July 2018 | Case Studies | Casebook

Fulfillment Makeover Reveals A Glowing Supply Chain

Tags: Distribution, Logistics, Supply Chain

DHL's Lockbourne, Ohio, facility houses 6,400 square feet of cold storage, seven high-speed fulfillment lines, and eight production lines to handle storage, kitting, and fulfillment services for Rodan + Fields orders.

Thanks to a new strategic fulfillment location and automation makeover, Rodan + Fields has skin in the social commerce game.

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Rodan + Fields was growing fast. By 2016, the skin care company was shipping so many orders, its Dallas-based fulfillment center could barely handle the volume.

"Our peak days started to hit 30,000 to 40,000 orders, sometimes more," says Bryan Wayda, chief supply and service officer at Rodan + Fields in San Francisco. "The building and process weren't designed to handle that volume of flow."

In 2017, Rodan + Fields moved its operations to a facility in Lockbourne, Ohio, operated by DHL Supply Chain Solutions. Thanks to the strategic location, combined with new automation, Rodan + Fields now ships many more orders than it could before, and more efficiently. And it gets product to its customers faster than it could in the past. The relationship with DHL Supply Chain has also laid the foundation for greater efficiencies in the future.

Rodan + Fields was founded in 2002 by dermatologists Dr. Katie Rodan and Dr. Kathy Fields. The business originally sold its products in department stores, and beauty care giant Estée Lauder acquired the brand in 2003. But in 2007, the two doctors bought the brand back, abandoned the brick-and-mortar channel, and committed to a new business model: social commerce.

A hybrid of multilevel marketing and e-commerce, social commerce uses independent consultants to enroll customers, each of whom makes purchases through a personalized version of the company's e-commerce site.

Because Rodan + Fields makes its skin care products for daily use, many customers buy subscriptions, receiving a new shipment automatically every 60 days. Five days before the order is due to ship, customers get an email alert, which gives them a chance to make modifications if they want.

Rodan + Fields chose the Dallas area for its original fulfillment center because, at the time, the company's market was concentrated in the South and Southeast. Contract manufacturers in New Jersey, Illinois, Ohio, and Southern California shipped product to the building, a multi-tenant facility operated by a third-party logistics (3PL) provider.

The arrangement worked well at first. But then business exploded at an unexpected rate. "We'd simply outgrown the building," Wayda says. Also, as volume grew, the geographic center of the company's customer base started shifting.

Rodan + Fields faced a choice: Should it supplement the Dallas facility with an operation in another city? Or, to better serve its evolving market, should it relocate entirely?

Searching for Solutions

Instead of reaching its own conclusion, the company issued a request for proposal to about 16 3PLs, including the incumbent. Rodan + Fields described its goals for throughput, market reach, and efficiency, and left it to the 3PLs to propose solutions. In the end, the company chose DHL Supply Chain, which recommended moving to Lockbourne, a suburb of Columbus.

"The Lockbourne site was in the 100-mile circle of our center of gravity to our customers," Wayda says. Moving there would shorten the fulfillment cycle to most customers by about one day.

DHL Supply Chain recommended Lockbourne to Rodan + Fields in part because that location offers a ground transportation network that can reach a large population within two days.

"The second reason is DHL Supply Chain has a large presence in that market, which allows us to leverage resources, associate sharing, and management capabilities across multiple sites," says Kraig Foreman, vice president of operations at DHL Supply Chain Solutions, North America, in Westerville, Ohio.

The technology in its proposal also worked in DHL Supply Chain's favor. "DHL gave us an automation model that allowed us to start with the capacity we're at today, to achieve the throughput we need, but then grow into the future in a more flexible way than some of the other solutions," Wayda says.

The new operation automates many fulfillment processes that were performed manually in the previous facility. Fulfillment in Lockbourne happens in two phases. In the first, associates pre-assemble bottles and tubes of product into kits, which Rodan + Fields calls regimens. A regimen is the company's basic sales unit.

"Before we even see an order, we have teams of associates working on building the kits," Foreman says.

Because the Food and Drug Administration regulates some of the products in a regimen, Rodan + Fields tracks product lot codes. DHL Supply Chain uses an automated spray printer to add those codes to the regimen boxes.

As DHL Supply Chain receives customer orders in its Manhattan Associates warehouse management system (WMS), a pick-to-light system tells associates which regimen boxes to pick and place in a carton for each shipment. "The WMS automatically sizes the box," Wayda says.

The system inducts each shipping carton onto one of several production lines, based on what's inside and which parcel carrier will handle it.

"When the carton hits the specific production line, all the components are put onto it, including packing slips, shipping labels, and dunnage," Foreman says. "It comes out the other end of the line and is ready to load onto the parcel carrier's truck."

But before the box leaves, it's conveyed over a scale. "This is to make sure the weight of the box is equal to the expected weight," Wayda says.

More Volume, Greater Efficiency

Employees at Rodan + Fields have a view into the WMS that lets them look up the status of customers' orders. Visibility into the system also helps DHL Supply Chain fine-tune its processes to meet daily demand.

For instance, if DHL Supply Chain sees orders are spiking on Monday, it will "wave" orders being shipped to shorter distances, allowing Rodan +Fields to ship to longer distance addresses first. "Both orders are shipped on time, but regardless of distance, orders will reach customers about the same day," Foreman says.

DHL Supply Chain opened the Lockbourne facility in May 2017. Rodan + Fields moved fulfillment there in stages.

"We transitioned by state," Wayda says. At first, the Lockbourne site shipped only Rodan + Fields's top-selling products, and only to customers in Ohio. DHL Supply Chain gradually added more products and more states, until, in October 2017, it was handling all of Rodan + Fields' fulfillment.

The biggest benefit Rodan + Fields has gained since the switch is greater capacity. "We're experiencing growth each month," Wayda says. "We've hit levels that I don't think we could ever have achieved at the prior facility."

Throughput in Lockbourne is 50 percent higher than it was in Dallas, Wayda says. And the operation is more efficient. "We were expecting a 20-percent efficiency gain," he says. "We've had some months when we exceed that."

A Fulfilling Experience

Automation has also helped to improve fulfillment quality. For example, it's now much easier to locate boxes that contain incomplete orders.

"The weight checking catches that quickly, and we have an opportunity to fix the order before the customer realizes someone mispicked," Wayda says. "And it provides fast coaching back to the worker, to show them how to watch their indicators when they're picking product."

Now that DHL Supply Chain has the new facility up and running, officials at Rodan + Fields are contemplating other automated processes they might add.

For example, at the end of the production line, they have left room for equipment that sorts packages to different conveyors, based on destination. That could enable techniques such as zone skipping, which would cut transit times even further for packages bound to popular destinations such as Southern California, and reduce shipping costs.

"We can sort packages and send them straight from Ohio to Phoenix or Los Angeles; from there they can go out right away to last-mile delivery," Wayda says.

"These efficiencies are an important part of the selection we made," he adds. "We believe we can enable future processes fairly quickly."n