54 www.chainstoreage.com CHAIN STORE AGE, FEBRUARY 2005

S ince 1997, CompUSA has op-erated a just-in-time supplychain that keeps goods flowing

through its distribution centers andinto its stores. Each of CompUSA’s229 superstores receives three to 10pallets daily. The merchandise goesstraight from the back door to the sell-ing floor.

Doug Brown, CompUSA’s seniordirector of logistics, says that the flow-through approach and transportationimprovements have yielded a competi-tive advantage in shorter transit times.He talked with Chain Store Age abouttransportation processes and rethink-ing the CompUSA supply chain.

Chain Store Age: What is normal-ly called a distribution center, youcall a cross-dock center.

Brown: That’s because we don’twarehouse any goods in our cross-docks. Whatever comes in today getsprocessed today and ships to storestomorrow. This helps maximize inven-tory turns and keeps goods on the storefloor. Plus, the longer product sits in awarehouse, the more it disappears orgets damaged.

CSA: Does CompUSA process allits inventory through a cross-dockcenter?

Brown: No, about 30% of the prod-uct volume goes through a cross-dockand about 70% delivers direct to the

stores f romvendors. How-ever, in termsof dollar vol-ume, it’s justthe opposite.As measured indollars, about

70% of our inventory goes through across-dock and 30% ships direct-to-store.

CSA: At what point do you takecontrol of the transportation of in-ventory?

Brown: We have an initiative underway to convert as many vendors aspossible from freight-free paid (FFP)transportation to freight-free collect(FFC) transportation. Historically,85% of our vendors have been FFP,which means the vendor is responsiblefor selecting the carrier and maintainsthe risks of the shipment until it arrivesat our cross-dock or store. On average,we feel most vendors mark up thefreight costs by about 20%, so we’vebeen paying more than we should fortransportation. Also with FFP, wedon’t have visibility of the goods intransit and we have less control overour supply chain. By converting ourvendors to FFC, we can choose ourown carriers, leverage discounts withthese carriers, gain visibility to in-tran-sit inventory and better manage oursupply chain.

CSA: Are vendors willing to makethe change?

Brown: Some are harder to con-vince than others, and the discussionshave to be handled at the senior-mostlevels of the companies. In some cases,our CEO is meeting with their CEOs.Even then, it’s difficult to convert acompany when its logistics department

is a profit center and it’s makingmoney on freight. But there are someadvantages to the vendor in convertingto FFC. For instance, it no longer hasthe risks associated with in-transitinventory and it doesn’t have to man-age freight claims for losses or dam-aged goods. Also, before a vendor canbe paid under the FFP system, it has toprovide a proof-of-delivery (POD) toCompUSA, so converting to FFC en-ables it to collect sooner.

CSA: After converting to FFC, howare you managing the inbound trans-portation?

Brown: For the most part, we’rerelying on one of the FedEx compa-nies, either FedEx LTL, ground, ex-press or FTN [FedEx Trade Net-works]. A major initiative for Comp-USA this year is to reduce our over-all transportation bill by $3 million.FedEx has come up with approximate-ly $1 million of that cost reduction forus. Working with a carrier that meetstime-definite deliveries also helps usprovide better customer satisfactionbecause shoppers can depend onCompUSA to have product in stock,in good condition and at the rightprice.

CSA: Define your expectations fortime-definite deliveries.

Brown: Our stores have very limit-ed dock areas, so it’s important to min-imize the number of carriers attempt-ing to bump the dock. All store de-liveries have to be made before noonbecause in the afternoon hours, thedocks are used for outbound ship-ments, either transfers of merchandiseto other stores, product returns to ven-dors or shipments to customers. FedExhandles 75% of the shipments fromour cross-docks to our stores, and it

Million-Dollar CompUSA takes control of in-transit

By Connie Robbins Gentry

RETAIL TECHNOLOGY SUPPLY CHAINTRANSPORTATION

FedEx can provide next-day delivery fromCompUSA cross-docks to93% of its stores.

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consistently delivers to every storewithin a two-hour window beforenoon. Knowing when the deliverieswill arrive also helps our stores sched-ule labor. There isn’t warehouse spacein the stores so the product has to bereceived and immediately taken to theretail floor. Another advantage is thatFedEx can provide next-day deliveryfrom our cross-docks to 93%of our stores, which reducestransit time and creates acompetitive advantage forus.

CSA: Are most of yourvendors domestic or inter-national?

Brown: Most of our ven-dors, probably 90%, are lo-cated in the United States.and the remaining 10% arein Taiwan and Hong Kong.All of our imports are com-ing through the port in LongBeach, Calif., and are pro-cessed at our La Palma,Calif., cross-dock.

CSA: Is the Long Beachport still a bottleneck dur-ing peak season?

Brown: There were some bottle-necks this past season but nothingmajor like the year before. However, Iam going to be investigating whetherto bring containers through other portsto our cross-docks around the country.The West Coast longshoreman prob-lems aren’t getting fixed anytime soon.The other change I’ll be looking into isa FedEx program that pre-distributesthe freight for stores before it leavesAsia, so the imports would bypass ourcross-dock centers. FedEx already in-stituted a truckload, pooled-distribu-tion program that has shaved a day off

transit time for the imports beingmoved from our California cross-dockto other cross-docks. The program uti-lizes a truckload carrier that has 53-ft.trailers with double-decking capacityso we can double the number of palletsin a trailer. FedEx schedules a team ofdrivers to deliver these trailers to ourother cross-docks, where they break

down these shipments and pedal runthem to our stores.

CSA: Have you felt any impactfrom the new C-TPAT regulations?

Brown: We haven’t been impactedyet, but C-TPAT is going to impact allimports. Before the mandatory compli-ance goes into effect, we wanted to befully prepared. We asked FTN, whichis already C-TPAT-certified, to do athorough assessment. FTN submittedan evaluation and recommendations inDecember.

CSA: Are there areas that appearvulnerable?

Brown: One area in particular gotour attention. We work through a third-party company that helps us chooseinternational vendors to purchasefrom. We discovered that although thethird party conducts quality-controlchecks on the product to make certainthe vendors are meeting our qualityspecifications, there were no security

checks. No one was check-ing the boxes or containersbefore they shipped. Al-though that is not somethingthat we have direct controlover, we now expect our buy-ing agents to put some newsecurity procedures in placeto police those shipments.We intend to do everythingnecessary to be in totalcompliance of C-TPAT soour containers are processedthrough customs withoutdelay.

CSA: You’re cutting trans-portation costs by $3 mil-lion, converting vendorsfrom freight-free paid tofreight-free collect, re-rout-ing imports and tightening

security—any other plans for thisyear?

Brown: Actually, we’re conductinga study of our total supply chain, par-ticularly the just-in-time philosophy.The cross-dock centers and just-in-time strategy have been a core strengthfor our company, but we may need totweak this approach so that our sup-ply chain serves today’s demand asefficiently as it served yesterday’s de-mand.

CSA: Can you elaborate on whatthose “tweaks” might entail?

Brown: We think the supply chain

CHAIN STORE AGE, FEBRUARY 2005 www.chainstoreage.com 55

Headquarters: DallasCEO: Larry MondryAnnual sales: $5 billion (estimated)Type of business: A privately held retailer of technologyand home entertainment products and servicesFounded: April 1985Number of stores: 229 CompUSA SuperstoresAreas of operation: 90 major metropolitan markets inthe United States and Puerto RicoDistribution centers: Five cross-dock centers located inCalifornia, Texas, Georgia, Illinois and New JerseyInventory: 5,000 SKUs in an average store, plus anadditional 25,000 SKUs available for special orderStrategic goal: To reduce overall transportation costs by$3 million in 2005

Savingsinventory and plans to save $3 million in transportation costs

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56 www.chainstoreage.com CHAIN STORE AGE, FEBRUARY 2005

of the future is probably some combi-nation of cross-docking and somewarehousing of inventory where itmakes sense—but we won’t knowuntil we run all the numbers. Today,we purchase just enough inventory tokeep stores in stock. However, if wepurchased in truckload quantities, wemight get the goods below marketprice. If we could do that and stillenhance margins after the cost ofwarehousing, then it might make senseto tweak our strategy. In addition tolooking at how we purchase goods andhow we route the goods through oursystem, we’ll also consider whether toadd cross-dock centers and whether

we should consolidate our e-com-merce operations into our cross-dockcenters.

CSA: How are you handling e-commerce fulfillment now?

Brown: On-line sales are a verysmall part of our CompUSA busi-ness. Two of our CompUSA storeshave some warehouse space, and thee-commerce fulfillment is handled outof those stores in Mesquite, Texas,and Pittsburgh. CompUSA also ownsa small West Coast chain, Good Guys,which has 71 stores and its own DC inHayward, Calif. We’re also evaluatingif combining the Hayward and LaPalma DCs would reduce expensesand create additional synergy acrossthe supply chain. ■

—cgentry@chainstoreage.com

Responding to the Unexpected

The tsunami that struck Indonesia, Thailand, SriLanka and other South Asian nations last month

wrought massive human suffering and devastation.After the humanitarian cost, the major concern amongthose in worldwide logistics is whether the damagewill affect exports leaving those countries.

Retailers and shippers tell Chain Store Age theyhave not felt any impact from the storm because theproperties most devastated by the tsunami were resortsand tourist destinations, not the areas where manufac-turing facilities or ports are located. However, as thebattered countries contend with depleted resources andthe coming years of reconstruction, there likely will be

an impact on the exportation of both raw materials and finished goods. Closer to home, California’s rain-ravaged roads and flooding may delay dis-

tribution of imports arriving at West Coast ports. When trucks do make it outof California, drivers face record snowfalls in nearby states.

Doug Brown, senior director of logistics of CompUSA, reported no major delaysdue to weather-related issues. “However, we continue to experience delays at theLong Beach port due to the backup of steamships and a shortage of port labor. Insome cases, our draymen wait 24 hours at the port before they can pick up containers,and we are experiencing a two-day delay before the freight reaches our cross-dock.”

Mark Rourke, VP and general manager of transportation management at GreenBay, Wis.-based Schneider National, said there have been some weather-relateddelays, but “no massive disruptions. The true impacts [of the rain and snow] aremuch less than one would believe from news reports. Certainly, there were somechallenges in the West, but these were mitigated rather easily with alternativeroutings of equipment.”

The more critical issue that Rourke frequently encounters is delivering time-sensitive, promotional products for retailers’ special events. The normal chal-lenges of transportation and logistics are exacerbated by tightly condensed leadtimes and delivering small quantities to hundreds, sometimes thousands, ofstores within a designated window of time.

Many times, the call to action comes from a manufacturer or consumer-productdistributor responding to the heightened expectations of its retail clients. In mostcases involving seasonal promotions or special-event merchandise, Rourke saidthe shipments bypass the retailers’ DCs and go straight to the stores. The “hoursof service” regulations that went into effect in January 2004 have compoundedthe challenges, making it extremely difficult to maintain cost efficiencies whenmaking multiple LTL deliveries from a single truck.

He suggested that retailers should increase lead times as much as possible andcommunicate expectations early in the game. After that, step aside and let thetransportation companies recommend the best plan of execution. Retailers thatmicromanage or restrict delivery routes often spend more than those relying onthe expertise of national carriers.

In spite of added transportation expenses, demand continues to increase dra-matically. Schneider saw a 60% increase in “promotion-related” deliveriesfrom the beginning of 2004 to 2005, and that was on top of more than a 200%increase in the demand for those services from 2003 to 2004.

—Connie Robbins Gentry (cgentry@chainstoreage.com)

SUPPLY CHAINON THE MOVE TRANSPORTATION

RETAIL TECHNOLOGY

Transportationmanagersshow graceunder pressure

CompUSA stores, like this one in Irving,Texas, receive three to 10 pallets daily.

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