In the often cutthroat world of consumer electronics, manufacturers need every possible advantage to win the hearts of retailers and, eventually, consumers. At the same time, they need to keep logistics costs down.
Vizio, a maker of flatscreen televisions, soundbars and cables, has found a way to achieve both goals.
Like many players in the consumer-goods sector, Vizio supplies product primarily through a network of hubs that feeds the distribution centers of major retailers. In Vizio’s case, the layout consists of facilities in Los Angeles, Dallas and Chicago, shipping to some 85 destinations around the country. The hubs are in turn supplied by three factories in Mexico, located in the Tijuana and Juarez areas.
Most of Vizio’s products continue to flow to market in that manner. Three years ago, however, the company came up with a creative alternative to the status quo. It began offering discounts to retailers if they would commit to receiving TVs in full truckload quantities, over a specified period of time.
More than ever, retailers today hate to be burdened with excess inventory. But Vizio’s offer proved too attractive to resist. The company was able to launch a program whereby it shipped product in truckloads directly from the Mexican factories to the customer, bypassing its own D.C.s entirely, according to senior director of logistics Chuck Hatch.
The idea was a simple one, and found instant acceptance in the marketplace among key accounts. Execution, though, was another matter. Vizio would need to manage the shipment of truckload quantities from the factory. That called for a system of tight controls, including proper labeling and careful positioning of trailers.
A New Responsibility
Vizio was already using C.H. Robinson Worldwide Inc. as its primary third-party logistics provider. Now it was asking the vendor to manage the D.C. bypass program as well.
From day one, Robinson began meeting with manufacturers and setting up the necessary logistics relationships, according to Daniel Quintela, key account manager for the 3PL. The task includes coordinating production schedules with equipment availability, and making sure that the right TVs go into the right trailers.
“Product is literally coming off the line directly into trucks,” says Hatch. Any misstep could result in the slowing or interruption of production at the factories.
Robinson continues to manage mode selection, along with all last-minute changes in scheduling. It provides visibility of items in transit via its proprietary Navisphere technology platform, transmitting daily reports to Vizio on the progress of shipments.
To start the cycle, Robinson drops trailers at either of two U.S. locations near the Mexican border – Otay Mesa, Calif., and El Paso, Tex. From there, a drayage agent runs the empty equipment to the factories.
Vizio relies on both over-the-road and intermodal services to move the equipment back north. Loaded intermodal containers are driven back over the border to the Otay Mesa and El Paso yards. From there, they are drayed to nearby rail hubs for longhaul transit to retailer destinations.
Quintela says Robinson draws on an extensive network of equipment and transportation partnerships to position the intermodal boxes. The 3PL was already moving a substantial amount of Vizio product by rail under the traditional system that utilizes the shippers’ own D.C.s.
Roughly 70 percent of units travel to the customer under the truckload option. Product might also be brought into the hubs, then cross-docked into less-than-truckload trailers, depending on the needs of the moment. In such cases, Robinson assists with the proper labeling of pallets, and preparation of bills of lading.
The Essential Factor
The biggest challenge in making the program work lay in the maintenance of timely communications, Quintela says. Robinson and Vizio must ensure that the proper equipment is available at all times for product coming off the line. The 3PL must also be in constant touch with the manufacturer about what is getting loaded into the trailers, to ensure adherence to delivery dates. All parties must be aware of any sudden changes in the plan.
The program has allowed Vizio to cut about a week out of its supply chain. In addition, with more product flowing to the stores, the manufacturer is able to better coordinate its physical wall displays at retail locations.
Hatch calls the initiative a success. The number-one benefit, he says, has been a reduction in Vizio’s outbound transportation expense. At the same time, the manufacturer gains greater flexibility in its supply chain, with the option of expediting shipments when necessary. And, of course, it achieves higher sales volumes through the bulk-buy program.
Quintela says Vizio’s planners have been scrupulous about providing Robinson with accurate forecasts of demand. The information “allows us to create partnerships with road and rail [carriers], to make sure we have the capacity.”
The initiative was designed expressly for bulk buys by retailers, but has proved to be a success in other cases as well. It’s utilized the most during peak seasons, when retailers need to stock up on additional product. But it can also be of value during product resets, or other factors that might temporarily delay the flow of production, Hatch says. At such times, Vizio will bypass its D.C.s. with smaller quantities, to ensure the timely arrival of product.
“We continue to find different ways to gain benefits from this program,” says Hatch.
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