Providing Fast and Reliable Delivery

By Marcus, Henry S.; Weiss, Abbott D. | Indian Journal of Economics and Business, March 2009 | Go to article overview

Providing Fast and Reliable Delivery


Marcus, Henry S., Weiss, Abbott D., Indian Journal of Economics and Business


Abstract

FAB/Starpoint began about ten years ago and has grown to serve retail leaders such as Walmart and Target. A key to their success is their ability to provide fast and reliable deliveries to their customers.

FAB/Starpoint was able to improve its service level from China without using new technology. By partnering with a new ocean carrier service provided by Matson, idle time in the logistics system has been minimized. Staffing and communications have been used effectively ensure a reliable service.

I. INTRODUCTION

Darrell Wilmont, the buyer at BullsEye, Inc, a large U.S. mass merchandising chain retailer, was describing his positive experiences dealing with a new supplier:

   These new Hello Kitty backpacks are really a hot item. We sensed
   they were going to take off with the tween girls, so we bought a
   bunch, and we still are having trouble keeping up with demand! It's
   a good thing that FAB is the supplier for these. Their fast and
   reliable deliveries from China are helping us get the most out of
   this short selling season. I wish more of our suppliers were so
   helpful.

II. FAB--THE SUPPLIER

FAB is short for Fashion Accessory Bazaar. FAB/Starpoint (hereafter called FAB) started about ten years ago and today they serve retail leaders such as Walmart, Target, Claire's, and Bed Bath and Beyond. FAB products fall into the following categories:

* Back to School (backpacks, paper products, lunch boxes)

* Art and Activity

* Kids' travel

* Home decor

* Accessories (handbags, watches)

These products target young people, typically ages 5-15. FAB acquires licenses (e.g. Disney characters, Hello Kitty); and then designs and markets products with the characters in order to gain a competitive advantage in the marketplace. The design skill is considerable, but most similarly-situated competitors have it; consequently, although the design skill might be thought of as a competitive advantage, it is a prerequisite.

FAB imports from China, as well as Philippines, Indonesia and Malaysia. When quotas restricted goods from China, the three latter countries were more heavily used than now, with the termination of the quotas. FAB contracts with local manufacturers in the foreign country to get its products made. In China each province sets its own rules. In some provinces it is possible to obtain a 17% export rebate on taxes, but only after the product leaves the factory. There are well-known intermediaries, such as Li & Fung, but they generally charge premium prices. Therefore, FAB has set up an office in Hong Kong with 60 people and one in Shanghai with 15. With new types of products, such as Hello Kitty garden accessories, FAB may find it helpful to find a new local partner. Steve Russo, the Company's President & CEO, notes that it may take a few years to fully build a new relationship.

Competitors exist with similar business plans; however, FAB is more concerned about competition from major retailers who bypass the middleman (i.e. FAB) and use a Direct To Retail (DTR) approach. In this way Walmart and others can simply go to Disney for a design and license; then go to China to contract for manufacturing. Consequently, the business is becoming very competitive. Typically, FAB takes the risk of bringing out its new products, knowing that a wildly successful product can be copied by someone else.

Steve Russo attributes the company success to:

* FAB employees

* Retail relationships

* Licensor Relationships

* Meeting and exceeding both retailer and licensor expectations are FAB's daily goals. He takes a long term approach with his customers; sometimes going the extra mile (such as funding markdowns not legally required).

In order to gain speed-to-market and to provide exceptional service, Steve explains, FAB has taken a different approach to the logistics of moving product from Asia to the U. …

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