Apparel Manufacturer: Make or
Buy / Outsourcing: Fulfillment Operations
Business Challenge
A $50 million manufacturer outgrew its Pick-and-Pack distribution facility faster
than its lease commitments. ISG had previously sourced small package shipping
and ocean freight, yielding 20% and 13% savings respectively.
The company struggled with whether fulfillment should be a core competence or
whether they should remain focused on apparel design and marketing. ISG was
engaged to understand the economics and trade-offs associated with outsourcing
fulfillment.
Approach
ISG performed a detailed Assessment of the current logistics operation including:
- Key operational and performance requirements
- Integration of shipping and fulfillment systems with order systems and processes
- The importance of the physical proximity of fulfillment to sales and operations
personnel given current processes
ISG created a detailed cost model
of the current operation that took into account all relevant cost variables,
excluding those costs that would not go away if fulfillment were outsourced.
ISG then performed a full supplier qualification effort to identify third party
logistics (3PL) companies that could meet the client's specific needs. Executing
a Request for Information (RFI), ISG qualified over a dozen potential partners
concluding that an outsource partner could yield compelling cost savings and
meet the stringent requirements. The client decided to proceed.
ISG then developed a Request for Proposal (RFP) that detailed the client's requirements
and provided suppliers with a flexible bid model enabling apples-to-apples comparisons
in an industry where that is often difficult to achieve.
Results: Significant Fulfillment Operations Improvement
Leveraging ISG's decision support data and after extensive due diligence,
the client narrowed the field to two providers that clearly demonstrated the
ability to do the job and offered compelling cost reduction and capability improvement.
The project sparked significant internal debate and motivated the current fulfillment
staff to implement several major operational improvements that significantly
increased capacity and reduced costs per order and per item. The improvements
came as a result of ISG recommendations and new ideas generated by the sourcing
process. In the end, the economic argument for outsourcing was reduced and the
client decided to maintain in-house operations for the near term.
