Vans also had to modify its distribution-resource- planning process to handle custom inventory that would pass through, but never be stocked in, its distribution center. It was more a matter of multitiered coordination than rocket science, Giles says. The modified process included generating a purchase order to fulfill the individual customer sales order, sending that purchase order to the factory, and getting an advance shipping notice from the factory to its distribution center. The J.D. Edwards system had to be customized to generate purchase orders to the factory on a daily basis, in addition to the monthly operations calendar it already supports for evaluating demand forecasts, generating purchase orders, and running distribution resource planning for its wholesale business.
Vans also installed United Parcel Service Inc.'s WorldShip system, a Windows-based shipping application. Vans electronically sends all the shipping data for custom orders to the WorldShip system, and factory workers in China access it to print out U.S. domestic-shipping labels that can be affixed to each shoe box. Once enough shoes are ready to go--typically about 40 pairs--the boxes are put in a master container and sent on their way to Vans' Santa Fe Springs, Calif., distribution center. Vans employees there cross-check individual orders against the advance shipping notices by scanning a bar code, then send them on their way. "The shoes are loaded on the same UPS truck that brought them here, and they're shipped out to the customer," Giles says. "It is a true cross-dock operation."
Pulling off direct shipping isn't easy, especially when supply chains stretch across the globe and when manufacturers are set up to ship products only in bulk lots. But manufacturer-to-customer shipping saves warehouse space and eliminates the need to have special facilities, such as cold storage for companies that sell perishables. QVC Inc., which sells food and other goods through its home-shopping TV channel and the Internet, fills most orders through its four distribution centers. But about 5% are filled by shipping directly from a vendor or manufacturer to the customer, says Andy Quay, VP of transportation and logistics. "It's an inventoryless model for us, a sale with zero inventory on our books," says Rob Muller, director of distribution planning and analysis.
What makes the system work is the Commerce Hub E-commerce portal (QVC owns a 65% interest), through which all direct-ship orders are processed. QVC's order-processing system determines if an order should be filled out of the company's own warehouses or directly by an outside vendor. The latter is routed to the Commerce Hub, where third-party vendors collect orders for processing. Before using Commerce Hub, QVC struggled to meet its goal of shipping 95% of all direct-ship orders within 48 hours. QVC has been able to hold outside vendors to that goal for the last 18 months. Vendors are able to print QVC-compliant shipping labels off the Commerce Hub portal.
Build-to-order models also can be hard to implement in industries with entrenched business processes. Take automakers, who've struggled with the five-day custom-built car idea for almost seven years. "They know what they need to do, but it requires a lot of navigating through legacy systems and fundamental changes to business processes," says the Yankee Group's Dominy.
For Vans, tightening its relationship with customers and its global supply chain has reinvigorated sales, particularly online. "This custom-shoe program has been a remarkable success," Giles says. "We get dozens of E-mails every day thanking us." Vans is considering leveraging the program in its 160 retail stores around the world. It ran one promotion last month with Teen Vogue magazine at its Irvine, Calif., store where hundreds of girls designed shoes using exclusive patterns.
Welcome back to the good ol' days, when customers could buy tailor-made shoes stitched together at the local shop. Only now it's 2004, the shop is online, and the cobbler is far, far away.