Closet Concepts Ltd.
Closet Concepts Ltd. (CCL) is a rapidly growing provider of
home storage and organization products. They manufacture a wide range of
products ranging from wire closet organizers to wood shelving systems. Basic
CCL product lines are sold through home improvement retailers and the premier
product line is sold through designers and custom homebuilders.
The CCL leadership team has been pondering an e-commerce
strategy and worries that it may lose sales to competitors if a CCL.com online
shopping option is not soon established. Fortunately, the CCL website is fairly
robust and it would not be difficult to add shopping capabilities to it. All
that was really needed was the approval to begin the project.
The approval came during a quarterly executive retreat.
During her opening speech, the CEO stated: “Increasingly, do-it-yourself
customers have expressed a desire to order product directly from CCL. The
customers claim to have difficulty in getting unique items and parts from the
CCL product line because the retailers don’t carry them in stock. This can
delay project completion and create customer dissatisfaction. By the end of
this retreat, I want a high-level plan that establishes our e-commerce strategy
and our plan for managing customer orders. I want us to have excellent
omni-channel fulfillment and delivery capabilities, but we cannot compromise
our service quality to existing retailers, designers, and builders. Now, break
into teams and do some brainstorming.”
A fulfillment analysis team was hastily assembled. It
consisted of Riley Sheahan, the chief customer relations officer; Jim Howard,
the vice president of logistics; and Tomas Tatar, the senior director of
transportation. All agreed that it would be a challenge to quickly add
omni-channel fulfillment capabilities and each had contrasting ideas about how
Sheahan suggested that CCL handle all fulfillment activities
in-house and to use its private fleet to move customer orders to major markets
for pool distribution by local delivery firms. “This will give us the greatest
control over our processes to ensure a superior customer experience,” she explained.
“I’m not so sure about that strategy,” replied Tatar. “Our
fleet is small and we use it to deliver high margin custom orders to 30 key
distributors. You’re talking about a tenfold increase in the number of delivery
points.” He also noted that total demand for online orders was unknown and
nobody had any idea about average order size.
Howard noted that CCL’s distribution centers were geared
toward massive orders from home improvement retailers that moved in
cost-efficient truckload quantities. “We already have difficulty handling the
smaller orders from designers and builders. Besides, Tomas will tell you that
our products can be odd-shaped and low density, attributes that lead to high
less-than-truckload delivery rates.”
Sheahan replied: “I don’t want some second rate trucking
company trying to fill our orders or damaging our product just because Tomas is
looking to save a few transportation dollars. We must maintain exceptional
control over these direct customer engagements. This e-commerce initiative is
just too important for us to cut corners.”
“I agree that we want it done correctly, but we don’t have
the resources or expertise to do this in-house,” stated Howard. “We need to
find a high quality 3PL that knows how to handle Internet orders.”
“Good point,” noted Tatar. “Partnering with the right
provider could be the ideal solution. They can serve CCL customers effectively
without busting our budget.”
“I need to know more about these so-called 3PL experts,”
replied Sheahan. “Gather some information and bring it to our late afternoon
session.” With that statement, she got up and left the meeting.
1. What roles can 3PL play in the CCL e-commerce initiative?
Is it a viable alternative to Sheahan’s private fleet/pool distribution
2. What type of 3PL service provider is best suited to serve
the CCL e-commerce customers? Why?
3. Should Howard and Tatar consider the use of an integrated
3PL? Why or why not?
4. If CCL decided to add installation services to its
e-commerce initiatives, what types of 3PL service provider should be used? Why?