Marcus Chung is chief operating officer of Coyuchi, which develops sustainable premium home textiles.

RESPONSIBILITIES: Ecommerce and retail operations, supply chain, sourcing, production, sustainability, and IT.

EXPERIENCE: Vice president, manufacturing and supply chain, ThirdLove; director, sourcing, Stitch Fix; vice president, responsible sourcing, The Children’s Place; director, responsible sourcing, Talbots; director, sustainability, McKesson; senior manager, social responsibility strategy, Gap Inc.; consultant, CEB (now Gartner).

EDUCATION: MBA, University of California, Berkeley; BA, Wesleyan University.

I began my career as a consultant. It was like an extension of school because I gained exposure to many different companies, but I wasn’t actually managing a part of the business.

Because I didn’t have a formal business background, I needed to gain the skills and competencies so I’d feel confident that I could succeed in an operational role. When I went back to business school, it seemed like a natural way to transition from an external advisor role to being an operator.

After business school, I started at Gap Inc. as part of its social responsibility and corporate sustainability team. A lot of our work involved partnering with the factories that produced our goods overseas and protecting the rights of workers, as well as managing the sustainability impact of our operations around the world.

To be effective and help influence decisions, I had to put myself in the shoes of the people in other functional areas. For example, if we needed to move production away from a factory that’s not complying with our standards, how do we manage that in a responsible way for the business?

Shifting to Supply Chain

The more I advanced in my career, the more I enjoyed supply chain and operations. I organically moved into more commercial roles. It’s rewarding to be making decisions.

Supply chain is such an interesting, dynamic part of business. We have to think about how issues in faraway countries can impact us, whether the disruptions in the Red Sea, or elections in different countries that might shift trade relationships. I love how global it is.

I still have a mindset on sustainability and social impact. Now, I’m in a position where I can guide my team so they consider these impacts as part of everyone’s jobs.

There’s a lot more awareness about sustainability and the impact supply chains can have on people and the planet. When I started out, we’d have to explicitly ask about organic cotton options and there’d be, say, two swatches. Now, suppliers have entire books of eco collections, with recycled, organic, regenerative, and other options.

Having an impact beyond the business operations also motivates me.

At the Children’s Place, we led a coalition of apparel brands that formed the Alliance for Bangladesh Worker Safety. This was to strengthen protections for workers in Bangladesh factories after the collapse of Rana Plaza. That effort had real impact on the people of Bangladesh and on the industry overall.

Managing Change

Coyuchi is a company of fewer than 40 people. When we introduce big initiatives, like implementing a new ERP system, almost the whole company gets involved. That’s on top of their day jobs.

My role as a leader is to help my team prioritize, because there’s always more than we can do. The hardest part is saying no and allowing others to say no to things that are not making a difference, or that we’re not able to execute in a way we can feel proud about. I am not great at this yet, but I’m working on it. I want to make sure we’re as focused as possible on the things that are moving the needle.

My early experience in roles in which I was not the decision maker informed how I lead today. I try to bring people along, collaborate, and ensure everyone can provide input and understands where we’re going. Even if we don’t unanimously agree on the outcome, the process helps us all become confident that we’ve landed on the right decision. One direct report said my management style is like a wilderness explorer leading a team. To reach the goal, you can’t lead by being militaristic and yelling orders.

Marcus Chung Answers the Big Questions

1. What’s the best leadership/supply chain advice you ever received?

Always create contingency plans.

2. If you could represent your country in the Olympics, for what sport would it be?

I grew up swimming competitively and was captain of my undergraduate swim team. I feel like I have to say swimming even though I haven’t been in a pool in years.

3. What gets you out of bed in the morning?

Unfortunately, it’s usually one of our cats, who recently started meowing loudly at 4:30 a.m.

THE CUSTOMER

E.T. Browne Drug Company, headquartered in Englewood Cliffs, New Jersey, is a long-standing proprietor of skin and hair care products. Founded in 1840, it is best known for its Palmer’s® brand, which includes the best-selling Palmer’s Cocoa Butter.

THE PROVIDER

SYSPRO is an enterprise resource planning (ERP) software provider with a global footprint. Founded in 1978, it specializes in providing scalable solutions within key manufacturing and distribution industries.

“We focused on all the pain points we had identified during the independent ERP evaluation and worked to see how we could improve and correct them within SYSPRO,” says Pieter Goes, vice president of information technology and business intelligence at E.T. Browne.

Helping manufacturers and distributors gain critical insights across their entire organization is one of SYSPRO’s strengths.

“SYSPRO is a configurable software,” says Dawn Gorey, the software company’s director of consulting services. “There are a lot of different options and ways to set up those options. It’s not a one-size-fits-all solution because you can customize it.”

Smooth Like Butter

With a nearly 200-year history, E.T. Browne Drug Company is one of America’s first skin care companies. Renowned for its Palmer’s brand, which includes the best-selling Palmer’s Cocoa Butter, the company’s products are sold in 100 countries and recommended by families from one generation to the next.

Committed to delivering high-quality, high-performing products, E.T. Browne chooses fair trade and organically certified ingredients whenever possible. This includes the use of natural, raw ingredients, some of which have a shelf life.

The company relies on essential functionalities such as expiry dating, lot control, and good habits such as effectively picking the oldest product and inventory first so as to cycle through it in the correct order. However, Goes admits it’s not always easy in their small production facility, where items sometimes get stocked in the back and workers have to move numerous pallets to gain access.

“We try to balance the efficiency of getting products picked versus making sure we cycle through all the inventory in a timely manner,” he says.

E.T. Browne’s primary peak of business occurs during the dry, winter months. When cold weather descends in the United States around November, orders from major retail partners increase as they build inventory to prepare for brutal cold snaps.

“At that point, product really starts moving off the shelf,” says Goes.

The company experiences a decent peak in volume from December through March, followed by a tapering off period. However, different product lines during the company’s history have caused peaks to occur at other points during the year. For instance, E.T. Browne offered an SPF rated lotion for a time, which caused an increase in summer orders.

“We have seasonality in skin care but the majority of our business is steady,” says Goes. “People like to use moisturizers year-round.”

Special promotions also affect demand. Sometimes E.T. Browne offers bonus sizing or specially priced bundles of their products. Retailers might decide to do a buy one/get one free promotion. These events typically prompt orders to increase and need to be forecast and projected correctly.

The skin care company needed to gain better visibility and control over its inventory and supply chain. The goal was to help predict demand and understand how fulfilling the anticipated sales pipeline would affect production schedules, as well as anticipate the peaks it needed to buffer.

JUST IN TIME

By upgrading its system and tapping into SYSPRO ERP’s additional capabilities, E.T. Browne gained better control over inventory and the supply chain, allowing it to predict demand, understand how fulfilling the anticipated sales pipeline would affect production schedules, and anticipate demand peaks.

Fortunately, E.T. Browne didn’t have to look too far for a solution. They had a long-running relationship with ERP software provider SYSPRO, having purchased their system in 1998.

“E.T. Browne went live in 1999 and has used the ERP solution ever since,” recalls Gorey. “However, we recently did a business process review to look for inefficiencies within the system that E.T. Browne was experiencing related to increased and incorrect inventory.”

Forecasting had always been an issue. “In the beginning, we used an add-on tool because SYSPRO couldn’t natively do what we needed it to do,” explains Goes. As the years passed, E.T. Browne admits to being guilty of not leveraging all that SYSPRO had to offer.

“Our staff didn’t always have the right understanding of SYSPRO’s capabilities and so they came up with manual workarounds,” says Goes. “They dealt with issues in a cumbersome manner outside the system that over the years they could have done within SYSPRO had we stayed aware of those improvements.”

By upgrading to the latest version of SYSPRO ERP, E.T. Browne was able to align its business to fully leverage SYSPRO’s material requirements and planning (MRP) capabilities.

“We implemented SYSPRO’s demand planning and forecasting modules and E.T. Browne has seen a dramatic decrease in inventory while still having the correct inventory on hand when they need it,” says Gorey.

By leveraging the SYSPRO ERP’s demand forecasting and supply chain management capabilities, E.T. Browne in effect created a just-in-time inventory system. It’s a model that works well for them. The system significantly reduces the amount of raw material and product the company has to have on hand at any given time, which translates directly into increased profits.

At the same time, the manufacturer is still able to keep one month of expected demand, plus another month of buffer. “We can now do all of our forecasting natively in SYSPRO with their engine, so we’re able to better evaluate key markets and key customers, enabling our forecasting and capacity planning to be much more accurate,” says Goes.

SYSPRO provided a tool that makes information readily available to everyone in the company. “It’s easy to see and share and more intuitive to use,” says Goes. “As a result, we can achieve a fill rate of greater than 95% and we’re able to process our purchase orders much sooner, resulting in better supply.”

NEW MANTRA

Ultimately, E.T. Browne’s decision to upgrade to SYSPRO 8 2023 was all about requirements planning and requirements optimization. Accurate forecasting is vital to the skin care company. It involves determining current inventory, their needs for the future, their production requirements, and subsequently their purchase requirements.

“That’s where we’ve really been able to drive efficiencies,“ says Goes. “Having all of that information in one system, and having all the systems talk to each other and be aware of one another, drives much better results.”

There is always a bit of a learning curve when any new software is implemented. Gorey’s observation is that E.T. Browne has adjusted to SYSPRO 8 2023 well. She also notes Peter Goes’ quest for continuous improvement.

“He constantly looks at its new features and functionality to determine how E.T. Browne could harness them to give the company more efficiencies throughout the system, not just inventory,” she says.

For his part, Goes is more pragmatic. “The step we are now working on is adhering to the system,” he explains. “If the system tells us to do something, we can’t think we’re smarter than the system. We have to trust it enough to follow through.”

Goes believes this is a problem most organizations face when implementing change along these lines.

“People are used to doing things a certain way, and it’s just something you have to work through,” he says. “We work with our people so they are not afraid to make that change.” He considers change management to be the hardest part of the process.

“The technology can do more than what we have the capability of rolling out and actually trusting at this point,” Goes says. “So, we’re trying to take steps toward that.”

Having reduced inventory by 22%, which enabled the company to grow profits by 113% on revenue growth of 7% year-over-year, E.T. Browne is committed to staying the course with SYSPRO.

“Whatever can be done in SYSPRO is now being done in SYSPRO,” Goes says. “That has become our mantra.”

ERP Upgrade: Visible Results

The Challenge

E.T. Browne Drug Company, a long-established purveyor of skin care products, determined it needed to upgrade its ERP system to gain better visibility over inventory and supply chain management.

The Solution

Having relied on ERP software provider SYSPRO for more than a quarter century, E.T. Browne upgraded to SYSPRO 8 2023, fully leveraging the platform’s MRP capabilities to create a just-in-time inventory system.

The Results

Realized a 22% reduction in inventory with the downward trend continuing over the past 12 months. Gross sales are up 7.2% and net profit is up 4.6% year-to-date.

Next Steps

Leverage SYSPRO to manage emerging challenges such as the growing need to use recycled materials.

A few years further along in his global trade career, Heimbeck left the typewriter far behind as he began to write computer code. “When you learn to program, you think about how you can use software to solve problems,” he says.

Those early problem-solving efforts bore abundant fruit in 1997, when Heimbeck and his colleague Kevin Clark co-founded Trade Tech, a digital platform for global trade. Heimbeck, the president of Trade Tech, sat down with us recently to discuss the company’s history and current activities, and how he’s leading it into the future.

IL: What opportunities did you and Kevin Clark observe in the 1990s that prompted you to found Trade Tech?

Kevin and I worked together at Fritz Companies. He’d been reading about the internet, which the U.S. military had developed to give personnel access to computer applications from any location. It occurred to me that if you could have a supply chain management application available from anywhere, then when customers asked if we could handle their business in obscure but growing markets, we could always say yes.

If we could get people all operating on a single platform, housed on one server that could be located anywhere, then they could work together. There wasn’t anything called Software as a Service at the time. We had to invent a browser-based front end by turning forms around so we could push data out.

IL: What’s one lesson you learned early in your career that helped to shape you as a leader?

Back in the day, we used fax machines. You printed a document, dialed a number, and maybe got a busy signal. Your phone rang, so you set down the paper and took a call from someone else who also needed a document. You printed that and went back to the fax machine, forgetting that the last document hadn’t gone through yet. It was terribly inefficient.

Then we put in autofaxing, and my team loved it immediately. It’s important to identify what people spend the most time on and what causes problems. Then they trust you, and when you introduce something new, they don’t push back.

IL: What keeps your customers awake at night?

My biggest customers worry about accounting. That’s a tough function in global trade, because it always takes at least two offices to complete a transaction. You can have cost and revenue at origin, or cost and revenue at destination, or a mix of the two. Keeping track of that is a chore, and it’s prone to errors. I’ve watched companies go into bankruptcy or forced acquisition because their books weren’t in order.

But when all your transactions take place on a single platform, you get a paradigm change. You have origin and destination doing accounting on the same shipment files, with all the data visible to everyone who needs to see it. No one neglects to enter cost or origin data because they assume someone else has done it. As you make these processes easier, you eliminate the worry and everyone can sleep at night.

IL: Among the challenges your company faces today, which do you find most interesting?

For the past six months we’ve been automating our own accounting processes, applying Trade Tech to Trade Tech. Customer service agents and salespeople shouldn’t be administering accounting. My goal is to have one person at a high level watching what the machine is doing.

IL: What characteristics make you an effective leader?

It starts with humility. I try to be nice to people but hold them accountable for achieving their goals. I focus on the community. And, most important, I stress equality among cultures, ethnicities, and genders. We’re a multinational company. Each and every one of us is important. We might have an American flavor, because that’s where the leadership is right now, but that’s going to change over time.

IL: Besides automating accounting, what new and interesting things are you working on at Trade Tech these days?

One of our teams is in the early phases of a project for a customer with precise demands for data in the origin process—making the booking with the carrier, getting confirmation, and coordinating with the warehouses. I think we can automate 90% of that process.

Next year, we plan to automate the U.S. Customs clearance process. Finally, we want to use that clearance data to get better information to the ports. If terminal operators know when cargo will be cleared and when it’s scheduled to leave the terminal, then instead of simply stacking containers five high at random, they can make efficient decisions about how to process those containers.

IL: What are the first things you check on each morning?

Our daily performance reports come out at 8 a.m., and I’m right there at 8:01. We’re a self-funding company, and our performance directly impacts our ability to reinvest.

Then I look at sales—how are we doing and how can I help? I also look at how the programmers are doing on development projects. What kinds of roadblocks are they running into, and how can I help them work through the design issues?

IL: If you could trade places with anyone for a day, alive or from history, who would it be?

I’d love to step back to the days when Nikola Tesla was working on that new thing they called electricity. Edison got most of the credit because he was better at raising money, but it was Tesla who came up with the real technical breakthroughs.

I’d like to see how we could have made it easier and faster for people to adopt electricity, and then see how we could apply those principles to digital platforms.

IL: Outside of work, how do you like to spend your time?

I love outdoor sports. I row competitively at the master’s level, in the winter I go snow skiing, and I love hiking and camping, particularly with my boys. I’m an avid sailor. And I like gardening. In addition, I work with the Washington Council for International Trade to advocate for free trade. And I love doing things with my kids and grandkids.

Thirst for Knowledge

One of the most important qualities Bryn Heimbeck seeks in his direct reports is a passion for learning. “Global supply chain management is complex and becoming more so by the day—wonderfully so,” he says.

Case in point: “I was in Vietnam recently, and I was amazed to discover that there’s an enormous Latino community there. People need to learn to deal with these new levels of globalization.”

Team members also need to understand Trade Tech’s platform, the solutions the company has built on that base, and the impact of new technologies.

“There are all sorts of things on Amazon Web Services that are enhancing the scalability of our platform,” Heimbeck says. “You can’t sell what you don’t know how to use, or help customers learn how to use it. We’re in a dynamic revolution. I need people who are driven to learn.”

LAUREN HARPER is chief of staff at Kodiak Robotics, which builds solutions that can power autonomous movement for the long-haul trucking market.

RESPONSIBILITIES: Support and add value to strategic and operational initiatives, such as developing autonomous solutions for the U.S. Army.

EXPERIENCE: Senior strategist and business operations, Kodiak; corporate strategy and development associate, TuSimple; finance product summer associate, AgriDigital; vice president, production, Picture Movers Anonymous; chief executive officer and founder, LouLou Productions; business valuation associate, Deloitte.

EDUCATION: MBA, Yale School of Management; B.B.A, Cox School of Business, Southern Methodist University.

I’m a jack of all trades. I earned an undergraduate finance degree, specializing in alternative assets. Almost all my classmates are in investment banking or private equity. I’m the oddball in autonomous trucking, but I love it.

After working in finance, I moved to the entertainment space. I worked primarily as a line producer, building the budgets and managing cash flow for music videos, TV shows, movies, and other projects.

While this work was exciting—I applaud people who work in entertainment and love a good TV show as much as the next person—I felt I wasn’t impacting people’s day-to-day lives in a tangible way.

When I pivoted from entertainment to the trucking industry, I knew I’d need to immerse myself in a different world. I got into the Yale School of Management, where there are people from all over the world, with all sorts of backgrounds and perspectives. You can learn from everyone.

Then I looked for a position in transportation. I grew up in a trucking family and witnessed how important safety is. I believe autonomous trucking has the potential to save lives on the road and save our soldiers on the ground. It’s fulfilling to feel I’m part of something that can make such a positive impact.

I worked in corporate strategy at TuSimple, an autonomous driving technology developer. I fell in love with it from day one. Partly it was my wonderful manager, but it’s also an exciting industry. I was impacting day-to-day lives. You could see our customers’ trucks on the road. It was tangible.

When you pivot to a new industry, you have to work hard and prove you belong. I said ‘yes’ to everything. I managed our insurance and worked with the CFO to manage investor relations, even though those weren’t technically my job. I’m proud of my willingness to learn, get my hands dirty, and make a spot for myself in this industry.

Then I was blessed to move to Kodiak and work with the leadership team. It has been a fantastic couple of years. As chief of staff, I can provide value and lead initiatives where I’m needed, as Kodiak strives to deploy driverless trucks in Texas in the second half of this year.

I’m also working closely on our program with the U.S. Army. We’re developing autonomous solutions for one of their platforms. The Department of Defense has their own language and way of working. Once again, I had to say, ‘Okay, this isn’t something that I’m familiar with, but I’ve just got to get my hands dirty and learn how to execute on a program.’

Unless I have a conflict, I go to every meeting I’m invited to. It’s a way to learn about other parts of the company. Plus, it’s hard to volunteer for something if you don’t know what’s going on. Success means showing up and learning so you’re ready to take on a project when it comes up.

I think about how exciting this industry is and the potential it has to positively transform ground transportation efficiency and reliability. I’m proud and excited to be a part of Kodiak.

Lauren Harper Answers the Big Questions

1. What’s the best leadership advice you’ve received?

That we are all created equal. We have our strengths and weaknesses, but we’re all people, and should be treated the same. It shouldn’t be hard to do this, but it’s something good to remember.

2. If you could have one superpower, what would it be?

My superpower, which I’d use only for good, would be controlling emotions. I’d love to be able to help someone feel the confidence they need or help them grieve less.

3. When you wake up in the morning, what are the first things you check?

At Kodiak, we use Slack as an informal means of communication. So I check direct messages and see if there is anything immediate I need to address. Then I stay off my phone, have a cup of coffee, and usually read. I’m a nerd and read about 70 books every year.

Drew Wilkerson, CEO, RXO

Drew Wilkerson graduated from college with no specific job in mind. But he knew how he hoped to spend his career. “I wanted to work with people and have the ability to create solutions and build strong relationships,” he says.

At the suggestion of a friend who worked there, Wilkerson visited third-party logistics company C.H. Robinson. “I spent a day with the teams, and I was hooked,” he says.

From a series of positions at Robinson, Wilkerson moved on to XPO Logistics, eventually rising to the role of president, North American transportation. In 2022, XPO spun off its technology-enabled brokerage business to form RXO, based in Charlotte, North Carolina. It chose Wilkerson to lead the new company.

We talked with Wilkerson about his rise to the CEO’s office and his current focus at RXO.

IL: Since the formation of RXO, what have been your top initiatives?

We want to take market share. To do that, we have to focus on giving customers great service from Point A to Point B , with good communication throughout the life cycle of an order. We have to create solutions for them, using our technology and data to run their transportation networks more efficiently. There has to be innovation.

And we need to have really good relationships with our customers. Our top customers have been with us for 16 years on average. They don’t just come back and renew the business we’ve done with them the previous years. In most cases, they reward us with more freight, because of the service and solution innovations we’ve brought them.

IL: What’s an unusual challenge you took on for a customer?

In 2021, the ports—especially on the West Coast—were so backed up, they sometimes had more than 100 ships waiting to get in. Obviously, that delayed our customers’ inbound shipments. So as soon as their product hit the port, we sent drayage trucks to pick up the freight and take it to our facility, where we transloaded it.

From there, we gave our customers options, based on what worked best for their networks—LTL shipments, truckload, intermodal. Were they looking to get products to consumers as fast as possible? Were they looking for the best price? By providing options, we helped our customers keep their supply chains moving during one of the toughest times I’ve seen in my career.

IL: What new and interesting projects are you working on?

We were early adopters of technology in transportation. Today, one important set of questions for us is how do we integrate our technology with everyone it touches? How do we give our customers a more efficient experience? How do we make our technology easy for the carriers we partner with, so they can negotiate prices, book loads, and manage their entire businesses from their phones?

We also want our technology to help our employees accomplish more every day. On a rolling 12-month basis, our employee productivity—the number of loads per head per day—is up by 18% year over year. That’s largely because our technology has reduced the number of keystrokes and clicks employees have to make, so they can focus on building relationships with customers and providing solutions.

IL: Which emerging technologies have exciting implications for RXO and its customers?

We’ve been using artificial intelligence and machine learning for a decade. It helps us move faster from a pricing perspective, and it has allowed us to attain some of the strongest margins in the industry with regard to how we procure transportation. For the future, generative AI offers opportunity for back-office functions and even for customer-facing activities.

IL: How would you describe your leadership style?

I’m very transparent and open. You do not need an appointment or scheduled meeting to stop into my office to talk about yourself, your career, or ways to improve the company.

I’m also customer-focused. I spend a lot of time with our customers and care about them deeply. My job is to make them look good within their organizations.

Finally, as a leader, I focus on surrounding myself with and retaining talented individuals. Many people on our leadership team had already been with us for 10 years or longer before the spinoff.

IL: How do you give criticism or correction when that’s required?

If you have good relationships with people, the best approach is to be direct. When people know that you’re invested in their future and the critique comes out of a good place, they’re generally receptive. Often, I talk about the “why” behind the criticism, what the impact can be for them if they consider doing something in a different way.

IL: What’s the hardest aspect of your job?

For a leader, the most difficult thing is making sure you choose the right people to surround yourself with. Coming into the spinoff of RXO, the most challenging part of my job was filling some positions with people who did not come over from XPO. Fortunately, the people we chose fit in well and have made us a better organization.

IL: Among today’s active leaders, whose brain would you like to pick?

I’d love to talk to Elon Musk, who is innovative and not scared to take on big challenges. I’d pick his brain on how he builds organizations and where he thinks technology can disrupt, or allow business to grow at a faster rate in the future.

IL: Outside of work, how do you like to spend your time?

I love spending time with my family. My wife and I grew up in the same small town in South Carolina and have been together since I was 16. We have two beautiful girls, ages 14 and 11. If I can spend time with them watching South Carolina football, basketball, or baseball, that’s even better.

From Imperfection Comes Strength

Early in Drew Wilkerson’s tenure at C.H. Robinson, a customer turned up with a complaint. “We had created some service issues,” Wilkerson says. Such difficulties may damage the partnership between a shipper and a 3PL. But that’s not what happened.

“One of my mentors at the time used those challenges as an opportunity to create a stronger relationship with the customer,” Wilkerson says. “He didn’t back away from the tough problem. He leaned into it.”

The customer was so impressed by how the service provider worked to arrive at a solution, the shipper ended up giving C.H. Robinson more business. “And there was more trust in the relationship,” he says.

That incident delivered an important lesson: “When things don’t go perfectly, that’s an opportunity to improve the business and create stronger relationships.”

THE CUSTOMER

On is an athletic footwear, apparel, and accessories company headquartered in Zurich, Switzerland. Founded in 2010, the high-performance sportswear brand has fast become a global entity with 52 branded stores and 10,000 dealers in more than 60 countries. Its workforce includes more than 2,800 individuals.

THE PROVIDER

Verity, headquartered in Zurich, Switzerland with offices in Chapel Hill, North Carolina, is a developer of autonomous indoor drone systems. Founded in 2014, this pioneering AI and robotics company currently delivers AI-powered mobile intelligence in 13 countries and counts 160 employees within its ranks.

The company is on a fast course. In a bid to optimize inventory management and ultimately enhance supply chain efficiency and precision, On recently joined forces with Verity, an AI and robotics company, to deploy fully autonomous drones in its warehouses.

On’s phenomenal growth shows no signs of slowing down. In 2023, the company recorded revenue of 1.8 billion Swiss Francs ($2 billion), a 55% increase that significantly exceeded expectations set at the beginning of the year. As sales racked up, On researched methods to improve supply chain execution and meet demand.

“We needed a solution for automatic inventory tracking that could help us boost productivity, minimize stock accuracy issues, and prevent loss of goods,” explains Erinda Lala, an On senior warehouse technologies specialist.

On was also looking for a solution that was easy and quick to implement, with low installation costs and flexibility to accommodate its ongoing growth. Open to embracing every technological advancement, On soon forged a partnership with Verity, an AI and robotics company.

Since On and Verity are both headquartered in Zurich, Switzerland, and their offices lie in close proximity to one another, it was natural for the two companies to become acquainted. Verity’s reputation and expertise in AI and robotics impressed the sportswear brand.

INITIAL TAKEOFF

In February 2024, the two companies embarked on a project whereby fleets of Verity’s fully autonomous drones were deployed in an On warehouse to enable full operational visibility through smart, real-time inventory tracking.

“We opted to kick off the project by implementing a pilot solution in one of our largest U.S. warehouses,” says Lala. Globally, On has warehouses in 12 countries as diverse as Japan, China, Australia, Belgium, the UK, Brazil, and Canada. It has two facilities in the United States.

“This initial phase will allow us to assess the effectiveness of the solution before gradually expanding to our other locations,” Lala adds.

A STEALTH APPROACH

For its part, Verity is on a mission to transform warehouse operations and optimize inventory management. The 10-year-old company came out of stealth mode at a TED conference in February 2016 and did a live demonstration of its ability to fly drones autonomously indoors. The presentation culminated with a swarm of drones flying over the audience.

Less than six months later, Verity did a proof of concept (POC) with a large U.S. retailer, demonstrating the use of drones to deliver automated inventory tracking.

“What we learned from doing the POC, was that there was a real demand for this capability, and our technology stack, while still best in class, was not mature enough for large scale deployment,” says Raffaello D’Andrea, co-founder and CEO of Verity.

Verity went back to the drawing board and, over the next three years, created a second-generation system that is the basis for what now is used inside 80-plus warehouses operated by companies in 13 countries including the United States, Canada, Germany, and South Africa.

“Building on our track record of successful projects in Europe, we completed our first deployment in the United States with Maersk in late 2021,” says D’Andrea.

Basically, the Verity drones used in warehouses navigate to the locations they are scheduled to scan, collecting accurate inventory data in three dimensions by scanning barcodes at any height using onboard, high-resolution cameras.

When an electric-powered drone’s battery runs low, it autonomously lands and recharges while other drones fly off to continue the mission. It isn’t necessary for a dedicated human operator to be on-site and entire operation cycles can occur at night or on weekends with no need for overhead lighting.

The drones take photos of SKUs to identify inventory errors, such as missing or misplaced stock items. Once the data is collected, the system compares the findings with data stored in the warehouse management system (WMS) and then distills that information into critical insights delivered directly to users via a dashboard.

The results are cloud-based and shareable, and strengthen a company’s data accuracy to improve decision making quality and speed.

PIONEERING INNOVATION

Sportswear brand On leverages technology to support company growth by improving product availability at its physical and online stores, and maximizing order fulfillment by boosting on-time and accurate delivery.

On’s success is rooted in innovation. The brand’s own CloudTec technology propelled initial sales of its running shoes—and its subsequent growth—so it’s no surprise On would be open to deploying fleets of autonomous drones in its warehouses. The company’s primary goal is to establish precise inventory management without having to rely on manual processes.

“The accuracy of our stock levels serves as the foundation for maintaining product availability and facilitating sales across various channels, including direct-to-consumer, business-to-business, and our own retail stores,” explains Lala.

By enabling full operational visibility through smart, real-time inventory tracking, Verity’s autonomous drones are minimizing stockouts, misplacements, and shrinkage across On’s supply chain. The drones scan On products daily, ensuring full availability of stock for both retail and ecommerce customer fulfillment.

“Our system allows On to not only spot errors before they impact operations downstream, but to also determine root causes so they can be addressed,” says D’Andrea, who notes that manually tracking inventory is frequently a detested, error-prone, and even dangerous task due to the heights involved.

“Our solution also addresses the labor-shortage issues that many supply chain companies are witnessing,” he adds.

Harnessing innovation for the benefit of customer experience appeals to On because it reflects the company’s own pioneering spirit and history. The sportswear brand is keen to get behind new, more sustainable supply chain solutions that reduce CO2 emissions linked to warehousing.

Verity clients net a reduction of 1,000 tons of CO2 emissions per warehouse each year, on average.

“By leveraging innovative technological solutions, we aim to improve our operations’ efficiency further, become a more sustainable brand, and take customer satisfaction to new heights,” says Caspar Coppetti, co-founder and executive co-chairman of On.

DRONE ON

“It’s hard to name an industry that wouldn’t benefit from mobile intelligence,” says D’Andrea. Singling out factors that affect the business category, he points to the velocity of the goods, their value, the tightness and quality of the labor market, and the impact of errors in operations.

Verity counts retailers, third-party logistics providers, and manufacturers among its clients. The company is already deploying its autonomous drones to scan everything from pet food to groceries, shoes to household goods, electronics to machine parts.

Enhancing real-time inventory tracking across customer touchpoints—whether physical stores or online—minimizes stockouts, misplacements, and shrinkage. Drone technology boosts successful order fulfillment for companies by improving on-time and accurate deliveries.

Verity clients are seeing their operational issue rates drop from 5-12% to less than 1%, significantly increasing their warehouses’ labor efficiency.

But it’s only the beginning. Many of Verity’s clients are pulling the company into new verticals, including security and inspection.

It makes sense. To stabilize altitude, drones utilize air pressure sensors, which allow the hover capabilities needed for videography or photography. The sensors are small, lightweight, and low power, culminating in the perfect payload for a mobile platform that can move anywhere in space, on demand.

“Our cloud-based solution is also agnostic as to how the data it ingests is generated, so we can easily incorporate other data streams into our system, including those from fixed sources, or even mobile phones,” D’Andrea adds.

LOOKING AHEAD

Six months into its collaboration with Verity, On is currently assessing the performance of the pilot project in its U.S. warehouse to identify future opportunities.

“We found a partner who can support our warehouse in its core activities without adding manual work, and help streamline the process,” notes Lala. “We hope we’re getting closer to our goal of a zero-error warehouse.”

Casebook Study: Prone to Drones Challenge

On, a Swiss high-performance sportswear brand, sought to optimize its inventory management and enhance supply chain efficiency and precision to support its burgeoning growth.

Solution

On partnered with Verity, a Swiss AI and robotics company, on a project to deploy fleets of fully autonomous drones in one of On’s U.S. warehouses beginning in February 2024.

Results

Early results indicate the collaboration is already improving ON’s key performance indicators.

Next Steps

The plan is to gradually deploy Verity drones in On’s additional 11 warehouse locations around the world.

Greg Skrovan is the director of global reverse logistics for Intel Corporation.

RESPONSIBILITIES: Leads the global organization responsible for warranty and reverse logistics strategy, service delivery, customer service and fraud mitigation for all Intel products, as well as more than $1 billion in returns. Oversees management of more than 15 3PL return depots and repair centers.

EXPERIENCE: Global program director, circular economy, supply chain innovation and business development; group manager, capital equipment planning and supply line management group; manager, global transportation and logistics procurement; manager, European logistics; regional transportation manager; all with Intel.

EDUCATION: Georgia Institute of Technology, M.S., international supply chain management; Michigan State University, B.A., supply chain management

I should have ‘supply chain nerd’ in my LinkedIn job title. Even as a freshman in college, I knew I wanted to study supply chain. I’ve been blessed to be in supply chain roles since I graduated.

My interest in the circularity aspect of supply chains kicked in about seven years ago when I became involved in the reverse logistics function. You can’t have a circular economy without reverse logistics.

Typically the biggest struggle in gaining continued investment in sustainability initiatives, especially in the supply chain, is showing a return on investment. The thing that excites me most about our mission is that we play a critical role supporting our customers’ needs while also driving cost savings and doing something positive for the environment through our asset recovery capabilities. We try to find a way to either resell or repurpose any material that comes back to us, so we’re getting its highest value. Or, we try to recycle, with little to no waste.

Our goal is to recover and resell or recycle 99% of products that come back. Today, we’re able to reuse or resell roughly 60% of materials that come back. We want to find higher value uses for the 40% we can’t currently reuse or resell.

Circularity provides an opportunity to do what’s good for the company and for the environment.

Years ago, I worked in Amsterdam with a team of employees to transform our European distribution model. It was a great opportunity to be immersed in another culture and country. The biggest challenge was understanding local labor laws and the unwritten rules around working with employees in the Dutch culture, versus managing them in the United States.

Building our European team meant working a lot and failing a lot. But we were able to leave knowing we had a strong operation and strong local leaders in place. The operation continues to thrive.

Today, my team includes people from seven countries. Recognizing the differences in cultures and perspectives and the different ways people work and are motivated and contribute, while also staying within the strong Intel culture, is incredible. One great thing about Intel is we have a strong company culture, but we also have an inclusive culture and we take advantage of differences in perspectives and experiences.

As supply chain professionals, I believe we have a responsibility, which doesn’t exist in all functions, to make decisions that benefit our companies and are also good for the planet. This profession has the opportunity to excel in that sweet spot between doing what’s good for the company and what’s good for the environment.

Greg Skrovan Answers the Big Questions

1. If you could speed the development of a supply chain-disrupting technology, what technology would you choose?

Artificial intelligence and machine learning. We’re currently leveraging this in our receiving process, where we take advantage of the data and watch trends and opportunities. I’m excited about using it in our day-to-day work to make faster and better decisions.

2. Do you have any words to live by?

A colleague once said he knew he wouldn’t always be the smartest person in the room, but he could be the most prepared and work the hardest. It’s about focusing on what you can control and influence. Do that and good things are going to happen. Worst case, you’ll sleep well, knowing you did everything you could.

3. If you could throw a dinner party and invite anyone from throughout history, who’d make the guest list?

I would bring back several family members who have passed. I would bring Jesus; that would be an opportunity you couldn’t pass up. And the chance to be able to listen to Martin Luther King would be incredible.

So, a mix of thought leaders, inspirational people, my family, and some storytellers to make the dinner enjoyable.

THE COMPANY

Kenvue Inc. is an American consumer health company. Formerly the Consumer Healthcare division of Johnson & Johnson, Kenvue is the proprietor of well-known brands such as Aveeno, Band-Aid, Benadryl, Combantrin, Zyrtec, Johnson’s, Listerine, Mylanta, Neutrogena, Trosyd, Tylenol, and Visine.

This required benchmarking, among other measures, its service levels, technology, and the ways in which its logistics processes could impact how Kenvue was going to market.

The good news? The company didn’t need to completely overhaul its operations. “But we did have to ask ourselves, ‘If we want to be best in class, what needed to change?’” says Rodney Leonard, vice president, U.S. deliver operations. The consensus that emerged identified leveraging data and partnering more strategically with retail customers as the approach that would provide the most substantial opportunities. “That’s what we are focusing on,” Leonard says.

In doing so, Kenvue has reduced unloading times, overages, damages, and shortages, while boosting on-time shipment arrivals at its customers’ warehouses.

Across the globe, Kenvue’s 2023 sales hit $15.4 billion, with 10 brands bringing in sales of $400 million or more. About half of net sales were generated outside North America. Each day, more than 100 trucks leave Kenvue’s four distribution centers strategically located across the United States; the company also has one in Canada. Then, the trucks head to customer distribution centers.

Digital First

To ensure an efficient operation, Kenvue has leaned into technology, becoming a digital-first company. This has meant shifting from a more transactional approach to focusing on data analysis. The company also uses technology to boost service to its retail customers and to help drive the decision-making process.

Kenvue centered on the on-time, in-full (OTIF) metric, knowing that optimizing this would maximize its revenue, as well as customer revenues.

One example is using technology to improve the order-to-cash process. When a customer places an order, Kenvue has to ensure it has the right inventory in the right distribution center and can efficiently move it to the customers’ distribution centers.

For example, an order from a Chicago location would probably be filled through the distribution center located in the Midwest.

Another step has been using technology to automate and receive orders more efficiently. Previously, Kenvue might receive a customer order, and manually hold it for an employee to review, checking that it contained the right price and quantity.

Also, purchase orders could come from different buyers within the same company. Placing multiple purchase orders, typically for smaller quantities, in different areas within a truck often led to inefficiencies in receiving and increased claims for overages, shortages, and damages.

Now, Kenvue has automated the intake and collation of these orders using EDI software and other Bot technology to optimize the customer logistics analytic review. (Bot technology refers to automated software applications that perform repetitive tasks over a network. It follows specific instructions to imitate human behavior but is faster and more accurate.)

Improved Picking, Packing, Shipping

When working with five orders with the same SKU, for instance, Kenvue can combine them, putting the orders together because they’re going to the same region. This enables employees to pick the items logically.

“We were able to use technology to help organize the orders and create a much smoother customer receiving experience,” Leonard says.

Before this change, a customer might receive multiple different Tylenol bottles on different pallets throughout the truck. As a result, it took them longer to find, count, and properly receive the products.

In a pilot with the new system, two of Kenvue’s largest customers saw up to a 40% reduction in unloading costs, as well as an improvement in reported errors.

By creating a cleaner, more organized order, the picking, packing, and shipping processes are also more efficient. These changes reduced Kenvue’s loading time by about 20%.

The new system has also cut overages, shortages and damages (OS&D) about in half. Previously, customers might think they hadn’t received some of the products they’d ordered. By more effectively organizing each load so the same SKU codes are together on the truck, Kenvue’s customers accelerate unloading time and can better assess the goods they’ve received.

The enhanced Pick Logic system was built in collaboration with Kenvue’s third-party logistics partner, who runs warehouse operations. The 3PL changed its picking sequence, or the logic within its system, from a “most efficient path” to an “end-to-end customer experience path” to streamline the customers’ receiving operation.

Timely Information Sharing Is the Key

For these tools to work effectively, Kenvue and its customers need to share information. With a timely exchange of information, Kenvue can understand its customers’ inventory levels and where they want to receive products, among other information. “It all starts with that data,” Leonard notes.

For instance, Kenvue might alert its customers to data on products that are running low. Then, the company can make more tailored suggestions regarding inventory replenishment.

In the past, if a customer indicated it wanted, say, 50 cases of a product, Kenvue typically would just ship the cases. Now, it can let the retailer know that it could actually use 60 cases at its store in Southern California, which had a spike in sales over the past week.

“We’re able to help retail customers prevent out-of-stocks on the shelf by having access to that data,” Leonard says.

The Perfect Store

Kenvue’s Perfect Store solution taps into AI to help retail customers drive better store execution. Analyzing and sharing a store’s daily sales data can identify irregularities and prevent out of stocks.

While moving products to a customer’s distribution center in the right quantity and time frame is a critical starting point, the products also need to get onto the store shelves.

Many retailers are also focused on acing store execution, Leonard says. The goal is to avoid inadvertently having products in the distribution center or back room, while the shelves are empty.

To help address this, Kenvue is initiating what it calls “The Perfect Store.” The goal is to help customers ensure on-shelf availability.

Store shelves are the customer’s space, and not Kenvue’s. But partnering can help both. For example, Kenvue recently launched Perfect Store pilots with several customers, using AI to help them drive better store execution. As Kenvue receives the store’s daily sales data, it can analyze the information to identify any irregularities at the store level.

Say a location that normally sells 10 items daily hasn’t sold any in three days. AI can alert the retailer, who can check whether the product is actually on the shelf.

“With AI, we can be targeted in looking at point-of-sale trends,” Leonard says. “We’re seeing some great results to drive the consumer experience.

“This is the next frontier,” he adds. “We’re driving all the way to the customer’s shelf.”

Kenvue continues to add customers to the program. “Every customer we have approached expresses high interest in the program,” Leonard says.

Leveraging AI and Partnerships

The AI tool can help in adjusting not only for historical trends, but also can consider factors such as weather patterns or social media and events.

So, if a summer music festival will be taking place in one city, the system can incorporate that data into its analysis. It might recommend boosting the inventory of sunscreen in the area. “We’re able to be much more forward-looking and predictive,” Leonard says.

While Kenvue and its retailer would typically sign a non-disclosure agreement, so the retailer can be confident the data will be used appropriately, sharing information also requires a trusted partnership. Kenvue has worked diligently to foster such partnerships.

The labor shortage has also helped accelerate this practice. In the current environment, many stores may have one or two employees in a store, and they’re trying to manage hundreds of products, Leonard notes. AI can help them.

Kenvue is testing this in different regions, highlighting best practices, while adjusting to each region. A bodega in Asia will require a different approach than a big-box store in North America.

“There’s a certain level of freedom that we have to use, but the concept and the spirit of using technology to drive consumer experiences is consistent,” Leonard says.

Since becoming an independent company, Kenvue has not only streamlined transactions, but it has also established a new culture and way of interacting with customers.

“It has been a whirlwind, but it has been exciting,” Leonard says.

Casebook Study: A View Into Kenvue

Challenges

After spinning off from Johnson & Johnson, Kenvue needed to establish a successful and effective supply chain as an independent company that’s also the world’s largest pure-play consumer health company by revenue.

Solutions

Leveraging data and artificial intelligence, while also partnering more strategically with its retail customers to drive efficiency.

Results

Reducing unloading times, overages, damages, and shortages, while boosting on-time arrivals at customers’ warehouses.

Next Steps

Continuing to test and implement The Perfect Store approach with customers around the world.

THE CUSTOMER

American Standard is a North American manufacturer of plumbing fixtures headquartered in Piscataway, New Jersey. The brand has been a mainstay in the building industry for the past 150 years.

THE PROVIDER

Hercules Forwarding is an asset-based less-than-truckload (LTL) motor carrier and customs brokerage with Canadian headquarters in New Westminster, British Columbia and U.S. headquarters in Vernon, California. It specializes in U.S.-Canada shipments with a specific focus on transloading solutions.

American Standard produces most of these units in one of four manufacturing plants it operates in Mexico and then ships them to distribution centers in the United States and Canada.

For a long time, the company relied solely on large and direct carriers to ship its product from Mexico. However, constant rate increases were affecting the bottom line.

“In 2005, we decided to go down to Laredo, Texas and see what other options we could find,” recalls Gary Harlow, a leader at Amstan Logistics, the logistics arm of American Standard, Inc.

Transloading is the Solution

That’s when American Standard connected with Vocar Transportation (acquired by Hercules in 2010) and landed on a transloading solution. “We began bringing our freight up to the border with Mexican carriers and then transloading the shipments at Hercules and putting them on U.S. trailers,” Harlow explains.

A practice that wasn’t as prevalent in 2005 as it is today, transloading is the transfer of goods from one mode of transportation to another enroute to its ultimate destination. “A lot of companies transload now,” Harlow notes.

Prior to engaging Hercules, American Standard interviewed several potential candidates. “We actually used two companies for a while—Hercules being one of them—but the other company didn’t do as good a job so we settled on using Hercules only,” Harlow says.

Almost 20 years later, the partnership endures. It has grown to the point that American Standard currently transloads more than half of its cross-border shipments. Transloading not only reduces shipping times but also cuts down on damage claims.

“We set up the operation exactly how American Standard needed it set up,” says John Volpe, who as president of Vocar Transportation oversees Hercules’ Texas operation. “We were flexible and catered to their specific needs.”

It All Starts with Cross-Docking

Theirs is a relationship grounded in distribution. It starts with cross-docking operations at the border in Laredo, Texas. Cross-docking entails unloading goods from vehicles making incoming shipments at a logistics facility and transferring them to vehicles handling outgoing shipments. The point is to incur little or no storage time in between.

“Cost was our major issue,” says Harlow. “If you don’t have options, you’re stuck with whatever capacity and/or pricing you get from the larger carriers. You don’t have a lot of control.”

Door-to-door (D2D) shipping isn’t the only recourse. When American Standard relies on U.S. trailers to ship its product out of Mexico, the order of operations proceeds like this:

1. U.S. trailers are loaded in Mexico.

2. Shipments are transported to the border and are cleared by a customs broker engaged by American Standard.

3. Shipments are dropped in a U.S. carrier’s yard to be delivered within the carrier’s capacity.

Depending on the time of year and capacity constraints, this means a shipment can sit in a designated U.S. carrier’s yard for far longer than American Standard often prefers. And the carriers in question are typically larger and thus more expensive. “Working with Hercules gives us much more flexibility,” says Harlow.

Expanding the Options

Hercules’ cross-docking operations give American Standard more options in regard to choosing carriers to transport shipments from Laredo to its distribution centers (DCs). Hercules typically handles 20 to 25 American Standard truckload trailers daily.

“We load a Mexican carrier’s trailer at our plants,” Harlow explains. “It travels to the border where our customs broker clears the load. Then the trailer gets dropped at Hercules’ facility on the U.S. side.”

American Standard then works with Hercules to transload shipments onto U.S. carriers. Theirs has been an efficient and long-running partnership. “Transloading has meant better pricing and better service,” says Harlow.

The relationship isn’t static either. It has evolved to include Hercules participating in American Standard’s LTL needs on the shipping lanes Hercules can service. “We’re not a nationwide carrier so we can only service them in certain lanes,” Volpe notes.

The relative fragility of American Standard’s product line influences shipping decisions as well. The company manufactures bathroom fixtures in its Mexican plants—mainly toilets and sinks. These items are primarily made of porcelain and require careful packaging. Despite the packaging, minimal handling does much to minimize damage claims.

“Damage doesn’t occur on the initial shipping side of things,” says Harlow. “The LTL side can be a different story.”

American Standard uses all kinds of LTL carriers including large providers such as SAIA and Estes that use various terminals where breakbulk handling occurs. If a shipment is going to incur damage, breakbulk terminals where packages are unloaded and reloaded is the more likely spot.

“We try to minimize the handling of freight by eliminating breakbulks,” says Volpe. “When we ship to the Pacific Northwest (Oregon, Washington) from Texas, the freight travels without being touched. A lot of our competitors have to go through two or three different terminals to get freight to that destination.”

EVOLVING AND ADAPTING

To minimize shipping damage to its main product line—toilets and sinks—American Standard eliminates breakbulk handling so freight travels without being touched.

When Hercules first began cross-docking American Standard’s freight at the border, everything arriving from Mexico was palletized. Then American Standard discovered a cheaper and more efficient way to ship its product: slip sheets.

Made of plastic, heavy laminated kraft paperboard, or corrugated fiberboard, slip sheets are pallet-sized but thinner. “We had to retool our operation to handle freight on slip sheets,” says Volpe. “It required additional equipment and hardware on our forklifts plus training of our dock personnel.”

Volpe likens picking up freight sitting on a slip sheet to picking up a pancake on a skillet with a spatula. “There’s definitely a learning curve but slip sheets offer savings,” he says.

Volume Savings

One could easily assume less weight on a trailer might be one of the savings but in American Standard’s case, Harlow points to volume savings. Given the insulating packing materials required, a toilet box is pretty big. “The slip sheets allow us to put more product into trailers because we no longer have the height of the pallets subtracting space,” he says.

American Standard appreciates Hercules’ willingness to adapt. Another example centers around availability.

“As shippers, we often have to adjust to a carrier or vendor’s hours or situation and our company happens to work through a lot of holidays,” Harlow says. “Hercules will ask what we need and be there just for us. They’re cognizant of our needs and that flexibility continues to sustain our relationship.”

HANDS-ON “HANDS-OFF” SERVICE

Because Hercules is a smaller, regional LTL carrier, it offers a more personalized experience. Harlow appreciates being able to talk with Volpe directly should problems arise. The sales reps that service national carriers sometimes can be harder to pin down.

“Hercules is customer-service driven,” Harlow says. “I can call and get them on the phone. I can’t do that with all of our carriers or reps.”

Harlow also points to the absence of breakbulk terminals. “If your shipments go through fewer terminals and encounter less handling, the result is decreased or zero damage,” he says. “Larger national carriers often touch your freight three times.”

Moving forward, Hercules hopes to expand its coverage map footprint. “We hope American Standard keeps giving us opportunities to grow,” says Volpe.

That seems likely to occur. “Hercules feels more like an extension of my team than a vendor,” Harlow says. “We have a very strong relationship.”

Casebook Study: Plumbing the Depths

Challenge

Plumbing fixture giant American Standard sought options to move fragile products efficiently and effectively from their Mexican manufacturing plants to distribution centers in Texas, Ohio, California, Canada and other locations.

Solution

American Standard partnered with Hercules Forwarding, an asset based less-than-truckload (LTL) carrier focused on providing transloading solutions. Hercules performs cross-docking operations in Laredo, Texas and, as a regional carrier, fulfills LTL shipments in certain lanes.

Results

American Standard went from 100% engagement in direct cross-border or door-to-door (D2D) shipping to 48% direct and 52% transloading. By incorporating transloading, the company reduced shipping times, achieved considerable cost savings and minimized damage claims.

Next Steps

The two companies plan to continue their long-running partnership. Hercules hopes to expand its coverage map footprint and provide American Standard with more breakbulk-free shipping routes.

The Customer

Belcorp is a Latin American direct-sales beauty corporation, guided by its purpose: “We promote beauty to achieve personal fulfillment.” The 50-year-old company offers more than 2,000 SKUs across three commercial brands: L’BEL, ésika, and Cyzone. Belcorp provides an entrepreneurial opportunity to its more than 900,000 beauty consultants across Latin America and the Caribbean.

The Provider

ToolsGroup offers probabilistic demand and supply planning solutions used by retailers, distributors, and manufacturers to enhance supply chain resiliency and efficiency. The company harnesses AI and real-time data from various sectors of the enterprise to help companies facilitate agile and effective decision-making.

“Complex” might even be an understatement for Belcorp, which operates three brands:

• L’BEL targets women aged 30 and older and employs advanced skincare technology.
• ésika caters to women between 25 and 45 years old; this brand aims to inspire confidence and unlock the potential of Latin American women.
• Cyzone targets members of Generation Z and focuses on affordable cosmetic products, while considering current digital market trends.

Belcorp’s network of beauty consultants offers the company’s products directly to potential customers.

Like many cosmetics companies, Belcorp leverages market trends to introduce new products every few weeks. While these evolving product lines are key to sales, they also require an agile and sophisticated supply chain planning and optimization approach, given the brevity of product lifecycles.

Additionally, Belcorp’s direct-selling business model operates with 18 commercial cycles, or marketing campaigns, per year. This creates higher volatility in customer demand and a need for greater flexibility and agility in the supply chain.

What’s more, it’s typically difficult to shift any unused materials or packaging from one brand to another, given their different focuses. “If you don’t plan well, you can end up with a lot of unused inventory,” Rodríguez notes.

A Supply Chain in Need of a Glow-Up

Belcorp works with about 200 suppliers located around the world. For most of the materials it sources, the company manages the logistics processes from the point of supply through to its plants, working with best-in-class fourth-party logistics (4PL) providers, says Nicolas Frasquet, corporate procurement executive director.

Belcorp produces its cosmetic products in four countries: Mexico, Peru, Ecuador, and Colombia, which is its most important manufacturing site. Belcorp also operates 12 distribution centers in Latin America and one in the United States.

While its primary markets are Colombia, Mexico, and Peru, Belcorp offers its products in 12 Latin American countries and in the United States.

All cosmetic products are approved under the Leaping Bunny Program by Cruelty Free International, which ensures that the company is committed to help end animal testing around the world. Along with cosmetics, Belcorp offers fashion accessories.

Beautifying Service, Inventory, and Distribution

“While a goal of Belcorp’s inventory management efforts is efficiency, the process starts by defining our service-level strategy, and then working toward it,” Frasquet says, noting that maintaining strong service levels is critical. Unlike traditional retail, there are no inventory buffers for a direct-selling model. If consumers order a product and don’t receive it on time, they have no immediate access to an alternative.

This can become frustrating for both consumers and the consultant, who loses the sale and profit. Moreover, if a consultant decides to stop working with Belcorp, the company essentially loses the capability to sell into that market.

“It’s best to secure the sales force and secure the consumer,” Frasquet says.

Because most of Belcorp’s products contain materials sourced from across the globe, and given the dynamic nature of the market, Belcorp runs and evaluates distribution scenarios every day. The goal is to adopt an inventory planning automation concept—that is, achieving the highest service with the lowest optimal cost and workload. This requires leveraging the right data, model, process, and culture, and ensuring the right inventory is in the right place with the right quantity.

“If we try to manage inventory and distribution with spreadsheets, we are dead,” Rodríguez says. Instead, Belcorp needs an inventory planning and optimization solution that enables the company to work toward an agile supply chain.

Belcorp management identified a handful of providers of inventory planning and optimization solutions. As they studied each one’s different capabilities, it became clear ToolsGroup’s approach best fit the company’s needs.

Its offerings are “more scientific, more data-based, and more driven by advanced mathematical models that can help inform decisions to guide inventory policies,” Rodríguez says.

Highlighting the Right Solution

With more than 2,000 SKUs and a constantly changing product mix, Belcorp needed best-in-class demand planning. By using ToolsGroup’s SO99+, the company optimized its inventory strategies.

Service Optimizer 99 (SO99+), ToolsGroup’s supply chain planning solution, which has been developed and refined over 30 years, leverages advanced probabilistic and optimization algorithms to optimize inventory levels, while factoring in a company’s desired service level at the lowest cost.

Achieving optimal inventory levels also requires mapping constraints, such as the amount of inventory the company can obtain from each supplier and at what time, as well as defining the amount of each product needed at each point in the supply chain, Rodríguez explains.

To achieve this, Belcorp began leveraging an advanced and automated multi-echelon inventory optimization (MEIO) model within SO99+. Among other functions, the MEIO model automatically calculates the optimal stock values at each node within a supply chain. This enables multi-level supply networks to meet their service-level goals, yet with a minimal inventory investment, says Angela Iorio, director, customer advocacy, partners and social, with ToolsGroup.

For example, MEIO software can recommend appropriate inventory levels for materials, components, subassemblies, and finished goods at any point in the supply chain.

The model, along with an advanced replenishment solution, also helps companies determine the ideal replenishment frequency for each product at each location. So, the solution could determine that one distribution center needs deliveries of red lipstick every two weeks, while another needs deliveries every three weeks.

Belcorp has consistently maintained a fill rate exceeding 95%. With the implementation of the ToolsGroup solution, management’s goal is to sustain or slightly improve this performance while simultaneously reducing total inventory value by 10 to 15%.

The ToolsGroup solution also empowers centralized demand planning, gathering overall requirements and dynamically assigning distribution priorities to each level, ensuring fair allocation logic to minimize stockouts at peripheral locations. This helps reduce costs across the supply chain and streamline operations.

Planners gain a centralized view of the company’s supplies across the network, with insights into inventory levels, service levels, and supplier performance. They can see both overall demand and the specific products most in demand.

With this insight, they can determine the optimal level of safety stock needed to achieve the planned service level for each product at a given location.

Getting Pretty in Phases

Belcorp’s supply chain leadership is handling its implementation of SO99+ in phases, which began in mid-2023 with a subset of products. This enables management to continually monitor performance and check that they’re not adversely impacting other supply chain KPIs.

Balancing inventory levels across Belcorp’s network likely will be completed in six to eight months, Rodríguez predicts. One reason is the phased approach Belcorp is taking with implementation and adoption. Lead times also come into play. For instance, the lead times for some materials, such as the glass containers for fragrances, can extend between five to seven months.

Information Offers a Better Look

Before implementing ToolsGroup’s automated MEIO model, it often took Belcorp six to eight weeks to optimize its inventory levels. The dynamic market and Belcorp’s need to continually introduce new products limited the usefulness of the information generated.

With the ToolsGroup solution, Belcorp can run sales and operations planning scenarios as often as necessary, and with a more sophisticated, data-driven approach. They can, for instance, make minor adjustments to the supply plan as needed and monitor the short-term evolution of demand and supply. They are able to plan ahead, avoid putting out fires, and work by exceptions.

“We now have more powerful insights to make data-driven decisions regarding the trade-off between service levels and inventory investments,” Rodríguez notes.

Before implementing SO99+, Belcorp had cut its airfreight costs approximately in half by implementing a push inventory strategy at select strategic distribution centers. However, this boosted inventory levels at the DCs.

“With SO99+, our goal is to optimize and reduce this inventory while maintaining air freight’s efficient performance,” Rodríguez explains.

Managing complex inventory requirements takes agility, advanced algorithms, visibility, and automated processes that enable companies to respond efficiently to market changes. For Belcorp, information about supply and demand variability is a must.

The less time Belcorp spends preparing information, the more it can dedicate to deciding how to take action. “The efficiency of our sales and operations planning process provides a competitive edge,” Frasquet says.

Through its partnership with ToolsGroup, Belcorp can automatically meet service levels, optimize inventory, automate processes, manage exceptions, and work smarter. Along with its goal of reducing inventory levels by 10 to 15%, it aims to improve service levels, decrease air freight use, and adopt inventory planning automation.

As it continues to define its supply chain digital roadmap, Belcorp plans to implement ToolsGroup’s lot size optimization module with price break constraints.

Case Study: A Demand Planning Makeover

The Challenge

Belcorp needed a more effective way to optimize inventory and service levels within its complex supply chain, where the universe of products changes every few weeks.

The Solution

The company partnered with demand and supply planning solutions provider ToolsGroup and implemented its Service Optimizer 99 (SO99+) solution. Belcorp also began using an advanced and automated multi-echelon inventory optimization (MEIO) model within SO99+.

The Results

Among other benefits, Belcorp gained the ability to automatically meet service levels, optimize inventory, automate processes, manage exceptions, and handle demand planning more efficiently.

Next Steps

Belcorp plans to implement ToolsGroup’s lot size optimization module with price break constraints.