Operations and Management: The Postmerger Warehouse

Oct 01, 2001 9:30 PM  By

When Jacksonville, FL-based Venus Swimwear bought Middleton, WI-based WinterSilks in 1998, Venus president Daryle Scott spoke of the operational synergies and additional revenue stream that the acquisition would bring.

But before the swimwear cataloger could reap the benefits, it had to integrate WinterSilks’ inventory into its Jacksonville, FL, distribution center. Not only did WinterSilks’ bulkier long johns, sweaters, and outerwear take up more room than Venus’s itsy-bitsy bikinis, but much of WinterSilks’ apparel was stored on hangers, whereas Venus’s items were generally kept in boxes. So the company had to install hardware for racks as well as reorganize the now-cramped space.

“The biggest obstacle we had was getting used to the way that Winter-Silks did business,” Scott says. These factors slowed Venus’s ability to get orders out the door, and fulfillment costs per order soared. “I learned that integrating a business is always more work than you imagine,” Scott says.

Just as when newlyweds move in after the honeymoon, there’s an adjustment period when two catalog businesses come together. You can avoid marital discord by following these simple steps:

  1. Perform due diligence prior to integration. This may sound like a no-brainer, but you’d be surprised how often catalogers neglect to figure out if, when, and how operations will be combined while hammering out the terms of the deal. Considering such matters ahead of time can mitigate the postmerger “your place or mine?” syndrome, says Dave Vander Zanden, president/chief operating officer of Appleton, WI-based educational supplies marketer School Specialty. Vander Zanden knows a thing or two about acquisitions: School Specialty has bought more than 20 companies since its inception in 1985.

  2. Consider seasonality synergies. If the peak selling seasons of your new product line and traditional product line are identical, you may have to dramatically increase your storage space, materials, and staffing to accommodate the new business, says Bob Betke, vice president of Richmond, VA-based operations consultancy F. Curtis Barry & Co. Extending the warehouse’s hours of operation can reduce some of the physical impact, but that can create staffing, supervision, and systems issues.

    When the peak of one business corresponds to the valley of the other, however, many warehousing issues and potential problems diminish. In fact, warehouse efficiencies become greater because there’s less dependency on hiring seasonal workers.

  3. Decide what type of warehouse space you need to dedicate. School Specialty’s acquisitions of Frey Scientific, Sportime, and Saks Arts & Crafts expanded the parent company’s product line to include science supplies, recreational equipment, and art supplies. Because Frey Scientific’s merchandise has such little overlap with the items carried by the company’s other titles, School Specialty stores and picks Frey’s more than 17,000 SKUs from a dedicated mezzanine within its distribution center.

  4. Review your “warehouse flow.” During integration, you must examine how introducing a product line different from your own will affect every individual process within the distribution center, Betke says.

    Take packing. Differences in product size, weight, dunnage requirements, and shipping methods will dictate exactly how orders must be packed. If you now need to pack much larger or heavier items, your pack table may no longer be large or sturdy enough.

    For heavier items, the transfer to and from the pack table can be an issue as well. And of course, to properly pack fragile products, you may need to buy specialized “foam in place” equipment.

  5. Convert computer systems as soon as possible. Vander Zanden attributes much of the success of the integration of J.L. Hammett to its rapid conversion to School Specialty’s warehouse management system. School Specialty acquired Hammett in November 2000; by April 2001 the platform conversion was completed. The conversion creates consistency between the businesses. “Everything becomes easier after that,” Vander Zanden says.