time machine

Watches aren't inherently perishable, but fashion is. Fads come and go with astonishing speed, and he who makes it into the store last loses.

For fashion-dependent companies that manufacture in Asia, time constraints make life doubly difficult: Not only must they contend with the complexities of overseas manufacturing, but they also must figure out how to get their products to consumers halfway around the world before the fad fizzles out.

That was the dilemma facing Timex Corp., the Middlebury, Conn.-based company best known for its inexpensive, reliable wristwatches. Timex, which sources most of its products and components in Asia, needed to speed up deliveries to retail stores around the world. It wasn't easy, but through a combination of creative process engineering, wise use of technology, and improvements in transportation services, Timex has managed to slash average order-to-delivery time from four or five weeks to just seven days.

Born in the U.S.A.
Timex Corp. is hardly a newcomer to the manufacturing game. The storied company got its start in the 1850s as Waterbury Clock Co. A spin-off, Waterbury Watch, sold tens of millions of affordable pocket watches, including the "Yankee" model, at one time the world's best-selling watch.

A U.S. Army contract during World War I sparked the development of the wristwatch. Civilians liked them, too, and began buying them in large numbers in the 1920s. In the 1930s, Waterbury Watch created a children's market when it teamed up with Walt Disney to produce the iconic Mickey Mouse wristwatch. In the 1950s, the company (then called U.S. Time) launched the memorable "torture test" ad campaign for its popular "Timex" wristwatch. (See sidebar.) A few years later, the renamed Timex Corp. began marketing the wristwatch as a fashion accessory. Later innovations, like the Indiglo illuminated watch face, the IronMan sports watch, and the new iControl watchmounted wireless controller for iPods, have kept Timex a household name.

This tradition of first-to-market product design has helped Timex survive competition from Asian manufacturers. According to the company, it is the only U.S.-based watchmaker still in business.

Although Timex has been able to keep its roots firmly planted in the United States—a market that still accounts for 80 percent of annual sales—it no longer makes watches in this country. Competitive pressures have led the company to move most of its sourcing, manufacturing, and assembly to Asia.

A long, costly process
Even as it shifted its manufacturing operations to overseas locations, Timex continued to follow its long-established distribution model for a number of years. Watches were preassembled based on sales projections and then shipped in bulk by ocean to Timex's distribution centers in the United States, Canada, Mexico, Europe, and Asia. At those centers, they were repackaged, labeled, and shipped to customers' warehouses.

Over time, a couple of problems began to develop. One was cost—this approach often led to overstocking of components and unsold watches. The other was speed. The time required to pick orders, pack them for transportation, ship them, warehouse them, repackage and label them for specific customers and countries, and ship them to customers' warehouses—not to mention the time required for the customers themselves to sort, pack, and ship the watches to individual stores—significantly lengthened the order-to-delivery cycle.

For a company with a history of being first to market with innovative products, that simply didn't fly. Competitive pressures added to the sense that it was time for a quicker, cheaper, and more efficient way of filling orders and moving product onto retail shelves.

Timex hired consultants and systems integrators to take a hard look at the whole shebang—manufacturing, storage, picking, assembly, packing, and shipping. The goal: to slash order-to-delivery time while keeping costs under control.

Together, Timex's project team, systems integrator The Numina Group, and the St. Onge supply chain engineering firm came to the conclusion that the far-flung global distribution network wasn't necessary, or even desirable. The company could assemble virtually all of its orders on a justin-time (JIT) basis at a single production and distribution center. By streamlining assembly and order fulfillment and by consolidating production and distribution in one location, Timex could save itself millions of dollars in inventory costs. What's more, it could pick and package individual stock-keeping units (SKUs) for direct-to-store delivery, saving retailers the time and expense of warehousing, repackaging, and reshipping the goods themselves.

Once everyone had signed off on the plan, Timex began working out the details of the Direct Ship program, as the initiative is known. One of the first steps was to decide where to locate the global DC that would house the operations. Eventually, the company chose Cebu in the Philippines. Why Cebu? There were a number of reasons, says Andrew Ledesma, Timex's director of distribution engineering, packaging, and transportation. To begin with, the company has been successfully manufacturing in Cebu for 27 or 28 years, says Ledesma, a Filipino who has been with the company nearly that long himself. Another factor was the availability of transportation. Air transportation service from the area has improved in recent years, with both FedEx and UPS increasing their capacity and service frequency. "We can now ship on one flight the same amount that used to take five flights," Ledesma says. "This allowed transportation to become a tool rather than an obstacle."

Sale-ready in record time
In 2005, Timex opened a $13 million, 46,000-square-foot distribution center that is attached to the Cebu manufacturing facility. The new DC is capable of shipping about 170,000 watches in 16 airline containers each day. It features state-of-the-art material handling equipment and software that is tightly integrated with an i2 supply chain planning system and an Infor Viaware warehouse management system (WMS). A pick-to-light system from Numina directs batch picking of product for induction into an Interroll cross-belt order-fulfillment sorter (OFS). That sorter and conveyors supplied by FKI Logistex and TGW-Ermanco transport and route built-to-order product from manufacturing through picking and shipping operations, where print-and-apply label applicators from Panther Industries prepare shipments for direct-to-store delivery. Tying it all together is Numina's Real-time Distribution Software (RDS), which handles control and execution.

The cycle begins when an order arrives and the required watch heads are assembled in a clean-room environment from parts and components made in the Philippines or imported from Timex-owned factories elsewhere in Asia. Straps and bands are added, the watches are placed in country- and order-specific retail packaging, and the packages are placed in totes.

As the totes leave the manufacturing areas on conveyors, the RDS system receives data on their contents. The conveyor moves the totes through a cutout in the wall and into the DC; a bar-code scanner reads the totes' "license plates" as they arrive. RDS dynamically assigns a forward- or reserve-pick location in the second or third level of the pick module (the first level is for bulk orders) and directs operators using radio-frequency (RF) terminals to slot the product in the assigned locations. The space-saving pick module is located on a mezzanine above the shipping area, a design that allowed Timex to pack a lot of activity into a relatively small space.

Next, the WMS sends orders containing the SKUs, serial numbers, and quantities assigned to each carton to the RDS system. Based on that information, the RDS transmits instructions to the customized pick-to-light system, which directs picking activity in the module.Workers there batchpick items for multiple orders into totes, selecting items from over 3,500 individual storage locations. The software manages the batch picking to make the most efficient use of the 116-destination order-fulfillment sorter, explains Dan Hanrahan, business development manager for The Numina Group. Meanwhile, inventory is automatically replenished from reserve locations as needed.

A conveyor routes the totes to the OFS induction area, where operators unload the watches and scan the bar codes on the bottom of each package. RDS looks up each SKU; based on that information, a retail price label is automatically printed and applied if required by the customer. When orders are complete, station displays at the head of the diversion chutes indicate what size cartons will be needed for each order. After they pack the cartons, operators then attach license plate bar codes to the cartons and use RF terminals to "marry" the cartons to the diverter locations.

The cartons leave the order-fulfillment sorter and travel by conveyor to a combination packing and shipping sorter. At the induction point, they pass through a scan-weigh station for in-line weight verification combined with a digital photo, which provides a visual record of the contents. If all is well, the cartons are sorted to the pack-and-seal lanes. If a shortage or other anomaly is detected, cartons are diverted for inspection.

At the pack-and-seal area, operators insert packing lists and any special export documentation, and then send the cartons through void-fill stations and variable-height tape sealers. After a final trip through the sorter, the cartons move out to the labeling stations, which automatically print and apply customer-specific compliance and shipping labels, Hanrahan explains. One more audit, and the packed cartons head on down the shipping lanes for pickup by UPS, FedEx, and other air carriers.

The cartons fly in "igloos"—large air-freight containers—to the carriers' hubs, where sorting takes place. UPS, for example, breaks down U.S.-bound containers in Alaska and combines Timex's shipments with other shipments going to the same retailer. The combined loads then head to additional destinations in the United States, where they are delivered by truck to individual stores.

Not all orders, by the way, move by parcel carrier, and not all go directly to the stores. Some bulk orders, for example, are stored and shipped in full cases to customers' DCs, says Ledesma. These and other, more complex shipments typically are handled by Timex's freight forwarder, Agility (formerly GeoLogistics).

Regardless of how the orders are shipped, though, Timex's customers can count on their speedy arrival. The timing of every one of the steps involved is governed by two requirements: All orders must be filled within 48 hours from the time they are received (most are now filled the same day), and most shipments must arrive at their destinations within seven days after the order's release. That's a far cry from the four or five weeks customers had to wait under the old system.

Transportation trade-off
You might think that the cost of shipping hundreds of thousands of wristwatches from an island on the far side of the Pacific Ocean would be prohibitive. And in fact, Ledesma says, Timex's transportation costs have increased. There are several reasons for that, he says. One factor, of course, is the DC's location. Another is that the products' time-sensitivity mandates the use of air express; ocean freight is simply not an option.

What's more, direct-to-store delivery by definition means smaller, more frequent orders. Though smaller orders help Timex minimize inventory, they also push up per-piece transportation costs. "You might ship five pieces in a package that weighs about one pound, but because of minimums, the rate is the same as it is for up to five pounds. If you could ship four pounds, then the per-piece cost would be less," Ledesma explains.

The higher transportation costs, however, have been more than offset by the savings afforded by Cebu's assemble-toorder capability and greater efficiency in production, order fulfillment, packaging, labeling, and shipping, Ledesma says. Timex also has gained better visibility of product, from planning to delivery, with much less inventory.

Timex isn't the only winner here. Retailers benefit as well. Timex's ability to ship orders with sale-ready packaging and customized labels to individual stores saves them both time and money while ensuring that merchandise is ready when shoppers want it.

The fact that Timex found a way to take weeks out of the order-to-delivery cycle while improving compliance with its customers' requirements should come as no surprise. After all, when timing becomes a problem, who better to solve it than a watchmaker?