Outsourced Services: Add Spice to the Business

As retail sourcing increasingly looks for advantages offshore, so the challenges of getting and maintaining control of the supply chain grow as well. Thoughtful examination of company core values and competencies are essential to success, Though moving product to the domestic market from foreign resources may be outsourced, ultimate responsibility to the final customer remains with the company. That said, there are those who have found there are great advantages to be gained in shifting most supply chain tasks to third parties that can handle them with greater ease.

A case in point is Ocean Flavor Sea Salt (www.oceansflavor.com) that would not be able to distribute its products at all without outside assistance. It began as what Alan Fisher, its president, describes as being a hobby. With his 50-50 partner, Al Kirchner who has the CEO title, the two had a method of producing a naturally low in sodium sea salt, something Fisher says is unique in the world.

A worldwide search for a production facility led them to Mexico's Baja California, which has the largest solar salt producing plant in the world, owned 51% by Mexicans and 49% by Mitsubishi. "They have the necessary technology to create our product," notes Fisher.

The fledgling company had its salt and patent--everything but customers. Their business grew from what Fisher estimates was $70,000 gross annual revenues in 2004 to $160,000 in 2005. "We were ecstatic," says Fisher.

At the urging of the company that was packaging the salt for Ocean Flavor, the partners attended the major Institute of Food Technologists show in Las Vegas, using a small space in the packager's booth.

"For the first hour after the show opened, nothing happened," Fisher recalls. "Within an hour and a half after the show started, it was like a tidal wave. And from that point on, until the end of the show, we actually needed help to answer people."

In February 2005, Campbell's began using Ocean Flavor's salt to lower the sodium content of their products. Fisher claims that from February 20 to December 31, 2005, gross revenues climbed to $2.5 million. "During that period governmental and medical associations talked of mandating lower sodium foods. So we have become a buzzword.

We are on track to do about $10 million this year."

The company outsources all supply chain activities, using the full services of Weber Distribution (www.weberdistribution.com). Ocean Flavor salt is trucked by Mexicans to a warehouse in Tijuana, then taken across the border. It is then housed in the U.S. in Weber's 103,000 sq. ft. facility in San Diego.

The Mexican plant handles all documentation that accompanies the salt. Since the plant has been moving salt across the border for more than 40 years it is well aware of necessary documentation to verify the product meets all U.S. requirements.

From the San Diego storage facility, the salt is sent directly to Ocean Flavor customers by truck or shipped via BNSF rail to Tekpak, in Marion, AL. Tekpak is the company's master distributor. It reformulates and repackages the salt, then ships it on to final customers who include Tyson Foods, Fairfield Farms and Unilever among others.

Ocean Flavor is considering buying or leasing trucks in Mexico because of some delays the company has experienced. "There have been a couple of key accounts where we've been late in delivering," says Fisher. "We can't always get truckers to go down to the plant since they are sort of dead heading down there. It's getting the salt to the border that's the problem. When you leave Ensenada, the next town south is La Paz and we're right in the middle. No one wants to run down to the middle of the Baja to pick up salt."

The company has now started selling its own branded salt. It is expanding its retail market in other ways and will continue to rely on its third party logistics supplier. "We outsource everything," explains Fisher. "Weber will be handling exports to Asia and now, imports, because we just signed an exclusive contract for Dead Sea Salt out of Israel. We're bringing it into Mobile, AL. It's the highest trace mineral salt in the world. It will be Ocean Flavor Dead Sea Salt."

A retail apparel manufacturer, Coffee Bean, Inc. had previously completed production at a facility in Colombia, but its now manufacturing in Asia.

"Sourcing for us at this time, encompasses selecting and working with our suppliers either in South America or Asia," explains Pedro Seidl, vice president Branded Apparel for the company. "We used to do all the sourcing of fabrics, trims, buttons, zippers, labels, you name it. But we've pretty much stopped doing that due to the software we've implemented."

Coffee Bean manufactures its own brands of children's wear. Its customers include specialty shops, boutiques and fine department stores. Its brands are Austin & Ashley, Picture Me and Ruth of Carolina, among others.

Seidl explains that Coffee Bean began as the marketing arm of a Colombian sewing factory. The company established a local presence in Miami for customers who weren't totally comfortable with the idea of overseas manufacturing. Manufacture at the time was just as in any other maquilladora operation.

"A plant would receive a box," Seidl recalls. "It would open the box and it contained everything needed to assemble a garment. Once it was assembled, it was put back in the same box and returned. The company performing the labor didn't purchase a single item."

Today's apparel industry now operates with a "full package" concept, according to Seidl. "Whoever contracts services gives a completed sample, tech package or drawing of something they want produced, and hands it to a provider. The provider has to come back with a fully assembled product with pretty much everything bought by them."

Coffee Bean understood that to have real presence in the American market, it had to have its own brands, names and products. After acquisition of several companies, branded apparel was a reality and operations are not as interlaced with the Colombian branch of the company. Where previously everything manufactured had to be done in its own facilities, that has changed.

For Coffee Bean to remain competitive with pricing and quantities it was necessary to move production to Asia. In order to do so successfully, selecting the right software was paramount. "When we were dealing with our own plants, information was being passed on in the form of faxes, spread sheets, emails, phone conversations and the like," he explains.

The choice for Coffee Bean was Miami, FL-based NGC (New Generation Computing-www.ngcsoftware.com), that specializes in product lifecycle management, global sourcing and enterprise resource planning for the apparel and sewn products industries. "One of the most important factors in our selecting NGC," claims Seidl, "was that we determined they pretty much had the largest footprint of applications in supply chain to fill our needs."

Coffee Bean looks at its offshore manufacturer as a one stop shop. Seidl says he tells the supplier, "Here's the garment. Here's the sample. Here are the specs. You guys go ahead. We don't buy a button. From conception to end product, it's totally outsourced. Because we monitor the process all the way along, it allows us to control everything from the moment the PO is issued."

Product Lifecycle Management software has helped Coffee Bean reduce production time. "In years past we had a couple of seasons," says Seidl, "spring, transition, fall and holiday. As retailers have become more sophisticated, they have added seasons. So we've had to reduce lead time."

Using NGC's solution has proved successful for the total outsourcing of Coffee Bean production. "Our design office isn't even in this state," notes Seidl. "Our manufacturing facility isn't even on this continent. The only constraint between our office and our manufacturing facility is the 12 hour time lag."

End-to-End Visibility
Nelson Galloway, senior account executive, NGC, explains the e-SPS suite being used by Coffee Bean. "It's designed to optimize and increase the efficiency of the process from product concept all the way through to receipted DC on the right. The chevrons at the top are the functional modules within the application. The red being everything prior to a purchase order, light blue being the purchase order management, and the darker blue being inbound shipment visibility. The application provides one version of the truth and is in one collaborative database."

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