Tompkins International is a global supply chain consulting and solutions firm dedicated to helping clients achieve supply chain excellence and profitable growth. Founded in 1975, Tompkins has integrated its decades of experience in strategy, commerce, logistics and technology into an ecosystem of six business units: Supply Chain Consulting, Material Handling Integration, Robotics, Applied Technologies, Fulfillment Services and Digital Commerce. By combining best-in-breed services and technologies, Tompkins delivers a true end-to-end supply chain solution enabling clients to improve the customer experience and ensure long-term success. Headquartered in Raleigh, North Carolina, Tompkins has offices throughout North America and in Europe and Asia.
- Most companies wait until they are experiencing issues dealing with outdated distribution channels and inefficient fulfillment before reaching out to a supply chain consultant. We recommend early and often.
- Network modeling is only as good as the data going in, the depth of the analysis of the results, and the action plan coming out of it.
- Uncovering the best location includes shopping multiple municipalities for incentives. You may find that once you have all the information on your options that it really comes down to prioritizing rent rate versus labor rate versus productivity gains.
- Facility design is being more important as companies are incorporating automation and robotics in larger facilities and in an effort to make the most of infill urban last mile fulfillment centers.
- There are options other than 3PL, 4PL and in-house logistics. Tompkins Fulfillment has created a middle ground where multiple clients can be accommodated through shared facilities, benefit from Tompkins technology, and have more flexibility through annual fulfillment contracts.
Justin Smith, Senior Vice President with Lee & Associate’s Irvine office, spoke with Jim Tompkins, the CEO at Tompkins International, to get his perspective on supply chain logistics and how companies nowadays have to adapt to the ever-changing world around them.
When do people usually reach out to you?
It’s not when the lease expires or any of those types of things. They usually call us when something is wrong. We have made a billion real estate decisions based upon the facts as they were known, but everything is crazy now. Instead of us having warehouses where we’re shipping products to retailers and where we’re shipping products to their distribution centers, we now find ourselves selling direct to consumer. It’s like you spent three years training to be an Olympic swimmer and now all of a sudden on the day of the trials they say, “Oh, by the way, you’re entered in the boxing competition” and you say, “Wait a minute, I’ve been training to swim.”
That’s exactly where people are. They’ll call and say, “I’ve got two of my own distribution centers and they are out of capacity. We’re dealing with the higher levels of returns because of ecommerce. For the holidays, I can’t hire enough people; there’s not enough people that we can find to hire.” I have even had some people tell me for the holiday season they dropped drug testing. It’s a crazy world where companies have invested heavily in stores and their store traffic is down, so now they don’t know what to do. That’s when people call us and say, “What the heck is going on?”
You and I, and everyone you and I know, are living in VUCA. The term VUCA was invented in 1988 by the US Army college. It was invented because the world was going to change when the Berlin Wall fell and when the Soviet Union collapsed. Within a year of them inventing the term, the Berlin Wall fell and within two years of them inventing the term, the Soviet Union ceased to exist. VUCA stands for volatile, uncertain, complex, and ambiguous.
VUCA hits everything. If we looked at last week, for example, my grandson had a hockey game. When my kids played sports, if the schedule said the game was at 1PM on Saturday, it was at 1PM on Saturday. With my grandson, I have to check three times before Friday night and Saturday afternoon to see when and where his game is going to be.
Here’s another example of VUCA. I go with my wife every December to New York City. We see some plays, do some shopping, and relax. This year, on Thursday night while we were at a Broadway play, I got an email from a major retailer that said, “Jim, your secretary told me you’re in New York City. Can you meet me tomorrow? I would like to talk to you about a new opportunity.” During intermission, I wrote him back and said, “I’m with my wife and we have plans for the day. My wife doesn’t get up really early, so I could do breakfast.” At 9:30AM the next morning we were done. I now have 4 new projects with this guy. One of his brands has grown 52% year over year and he needed a new distribution center up and running three months ago. And now he calls me. That’s VUCA. That is crazy. And guess what? I’m going to be in San Francisco with him in couple weeks which I can’t do, but have to do because that’s what we need to do to get this issue solved.
How do you create a network design when your sourcing is going to have a major change over the next three years?
A year ago 90% of our stuff came from China, today 80% of our stuff comes from Vietnam and Thailand, and three years from now 90% of our stuff’s going to come from Africa. We constantly look at what will impact our network. When we start with clients, we think about who the clients are that we’re trying to satisfy, what makes those clients work really work, and what we are trying to accomplish or achieve in the long run.
We used to say, we have a men’s store, so the business is going to sell clothes to men. That used to be a good definition, but today we have to ask, what kind of men? Are they over 50 years old? Are they wealthy or are they college graduates? Are these people hip? What percent of our market is in major cities versus rural? All these things impact how the stores will work, what the fulfillment centers will look like, and the overall real estate.
What do you do when time is compressed?
I didn’t know the guy who reached out to me while I was in New York City. I had never met him, I never had an email from him, and yet somehow I was already three months late. In the old days we used to complain about it, but now we ask “What’s new?” The VUCA lens, unlike the eye doctor, it blurs everything. We’ll always sit down and talk. The reason I’m going to San Francisco is to get clarity on what it is that we’re trying to accomplish and how it is going to change over the next 3 to 7 years.
How long does it take to gathering everything you need and come up with different options and solutions for the client?
I will explain the four projects I have with this one client.
The first project has two DCs today; one in the East and one in the Midwest. Those two DCs today are not adequate to get him through holiday 2020, so he needs to have significant work done in the next month for putting in place action plans for people, processes, and technology. We have to look at how these two facilities are operating today and how we can double the number of skews and give him 50% more throughput. We have to have that in place by August, so that’s job number one: enhance the two that he has.
The second project we have is a network job. They have done a llama soft model. The problem with a lot of lama soft modeling is it’s all about the data. If you have inaccurate transportation data, inaccurate cost of running the DC, inaccurate rents or facility cost, or you don’t properly nail incentives, you can absolutely make the wrong answer. What he did was hire a firm. They did a llama soft model and the results of that llama soft model basically said “west”. I asked him what west meant and he said, “What do you think of?” I said, “I think of Vegas, Reno, Salt Lake, Phoenix, and Idaho. For what you’re doing with apparel and your need to get the customer going forward in the same day, Idaho is out. So the second project we have to do is go out and shop these four municipalities and incentives. We have to find who is going to give us the best deal for what they’re doing. From a cost point of view, we’ve done many studies and the four are about equal. It depends how they want to rate rent versus labor versus productivity and so forth.
The third project has to do with the design of their West Coast facility. This particular client is very interested in our robots and how they could work for him. They are doing high volume throughput and they’ve got a relatively small number of skews, so it’s a really good fit for the robots. They want us to design for them the best traditional, conveyor, pick module, put-wall, sortation system, and then they want us to pick the best robotic application. I never wanted to get into the material and equipment business, but no one here had what I needed. Our equipment, literally, can be picked up and moved into a building in two days’ time with installation. We don’t need permitting. We just go in and literally roll stuff in there. Everything’s on wheels. We roll it in, plug it into a standard outlet, bring the robots in, set them on the tables, and everything’s ready to go. The IT is much more complex than that, but the IT is done before we go in the building, so it really provides that capability and it’s the first portable automation that exists in the world.
The fourth project he has, and this is his terminology, is he wants to do what he calls “in-market fulfillment centers”. What he wanted us to do originally was to design technology for him, but now he gets it’s already what we’re already doing with Tompkins Fulfillment, and he just needs to become a client of Tompkins Fulfillment. We’re designing a pilot for him out of the Atlanta Tompkins Fulfillment Service Facility so that we can show him the benefits. Does he get a sales increase when he goes to same day delivery? Does he get greater follow on orders with same day delivery? What is the benefit for him of same day delivery overall? What’s the cost? What does it do to his margins? We put him in the Atlanta facility and we’re collecting data now to see what’s actually going on while we design his IT.
What kind of reactions you get from people as you go through this?
This gentleman is extremely bright and extremely experienced. He was shocked at the questions that I asked him about his network model that was done by a good consultant, but then they made the recommendation on Reno without considering incentives. They made the recommendation on Reno without understanding everyone has selected Reno and there’s no labor left. He was shocked by that. He thought the recommendation for Idaho made a lot of sense until I explained to him that LA was two days away from Idaho. He thought they could do same day and I told him there’s cheap land and a great workforce, but it’s in the wrong spot.
His mind was blown. On the in-market fulfillment thing, he was amazed that we talked about store replenishment of eaches because now everything that goes to the store is by the case and that’s the reason why so many stores wind up – particularly with women’s merchandise – selling stuff at half off after season. The merchants knew that store wasn’t going to sell a case of that, but that was the unit of measure. Now that we can do eaches to store and not push to store a case, but let them pull eaches based on what is selling.
One of the benefits of your service are the options. How flexible is that?
The contracts with Tompkins Fulfillment Services are one year contracts. If you’re a traditional 3PL, it makes you very nervous because the traditional PL wants seven years. They oftentimes agree to five or maybe even four years, but they want that to just to learn the business and really get good at it. I get that, but the demands vary.
What we have is a contract and at one year it’s done. People ask, “How do you do that with you renting buildings and so forth?” I say, “ I’m not renting a building for any one client. I’m renting a building for 8 to 10 clients. What I do is if one of them wants to leave and another one wants to come in, that’s not a problem. I’m not betting on anyone’s success in a market. What I’m betting on is the success of digital commerce. I believe digital commerce is going to continue to grow.
Imagine this. 20 years from now, some grandpa is going to tell his grandchildren, “When I was small, every Friday night, me and my mom and dad went to a grocery store. We would get a cart, push the cart up and down the aisles, put things in the cart, and then take the cart up to the front where a cashier would take things out of the cart and ring them up and put them in a bag. Then we would take that bag, put it in the trunk of our car, drive home, and carry the groceries into the house.” The grandchildren are going to say “Yeah, right. Why would you do that? Did you want to pick out your specific can of tomato soup? What’s your problem, grandpa? You just you just tell Alexa, and she’ll bring it to you.”
Shopping in a grocery store makes zero sense. The only thing that’s stupider than pushing a cart up and down an aisle to buy your groceries, is to pay somebody to push their cart up and down the aisle and pick out the stuff for you. Why do you put this stuff in the store in the first place? You spend all this money to put it in the store so you can take it. Why don’t you just take it from the fulfillment center to the customers home? That makes so much more sense. You’re spending all the money to put it on the shelf, you got this expensive real estate taken up with stuff that has low margins, and then you’re paying someone to take it off the shelf after you just got done paying someone else to put it on the shelf.
Have you gotten into the cold storage industry?
We just signed our first cold storage direct to consumer business. That’s a huge business. The potential for this business is hundreds of millions of units over the next 10 years.
What goes into finding cold storage consumers and how does your work change when you’re in the cold storage space?
The challenge with cold storage is that we’re out of space. Every time someone builds a new cold storage box it’s full. That’s why it’s a big investment opportunity for real estate.
The definition of full is based on storage capacity, so a lot of these cold storage facilities are full from a storage point of view, but they’re really not doing much throughput. What we offer them is a capability of still being full from a storage point of view, but it’s substantially increasing the revenue of the building by the amount of volume we’re pushing through the store through the cold storage facility. They think this box is fixed. It has a capacity of 100 and it has revenue of $100. What we’re able to do them is take that exact same building that has a storage capacity of 100, but now get them $150 in rent instead of $100 because we’re going to be selling the throughput in the building. They’re willing to rent me a piece of the building, so I don’t have to go out and build my own cold storage. Then I can put my robots in there since they work in freezers. I can also do the picking and eliminate some of the terrible jobs that people are doing now, thus keeping them out of the freezer which turns out to be a very good return.
What other industries have you worked with?
What we used to do was sell to all the hospital all these different components, and then the hospital would pick them, kit them, sanitize them, and bring them to delivery room. About a third of the components you bring in they’d use, two thirds they wouldn’t use, and it was a major warehousing task in the in the hospital. A client came to us and said, “What we want to do is we want we don’t want to sell them all those components. What we want to do is sell them the components they are going to use and be able to reuse the components that they don’t use. Let’s set up in Memphis. We’ll use Federal Express. They’ll tell us, “Okay, we got a 58 year old man, 180 pounds, and we’ll create the kit. We will send them the kit. The kit will come in at 8AM on the day of surgery, they’ll cut the guy open, use what they want, put the rest back in the kit, send that kit back to us, we’ll take out the stuff that wasn’t used, we’ll figure out which ones we want to reuse again tonight, we’ll put that in the next kit, and we’ll have it back in the surgery room again tomorrow morning.
We designed that capability based on a five year old forecast of the volume increase they would have in market share. We accomplished that five year increase in market share in nine months. We then had to build another one in Baltimore and another one in LA. Four years later, we exceeded the 20 year life of how this is going to go because virtually no hospitals do their own spinal column surgery anymore. They don’t have the space, they don’t have the time, they don’t have the labor, and so we do it. The market share has quadruple over where they were, so it’s been a huge win by supply chain. It’s all supply chain.
For more information regarding this interview, please contact:
Justin Smith, SIOR
Senior Vice President