If you're searching for stories of companies that have successfully brought offshore production back to the U.S., look no further than Monster Moto LLC.
The company is a three-and-a-half-year-old maker of off-road minibikes and go-karts. At the time of launch, headquarters were in Dallas, in keeping with a strategy of producing overseas and distributing throughout the U.S.
Monster Moto was conceived with the aim of filling a yawning gap in the marketplace. Much of the power-sport business, especially for kids, consisted of complex and expensive equipment, according to chief executive officer Alex Keechle. Over the years, many companies attempting to break into the market had failed because their knowledge of the sport far exceeded their manufacturing and supply-chain expertise. “We believed we could capture that market in a way it hadn’t been done before,” he says.
Monster Moto located 600 service centers before it sold a single unit. It spent nearly a year developing the product, relying on contract manufacturers in Asia. Keechle said it was essential to hit the right price point, and offshore production appeared to be a necessary part of the goal.
The company had initial success with that supply-chain model, but it wasn’t satisfied. Keechle and his executive team dreamed of making minibikes in the U.S. Logistics, they knew, was the key to success.
After an extensive search for a suitable location, Monster Moto relocated its headquarters to Ruston, La. It was lured to the city in part by economic incentives and cooperative local officials, who made possible the construction of a 100,000-square-foot plant at a cost of nearly $5m. “Banks were reticent,” says Keechle. “They wanted to charge exorbitant lease rates. The city partnered with a local developer and guaranteed the lease.”
The Ruston plant opened in June of 2016. Within a matter of months, Monster Moto was assembling 30 percent of its sales in the U.S. The number is expected to more than double in 2017, although the company has backed away from the goal of assembling all units domestically by year’s end. “I don’t want to box myself into a corner to meet demand,” Keechle explains.
Plans for Growth
Nevertheless, Monster Moto has big growth plans, which can only be realized through strict cost control and an efficient logistics operation. Among the key enablers has been a redesign of packaging, with lighter and more environmentally friendly boxes produced in the U.S.
It’s not just a question of packaging materials. Monster Moto worked closely with UPS, its logistics and consulting partner, to reduce the size of its boxes. In shrinking them by just three inches, the company avoided oversize shipping charges and was able to open up new marketing channels, according to UPS supply chain consultant Mark Modesti.
UPS was central to the broader strategy of making domestic production economically feasible. On day one of its extensive evaluation, UPS brought in experts from marketing, ocean freight and brokerage. Using a whiteboard, they proceeded to examine every aspect of Monster Moto’s supply chain. “They caught the vision,” says Keechle. “They have a small-business solutions team that attacked us. The rest is darn near history.”
One money-saving change arose directly from the decision to assemble product in the U.S. Under the old system, a single 40-foot ocean container could hold 219 fully assembled minibikes. By shipping unassembled units from China, with engines in one container and frames in another, Monster Moto was able to boost capacity by 50 percent, to as high as 330 units per container. The resulting savings in transportation cost was significant.
The smaller box size for finished units led to further reductions in outbound shipping costs. At Ruston, minibikes are completely assembled except for the handlebars. The shipper can fit nine bikes to a pallet, 22 pallets to a truck, and 198 palletized bikes in a semitrailer. The combined savings from more efficient transportation means Monster Moto can afford U.S. labor for the assembly stage, Keechle says.
He expects to sell more than 70,000 units in 2017. The company’s U.S. distribution strategy casts a wide net. Its first domestic production consisted of go-karts sold in 15,000 Home Depot stores in the U.S. Other retail points of sale today include Walmart, Rural King, Blain’s Farm & Fleet, Ace Hardware and True Value Hardware. In addition, Monster Moto sells through approximately 100 smaller dealers, part of a new power sports dealer network set up in 2016.
The E-Commerce Angle
E-commerce is key to the company’s sales strategy. According to Keechle, Monster Moto is the number-one seller on Amazon.com in the automotive category, numbering some 9,500 SKUs. In 2016, direct-to-consumer activity accounted for 20 percent of the company’s e-sales, and total e-commerce activity drove an estimated 25 percent of the business, Keechle says.
UPS also helped out on the I.T. side, offering scanner guns, computers and warehousing software under a lease program. The arrangement is of particular value to smaller companies that are just getting their businesses off the ground, says Keechle.
UPS’s ocean freight brokerage arm helps Monster Moto to keep tabs on components coming into the U.S. from China. Modesti says the company had become frustrated over its inability to track freight across the ocean. The problem, he says, was akin to “a fog over the water. We improved visibility for them.”
Additional manufacturing and distribution points might be in the cards for Monster Moto — the Ruston site can be expanded to 200,000 square feet — but the company and UPS agree that the current setup is sufficient for now. At some point, says Modesti, it might look for some forward stocking locations, “but it’s not time for additional distribution centers.”
Monster Moto is also contemplating foreign sales, having already begun exporting to Canada. “We have not really touched UPS’s true international expertise,” says Keechle, adding that the company will be “relying upon them significantly” for future international sales. In the process, Monster Moto might avail itself of services from UPS Capital, which offers short-term loans with inbound ocean shipments providing the collateral.
Keechle believes the solutions that were devised in partnership with UPS were critical to Monster Moto’s ability to refashion itself as a domestic assembler of product. “Our entire company depends upon logistics and the supply chain,” he says. “That’s it.”
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