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Blog
Urban Outfitters zigs while others zag
January 2, 2008
There’s more than one way to skin a cat.
I was thinking of that old cliche before Christmas. In the rush to get away for the holidays, I did back-to-back interviews about recent materials handling projects with executives from Urban Outfitters, John Dewar & Sons, and Chrysler.
Apparel, whiskey and cars may not seem to have much in common, but each of those companies is a leader in their respective industries, and each recently implemented new materials and information handling systems. What’s more, those systems weren’t just about driving improvements in their DC’s or factories, although they did that. They were also integral components of a broader corporate supply chain strategy. Materials handling meets the board room.
But what really struck me was how different one project was from the next.
Take Urban Outfitters. The specialty retailer opened a 175,500 sq ft distribution center in Reno, Nevada, to distribute apparel, accessories and home furnishings to a growing number of stores in the Western United States. Urban Outfitters has an option to expand the space to 429,000 sq ft to meets its goal of growing the business by 20%.
The facility features a high-speed conveyor and sortation system for cross-docking as well as a pick-to-light system for automated piece and carton picking. Automation is always interesting to write about. But what really caught my attention was how the facility came about in the first place.
At a time when many companies are outsourcing their logistics to 3PLs, Urban Outfitters went against the grain and brought outsourced processes back in house. Why? “Speed to market is a competitive advantage,” says Ken McKinney, Urban Outfitter’s director of distribution.
Turns out that Urban Outfitters opened its first western distribution center with a 3PL back in May 1998. “We weren’t sure whether we should be in Nevada or California, so we stuck our toe in the water and went with a 3PL,” McKinney explains. “We never dreamed we’d do it that way for that long, but for 9 years, it remained our best option.”
Moreover, the relationship between Urban and the 3PL was a good one. What changed? “We are evaluating our supply chain from when a new product is conceived until it goes home with a customer,” says McKinney. “I’m responsible for reducing the time from when it hits the port until it gets to the store. I knew we’d have more opportunities to do that ourselves than if we rely on a third party.”
So Urban Outfitters zigged when others zagged. And materials handling will further a broader corporate strategy. You’ll be able to read more about Urban Outfitters in Modern Materials Handling this spring. Meanwhile, I’ll describe how John Dewar & Sons and Chrysler are improving their supply chains in my subsequent blogs.
If you’d like to talk about your most recent materials handling or information handling project, be sure to write me at Robert.Trebilcock@verizon.net.
Posted by Bob Trebilcock on January 2, 2008 | Comments (2)
Reader Comments
at 1/7/2008 11:07:18 AM, MegMhe commented:
Thank you for explianing that there is place for 3PL's, but the best option for direct control of customer service is to develop the internal competency.
at 4/14/2008 6:26:37 AM, Karen Galena, Supply Chain Visions commented:
Your article on Urban Outfitters both hit the mark and missed the boat. This article pointed to plain and simple good distribution strategies highlighting DC initiatives that can bring significant operational efficiencies. HOWEVER - the article "spins" insourcing as the panacea for Urban Outfitters. The question that always jumps out at me when somebody elects to brings something in-house from a 3PL is, "Why?" Urban Outfitters (UO) is growing and wanted to be faster and more efficient. My experience has been with the right processes, metrics and partnership it shouldn't make a difference from a cost or service perspective whether the execution is done by a 3PL. In fact, many times a 3PL can provide additional benefits i.e. protect the organization from labor issues, allow you to be responsive to the marketplace with network options, experience, etc. Your article fails to point out that there are MANY great 3PLs out there that could easily execute UO's strategies and that UO's situation is a classic "lease vs. buy" situation. It's great that UO has realized improvements, but I am left wondering what would have happened if they had gotten into a long term relationship with the 3PL and given the professionals a chance to invest and turbo charge the 3PL capabilities. Would it have been even faster? Would it have been even cheaper? I think it is important to point out that more and more companies are moving towards highly productive Performance-Based Logistics outsourcing agreements that focus on win-win agreements that achieve the kinds of success that UO was looking for. Companies don't have to go in-house to get the kinds of results UO achieved. Obviously, UO's supply chain needed a lot of investment. If I were UO's 3PL, I too would be unwilling to make investments in the face of that kind of uncertainty...where the relationship lasted nine years on a month to month agreement. Obviously there was not a long term strategic approach to outsourcing for UO.
Bottom-line - I think this was an interesting and provocative article for your readers. However, my word of advice to your readers is that anytime companies face this sort of situation they should press themselves to do an objective evaluation incorporating honest and balanced analysis of the different alternatives. UO had sound distribution strategies. And their decision to insource might have been the right one. But based on what is in the article the readers have no way of knowing.





















