Glass, Plus

Aug 01, 2003 9:30 PM  By

SIMON PEARCE may prefer to be known as one of the world’s best glass craftsmen, but he is also a trailblazer of another sort. The business that bears his name features a rarity in logistics: a holistic, end-to-end supply chain.

A native of County Cork, Ireland, Pearce, who began his career at the Royal College of Art in London, started his business in the United States in 1981. Launched in a historic mill in Quechee, VT, Simon Pearce now employs 350 people in six states and runs 12 retail stores nationwide, along with four manufacturing operations and two restaurants.

Most of the distribution for the five sales channels — catalog, retail, wholesale, Internet, and corporate — takes place in facilities in Windsor, VT, and Oakland, MD. Internet orders (estimated at 800 in April) are handled in the Oakland facility. Corporate orders account for about 10% of the business; recent clients include AT&T and Merrill Lynch.

Nine retail stores account for 50% of the business and are supplied from the Windsor facility. The remaining 50% comes from wholesale clients, whose orders are fulfilled in the Oakland DC. The company’s four trucks supply the retail stores.

The Windsor building measures 40,000 sq. ft., with warehousing taking up half that space. The extensive hand labor on the 600 pottery SKUs at the Windsor facility includes slip casting, jigger molding, and throwing of pots, as well as the formation of special molds for square items. After the product is formed, it is left to dry for 8-10 hours, then bisque fired for 15 hours to over 1,000° F. It is taken out and glazed, then fired for a second time for 10 hours or so at 1,200° F.

In the glassblowing operation, craftsmen work in teams of two; one shapes the glass while the other goes back and forth to the 2,700° F furnace to collect molten glass. All Simon Pearce glassware is clear, with no color added. The craftsmen make anywhere from 40 to 60 pieces an hour for each item. “The glass is ready about eight hours after it is produced,” says CFO Justin Reading. “That gives us a great deal of flexibility and we can react very quickly to demand.”

FedEx and UPS are the primary carriers for catalog and other direct-to-customer orders. Five production lines (first- and second-quality glass, first- and second-quality pottery, and non-manufactured products) are warehoused under one roof.

The Windsor facility uses bin locations and paper pick tickets. It is a highly labor-intensive operation. Processing an order for wholesale customer RedEnvelope, for example, involves washing each piece and drying it by hand, as well as special labeling.

Last May, O+F interviewed Simon Pearce and logistics director Bill Heston together in Pearce’s small office, located in the Windsor, VT, facility. Sitting at his prototype-strewn desk, Pearce, an intelligent, articulate man whose face is alive with curiosity and humor, talked about the unique philosophy that drives his business.

“It was never my original intention to do everything myself,” Pearce says. “But it was really difficult to get the retailers out there to do the product justice.”

Long before the term “multichannel” was invented, and long before customer coddling became a desirable corporate goal, Pearce had envisioned a novel method of customer service, one that grew out of his aborted desire to start a coffee shop in his native Ireland. When he bought the Quechee, VT, mill that today houses the Simon Pearce Restaurant, it was with the goal of giving customers what he calls a “complete experience.” They enjoy the merchandise in a unique way: “They watch the product being made, they experience its use by eating off it, then they buy it.” (By the way, the restaurant isn’t just a prop to showcase the tabletop items: The food is delicious, carefully prepared, and elegantly served; the staff attentive and courteous; and the setting exquisite.)

The Simon Pearce story may teach a lesson that few retailers in the U.S. would want to hear: Big isn’t necessarily better, or even good. Many of Pearce’s tenets run counter to standard business school wisdom. For one thing, he believes that “bar codes detract from the appearance of the product.” So he’s resisting them until a sensitive bar code becomes available for retail use. He’s considering an embedded microchip that can tolerate the high temperatures of molten glass, but so far can’t accept even the tiny imperfection that would result. And at a time when most operations are cutting inventory to the bone, Pearce doesn’t believe in reducing it. “It’s a pet peeve of mine that we should not run out of a product,” he says. “There’s a cost of carrying the inventory and there’s a cost of not carrying the inventory.”

As Heston points out, doing the latter can ruin a potential sale. Simon Pearce needs a sizable quantity of inventory just for presentation, largely because the product is handmade. “Customers often want a matched set,” says Heston. “They’ll take out 50 pieces to choose a set, especially for barware, stemware, and candlesticks.”

Containing the packaging costs (estimated at $300,000 last year) of all that fragile inventory is one of Heston’s main concerns. For instance, wholesale customers demand special packaging. “RedEnvelope has very specific requirements,” Heston says. “They will never see or touch that product, but will just slap their mailing label on it.” The retail stores needed to dispose of a tremendous quantity of packing materials. Heston solved the problem with reusable totes, which, he says, were dramatically effective; for example, out of 6,000 pieces of stemware, only two were broken. The totes also cut down on volume. Three pallets of glassware can now be stored on one and a half, and during off-peak periods, one truck can hold deliveries to four stores instead of two. In addition, wrapping only every other piece saves on both labor and materials.

The products are aimed at a broad market — average customer income tops $70,000, but a wedding gift typically goes for $75. “The market is huge,” asserts Pearce. “We haven’t even scratched the surface. There’s enormous potential, but we’re much more interested in producing a beautiful specialty product on a limited scale. It’s very natural growth. We have no plans to grow huge. Our $25 million volume a year explains why a wine glass costs $50.” At present, sales are flat, but new merchandise is selling briskly.

Pearce believes that although he has no specific customer profile, the buyers of his products are “mostly people who have discerning taste. They have definite ideas about what they like and don’t like. They look for everyday usability of the product. They don’t want to put it in a cupboard and pull it out three times a year.” Competing manufacturers of tabletop merchandise are mostly European firms such as Baccarat and Steuben. “‘Made in America’ used to be a handicap, but now it’s an asset,” says Pearce.

His company’s chief competitive advantage derives from its ability to design and build its own production equipment, including glassblowing furnaces. “That gives us a huge advantage in this business,” says Pearce. “Usually the equipment costs $3 million to $4 million, but we build it for a fraction of that. We go from production to market at an unbelievable speed compared to other companies.”

For a perfectionist, Pearce is surprisingly hands-off. He wasn’t always that way, however. “When the business started, it was a typical pyramid,” he says. “Then I pulled back, because smart employees don’t want to be micro-managed like that. I’ve learned to give people responsibility and empowerment in their area. One brain isn’t enough any more. To run a company, you need smart people in all departments.”

Distribution cuts across many departments, adds Heston. When discussing issues, Pearce acts as a facilitator, guiding the discussion but not dictating the solution. “For example, when we were renaming some products, he gave us broad direction but expected us to find the solution and implement it.”

The old Simon, by contrast, would have given them the answer, Pearce concedes. He dwells at length on how his change in attitude — occurring during a long break he took from the business — has affected his life and management style. “The most interesting thing I’ve discovered in the last couple of months is the realization of how I had run the business before and how I wanted to run it differently. It was working, it was successful, but it was headed for an absolute dead end. So I took a break, looking inward through Buddhism and meditation and gaining perspective during a five-year journey. It’s a misconception of youth that it’s all out there that makes you happy.”

Rama Ramaswami is editorial director of O+F.

VITAL STATS

$25 million annual volume 1,200 packages shipped a month 1,800-1,900 pre-packed case lots shipped a month 34,000 units shipped a year 2,100 SKUs (1,300 non-manufactured)

Simon Pearce’s 108-employee Windsor facility is low on automation. Up to 12 workers can pick product, but the number varies. “Primary picking is all done manually,” says logistics director Bill Heston. “Any automation we do will be mainly on the IT side, such as bar coding, rather than mechanical automation.” Location of items presents another challenge, he says. “Slotting first-quality products is easy, but slotting seconds in bins is a huge problem.”
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