To shorten delivery times and provide better service to its customers, National Business Furniture opened three new distribution centers in Austell, GA, Reno, NV, and Cranbury, NJ, in early 2008.
Previously Milwaukee, WI-based NBF fulfilled all orders using a drop-ship-only model. That worked great for about 30 years (since the company’s founding in 1975), but NBF wanted to provide its customers with even better and faster service by shipping directly from their own warehouses.
“Part of our Perfect Service Initiative at NBF is providing our customers with popular products that arrive quickly and in great condition,” says Dean Stier, marketing director, catalog brands, for NBF. “Stocking our best-selling items in these strategic locations allows us to improve the service level to our customers.”
By moving away from a strict drop-ship-only model, NBF now has first-hand experience in dealing with multiple fulfillment platforms.
“Ten years ago, most of the merchandise was still made in the U.S., which meant the drop-ship model worked pretty well,” explains Jeff Spotts, director of logistics for NBF. “But now, more is being made in China and Mexico, so a lot of furniture distributors have had to move to a warehouse and fulfillment model. They’re now receiving their merchandise via containers.”
The difference between using a domestic manufacturing base, versus importing, is that “if you have a hiccup in the production cycle in the U.S., you could do what you need to do to get that product back into stock and sent out,” says Stier. “But if there’s a hiccup in China, you could be out six, eight, ten weeks, depending on how backed-up your supplier is.”
But Stier adds that most of the manufacturers NBF works with “do a good job of getting product shipped on time.” Besides, NBF is not abandoning the drop-ship model altogether. Stier says the company — which gets a lot of big orders through government contracts and educational institutions — will continue to ship a majority of its merchandise direct from manufacturers. For the most part the new DCs — which are being leased — will be used to fulfill smaller orders that come in via its catalog and Website.
“We’re still drop-shipping a majority of the SKUs,” he says. “We just got into warehousing—and right now we only have 265 SKUs in the warehouse. That’s out of tens of thousands of SKUs.”
Part of the goal in opening the new DCs is so customers can have more items shipped the same day. NBF has added special “ships today” icons to its print catalog and Website to identify items that are available for immediate shipment.
Spotts says for now only about 5% of NBF’s total sales are coming through the three warehouses — even though they’re almost 100% utilized. But the plan is to beef that up to about 30% by 2012. This, he says, will require an expansion of each of the three DCs to nearly double their current size — “and possibly a second expansion after that to add roughly another 30% of warehouse space.” The expansions will be achieved by pushing back walls in the existing facilities — no new construction is planned.
Currently, the Austell, GA, facility measures 42,000 sq. ft., the Reno, NV, facility measures 57,000 sq. ft., and the Cranbury, NJ, facility measures 56,000 sq. ft. All are racked with 30 feet of storage to the hanging iron.
Having DCs, Stier says, not only reduces the amount of time it takes to get to the customer, it also reduces the likelihood of the items becoming damaged.
“We’re already seeing damage claims go down,” he says, adding that damaged items are the bane of any furniture distributor’s existence, because the merchant must bear the cost to re-ship the item.
How did this move to a warehousing/fulfillment model come about? NBF in 2006 was acquired by K+K (Kaiser + Kraft) America, a subsidiary of German conglomerate Takkt AG, a leading business-to-business direct marketing company of office, business and warehouse equipment in Europe and North America.
As Spotts explains, K+K America also operates another durable goods supplier, C&H Distributors, which it acquired in 1998, “and they were interested in replicating that business model with NBF, because it had been so successful.”
But C&H specializes in durable goods like tool carts, industrial safety supplies, and materials handling equipment (it started dabbling in office furniture in the late 1990s). So it made more sense to keep those two businesses separate, in terms of supply chain.
Instead, Takkt decided to open three new warehouses to be shared by NBF and another one of its other sister companies, Topdeq, which also specializes in office furniture. Takkt acquired Germany-based Topdeq in 1994 and K+K started marketing its goods to the U.S. about five years ago. (There’s also a fourth K+K brand in the U.S., a restaurant supply company called Hubert.) Topdeq was previously distributing out of a single DC.
Spotts says the three new warehouses are managed by Topdeq personnel, “and we pay a transfer fee for each item we sell.” Although the two brands are separate, he says NBF is contemplating working with Topdeq in the future: “We’re exploring the possibility of bringing some of their products in with ours,” he says.
Spotts says because NBF’s furnishings come in a lot of custom colors and fabrics, only items that are best sellers will be warehoused.
“Because all our brands come with such a wide selection — we may have one chair that comes in 15 to 30 different colors — it doesn’t always make sense to stock some of those,” he says. “So we’re only stocking our best sellers – those items which have the fastest turns – that way we can service the customer much faster.”