E-Commerce Fulfillment: No Pain, No Gain
Escalade Sports has been playing the supply chain game since 1927. At one point in its history, Sears, the traditional model for catalog and retail store sales, accounted for about half of the sporting goods manufacturer and distributor's business. Today, while the company still serves specialty shops, department stores, and big-box retailers, Amazon and other e-commerce direct-to-end-user channels have changed the game.
More to the Story:
Headquartered in Evansville, Indiana, Escalade Sports manufactures, imports, and distributes widely recognized sporting goods brands in archery, indoor and outdoor game recreation, and fitness products through major sporting goods retailers, specialty dealers, key online retailers, traditional department stores, and mass merchants.
Arkieva is a Wilmington, Delaware-based software company that empowers manufacturers with integrated, value-driven, personalized supply chain planning solutions for product segmentation and analysis, demand and supply, inventory, and executive sales and operations planning management.
E-commerce retailers are poised to win a larger share of the company's revenues and supply chain fulfillment requirements, says Eric Wilson, director of planning at Escalade Sports.
"We're seeing e-commerce sales grow by 20% per year," he says. "The business model has changed and we need to change our business model to keep pace." It may not be long before e-commerce fuels half of the company's sales, he adds.
Transitioning to Internet Speed
As many companies have learned, the supply chain shift from traditional channel models to dynamic, difficult-to-forecast e-commerce fulfillment requires a good mix of thought leadership, time, and technology—things Escalade Sports took to heart when it started to evaluate what a digital supply chain transformation project would entail.
Headquartered in Evansville, Indiana, Escalade Sports, a wholly owned subsidiary of Escalade Inc., manufactures, imports, and distributes 47 different sporting goods brands in the basketball hoop, archery, dart, billiards, indoor and outdoor game recreation, and fitness product categories. The United States is the primary market for the $200-million company, but it does have a small portion of international sales as well.
Although Escalade Sports produces some of its products at manufacturing facilities in Mexico, Florida, Illinois, and Iowa, it works with between 60 and 70 contract manufacturers in China for many other items. As it sources more of its production overseas, the company has seen manufacturing and shipping lead times climb from 40-50 days to about 120 days.
With approximately 8,000 unique SKUs shipping from Escalade Sports' four locations in Indiana, Illinois, Florida, and San Diego, forecasting, demand planning, and inventory management of predominantly seasonal sporting equipment were some of the company's biggest pain points. Where it once was commonplace for retail customers to receive shipments two weeks after placing orders, consumers now demand two-day fulfillment, and that expectation is dropping to delivery within a few hours.
"Many of our products are seasonal," Wilson explains. "Previously, we had to plan the entire season's forecast in the pre-season because we had long manufacturing and shipping lead times. The hope was that if the forecast plan was good, we would sell through the season, and have nothing left at the end.
"It's a great concept but it's hard to achieve, especially when we have to plan so far out for many products," he adds. "Often, we would run out of about one-third of our SKUs, have too much inventory for another third of our SKUs, and hit the forecast plan for the final third of our products."
Growing and unpredictable business-to-consumer (B2C) demand has made forecasting and inventory management more complicated, and it has begun to pinch the company's supply chain and business operations. Inventory turns dropped from 4 to 4.5 several years ago to 2 about two years ago. Service levels that once reached 80-90% when traditional retail customers were the dominant sales drivers have fallen into the 70s as e-commerce spikes.
"We simply could not replenish fast enough," says Wilson, reflecting on the state of business when he joined the company two years ago in late 2017.
"We had in place one of the most widely used planning tools. You may know it; it's called Excel," Wilson jokes about the spreadsheet process the company used to manage supply and demand planning. "We had an old legacy Enterprise Resource Planning (ERP)system that we didn't want to replace. Instead, we wanted a solution we could bolt on to that would become the engine for our transactional system and create end-to-end inventory optimization."
This is a fairly common technology transition pattern. "Despite all the progress the industry has made and the best-of-breed technology that is available, 60-70% of supply chain practices still run on Excel," says Sujit Singh, chief operating officer of Arkieva. Many companies typically look for an ERP extension when their legacy systems are pushed to their limits, he adds.
A few months after stepping in as director of planning, Wilson headed up a nearly seven-month review of what processes required tweaking and which supply chain gaps had to be closed. Setting up a four-point framework focused on integrated planning, segmentation (SKU rationalization), metrics, and supply chain systems, Wilson aimed the digital supply chain transformation outcomes toward standardization, delighting customers, and reducing costs.
Choosing a Solution
He then started the search for a technology provider who could propel the business forward. He narrowed that list to four vendors.
Wilson ultimately chose Arkieva, based in Wilmington, Delaware. He had worked with Arkieva before and thought its end-to-end solution for demand planning, inventory planning, supply chain planning, and sales and operations management could help Escalade Sports up its game.
From a technology standpoint, the implementation, which started in summer 2018 and was completed by spring 2019, was "fairly straightforward," says Quinn Freeman, Arkieva's practice director.
Once the data cleansing and sales and revenue segmentation was done, Escalade Sports and Arkieva phased in the demand planning, inventory planning, supply chain planning, and scheduling solutions over a few months.
With these baselines and digital forecasting models in place, Arkieva's solution now feeds back to Escalade Sports' planning information nightly, and can be used to drive more efficiencies, Freeman says.
The hardest part of the implementation was change management and getting the workforce on board.
"Introducing a lot of change quickly can be painful for the people, the organization, and the culture," says Wilson. "We needed to get the whole company to understand the pain, the vision, the business model, and the roadmap. We treated the implementation as a separate work stream to help everyone adjust."
Another challenge was spelling out exactly what needed to be done, and why it needed to be done a certain way. This sometimes-overlooked activity helps clarify the vision and instill the importance of why the company is going ahead with the changes.
Although Escalade Sports is still in "block and tackle" mode with the Arkieva solution and continuing to standardize the planning process, the company has had a few early wins.
It has seen a 26% gain in forecasting for some products; a 10% improvement in fill rate; an 18% reduction in SKUs through SKU rationalization; a 10% increase in customer service levels; and a 17% drop in expedited/premium freight costs, customer penalties, and shipping costs.
Inventory optimization has also improved inventory health, allowing the company to make better cost, inventory, and fulfillment management decisions.
The software's future decision-making capabilities may continue to expand as machine learning, artificial intelligence, and smart forecasting are added to future modules, Singh notes.
Further down the road, the company may examine how the Arkieva solution can help improve raw materials planning for its internal manufacturing facilities, Wilson says.
Sounds like an e-commerce fulfillment slam dunk.