CSCMP's Supply Chain Quarterly
September 22, 2019

The big question: Can you do more with less?

BRG Sports wondered whether reducing its number of distribution centers would let it cut costs but still improve customer service. The company conducted a software analysis to find out.

When companies grow through mergers and acquisitions, they inherit a network of plants and distribution centers (DCs). Although the plant and DC locations may have made sense for the original businesses, they may not provide an efficient supply chain flow for the amalgamated enterprise.

That was the case for BRG Sports Inc. (formerly Easton-Bell Sports Inc.), which ended up with a network of a dozen distribution centers when Easton-Bell was formed through the merger of two sports equipment companies.

Four years after that merger, the sports equipment manufacturer decided to analyze its network and develop a plan for a more streamlined supply chain. It seemed likely that the company could reduce costs by rationalizing the number of DCs in its network, but could it do so and improve customer service at the same time? After a yearlong, software-based analysis of its network, BRG found that it could achieve that objective if it redesigned its distribution network around a primary DC located in the center of the United States.

A cumbersome network
The forerunner of BRG Sports, Easton-Bell Sports Inc., was created in 2006 with the merger of two companies, Riddell Bell Holdings and Easton Sports. Featured brands back then were Riddell football helmets and protective equipment, Bell bicycle and "power sports" helmets, and Easton baseball and softball equipment. In 2014 Easton-Bell became BRG Sports when it divested itself of the Easton businesses. That move also resulted in a shift in its headquarters from Van Nuys, California, to Scotts Valley in the northern part of that state. Today, BRG Sports retains the Bell, Riddell, Blackburn, and Giro brands, focusing on action sports and football helmets, protective gear, apparel, and accessories.

Back in 2010, executives at Easton-Bell began to wonder whether the supply chain network resulting from the merger of Riddell Bell and Easton Sports was too cumbersome. At that time Easton-Bell operated 12 distribution centers throughout the United States to serve its customers, which ranged from large retailers like Wal-Mart Stores and Dick's Sporting Goods to small specialty bicycle shops. It also had a growing e-commerce business that sold products online and shipped them direct to the consumer's door. "There was a lot of duplication in our logistics network," says Lewis Hornsby, vice president of global logistics and fulfillment and general manager of BRG Sports' Rantoul, Illinois, operations.

In addition to manufacturing sports equipment in two plants in the United States, one in Illinois and the other in Ohio, the company imported a large portion of its products from overseas. Most of the imported goods were sourced from Asia, primarily from China, Taiwan, and the Philippines.

With such a far-flung supply and customer base, the question before Easton-Bell was this: Could it lower costs and improve customer service with fewer DCs? To arrive at an answer, the company engaged Atlanta-based Competitive Insights Inc., which provides analytics as part of its cloud-based integrated business planning solutions.

A year's worth of data
Competitive Insights began the project by creating a financial picture of Easton-Bell's current supply chain flows. It developed a cost baseline by gathering data from all three Easton-Bell business units at that time (Easton baseball, Riddell football helmets, and Bell cycling and helmets) over a period of one year. Taking a one-year "snapshot" of activity ensured that the model incorporated all of the network's "ebbs and flows and seasonality," Hornsby says.

The information gathered for the analysis included the costs of inbound shipping, both domestic and international, as well as the costs for outbound deliveries, plus data on manufacturing and labor expenses for operating a plant or DC in each area of the country. The analysis even included such costs as electricity, property taxes, and facility maintenance. "The analysis ran the gamut of everything that had a material impact on the supply chain's costs of doing business," Hornsby recalls.

Most of the cost data came from the company's SAP enterprise resource planning (ERP) system. Analysts also pulled some data on transportation costs from a transportation management system (TMS) and got some inbound cost data from the company's freight forwarder.

Once the analysis had painted a cost picture of the current operation, Easton-Bell and Competitive Insights began examining various scenarios to determine the impact of a different supply chain makeup on operating costs and customer service. The analysis also took into account the impact of a network change on key customers like Wal-Mart Stores. After considering more than 20 different scenarios, the analysis determined that Easton-Bell should operate just one main distribution center somewhere in the middle of the United States.

The modeling exercise also indicated that the company should build an entirely new facility rather than repurpose or expand an existing one. "The majority of our facilities were old and somewhat antiquated," Hornsby explains. "We were competing with 25 or 30 competitors that could take and ship orders faster than we were. We had to step up our game, and this was the way to do it."

Texas or Illinois?
As for where to locate the new DC, the company was faced with a choice: It could either establish a new facility in Dallas, Texas, or in Rantoul, Illinois, where it already had a plant that made bicycle helmets and full-size collectible football helmets. Although the analysis indicated that the Texas location offered lower overall costs, the company made a decision to build the new DC in Rantoul in order to hold onto experienced employees who had specific knowledge in core areas, including manufacturing. "Expertise was the key," explains Hornsby. "We had 350 employees [in Rantoul] with an average of 17 years of experience apiece. When we made the announcement about where we were going to build and I was asked why, I said there were 350 reasons why we should build in Rantoul."

In August of 2012, Easton-Bell broke ground on a new 800,000-square-foot facility in Rantoul; construction was completed 14 months later. The new building was designed to support a product flow with supplies received at one end of the building and merchandise shipped out at the other. According to Hornsby, the new DC can hold about 44,500 pallet positions and thousands of stock-keeping units (SKUs). Although receiving is handled manually, the DC takes advantage of automated equipment to facilitate and speed the picking, packing, and shipping of orders.

The network consolidation will enable BRG to improve transit times, minimize duplication in the supply chain, and reduce costs. For example, the Illinois location allows the sports equipment maker to avoid the longer transit times associated with all-water shipments from its Asian suppliers to the U.S. East Coast. Now it unloads cargo on the West Coast and moves it via intermodal rail to Rantoul. And by serving most of its customers from one central location, BRG will be able to get better rates on outbound shipping as well.

All of these changes have an impact on service. "There was a huge customer service benefit," Hornsby says. "By shipping out of the central part of the [United States], you can reach 95 percent of the country with ground or normal transportation within two to three days."

Although the software analysis suggested that a single distribution center would minimize costs while maximizing service benefits, BRG decided to retain a second facility. In addition to the new DC in Rantoul, the company is keeping a smaller distribution center at its Elyria, Ohio, plant, which makes football helmets.

Complete data is critical
What advice would Hornsby offer to others who are considering a similar project? The BRG supply chain executive said companies should make sure they have a wide-enough range of data to capture any seasonality. He noted that when Easton baseball products were part of the company's portfolio, there were sales spikes during the spring and fall. These sales spikes had to be taken into account to get an accurate picture of the company's distribution network needs.

Hornsby's second piece of advice would be to make certain that the financial model encompasses all cost factors, from property taxes to snow removal, associated with every facility. "Don't scrimp on the data range," he recommends, "and be sure to capture every cost you can imagine."

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