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Posted Date: 11/1/2012

Rocky Brands: Expanding without Adding Space

By Jordan K. Speer
We all know it’s not possible to squeeze blood from a turnip. But sometimes you can squeeze more space out of your warehouse.

That’s what Rocky Brands did. The $240 million designer and manufacturer of premium quality outdoor and occupational footwear and apparel brands such as Rocky, Georgia Boot, Durango, Lehigh, Michelin Footwear and Mossy Oak Footwear, redesigned its 200,000-square-foot distribution center in Logan, Ohio to be far more productive, improving turn times, throughput and overall efficiency — without adding an inch to its footprint.
 
On a growth trajectory
Rocky Brands, headquartered in Nelsonville, Ohio, has been around since 1932, although at that time it was called the William Brooks Shoe Company, named after a co-founder of the company and grandfather of current long-time chairman Mike Brooks, who stepped down last year as CEO. (The company took on the Rocky moniker after it was bought back by the Brooks family in 1975 from the Irving Drew Shoe Co., which purchased it in 1960.)

Rocky Brands is primarily a wholesaler, selling to more than 9,500 dealers ranging from Walmart to independent retailers; its largest customers are Tractor Supply Co., Bass Pro, Dick’s Sporting Goods and AAFES. Rocky Brands also does business via its website, rockybrands.com.

In recent years, the company has put heavy emphasis on growing the business, and in 2005 it acquired one of its competitors, EJ footwear, a purchase that added several new brands to its portfolio and more than doubled its size, says Michael Walker, senior vice president of product fulfillment.

Additionally, it brought a whole new business model to the company. Lehigh, one of the brands that Rocky acquired with the purchase, ran a “quasi-retail” operation via a fleet of trucks that traveled to occupational sites around the country. Although customers benefitted from the on-location convenience, the trucks could only hold so many style and size combinations — about 1,200 pair — which often left the selection wanting. Despite the door-to-door service, shoes sometimes had to be shipped to the customer after purchase, from one of about 60 mini warehouses scattered around the United States — what Walker calls a “high-cost model.”

The EJ acquisition and all of the new brands, locations and business models it brought with it prompted Rocky Brands to reassess its distribution strategy, including the number and layout of its warehouses, its methods of order fulfillment and the technology required to run it all.

Consolidation, then reconfiguration
When Rocky Brands bought EJ it also acquired a warehouse in Pennsylvania, which, along with its “underutilized” company-owned Logan, OH warehouse and a 3PL it brought on board, were adding up to big bucks.

The company decided to cut costs by consolidating both facilities into its centrally located Logan DC and eliminating the 3PL. This also had the additional benefit of improving customer service. Customers ordering from Rocky’s original brands and its newly acquired brands were receiving two shipments because the different brands were still being fulfilled from different facilities.

To accomplish that goal, “we had to change the way we ran the warehouse,” says Walker. To do that, Rocky Brands brought systems integrator EnVista on board to help with its redesign, which also included an upgrade of its Manhattan Associates’ warehouse management system (WMS) and the integration of WMS with its warehouse control system (WCS), which controlled the conveyor and sortation system.
 
One of its most important goals was to increase storage capacity without adding physical space. Done correctly, it would not only allow for more inventory but could also improve other warehouse processes, including improving the efficiency of the picking process.

The most significant change that Rocky made to its DC was shifting from an all-active SKU location model to a combination SKU reserve/active reserve model. In other words, some parts of racks — those highest up and most time-consuming to access — are now dedicated to reserve storage, while the three bottom-most, and easiest to access, rows are active picking locations.
That change accomplished a number of major improvements. For one, it increased storage capacity. Because cases were previously placed anywhere there was an available slot, and because everything was considered active, locations were often limited in the number of cases they could hold because of the presence of open cases. Now, the warehouse can make full use of the cube in an available space.

The new layout also had the effect of dramatically speeding up the picking process. “Before, every place was an active location,” says Walker, “so you had to keep going up and down and up and down. We were taking so long to pick orders. Now [pickers] never have to leave the ground, which is much more efficient.”

In addition to changing the way it used its cube space, Rocky made numerous additional changes to maximize the DC’s ability to store and process inventory most efficiently. For example, it extended the racks to the ceiling, taking advantage of space that had previously not been utilized. It also decided not to dedicate an open-pack face for some slow-moving SKUs, to maximize cube space.
With space maximized and the reserve and active inventories separated, Rocky then set about to improve its processes.
 
It implemented an ABC product strategy, grouping products according to the velocity with which they move through the warehouse, with high-velocity items closer to packing stations and slower-moving items farther away, as they are accessed less frequently. More recently, the company implemented the slotting optimization solution from Manhattan Associates, and is looking to utilize its labor management module as well.

Rocky also changed its carrier pickup schedule for outbound shipments to create a better flow through the DC, and subsequently redesigned the way it created order picking waves to be based on how they will ship (i.e. small parcels vs. orders going out in a truckload or LTL), vs. the customer they will ship to, which allowed for more efficiency in processing orders.

The upgrade of its WMS system, and integration with its WCS, enabled many of the changes it made by giving the warehouse visibility into inventory at all times and improving communication between the picking operations and the materials handling equipment. That allowed for the speeding up of the 19-chute sortation system, which had previously been identified as one of the major bottlenecks in the warehouse.

This past summer Rocky continued its effort to gain the most value out of its Logan, OH distribution center. Sortation was proving a bottleneck in processing higher volume smaller orders. Instead of adding additional chutes to the existing 19, the company instead chose to implement a put-to-carton methodology whereby each chute can now process three orders at a time vs. just one, thereby expanding capacity with very little capital and no additional space requirements.
The changes it made to its DC allowed Rocky to improve its turn times by one turn and its throughput by 50 percent, and also set the company up to be better prepared for more strategic growth.

Accommodating a new blueprint for growth
About two years ago Rocky Brands set out a new strategic plan to 1) increase its direct and B2C e-commerce; 2) grow its business with mid-tier retailers; and
3) expand internationally. (Currently, the majority of Rocky’s international business is in Canada, but the company has enjoyed double-digit growth the past two years in other world areas.)

The direct-to-consumer goal had been motivated in part by its Lehigh business. Although it was a high-cost model, Rocky didn’t want to give up its direct contact with customers, and realized it needed to take the plunge into e-commerce. Today, the company operates eight separate e-commerce websites, one for each of its brands, and its old Lehigh model has been chiseled down significantly, to 20 trucks and a few warehouses. The Lehigh business has also leveraged tablet technology to allow customers to place e-commerce orders at their places of business. Lehigh provides a kiosk with an embedded iPad; 17 kiosks are currently deployed.

The different demands of picking and shipping for direct consumers vs. retail customers are putting more pressure on the DC to move even faster. “Our goal is to get to five hours from the time an order is processed (i.e., when the customer hits the enter button) to the time Rocky sends the customer an email with a FedEx tracking number,” Walker says.

In April, Rocky completed implementation of a new ERP system from Aurora, which is configured to its WMS system. It is issuing separate waves for singles, and has changed the way it processes singles, now picking instead of going through the sortation system, which was “adding no value” when you’re picking one or maybe two items for a single order, says Walker.

Other processes in the works are to combine the shipping label and packing slip into one item, and to use data from its WMS to continue to pull more value from its slotting optimization system, which will provide a lot of value relative to placing high-volume direct-to-consumer items closest to the appropriate packing stations. Near-future plans are to update its e-commerce platform (currently it is using a third-party provider) and to bring its entire retail division onto Aurora.

Smaller orders, bigger business
Five years ago, 60 percent of Rocky Brands’ volume was full carton. Today, that figure is less than 15 percent.

E-commerce is one major driver of that change, but another has come because of a shift in the way that Rocky Brands is doing business with its retail customers.
“A few years ago we realized that customers were waiting for us to offer a special program before placing an order. They would let their shelves get stocked out. Some of [the special programs we offered] were just things like free freight.”

Empty shelves were bad business for both Rocky Brands and the retailers. To incentivize retailers to order more frequently, the company launched the “5F” program, or “Free Freight for Frequent Fill-Ins.”

Now, those retailers who order a minimum amount of inventory on a regular basis are rewarded with free shipping every time, while the e-commerce platform is making it easier for retailers to place re-orders online.

“We don’t want their shelves to be empty,” says Walker. “We want retailers to order product and keep it on the shelves, and because of all of the changes we’ve made to our warehouse, we’ve had no problem keeping up with these major shifts in the number and frequency of shipments.” 

Jordan K. Speer is editor in chief of Apparel. She can be reached at jspeer@apparelmag.com.

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