,” Brady admits. “I’d like to get that down to about a dozen.”
But because its major DC is in Medford, Ore., and needs both dry van and temperature-controlled capacity, right now those options are important. “You need to find that needle in the haystack sometimes,” says Brady.
Harry & David also supplies fruit and gourmet gifts to its approximately 50 retail stores that are open year around. Another challenge is supplying finished goods to the more than 30 seasonal retail stores that open, mostly in malls, for the 60 days prior to the holidays.
“That’s another seasonal challenge,” he says. “We also open up “pop-up’s” and “kiosks” in malls and this basically doubles our retail footprint within 60 days.”
The hyper-seasonality of Harry & David’s business is at the very essence of its operations. “You have to partner with right kind of carrier mix that can support that seasonal complexity,” Brady says. “I have to tell that partner what I need when it ramps up; what I need off peak; and what we will commit to in order to gain their commitment. We’re very good about forecasting, we know what volumes we’re going to ship, and we’re transparent about what we’re going to need, and when we’re going to need it.”
Subscribe to Logistics Management magazine
entire logistics operation. Start your FREE subscription today!