GoldLantern, a consumer electronics manufacturer and distributor, specializes in developing and marketing Bluetooth, digital imaging, iPod/MP3 devices, and other computer peripherals. By utilizing top manufacturing partners around the world, it sells these products on its Web site and through distribution agreements with retail giants such as Fry’s Electronics, Costco, Wall-Mart, and Micro Center. Many of these devices carry the company’s “GL” logo.
GoldLantern has to get its goods from distant manufacturers to U.S. markets quickly. When he established his company in 2001, CEO George Stepancich saw how outsourcing would keep it “lean and mean.” In fact, he saw it as his only true path to success.
The CEO decided to outsource his supply chain, distribution, and logistics tasks to a third-party logistics provider (3PL). He wanted one that could efficiently move products from these overseas manufacturers to his North American customers that buy anywhere from individual units to thousands. Stepancich wanted a provider experienced in “just in time” (JIT) delivery so GoldLantern didn’t have to invest in expensive warehouse facilities and personnel.
“I didn’t outsource with the idea that GoldLantern would save a lot of money over our doing it ourselves,” says Stepancich. “I was most interested in avoiding the challenges and headaches of distribution. We’re product developers and marketers.”
He was confident that GoldLantern could do a good job managing its own supply chain if need be. “But it’s not core. Others can do it as well or better. So why bother?” Another key reason Stepancich outsourced this function was scalability; he wanted the ability to grow his market share rapidly when opportunities arose, but without the obligations of maintaining a large distribution infrastructure during times when sales might not be as brisk.
“The relationship between production and supply chain behavior is important because the planning decisions play a major role in determining how demand propagates through the supply tiers,” according to Mary J. Meixell, PhD, professor of Industrial Management at Quinnipac and Lehigh Universities.
Stepancich chose Suddath Logistics/Centra Worldwide, a global logistics and third-party supply chain service provider, to manage his product delivery chain. GoldLantern’s ability to respond to customer demands and competitive pressures also relies on having accurate information about where goods and products are at any time if it is to meet JIT delivery. So his provider needed to demonstrate strength in delivering such “snapshot” intelligence as well.
A responsive distributor for GoldLantern’s growing retail line
GoldLantern has access to 16 Suddath-owned and operated warehouses across North America, and – if necessary – even more space through the provider’s corporate allied partners. This service package includes warehouse staff, shipping and fulfillment experts, and all other services found in an efficient supply chain manager. The provider’s online, location-intelligent inventory control system produces better visibility for GoldLantern managers.
Suddath’s single contact person with Stepanchich streamlines communication and eases stress during events that pose problems or concerns. This is bound to happen from time to time with a supply chain based on JIT delivery, which displays peaks and valleys more than a consistent flow of goods.
“Like all retailers, we experience such challenges,” explains Stepancich. For example, shortly after digital picture frames first appeared on the market, they became a big demand item around Mother’s Day. “We had to plan, manufacture, and deliver a lot of product to the market quickly,” he says.
The CEO says his supplier’s experience made communication easier, and the situation much less stressful as Suddath’s market intelligence was able to give him and his partners a “heads up” to the coming spike in demand through that single point of contact.
Reuben Salazar, vice president of sales and marketing with Suddath, notes that Suddath has over 90 years of experience in supply chain management and product delivery. He cites this experience as a reason why the supplier was able to deliver the frames in time for Mother’s Day when demand for the gift was high. He says it also creates confidence and eases buyers’ uncertainty about a product’s JIT delivery.
Provider enables planned buyer growth
The business partnership between Suddath and GoldLantern enables Stepancich to maintain a scalable business with low fixed overhead costs. Because they are not tied up in the day-to-day details of filling orders and managing inventory, GoldLantern executives can devote their time and energy to develop, brand, and market new products.
As Stepancich’s firm eyes its tenth anniversary, he knows why outsourcing is the key to his growth. “Without it, my company would be very different, and maybe not as successful.”
His company of less than 15 employees is about to expand modestly. “I’ll gradually add specialists to manage my outsourcing relationships so I, too, can focus more on product development. That is my passion.”
Given the confidence that they could fill orders in a timely and efficient manner, GoldLantern now actively embraces retail Web distribution, selling directly to consumers through major online partners in addition to its own Web site.
Not counting Amazon, direct sales from the GoldLantern site run about 10 percent of total receipts, a growth channel which Stepancich finds encouraging. His ability to penetrate major consumer product retailer markets efficiently and with minimal distribution fanfare enables his company to cut a noteworthy slice of the almost US$165 billion retail consumer electronics industry, even in a down economy.
“Providing our customers with innovative products and services is what gets me up in the morning. Knowing we are delivering these products to our customers reliably and on time lets me sleep at night,” concludes Stepancich.
Lessons from the Outsourcing Journal:
- Firms that use just-in-time inventory management find that an experienced third-party provider can help smooth out the typical spikes in product demand and get the optimal number of their goods to market when that demand is high.
- Without outsourcing a company with few employees could never successfully nor profitably develop and maintain product distribution relationships involving millions of units with the largest retail outlets in the United States.
- A single contact person streamlines communication in an outsourcing relationship and eases stress during events that pose problems. These are bound to happen from time to time with a supply chain based on JIT delivery, which displays peaks and valleys more than a consistent flow of goods.