What a Ride!
How Monster Moto—with help from UPS—moved product assembly from China to Louisiana, a strategy that was no child's play.
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Say you're selling a quintessentially American product. Wouldn't it be great to produce it in the United States and strive to build it better than you could overseas—and at no greater cost?
It has been just a few years since officials at power sports company Monster Moto started asking how they might move their manufacturing from Asia to the United States. In 2016, they answered that question and met their goal, as mini bikes and go-carts started rolling off the company's new production line in Ruston, La.
Monster Moto has created new jobs in the United States without increasing its production costs and, in some cases, even reducing them. The company has also gained several business benefits to help accelerate its growth. Much of that success comes thanks to a major effort to design a new logistics strategy.
Founded in 2013 in Garland, Texas, Monster Moto produces high-quality, affordable mini bikes and go-carts for children. It sells them through multiple channels: big box stores, independent power sports dealers, its own e-commerce site, and Amazon, as well as through partnerships with conservation groups.
Monster Moto is still a small business, with only about 50 employees. But it's growing fast. It sold 20,000 units in 2014, and since then sales have been growing by about 70 percent per year. It has committed to creating a total of 287 jobs in Ruston over 10 years.
Originally, Monster Moto made all of its products in China. The logistics of that supply chain were simple. "Some of our retail customers would take FOB [freight on board] China orders straight from our facility in China, or from the port, in containers," says Alex Keechle, the company's chief executive officer. Monster Moto shipped the rest of its product to Garland, and then trucked it to retail customers or drop-shipped items to consumers.
Then came the idea to move production to the United States. The plan was to continue sourcing components in China, but to ship those parts to a domestic factory for assembly.
Three compelling arguments gave rise to this plan, Keechle says. First, onshoring would remove some risk and waste from the supply chain.
As Monster Moto expanded its product line, forecasting demand for specific models became increasingly difficult. "With a 30-day lead time [for manufacturing] and 30 days transit time on the water, you have to make large guesses about your demand," he says.
Assembling in the United States would cut the time between manufacture and sale, tying production to fresher market intelligence. "If we just ordered the components, we could build much more quickly on demand, and not be over- or under-inventoried on a particular SKU [stock-keeping unit]," Keechle says.
Second, while contract manufacturers in Asia are great at repeating the same process 100,000 times, they're not as good at making product modifications along the way. "If we wanted to make a small change, it was a Herculean effort," Keechle says. Domestic production offers greater flexibility.
The third argument was aspirational—the desire to make an iconic American product in the United States. Monster Moto can do that without increasing costs and, in some cases, actually saving money, Keechle says.
"American workers put on their thinking caps and say, 'If we did this slightly differently, we could enhance productivity,'" Keechle explains. "And guess what? They did it."
More efficient production explains in part how Monster Moto made onshoring pay. Other benefits grew out of Monster Moto's work with a partner—UPS—to redesign much of its logistics network.
A Visit and a Vision
UPS's role in the transformation started with a routine visit from Joseph Elenez, a new account executive. He came mainly to introduce himself and talk about UPS shipping rates. But then Keechle told Elenez about Monster Moto's vision—the onshoring plans, the need to ship components rather than finished product from Asia, and the company's targets for growth.
As he listened to the complex story, Elenez realized that Monster Moto's needs extended way beyond shipping rates. He asked for a chance to bring in a UPS team to analyze all of Monster Moto's logistics requirements and offer a set of solutions.
At the head of that team was Mark Modesti, a UPS customer solutions consultant. Modesti launched a process that began with an intensive whiteboarding session. Keechle and Rick Sukkar, Monster Moto's chief operations officer, joined Modesti in a room with several other UPS team members: a supply chain optimization expert, a marketing representative, an ocean and airfreight expert, and two meeting facilitators. The group dove into a highly detailed discovery session.
The process was exhausting. "We spent hours upon hours having the business dissected—our plans, thoughts, sales, channels, packaging, inbound," Keechle says.
According to Modesti, two major issues emerged during the whiteboard session: how to reduce the size of the packaging that Monster Moto used to ship finished products, and whether to add two new distribution centers (DCs) to the outbound network. But the conversation broadened way beyond those topics.
"UPS doesn't have a lot of preconceptions with a customer like Monster Moto until we get into the whiteboard sessions," Modesti says. "We talk about everything from reverse logistics to outbound, marketing, sales, inbound logistics. What are the goals? What's the current distribution process?"
That interrogation complete, the UPS team went away for about one month to cook up a series of recommendations. Then they came back with a list of proposals.
Although Monster Moto didn't follow through on every suggestion, it did engage UPS to help with several crucial items. One was the switch from importing finished product from two contract manufacturers to the much harder job of importing components, purchased from numerous overseas suppliers.
"UPS offers solutions that involve warehouses, so the freight gets shipped much more efficiently from Asia," Sukkar says. Monster Moto doesn't use UPS to consolidate all its freight before shipping. "But, incrementally, they have gotten some of that business," he adds.
UPS now also manages much of Monster Moto's inbound transportation, particularly by ocean. And UPS and its subsidiary, Coyote Logistics, move much of the finished product from Ruston to end customers and dealers. "UPS handles a majority of that business because they've given us good rates," Sukkar says. "They want a relationship, and we want that, too."
While UPS plays a large role in Monster Moto's new supply chain, the manufacturer uses other carriers as well, and employs in-house personnel to oversee inbound and outbound logistics. Monster Moto has implemented UPS's WorldShip transportation management software to coordinate and monitor those moves.
Besides delivering several transportation solutions, UPS provided much-needed help with Monster Moto's packaging challenge.
The problem lay in the fact that a mini bike or go-cart must travel in a particularly sturdy box, to make sure it reaches the consumer without damage. "Monster Moto had packaging that originated in China that even included a little metal cage built around the vehicle," Modesti says. "That impacted the weight and it was too big."
The package was ever-so-slightly heavy and bulky enough to tip Monster Moto into a more expensive tier for shipping products sold through Amazon, Sukkar says.
Monster Moto worked with UPS's packaging lab—and also with a design team at Louisiana Tech University in Ruston—to develop smaller, lighter packaging that would still protect the product. "And we've done it; we've cracked the code," Sukkar says. "It will save us about $50 a box."
UPS also designed the packaging to better protect returned product. "Some of the returns came back in awful condition," says Modesti. Not many customers send product back to Monster Moto. "But they still needed to have packaging that would accommodate that return," he adds.
Another crucial piece of help from UPS paved the way for Monster Moto to expand its sales into Canada.
"As a result of that first discovery session, we brought up selling internationally, and they said, 'We don't have the bandwidth for that,'" Modesti says. "But by the end of the solution session, they said, 'Eighty percent of product buyers are outside the United States. We can't ignore that.'"
Canada represents a big market for power sports. But distributing product there from the United States is complicated; essentially, it requires working with a Canadian third-party logistics (3PL) provider. The first time Monster Moto received an order from north of the border, it started looking for a suitable partner. "But we couldn't promise the kind of volume that most of those companies required," Sukkar says.
UPS used its influence to locate a 3PL that would take on Monster Moto's business despite the initially low volume. "Now that we're in, we have a lot more options," Sukkar says. "But UPS was crucial in the beginning."
Monster Moto isn't sharing any plans it might have to expand into other international markets. But UPS has helped the company explore the possibilities. "We helped by analyzing their web traffic," Modesti says. "When we looked at the countries that were visiting their site, we talked about what it would be like to export to those countries. That helped inspire their thinking."
And what of Monster Moto's other concern about adding two DCs to its outbound network? Originally, Keechle, Sukkar and their team were convinced that they needed new facilities—or capacity acquired through a 3PL—to reduce shipping distances and costs. But based on Monster Moto's current volumes, UPS advised the company to delay that move. It was a good idea, but not an immediate need.
Still, the day when Monster Moto will turn to UPS for help pre-positioning outbound product is probably not far off. "We've got a warehouse that's made for assembly, not for storage," Sukkar says. The facility in Ruston is already quite full, and as Monster Moto grows, it's bound to run out of space.
If Monster Moto stores finished goods in strategically located DCs, more of its shipments will qualify for UPS's single-zone shipping rates, reducing the cost to ship product to customers, Sukkar says.
The warehouse in Ruston could get a second look as well. Early in its engagement with Monster Moto, UPS sent an engineer to survey that facility. "He walked about 20 feet into the warehouse and said, 'Wait a minute. Why are we doing it this way?'" Modesti says. The farther he walked, the more suggestions he made.
Sukkar agrees that the Ruston warehouse isn't operating at top efficiency. "We opened in late May 2016, and will probably produce north of 10,000 units this year in Ruston—right off the bat," he says. With that kind of zero-to-sixty startup, it wasn't possible also to aim for maximum efficiency.
"This year is about proving things out," Sukkar says. "Once we prove out, next year is about optimization." That's when Monster Moto will bring UPS back to help improve operations in the warehouse.
Monster Moto is also looking for ways to squeeze more cost out of its inbound transportation. For instance, consider the frame of a go-cart. "That frame is a bulky item that is mostly air," Sukkar says. "Sending it on a ship from China is inefficient."
Sukkar says he's trying hard to figure out how to get the frame made in the United States. In the meantime, the company could save money by making better use of what is now empty space. "We're currently working on bundling vendors, getting the tire and wheel vendor to ship inside the frame, for example," he says. "That's just the beginning. There are many savings opportunities."
It's not yet clear whether Monster Moto will embrace some other solutions that UPS has offered. One is a financial services tool that Monster Moto can use to determine the creditworthiness of retailers that want to carry its products. "And we guarantee the transaction," Modesti says.
The UPS team also proposed helping Monster Moto with environmental sustainability. "We have eco-responsible packaging, for example, and carbon-neutral shifting, where we mitigate the carbon footprint," Modesti adds.
Whatever comes next for Monster Moto, company officials are proud that they have been able to create American jobs while also revving up their power sports brand. "We moved production back to the United States because it made sense from a business perspective," Sukkar says. "There are many facets to that, with customer flexibility and nimbleness at the top of the list."
Monster Moto has a reputation for manufacturing excellent products, and their quality has improved even more since the move to the United States. So have speed to market, flexibility, and cost.
"Those were the three areas we modeled," Keechle says. "And what has come out has beaten the model."