July 2001 | Case Studies | I.T. Toolkit

Ricardo Sends Logistics Problems Packing

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Custom-tailored software cuts transport costs by thousands of dollars a month for a leading luggage manufacturer.

For a company that makes travel bags and cases, you'd think packing would be a no-brainer. Yet when it comes to packing its products for shipment, luggage manufacturer Ricardo Beverly Hills once faced challenges that would stump the most experienced world traveler.

A piece of luggage is itself a well-crafted and attractive shipping container, and luggage manufacturers take advantage of this fact when they transport their products. "Luggage is unique; it can be nested together to save money on shipping," says David Royal, vice president of finance at Ricardo. By packing smaller bags inside larger ones, the company can fit more pieces into ocean shipping containers when it transports them from factories in Asia to its warehouse in La Mirada, Calif.

Creating Shipping Puzzles

The nesting tactic, however, creates puzzles in the shipping department. Like other suppliers that sell to retailers, Ricardo picks goods in its warehouse, boxes them for shipping, prints labels, and transmits advance ship notices (ASNs). But first, employees must pull apart the bags, which arrive from Asia nested by style and color. Then they have to build the luggage ensembles each retail store requires, re-nesting the bags for efficient packing.

Managing this operation, putting the right compliance labels on outbound cartons, and getting shipment data into the order processing system used to be a time-consuming process.

Success a Mixed Blessing

But with Ricardo's rapid growth in recent years, time was the last thing the company could afford to waste. About six years ago, the 20-year-old firm passed into the hands of new owners who set about building demand for its products—well-made, moderately priced luggage in attractive colors and patterns. Along with its traditional customers—discount chains and specialty retailers—Ricardo started selling to major department stores. Revenues soared, but in the shipping operation success proved a mixed blessing.

"The first year I was here, sales grew by $20 million. We were behind all the time," Royal says. "I was constantly getting pressure from customers and management about why we were behind. It was always the labels."

Although Ricardo used software to automate its shipping process, the system that produced labels wasn't integrated with the order management system. "We'd key orders into the system. Then we had to re-key them to make compliance labels so we could send advance ship notices," Royal says. "In this fast-paced environment, customers want us to ship quickly. We needed to make a change."

Manual System Wastes Time

Compounding the problem, the old system didn't print labels in an order that corresponded to the way luggage sets were staged for shipping. Staff had to sort through labels manually and match them with boxes. "That took hour and hours," Royal says.

Also, using the old software to design compliance labels in the formats new customers required took far too long. "It cost us big time with a new customer in terms of chargebacks"—fines retailers impose on suppliers who don't meet their standards for shipping labels or make other errors, Royal says.

Ricardo found its solution just a few miles down Interstate 5—at Pfastship Worldwide Logistics Inc., Santa Ana, Calif. The manufacturer started working to implement Pfastship's shipping solution in 1999. Because Ricardo asked Pfastship to customize the software extensively to meet its special needs, putting the system into production took longer than expected.

But as the luggage firm gets its last few customers up and running on the new system this summer, Royal says his operation is already working more efficiently. Soon, he says, Ricardo will start saving $10,000 per month in labor and related costs.

An Integrated Package

Pfastship's shipping software is designed in a series of modules that integrate with one another and with third-party systems for order entry, warehouse management, enterprise resource planning (ERP), accounting, and other functions. The base package helps users prepare orders for shipping. Companies use it to shop for rates and select carriers; generate labels; consolidate orders in one box, or split an order among more than one carrier to save shipping costs; and transmit shipping and freight rate data to other systems within the company.

Ricardo uses the version of Pfastship that runs under Microsoft Windows NT. Along with the base package, the company employs modules for packing, consolidation, and electronic data interchange (EDI), Royal says.

Different Kind of Flow

Pfastship's developers had to modify their system for Ricardo because of a work flow that is vastly different from other companies that use the software.

In a typical operation, a worker picks an item, scans its bar code, and sends it down a conveyor to the shipping area. There the shipping system prints labels for orders as needed.

"Ricardo wanted all the labels printed up front. The company doesn't even print the labels in the shipping department; they actually print them in the accounting area," says Charles E. Cook III, Pfastship's president. "They manage how all the boxes will be packed, how everything will be managed, and all the kitting in the accounting area. Then they print all the labels and take them to the warehouse." Warehouse workers use the labels as pick slips, he says.

Sorting labels to correspond with orders is complicated by the fact that each of Ricardo's customers might ask the company to assemble luggage pieces into different ensembles. "We could not have a SKU (stockkeeping unit) for every possible shipping combination," Royal says. "We needed to be able to nest items together, and we wanted to do it at the Pfastship level."

Also, labels needed to come out of the printer in an order that would make it easy to match them with the luggage sets as they were boxed. Figuring out how to do that within Pfastship's software took quite some time, Royal says.

Pfastship developed a method that allows Ricardo to sort the labels before they're printed. Once the system identifies which orders will be shipped, and how they'll be nested and packed, Pfastship sends the data for those labels "into a batch process," Cook says. "The labels can then be sorted based on however they want to configure them to print." Ricardo can sort the labels by SKU, pick location, item color, customer, and several other factors.

Split Shipping

Pfastship also had to modify its software to accommodate customers who want a single order split for shipping to multiple distribution centers (DCs), Royal says. In addition, it had to create a way to handle data for shipments that diverged from the original order—for example, if a customer ordered 100 four-piece luggage sets and the warehouse had only 95 of the desired blue tote in stock.

Much of the benefit Ricardo expects from the system will come from the ability to sort labels before printing them. Gone are the days of hunting through printed labels by hand to find the right one to apply to each carton. Now, "item numbers print directly on labels. It's all sorted by color, style, DC, and purchase order. It's worlds and worlds of difference," Royal says.

Along with printing labels, the system transmits ASNs to customers, returns information to the order entry system for invoicing, and returns tracking information to the order tracking system. Because Pfastship integrates with these other systems, staff no longer needs to re-key data. This reduces the opportunity for errors, which should save the company a good deal of money on chargebacks, Royal says.

"Before implementing the Pfastship software, what we shipped was what we ASN'ed. But we could invoice something different because we might have filled out the paperwork incorrectly. All of that is going to be fully integrated, so we expect our shortages and our overbillings to be reduced. We also expect more accuracy in terms of invoicing because of the integration," Royal says.

As with all modifications it performs for customers, Pfastship has now made Ricardo's custom features part of its standard package, Cook says. Future customers who want to use any of these features can set the appropriate flags on the software to start taking advantage; others can simply leave those features turned off.

Looking back on the implementation project, Royal terms it "pretty ambitious." Because Ricardo's needs were so particular, the modifications took more time and resources than company officials had expected when they began.

Still, "within less than one year, we expect to recapture the cost," Royal says. "Our goal is to save $10,000 a month. We're not quite there yet, but I don't think we'll have any trouble achieving that goal."

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