Warehousing & Logistics

On Sep 30, 2008, at 6:55 AM, Dave wrote:

Hey John,
Thanks for the quick response. Let me fill in some of the blanks.

In order to produce a 4-piece ceramic dinnerware set this was just about the smallest run we could do in Asia. The CBM number is a little misleading as it was closer to 7 CBM but we switched the packaging to have 4 pieces per box vs. 6 pieces per box to correspond to our minimum orders thus the volume increased by 50%. I am very much in agreement with you on keeping the orders at the factory minimum.

This brings us to your golden rule, having orders before you produce. I think your book lays out a great, very low risk system. We have taken an admittedly riskier approach. The main reason we made this decision is that in speaking to retailers and sales reps we determined that we would have a very hard time selling a product that could not be delivered for at least 3 months.

***A hard time, not too hard. And if too hard, the answer would be redesign the product so enough people would wait the time amount required.***

To reduce this risk we got feedback from multiple retailers and reps and did a survey of over 200 consumers to determine whether their would be a market for our product.

***I like what Drucker says about "entrepreneurs eliminate risk." To survive you eliminate it earlier or later. The problem is the later to work on risk the harder it is to eliminate. Although the discussion with reps and consumers and surveys is not bad, it does not equal the mitigation of risk that orders in hand would be. Not trying to scare you, just want to get to hard reality.***

So I can concentrate fully on selling I would like to set up a warehousing fulfillment system as you describe in the book with your warehouse in Sparks.

***If you had orders already, then you would not be concentrating on selling, you'd be concentrating on developing what is next, where you should be. I am not sure you should set up fulfillment yet, and I'll explain why below...***

Our margins are such that we can afford to cover the warehouse and fulfillment charges when looked at by the piece, but I am not positive that will add up to the minimum monthly charges the warehouses are asking for, as until we begin selling I am not positive what our monthly sales will be.

***Very good.***

We had someone in place with no minimums, but I recently got an email saying they were full. This brings me back to the question of where/how to find a pick and pack warehouse for a new business. I will take a look at where competitors are shipping from and see what I can find out. Any additional advice is appreciated.

***The inevitable is the ideal. I know much more than I say, simply because people tell me it is overwhelming what I do say. When the "right plan" is followed, I don't have to say much more anyway, because it works. This situation may allow me to say more...

I've seen this economy before, and there is trouble ahead. Had you orders already, then things would be simpler. But here is what you will face: good retailers will tell you they have no open to buy. As you get turned down, keep a record of them, since they will be your best customers. bad retailers will order from you, and terrible retailers will order lot. Neither will pay you in the end. The good smart customers will honor the orders they have placed, will work thru these times, and be the customers standing afterwards. The ones who say no are the ones you want.

Anyone who is still buying given the economy the last few weeks is foolish or criminal. The smart ones will wait and see. Meet them, but be prepared to be turned down...

The ones who turned you down, visit them once every 2 weeks or so, to see if they need a fill in order (which you have in your trunk) Be positive, and very brief... mention who is selling your wares. offer a small $250 assortments... NEVER suggest or accept "consignment sales" or in any way guarantee sales. Your terms are the same as everyone else... the only thing different is you will deliver quick and easy.

A retailers dream is product that can be bought low minimum and quickly resupplied... they will likely give you prime space. This of course means you will running around like crazy, but you won't have the pick and pack expense.

I think a pick and pack operation now will mean no quick response. Well, it was about time you cleaned out the garage anyway, wasn't it? If no garage, a mini-warehouse...

Or , this is something I might do. Mall owners are in trouble. I was in SF last week in Westfield Center on Market Street, probably one of the heaviest trafficked malls in USA. Nordstrom, godiva all the top retailers. "Available for short term lease" said a prime 1000 space. They know they will not lease it to a long term renter before Christmas, and they don't want it empty. They are looking for someone to come in for three months.

Your deal is ceramics that cost you 4 retail for 20 and you split the net 50/50. You set up 8 nice place settings showing your ceramics are good as casual to formal, then stack them high and watch them fly. Otherwise do not put a dime into presentation. Have gift wrapping for a nominal fee, and bring in subcontractor "save the whales" charity crew to handle that. Offer assortments at the 19.95, 24.95, 29.95, 49.95, 99,95, and 199.95 price points.

You'll need credit card capability, and if you don't have it yet, you are not likely to get it now. Work this to your advantage. Tell the mall managers you'll use their cash registers and credit card capability and they can handle the receivables, paying you weekly.

At the same time you can try to unload on other retailers too, but this way you will have your goods in front of paying customers. Start at the top end malls and move down to the best that will cut the deal.

Just an idea...


John

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