How Ariens Weathers Seasonal Demand
A 3PL partnership helps Ariens blow away logistics inefficiencies and mow down transportation costs.
When snow throwers and lawn mowers are the main products in your portfolio, seasonal order variability, uncertain weather changes, and the ability to ship bulky, odd-shaped equipment become important parts of your supply chain and logistics planning practices.
Outdoor equipment manufacturer Ariens Company can attest to that. It has firsthand experience in managing those complexities and the unpredictable elements layered upon them.
The private, family-owned Brillion, Wis.-based company faces the dilemma many others encounter: Balancing lean manufacturing practices while simultaneously optimizing inventory for inbound parts and outbound finished goods, and expanding the customer-facing distribution footprint to improve order fulfillment and time to delivery.
Tackling these common but significant issues led Ariens to seek help from a third-party logistics (3PL) provider that could automate some processes and smooth warehousing and transportation flows.
However, the company's initial choice did not work out, says James Merwin, vice president of supply chain for Ariens. The 3PL that Ariens started with was a big player in the freight business, and bundled Ariens' warehouse and transportation practices into one offering. The companies tried to work together, but it wasn't a match.
"We may be a smaller company but we still expect to have some things tailored for us," Merwin says. "We couldn't fit into the out-of-the-box solution the 3PL offered us. We needed a more customized mix of managed services and technology, and we weren't seeing any significant cost reductions."
Ariens and the 3PL split ways, and the company began the Request for Proposal process to find a new logistics partner.
The company then conducted a new RFP search, which resulted in its current strong relationship with Redwood Logistics. Chicago-based Redwood offers logistics services, data-driven network solutions, and a strategically integrated model that has allowed Ariens to achieve significant efficiency gains, improve inbound and outbound material and shipping visibility, and reduce costs.
"It was clear early on that the companies were a good fit," says Merwin. "We share a sense of partnership, and are finding ways we can help each other grow."
During their initial meetings, Redwood executives explained their available solutions, and how they could tailor them to meet the company's needs. "We went with Redwood, and it was one of the smoothest implementations I have been part of," Merwin notes. "We are about 18 months into the partnership and we continue to see improvements. Efficiency has increased and our overall freight costs have declined and continue to do so."
Defining the Necessities
Getting to this point, however, didn't happen overnight, but was several years in the making.
When Merwin joined Ariens in 2013, the company was in different stages of implementation and integration (or disintegration, as the case would be in one part of the operations) of several supply chain, logistics, operations, and manufacturing practices.
Ariens—which annually ships about 60,000 zero-turn lawn mowers and between 120,000 and 200,000 snow throwers depending on winter conditions in North America (its main market)— maintains a year-round production schedule, alternating seasonally. Snow blower production ramps up in the spring and summer, with sales starting to pick up in fall and going through the winter. Lawn mowers go through the factory in late fall and winter, and are out in the market during the spring and summer gardening and lawn-tending months.
Typically, though, Ariens has to adjust its production run as the weather changes and orders and reorders fluctuate to accommodate an unexpected uptick in demand. A harsh, snowy winter in the United States, for instance, means an unpredictable number of snow blower reorders from Ariens' small and mid-size dealers and big-box retailers and hurry-up deliveries to snow-affected regions.
This makes forecasting tough. Although Ariens' customers send in preliminary orders three or four months before the seasons change, giving the team enough time to fill early-season demand, the mid-season reordering cycle and final delivery schedule runs on Mother Nature's time.
Getting additional snow blowers to the right part of the United States and Canada rapidly—say, within one or two days of when a snow storm hits and end users urgently need to shovel out—becomes a logistics challenge Ariens frequently has to work through. If the snow blowers are not on the shelves of their dealer's space-constrained shops, Ariens loses the sale of these spontaneous purchases because harried consumers grab a competitor's brand.
Complicating matters, Ariens migrated to lean manufacturing about 17 years ago, but until recently it struggled with gaps in its inbound and outbound inventory management strategy. Ariens operates two factories in Wisconsin and one in Nebraska to produce snow and lawn equipment and other machines such as log splitters, power brushes, and grass edgers. While implementing lean concepts made the factories more efficient overall, getting and pulling the right mix of incoming materials from about 250 suppliers on any given day, and putting enough finished goods into distribution warehouses, weren't always perfect calculations.
Meeting Performance Metrics
In reality, on-time delivery performance to customers suffered, says Merwin, because while Ariens is good at building to three- to six-month forecasts, its business model and products don't lend themselves to a quick-turn, build-to-order model. When the company evaluated one of its important performance metrics—getting product out within three days of receiving the order—it discovered it was hitting that goal less than 50 percent of the time.
Other logistics and transportation bumps also turned up. Small dealers account for about 85 percent of Ariens' revenue and about the same percentage of Ariens' outbound truck shipments. Big box retailers Home Depot and Lowe's round out the revenue side, but they schedule their own shipments and use their own trucking fleets.
"Most of our dealers are small single-point businesses, some may have two to four locations, but none of them have significant warehousing space," says Merwin.
"Many of their orders are for less than full truckload deliveries," he adds, noting the challenges and costs associated with moving partially filled trucks around big stretches of North America. "The big box retailers want full truckloads, but they schedule their own pickups and deliveries."
Because of these different kinds of shipment requirements, Ariens had to re-evaluate its distribution and warehouse footprint and find better ways to match production, inventory, and shipping needs.
Ups, Downs and Outsourcing
The combination of these ups and downs, and a recognition that managing freight was not Ariens' specialty, prompted the decision to outsource logistics operations.
Enter Redwood Logistics. The 3PL came to the table with innovative ideas for managing and fulfilling orders, and suggestions for multi-modal and cost-effective partial shipments. Redwood also helped Ariens better understand government regulations.
Importantly, Redwood was willing to work with Ariens' warehouse solution provider, Warehouse Specialists, LLC (WSI), which was brought back into the fold after the first 3PL relationship crumbled.
"When we began to talk with Ariens, we knew they wanted a best-of-breed transportation and warehouse management solution," says Steve Walton, Redwood's chief growth officer. "Some of our competitors have a 'take it all' approach, but we knew early on we needed to create a place where different parts could co-exist."
"When transportation and warehouse management was bundled in one package, we started to lose control of those relationships; we weren't sure who was managing what," Merwin explains. "This time, we wanted to give the warehousing piece back to WSI and we wanted Redwood to manage the transportation.
"It became clear to us that Redwood would be able to tailor their systems and build one solution that allowed information to flow back and forth, and tied all the pieces together," he adds.
Redwood did just that—it linked the enterprise resource planning, warehouse management system, and transportation management platforms together to create a one-world view.
One key outcome of having a connected view was a redesign of Ariens' distribution network. Instead of holding inventory and fulfilling orders from one or two main warehouses (which, for some time, was the back of one of Ariens' factories), Redwood helped Ariens move to a hub-and-spoke model.
In this scenario, finished goods are distributed to a few central hub sites and then routed to smaller facilities throughout the United States, allowing different regional customers to be better served with shorter travel distances. The domino effect of that setup creates more flexible delivery options, including partial shipments and multimodal transportation options. It also enables loading a truck full at one warehouse and making several short-distance stops to multiple dealers who always fell in the less-than-full truckload category.
"Once we were able to set up and integrate the right data flows, we could start looking at more granular data, such as order type, the business process being used, and performance metrics," says Walton. "From there, we could create repeatable and scalable use cases and capture even more information about the transportation and warehouse network."
Deep Dive Into Data
Drilling down other metrics such as cost per pound and cost per delivered pound also became possible. Having this knowledge, and aligning key performance indicators (KPIs), widened creative problem solving, says Walton.
For instance, Ariens now has a clearer picture of where it can break up or fill truckloads, reduce costs, delay shipments, or expedite delivery. By running different cost-per-pound scenarios, Ariens can optimize how it moves products in and out of the factory and throughout its distribution network.
"We spend $30 million annually on freight. If we can shave a few points off, it makes a big difference," adds Merwin. "Since partnering with Redwood, we have seen our freight costs decline and continue to do so at a steady rate."
Freight costs as a percent of sales were about 6 to 7 percent two or three years ago, Merwin notes. For the fiscal year ending June 2016, that metric dropped to less than 6 percent, and over the past few months has been trending lower than 5 percent. The goal is to get freight costs as a percentage of sales to 4 percent.
Merwin also expects to see a shift in Ariens' ability to fulfill customer orders faster and tap into a forward-looking view of its order fulfillment capabilities. Its target is to improve its performance rating for getting product out within three days of the order from 50 to 80 percent.
"Our goal is not to get to 90 or even 100 percent," Merwin explains. "We use 80 percent as our goal for that metric because we have to factor in frequent, weather-based seasonality fluctuations we can't predict.
"We also don't only want to know about yesterday's delivery performance," he adds. "We want to have an advanced view of where inbound orders and outbound delivery meet."
Merwin and Walton attribute the current results to combined teamwork among Ariens, Redwood Logistics, and WSI.
"It starts at the top with monthly reviews of what has happened, how the KPIs align, and how business processes can be automated," says Walton. "But, it's also the simple things that drive alignment. For example, we can adjust delivery times when dealers can't take a full truckload and reduce the pressure they feel for stockpiling finished goods. Or, when things get hectic, we can move people from one team to another to help deal with the fluctuations."
Macro Views to Micro Nuggets
Going forward, the companies plan to continue to find other ways to drive performance, reduce costs, and trim delivery times. It will also drill down from wider macro views of Ariens' warehouse and transportation landscape to micro nuggets that provide continual systematic improvements, such as examining carrier lines and routes, split shipments, average travel distances, and inventory-level tweaks.
"In the end," says Merwin, "we want the ability to make smarter decisions."