When doing a business plan, and considering how you're going to take your product to market, you first need to know how you'll get product into your building, then how you'll get product out to your customers. That has to be in your business plan. — Susanna Ross, CEO, Ink Big.
It all begins with material handling logistics. Successful entrepreneurs like Ms. Ross are adamant about the importance of what you do. You, faithful reader, are part of your company's DNA. Ross made this clear during a small-business panel discussion held recently at a Staples outlet in Cleveland. Aspiring business managers from around the region attended this event to get advice on how to get started. Staples chairman Tom Stemberg acknowledged that without a good handle on supply chain issues, a fledgling company will struggle.
"One of the challenges of being an early stage entrepreneur is that everything is contingent on something else," he said. "If you can't buy it, you can't sell it."
It all comes down to inventory control, whether you sell casters or kilts.
Kilts?
Yes. Skirts for men. Danielle Villegas is chief of operations for Utilikilts (www.utilikilts.com), a small-company success story detailed in one of the handouts distributed at the Staples event. I followed up with Ms. Villegas by phone, and she's convinced there's a market full of men who want the liberation that this garment provides. But she and her brother Steven had to make the business case to convince investors. How would they source their material and master supply and demand?
"Your sourcing supply chain is one of the early maker/breakers because of the state of manufacturing in this country," Villegas told me. "Textiles is a dying industry. The material vendors have minimums. They sell 10,000 yards at a time to Nike, and here we are wanting to buy 100 yards."
Still, having a unique product gave Utilikilts more time to perfect its logistics. Now, after four years, its supply chain and its product quality are consistent enough and it has enough market data to understand its business cycles and adjust its inventory strategies.
Until recently this little company was handling 3,000 SKUs. It's now down to 1,000, and it can provide overnight order turnaround for its best-selling products. Not bad for a kilt company that offers 30 waist sizes, five different lengths and five different colors in each model.
"We won't be the low-price leader supplying Wal-Mart," Villegas acknowledges. "We maintain a certain amount of stock for the event season while making sure there are enough kilts here on Saturday when people come in from Oregon to buy."
What this small business has learned is the beauty of simplicity, understanding its market and serving that market well. The resulting success has bred competition, believe it or not, and Villegas believes that's healthy. She studies the competition, direct and indirect. She cites Levi Strauss as an example:
"Even they will tell you maybe it wasn't so good for them to diversify; maybe they should have stayed a certain size. Those basics of knowing what you're trying to accomplish don't ever go away, but they can get lost no matter how big you are."
Carrying costs are a major driver of handling strategy. According to the 15th Annual State of Logistics Report sponsored by the Council of Logistics Management, those costs have come down from 39 percent of total logistics costs in 1989 to 32 percent today. The report says industries have capitalized on lower interest rates by investing in technology, managing inventories more efficiently, reducing warehousing expenses and minimizing risk.
For you, that's all in a day's work. But is it part of your company's business plan?
Tom Andel, chief editor
