Popping the Cork on Outsourced Logistics
To get its innovative wine access system to market, Coravin raises a glass to its third-party logistics provider..
After experiencing logistics challenges during a high-volume holiday season, Coravin, a wine access system innovator, needed help handling distribution, shipping, and product assembly. With assistance from a third-party logistics (3PL) provider, Coravin formulated a product distribution strategy to help operations flow like wine.
Founded in 2011 by Greg Lambrecht, Burlington, Mass.-based Coravin invented a wine access system that allows the user to get a glass of wine out of the bottle without removing the cork. The wine flows through a needle that is inserted briefly into the cork, and the cork reseals itself once the glass is poured. The technique keeps oxygen out of the bottle to preserve the quality of the wine. The system uses argon, an inert gas that keeps wine pressurized in the bottle, but has no deleterious effect on its taste.
Getting Product to Market
As an innovative and entrepreneurial company consisting of approximately 50 employees, Coravin is relatively small, but has peaked worldwide interest in its wine preservation technology. Consequently, a major challenge for Coravin was developing a strategy for getting its product to market.
"Both the CEO and I come from consumer products backgrounds," says Calli Prendergast, Coravin vice president. "When we launched the product a few years ago, we agreed the best thing to do initially was to keep direct control of all operations, including doing our own product distribution. Upfront, we realized that as we grew, we would probably seek a 3PL to handle distribution. But at least at the onset, it was important for us to experience the logistics challenges so we could understand them, along with the role they play in the business."
As part of this early effort, Coravin hired a distribution manager. And in 2013, during its first holiday season, the company used a skeleton crew that was augmented with temporary workers. The 2013 holidays proved to be successful, and also busy. The peak season taxed Coravin employees and contract workers, who struggled to keep up with assembling, gift wrapping, packing, and shipping product to more customers than the company had originally anticipated.
"The experience of handling product distribution on our own turned out to be painful during that first holiday season," recalls Prendergast. "We tried to work with a small staff and temporary workers, and we had committed to offering top-of-the-line customer service. Media and press coverage about our product had built up excitement in advance of our first Black Friday sale. Between the packaging, gift wrapping, shipping, and demand that the publicity created, we had all the distribution we could handle."
Looking for Distribution Help
It didn’t take long for Coravin management to determine it needed a 3PL to handle distribution, shipping, and portions of its gift packaging, gift wrapping, and product assembly operations.
"We looked at several 3PL providers as an outsource option, but also as companies capable of partnering with us in this process," says Prendergast. "One advantage as we entered the 3PL interviewing process was that I had already worked with Kenco at a previous company. The CEO also had worked with Kenco. We knew its capabilities and its people. When we looked at the parcel solutions available through a 3PL, we saw the economic advantages of participating in the more attractive shipping rates that a 3PL can obtain because of its larger negotiated volumes. Given this, outsourcing shipping and distribution made even more sense."
Coravin contacted Kenco about assuming responsibility for distribution and shipping, and the two companies began to formulate a product distribution strategy.
"When we initially came to those meetings, we wanted Kenco to assume responsibility in several areas," says Prendergast. "First, we had to integrate our internal systems with Kenco’s systems so information exchanges would be as close to real time as possible. This meant order information had to flow to Kenco from the Coravin order system, and information from Kenco’s shipping and order fulfillment systems had to flow into our systems. Both companies also required real-time, accurate visibility into inventory. To facilitate this, we had to integrate our IT systems to also address inventory."
The ultimate goal for the end-to-end system integration was to facilitate instantaneous information exchanges so Coravin’s orders would stay in step with Kenco’s order fulfillment actions. To achieve this integration, Kenco and Coravin closely collaborated, carefully mapping out all the data and system requirements for the integration. The project team determined that using electronic data interchange would allow them to exchange 945 warehouse shipping advices and 947 inventory adjustment advices.
"The end result was that the reporting system we both used was fully automated after the system integration," says Prendergast.
As Coravin’s fulfillment center business partner, Kenco had immediate visibility of purchase orders. This optimized operational coordination. "The system integrates inventory information to where Coravin sends us the orders and we send the confirmations," says Judy Craig, Kenco vice president.
Thanks to the business process improvements the system integration delivers, an order comes into the Coravin system in Massachusetts and Kenco fills it as quickly as 10 minutes later at its Chattanooga, Tenn., distribution center.
Transferring White Glove Skills
Having directly experienced the challenges of packaging, gift wrapping, distributing, and shipping product through one holiday season, Coravin also wanted to outsource several product assembly operations to Kenco.
"Our light assembly, gift wrapping, and packaging process required that workers receive special training because these requirements are customized to the product and for our clientele, who are serious and affluent wine collectors and connoisseurs," says Prendergast.
Consequently, deciding to outsource this work to Kenco required several Coravin employees to travel to Kenco’s Chattanooga distribution center (DC) to perform hands-on training of staff. During training, Coravin employees also produced a set of documented procedures for these operations that Kenco staff could continually use and reference. A key focus of training was precisely assembling each unit’s capsule, in addition to mastering the specialized gift wrapping and inclusion of personalized notes.
"This is an assembly and gift wrap process for a high-value product," says Kenco’s Craig. "The gift wrapping operations must be consistently executed to a high standard."
Meeting the needs of a white glove clientele is challenging. If an order is in the system by 1 p.m., Coravin customers expect the order will ship the same day, and be correctly shipped to specification.
"We have to meet customer service metrics in the distribution process," says Craig. "We track these metrics, and provide feedback to Coravin that helps identify any changes to the business model that it needs to address."
Reaping the Benefits of Outsourcing
Moving to a 3PL with knowledge and experience in dealing with multiple distribution points and sales channels has been a great benefit to Coravin, according to Prendergast, who still has fresh memories of the challenges faced when trying to handle order fulfillment and distribution in-house during the 2013 holiday sales season.
"The quality of the partnerships formed with logistics partners can help companies continue to grow their businesses," says Craig.
Since outsourcing light assembly, packaging, distribution, and logistics to a 3PL, Coravin has moved to a multiple sales and order fulfillment model over a short time, which has further complicated distribution.
"We continue to fill customer orders directly as they come in through our website, but we also separately ship orders to business partners including wine shops and vineyards. In turn, they sell our product to their end customers. We now manage multiple drop ship programs," says Prendergast.
"Our business continues to expand," she adds. We have a growing presence in Europe with a facility in Amsterdam that serves customers in England, France, Germany, Italy, and Spain. In 2015, we anticipate we will start marketing our product in big box stores."
Still, logistics challenges remain—especially when selling to foreign markets.
"Certain countries, such as Brazil and Japan, restrict the use of argon as an element in products, and consider it a hazardous material," says Prendergast. "We are still learning the various customs rules and restrictions that apply in different countries as we continue our market expansion."
However, true to its entrepreneurial roots, Coravin remains undeterred.
"We are an entrepreneurial company, and we will always come up with new products," says Prendergast. "We recognize our strength is product innovation and marketing—and if we are to be successful in every area of our operation, we need to find trusted business partners that can assist us.
"Early on, we recognized we needed to outsource distribution and logistics," she says. "Finding a third-party logistics partner that we could rely on and collaborate with, and that offered distribution and logistics expertise that could support the rapid sales growth and market expansion that we were anticipating, was crucial.
"The clientele for our products will always expect us to meet their high expectations, even in periods of heavy expansion," Prendergast continues. "This is what convinced us to identify our core competencies, and to recognize where we didn’t have the expertise.
"To be successful, we have to meet our clients’ expectations in every aspect of our operations. It’s reassuring when you find operational expertise that can match your core competencies in product innovation and marketing," says Prendergast. "Being able to outsource some operational elements of our business leaves us free to focus on what we do best—making innovative products and growing sales."