Kichler Lighting is a family-owned company that designs, engineers, markets and distributes lighting solutions. Kichler does not sell directly to consumers. While the company does sell products through the large home improvement retailers, the bulk of its products are distributed to other retail customers, such as showrooms, electrical distributors, landscape lighting distributors, and catalogue and online retailers. In the US and Canada, the company fulfills orders out of three distribution centers (DCs) located in Las Vegas, NV; Braselton, GA; and Cleveland, OH, its largest DC.
Based on the company’s distribution channels, it’s not surprising that the great majority of its shipments are less-than-truckload (LTL) and parcel. Over the last few years, the proportion of orders shipped via parcel has increased significantly. Because the company’s products tend to move in high volume, but are of low value, parcel shipments move via ground service rather than air.
Today’s posting is about how Kichler Lighting made some significant changes in its distribution practices to support a much more cost-effective cross-border shipping process into Canada from its Cleveland distribution center. Dan Speck, the Director of Distribution at Kichler, was kind enough to walk me through the company’s process.
Shipping to Canada via LTL was, and remains, fairly straight forward. Parcel was the challenge. Clearing customs on a per-package basis would have been prohibitively expensive, so Kichler’s goal was to engage in consolidated clearance – i.e., take 60 to 120 individual parcels and clear them through the company’s broker all at once. Clearing individual packages was a manual and time consuming process for Kichler’s broker. It is often more than ten times cheaper to use consolidated clearance. Dan did not want me to disclose actual costs, but he walked through the math with me. If you assume a shipment of 100 packages or more, it is indeed more than ten times cheaper, leading to savings of hundreds of dollars per shipment. With daily shipments to Canada, these savings add up quickly.
FedEx came to Kichler and showed them how the consolidated process would work. FedEx collects the consolidated shipments at Kichler’s Cleveland DC, bypasses its local hub, and drives the consolidated shipments (which includes shipments from other customers too) straight to Buffalo. There the packages clear customs and are inducted into FedEx’s Canadian hub in Mississauga, Ontario and then the packages are sent via ground service to the correct destination in Canada.
In addition to saving Kichler money, this process eliminates one day of lead time. Kichler began this program in 2007. While Dan praises FedEx for being an excellent partner, he stressed that without a prior implementation of a warehouse management system (WMS) from HighJump Software, and a parcel shipping solution from Kewill Systems, this program would have been much more difficult to initiate. HighJump was implemented in the 2004-05 time period; Kewill was selected as the parcel shipping provider at HighJump’s suggestion.
What HighJump has allowed Kichler to do is pack more parcels into the same package. Increasing the average weight of the packages drives discounts, if you can get the package’s weight up into the right range. HighJump provides the cartonization capabilities that allows the right parcels to be combined into the optimally-sized package. Because Kewill is integrated with the HighJump WMS, all of the needed customs paperwork is generated as a natural and integral part of the picking/shipping process.
I’ve long covered logistics software systems. It is natural to think of a WMS as driving savings in warehousing, and TMS as driving savings in transportation. What I find interesting in this case is that warehouse management cartonization functionality drove some of the transportation savings, that parcel integration helped drive customs clearance savings, and that it was really the combination of a new FedEx service and logistics software that allowed Kichler to fully grasp this cost savings opportunity.