Editor's note: By all rights, Limited Brands should have been among the companies hit hardest by last year's port logjam on the West Coast. The company, parent of such brands as Victoria's Secret, Bath & Body Works, Express, Limited Stores and Henri Bendel, imports thousands of containers annually from factories around the world and has traditionally relied heavily on the Southern California ports, bringing 75 percent of its containers through these gateways as recently as the spring of 2004.
But as the containerships began to pile up and other retailers began panicking at the prospect of empty store shelves, Limited Brands sailed through the season relatively unscathed. Instead of waiting weeks or months for its merchandise, the company experienced delays of only two days on average from the merchandise's point of origin (typically in Asia) to its seven DCs in Columbus, Ohio.
At the same time, the company—or to be precise, its logistics group, Limited Brands Logistics Services—was doing the seemingly impossible on another front. In the midst of the worst trucking environment in decades, it not only managed to find trucks to move its goods, but it did so while maintaining service levels. In fact, the company, which moves approximately 40,000 domestic truckloads each year, actually recorded improvements in inbound performance (though outbound service suffered slightly).
The question that immediately comes to mind is how did they do that? To find out, we turned to Paul Marshall, director of inbound logistics for Limited Brands Logistics Services. What follows is his first-hand account of how Limited Brands reacted to the developing crisis and some of the key lessons learned.
IN THE SPRING OF 2004, WE BEGAN TO SEE DETERIORATION IN THE LEVEL OF SERVICE ON the U.S. West Coast that worsened throughout the year. That was something we couldn't ignore: At the time, we were shipping approximately 75 percent of our containers through ports in the Pacific Southwest, which, with the exception of the contract dispute with the International Longshore and Warehouse Union in 2002, had always proved reliable.
It quickly became clear to us that unlike the contract dispute, this wouldn't be a temporary setback. To begin with, it wasn't a matter of solving a single problem like a labor disagreement. Instead, a constellation of factors—poor forecasting and labor planning, an unforeseen surge in container volume, labor and equipment issues among the rails and truckers that served the ports, and an imbalance in work flow—were contributing to the lengthy delays.
What was also apparent was that solving a problem of this magnitude would take time. Although the industry is responding with larger vessels, extended hours, more labor and more port and rail equipment, those are stop-gap measures. In the long term, more infrastructure will be needed—particularly rail yards and track— and that will require significant investment and time. And although we were working (and continue to work) with other big importers through industry associations and coalitions to develop long-term solutions to congestion and related challenges, we knew we needed to take action right away. Our team put together a network plan with plenty of contingency options. What follows are some of the key points from that plan:
So what lies ahead? Though it appears that West Coast ports have largely reverted to their previous service levels, we anticipate similar challenges this year as peak season approaches. Our response will be very much the same. In the end, we believe that giving ourselves as many options as possible, gathering up-to-date information on congestion hotspots and being agile will enable us to succeed.
Easing the truck capacity crunch
As so often happens, while we were dealing with crises in our global supply chain, we were experiencing trouble on the home front too. As the port and intermodal congestion escalated, Limited Brands, like retailers everywhere, found itself dealing with a shortage of truck capacity as well. At first glance, that might appear to be less troubling to a company known for its heavy import volumes, but that's not the case at all. Reliable trucking service is crucial to keeping our store shelves (and garment racks) stocked. We move about 40,000 truckloads per year of both materials sourced domestically moving to DCs and shipments moving from our DCs to stores. We deliver to 60 percent of our store base in one day and to all stores within three days, which means even a few days' delay could be disastrous.
We first began to see deterioration in truckload services in late 2003 as factors like a shortage of drivers, skyrocketing fuel and insurance costs, rail capacity conconstraints, and government regulations began to take their toll on trucking operations. It quickly became clear to us that this was more than a simple transportation problem; if we wanted to assure ourselves of truck capacity when we needed it—and at a reasonable cost—we would need to examine the process from end to end.
Our team looked at operations at our own DCs, at our suppliers' loading docks and at the carriers themselves to come up with a multifaceted trucking plan. What follows are some of the key objectives from that plan:
As hard as we've worked to remediate the trucking problems, we still have a ways to go. To date, our efforts have met with mixed results. We actually improved on our inbound trucking performance thanks to our contingency planning and our commitment to monitoring loads on a daily basis. Unfortunately, however, our outbound performance deteriorated slightly from the prior year.
Because we expect the same challenges this fall, we're now tweaking our plans for the outbound operation. Among the options we're weighing are adding capacity in the form of more carriers and creating contingency plans for the outbound operation. There are no guarantees, of course, but we hope that these refinements will allow us to post positive results once again.