Growth is good, although you may begin to doubt that if your partner is increasing its business so much that it begins to pay insufficient attention to your needs. And if that cold shoulder starts to cost you money, it's probably time to grow yourself right out of that relationship.
That, in large measure, is what happened to Grayling Industries, an Atlanta-based company that manufactures plastic container liners for liquid and dry applications in industrial packaging, and a number of other things used in asbestos abatement.
The polyethylene products are shaped and formed in a 60,000-square-foot factory in Juarez, Mexico, across from El Paso, Texas. From there, the product line is shipped worldwide. Sales are approximately $20m a year, says Carlos Rubio, director of finance and operations at Grayling.
Traditionally, raw material was brought into Mexico for the manufacture of the liners and other products. Some suppliers didn't ship across the border, however, so supplies were generally stored in a warehouse in El Paso, operated by a large customs broker. When purchase orders came in, inventory could be drawn down and moved across the border to the plant.
"We would ship our inventory in there and store it," Rubio says. "The broker would send us a report of material we had on the floor. We would tell them what we wanted, they would do the actual brokerage for us. We'd send a 3PL to pick it up and bring it into Mexico.
"Seems like a happy marriage, right?"
But the relationship's split was coming because the broker's business was booming, Rubio says. Grayling was far from its largest customer, and the attention it needed suffered. "Orders started being put into the system late or not at all or incorrectly. We had suppliers telling us that we weren't performing within 30 days, and we started losing discounts - some of 2 or 3 percent. We'd lose them because the broker captured the P.O. a week late, and we didn't know that. Or they'd capture it incorrectly. We couldn't get the discounts we wanted."
For a SMB like Grayling, losing $40,000 a year in discounts was no small matter, Rubio says. "It became a nightmare for us."
When inaccurate data led to shipping the wrong product to China - which cost Grayling another $22,000 - Rubio realized something had to be done.
It was decided that Grayling needed to have accurate and real-time inventory management and just-in-time delivery of raw material to the Mexican plant.
Grayling gave the storage business to Prologistics, a El Paso-based 3PL that was already doing most of the manufacturer's freight moves. However, even though it had a small warehouse at the time, it didn't have the kind of warehouse management system that Rubio felt he needed.
"I knew Prologistics was an accurate group," Rubio says, "but I wanted something web-based so I could see real time to make sure what they were receiving, to see what's on the floor. I wanted to actually see it in the system."
He says he met with the 3PL's president and proposed a system that would allow it, Grayling and its suppliers to access inventory information at any time.
"I knew if I could get my suppliers on board and create a consignment situation, it could be a win-win-win for all three of us," says Rubio. "If they could hold it for 60-day consignment, my supplier could actually produce more, get longer runs, have less change-overs, and longer purchase orders."
Appropriately enough, he found the answer on the internet, where he learned about SmartTurn, a San Francisco-based provider of on-demand inventory and warehouse management solutions. Founded in 2004, SmartTurn was a division of Navis, which provides logistics solutions for marine container terminal management, yard management, and logistics asset management systems. SmartTurn officials say the company was developed to help with the supply chain needs of small and medium-sized companies who partner with large companies.
Rubio gave SmartTurn a call and explained what he needed. "They said they could get that system up and running in a week at a cost that was unbelievable."
He says he bought the package, took a week to install it and three months to "smooth it out."
Results? "There have been cost savings across the board," he says. "In one year, we had cash flow savings of $500,000 and no downtime in the production line. We've only had one missed shipment. That was a misplaced order on the receiving side, which we caught because we have real time. And we've had no discounts lost."
Luis Gijon, warehouse manager at the Prologistics facility, recalls the inventory hassles and errors before SmartTurn was implemented.
"Everything was manual, and there was a lot of paperwork," he says. "If a customer wanted something, we had to go to the floor and check it."
Now, separate inventories are kept in order. For instance, Winpak, a manufacturer of rigid plastic sheets based in Winnipeg, Manitoba, is Grayling's largest supplier of raw material. Its inventory is kept separate from Grayling's until a purchase order is received.
Prologistics acts as Grayling's distribution center, Gijon says. Raw material is kept there until shipped to the manufacturing plant, and finished goods are routed back to the warehouse until shipped to customers. Prologistics, of course, brokers all inbound and outbound transportation.
"It's a lot easier to see inventory and more efficient," says Gijon. "We know what to release, and when. Grayling knows what inventory the vendor has in here and what they have in here. As long as all information is entered accurately, the system eliminates errors."
The value of the tracking enabled by the implementation can't be overstated, Rubio says.
"You treat inventory like you treat cash. You keep it in a place with good controls. And SmartTurn has brought that control. I get to see the daily in's and out's. I get to understand what's on my floor for production. It's been a cash flow king, and at a cost that has probably had a ROI of 1000 percent in a couple of weeks."
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