Keep on truckin'
Marc Barnes -- Casual Living, June 3, 2011
THE NEWEST CHALLENGE FOR OUTDOOR furniture manufacturers and retailers? Look to your closest interstate on-ramp at the tractor-trailers and delivery trucks thundering by. Then, look up at the sign at your nearest convenience store. Chances are, the price per gallon for gas is higher than it was yesterday.
Retailers and transportation companies alike are bemoaning the increasing fuel prices, the dwindling supply of truck drivers and new regulations that limit how many miles truckers can travel in a day.
All of that is coming together during the height of the retail season in much of the country - a season that many observers saw as having the potential for being much improved, given an improving economy and pent-up demand.
Jeff Sather, an account executive with Mode Transportation, brings a different perspective in that he's seen transportation from both sides, because he used to be a casual furniture retailer. Sather said the biggest changes are that retailers are ordering direct containers from China, and the Internet has become an additional sales tool. As a result, retailers who were formerly only concerned with inbound freight are having to learn how to ship farther than their traditional 50-mile delivery radius.
"Having been a casual retailer, I know how many times on a Friday afternoon that I have heard, ‘I need it, can you deliver?'," Sather said. "That's the nature of the consumer. The consumer is not going to change. How do we as an industry fulfill their requests?"
One key to success, especially under deadline pressure, is to find a one-stop firm that can handle everything from the container to the final home delivery, Sather said.
Those with an online presence are likely having the most difficult time navigating what's rapidly becoming a logistics logjam.
Todd Arend, general manager at InstylePatio.com, said online customers expect low prices and free shipping, so cost increases on shipping mean either the prices go up for the customer or the margin gets sliced.
Arend said it boils down to a Business 101 model, which means dealers consolidate shipping to fewer carriers, negotiate as many discounts as possible and look carefully at making the best deals they can on sourcing.
Similarly, Marc Acord of M & J Seasonal Concepts, which has both bricks and mortar stores in Kansas, Missouri and Oklahoma as well as an online retail store, said the biggest challenge for him is pricing the product.
"It's really a moving target, not only the freight charges but also the fuel surcharges all over the board," Acord said. "Product is priced on the floor or website to ship and you never know what the price is going to be until you get the invoice from the freight company."
Acord also faces challenge currently with finding white-glove delivery companies to go the final mile to a customer's house - and meet the customer's expectations as to delivery. But he says that pales in comparison to chronic problems that he sees getting worse.
"We have had a lot of issues with LTL companies stacking a refrigerator on top of a table," Acord said. "Everyone is working harder and faster, and they don't take the time to do it right."
He said freight companies are willing to work out damage claims, but the effect is that delivery is delayed and the customer is inconvenienced.
Tami Newton, commercial sales director of Palm Springs Ratt an & Garden Classics, said one of her greatest challenges is America's need to eat three times a day. During the height of outdoor furniture season, truck drivers would rather haul produce than furniture, because it pays better.
"We try to negotiate the best freight and the best terms and the best discount and run with it," Newton said.
Palm Springs Ratt an is in the business of moving product into its 19 retail outlets in Florida - and often, out to customers' homes in the Northeast or upper Midwest. Typically, someone who spends the winter in Florida will purchase an item and want to have it shipped back home.
Newton said freight companies are often astounded to find that Palm Springs Ratt an doesn't inflate its freight rates to customers. Palm Springs prepays the freight charges, inspects the products carefully and charges the customer exactly what it was charged.
"We are doing good and also making good at the same time," Newton said. "We try to have a plan for everything. If something catches us off-guard, it only happens once. We learn and we find out how we can be better prepared."
At America West, Kirsten Orzag, director of human resources, said her company's main challenge is that shipping rates remained the same over the past several years while expenses increased and changes occurred in the number of hours drivers can work.
Orzag said the company has streamlined both in the office and operationally, which has resulted in enough cost savings to avoid price increases. It has also concentrated efforts on improving communications with customers.
"That is one of the key things that has helped get through this," Orzag said. "The customers know when they will receive the shipment and what will happen when it does arrive."
At HomeDirect USA, the business model is to deliver the goods straight to the consumer. Tony Coletto, vice president of sales, said the business is seasonal with televisions and exercise equipment being delivered in the colder months and patio furnishings when the weather turns warm. He added e-commerce was not as affected by the economy as brick-and-mortar outlets were.
"We have seen that this year was way better than last year, and last year was better than the year before," Coletto said. "I don't think everybody is getting back to work, but I think things are loosening up and consumers are back buying again."
Jack Hawn, president and CEO of Zenith Global Logistics, said the challenges center both on fuel increases and on driver shortages, which is made worse in part because the general driver population is getting older and is unwilling to stay on the road for days on end.
Zenith's game plan is to continue establishing regional terminals, which means that drivers don't drive as far from home. As a result, Zenith has control of shipments on its own equipment from terminal to terminal.
"Our intentions are to roll out quite a few more of the home delivery hubs," Hawn said. "We see it as a vertical move - for us, it was as simple as we want to be able to handle the entire supply chain."
Keith Hewitt, president and CEO of HEP-Direct, said it is difficult for a white-glove carrier to make a reasonable profit margin delivering outdoor furniture because it is generally less expensive, takes up space in a truck and doesn't weigh that much.
Many consumers, Hewitt said, are unwilling to pay the price for a level of service that means two workers unload, assemble and set up furniture on a customer's patio or deck, and then remove the debris. HEP did handle the delivery for one, a major retailer, for three years and barely broke even.
The exception is a current client, which is a high-end manufacturer with a high volume of shipments and deliveries usually to second homes in vacation areas. In that circumstance, the customers don't mind paying the bill.
"That's really not your typical (situation)," Hewitt said. "Our system here, the way we do everything, is based on weight and distance."
Will O'Shea, chief sales and marketing partner of 3PD, says his firm's key strength is its consistency, which it uses to help protect the retailer's brand. Communication is constant, with customers receiving updates in real time as to when the delivery will take place so that they can plan their day.
In addition, approximately 10 minutes after the delivery, the customer is asked to participate in a survey to determine how the service was - and if there was an issue, they are urged to leave a message on voicemail and 3PD will call them back within the hour. "To a retailer, that's important," O'Shea said. "If you had a bad experience, then you are going on Yelp and Facebook and you're going to say you had a bad experience with this retailer. Making sure you correct any situation immediately is extremely important."
The value of an item arriving on time and undamaged can't be underestimated, O'Shea noted.
"A lot of folks are pushed to get a low rate, but there is still an opportunity to look at the total logistics cost and what the impact of a successful delivery can or can't be to that overall cost," O'Shea said.