NEW YORK — Procter & Gamble may have elevated logistics to an art form, but for smaller beauty firms, managing the supply chain is often costly and headache-inducing.
And for companies trying to do business with big-box retailers, which require that their vendors run their supply chains like a well-oiled (and high-tech) machine, getting the goods to the stores on time is paramount.
Chris McClain, chief executive officer of Advanced Beauty Systems — a beauty firm that markets Bodycology body care and Cantu hair care products to mass retailers — said the company had a two-person team dedicated to supply chain management before he outsourced the job to CaseStack, a Los Angeles-based logistics provider.
Wal-Mart measures specific supply chain metrics, “and we were not meeting those metrics,” said McClain, explaining ABS’ decision to link arms with CaseStack. ABS also distributes its wares to Target, Kmart and Brooks Eckerd Pharmacy.
The move is saving time and money, said McClain. Since handing over its logistics functions to CaseStack in spring 2005, ABS can now get goods from its manufacturing facility to its retailer partners in seven to eight days, down from its previous time frame of 14 to 16 days, and has reduced freight claims for lost or damaged goods by 80 percent, noted McClain.
“The biggest savings for us has been time,” he said, “and it’s enabled us to scale up quickly.” McClain forecast that his business will grow 50 percent this year, adding that savings on logistics has allowed ABS to focus on ramping up its product pipeline.
CaseStack, which was founded in 1999 by a former P&G executive, has built its business by convincing midsize companies, like ABS, to outsource their logistics needs. Prior to founding the company, CaseStack ceo Dan Sanker had been at Deloitte & Touche as a supply chain solutions consultant after having held posts at P&G and Nabisco. His work at Deloitte gave him a glimpse of how difficult it can be for midsize companies — generally, firms with sales under $1 billion — to compete with consumer packaged-goods behemoths.
By providing warehousing, transportation and product tracking technology, CaseStack gives these companies economies of scale and allows them to do business with mass retailers efficiently, explained Sanker.
“Over time, retailers have begun to order smaller quantities of goods to make their warehouses run like more of a conveyer belt,” said Sanker. “This puts pressure on smaller firms and adds to their shipping costs.”
He noted that beauty companies typically spend 5 to 10 percent of their sales on logistics. By teaming up with a logistics provider, they can shave roughly 10 to 15 percent off their logistics costs, he added.
The savings come from consolidation. Midsize companies typically ship less than a full truckload of merchandise to their retail partners. CaseStack gathers its clients’ goods into its warehouses across the U.S. — located in Los Angeles, Dallas, Cleveland, Atlanta, Chicago, Philadelphia and Portland, Ore. — and then fills each truck that leaves a facility with multiple vendors’ goods. For instance, a typical truckload may contain pallets from 15 vendors, noted Sanker.
CaseStack’s growth rate seems to indicate that midsize companies are embracing outsourcing. The logistics firm’s sales are on track to reach $65 million this year, up from $35 million in 2005, according to Sanker.
CaseStack’s client list is 500 deep and extends across the food, health and beauty care, natural products and general-merchandise industries. Most of these clients distribute to big-box retailers, ranging from Wal-Mart to Best Buy.
The business may be focused on the mass market, but its reach extends to niche beauty firms as well.
Red Flower, a niche beauty firm that manufactures natural products, relies on CaseStack to ship large amenities orders to destination spas across the U.S., including The Carneros Inn, located in Napa Valley, Calif., and the Mayflower Inn, in Washington, Conn. Red Flower, which industry sources estimate does $5 million to $7 million in sales, ships roughly 75 amenities orders each year, with each pallet shipped weighing some 1,200 to 1,500 pounds, noted Vincent Handon, project manager for Red Flower. Outsourcing the job has saved 30 percent in shipping costs, he said. “It’s helped us contain cost-of-goods, and for a small company that’s very important,” he added.
“It’s an asset in terms of simplifying shipping. It does allow us to make quicker, faster delivery decisions,” said Yael Alkalay, co-founder of Red Flower.
Red Flower also distributes its beauty products to select retailers, including its SoHo boutique, located at 13 Prince Street, and Barneys New York stores nationwide.
Noting retailers’ percolating interest in exclusive brands — including Walgreens and Target — CaseStack’s Sanker said the logistics firm is looking into taking on retailers as clients as well. Both Walgreens and Target have recently cleared substantial square footage in their beauty departments for a host of exclusive beauty brands. Retailers are increasingly adding exclusives and private label brands to differentiate themselves from competitors, noted Sanker, pointing to the success of Costco and Trader Joe’s. Sanker’s hope is that these retailers just might find themselves in need of a logistics partner as well.