2005 Supply & Demand Chain 100 Case Study  Global Hair-Care and Cosmetics Supplier/BAX Global Inc.

Profiles in Supply Chain Enablement: Moving to direct-to-retail order fulfillment, this top player in the hair care sector tapped BAX Global to design and implement a new distribution network.

Profiles in Supply Chain Enablement: Moving to direct-to-retail order fulfillment, this top player in the hair care sector tapped BAX Global to design and implement a new distribution network.

Company: Leading Global Hair-Care and Cosmetics Supplier
Company Size: Large
Company Sector: Retail/CPG
Area(s) of Enablement: Fulfillment/Logistics, Supply Chain Integration & Infrastructure
Enabler: BAX Global Inc. (Irvine, CA)

SDCE 100 2005Case Study: This international cosmetics supplier (name withheld for reasons of confidentiality), offering full-service hair care products in North America, was looking to change its distribution model. It had traditionally used direct-to-salon shipments on a limited basis, while servicing most of the United States and Canada through distributors as a result of acquisitions over the years. But the company wanted to shift away from using distributors and move to direct-to-retail order fulfillment.

In addition to a tight timeline for the implementation of the new distribution model (a proposed 50-day startup), the company faced several other challenges, including dealing with more than 800 stock-keeping units (SKUs), making 21,000 to 28,000 picks per day, and handling between 5,000 and 7,000 lines per day. The company's products ranged in size from gallon jugs to small tubes of lipstick, often on the same order and requiring same-day order fulfillment.

The company also was aiming for 99 percent order pick accuracy and was looking to gain real-time inventory data. It had requirements for the storage and handling of hazardous materials (aerosols, flammable liquids, oxidizers), air conditioning for its product range, and scalability of the new system to handle increased volume and growth.

The Solution

The hair care company tapped BAX Global, the Irvine, Calif.-based international freight transportation and supply chain management service provider, to design, implement and operate the new distribution network supplementing the company's current distribution centers, along with a returns handling operation.

BAX conducted a "harmonization study" and concluded that the service provider could help the customer improve its service standards beyond the standards proposed in the company's request for quotes on the project. For example, while the company targeted on-time delivery levels at 98 percent, BAX proposed 99.8 percent; and while the company sought 99 percent order accuracy, BAX proposed 99.8 percent.

Elsewhere, BAX suggested that the customer could leverage the new model to lower its delivery and distribution costs, including by using a third-party logistics (3PL) shared facility, implementing best practices and taking advantage of available labor at BAX's Toledo hub, a multi-use facility, during daily peak periods.

On the technology side, BAX's solution included a warehouse management system (WMS) coupled with electronic data interchange with the customer's enterprise resource planning (ERP) system. To ensure accuracy and on-time delivery, as part of its solution, BAX implemented Siemens' pick-to-light order fulfillment solution. The high-density flow rack allows for paperless picking, conveyors integrating picking with shipping, pick-to-shipping-carton and sequential location of product by size in the picking module, ensuring compliance with BAX's proposed order accuracy.

Reaching Goals

The customer needed orders fulfilled the same day, so instead of weekly full-carton orders sent through distributors, BAX Global proposed handling daily item orders direct to salon customers. The cartonization with order processing from the WMS predetermines shipping carton size before the order is picked. Pre-glued die cut carton used to speed carton setup and induction into the picking module process has augmented the productivity of the new distribution model by at least 10 percent, according to BAX.

The facility startup, with base fulfillment operations, occurred in 45 days, while the conveyer equipment installation was 60 days from the go-live of the system, and the pick-to-light installation and systems integration took 45 days after the conveyors were installed. The total time spent on the project amounted to five months.

To date, the customer has seen its order fulfillment accuracy reach 99.8 percent, inventory accuracy hit 99.9 percent, and receiving-put-away recorded at 99.5 percent. The company has seen its volume of activity increase by 15 percent, and it is scheduled to expand another 25 percent within the space of a quarter. The project, which was budgeted at under a half-million dollars for all the capital equipment, initially included a target payback within two-and-a-half years, but the additional volume is expected to bring that down to within two years.

The hair care customer has worked with BAX Global on two projects this year, and an executive with the company commented: "In both cases, BAX has proven to be a high quality solution provider and consultant, highly responsive, focused on tailoring their solutions to the customers needs. They combine a pragmatic approach for short-term solutions with long-term strategic vision. BAX adheres to commitments and meets deadlines."

For more stories of successful supply chain implementation, read the "2005 Supply & Demand Chain Executive 100" article in the June/July 2005 issue of the magazine. Also watch the Today's Headlines section of SDCExec.com every Tuesday and Thursday for more in depth best practices drawn from this year's Supply & Demand Chain Executive 100.