AS DISTRIBUTION HUB, MEMPHIS KEEPS DELIVERING
Strategic location eases logistics of providing customer service
Commercial Appeal
By: Richard Thompson
March 28, 2001

Distribution centers, sorting facilities and terminals cover the landscape in some areas of Memphis. They proliferate around Memphis International Airport and within an intersection or two of the city's major highways.

Drive around, you'll see them.

After all, Memphis is the "distribution" hub of North America - and increasingly in these Internet times, the world. But what do you really know about these distribution centers?

Marinate that thought for a moment.

Can you really understand the significance, for instance, of the Ford Motor Co.'s being able to overnight-ship emergency automotive parts to more than 5,000 Ford dealerships around the country because the world's No. 2 automaker contracted with FedEx Corp. and opened a parts center in Memphis?

You will the next time the plumber cancels because his Ford cargo van broke down and the dealer didn't have the part to fix it right away.

Ford's new commercial-trucks parts center is 15 minutes away from the FedEx superhub at Memphis International Airport. That 15-minute transport extends Ford's cut-off time for emergency part orders by nine hours (from 2 p.m. CST to 11 p.m.) and still be delivered for the next business day.

"This strategically located parts hub will perform warehousing and delivery of critical commercial service truck parts to get our customers back on the road as quickly as possible," said Darryl Hazel, executive director, Ford Customer Service Division-North America.

See that? Distribution is customer service. But, industry experts say, that's a hard concept for the average person to grasp - unless you work there, of course.

For years, many companies have had a hard time making the connection, too, and some (namely online retailers) are still struggling.

Management has often neglected the distribution process. In the 1960s and '70s, distribution processes suffered because management viewed these activities as being largely unskilled and unworthy of attention. Typically, the whole process was fragmented at many companies and spread across their organizational structures.

During that period, distribution costs accounted for nearly half the cost of many consumer products; but few companies understood the extent of the costs or how to reduce them. Attempts to reduce distribution costs often had adverse effects on customer service. That led to changes in how management viewed distribution.

Instead of having a fragmented process, industries moved to integrate functions like purchasing, warehousing, inventory control and customer service.

Although there was some resistance to change, the high inflationary times of the 1970s and the deregulation of the transportation industry provided the impetus that many companies needed to develop a rather holistic view of distribution.

By the end of the 1970s, the term "logistics" was born.

Deregulation dramatically changed the relationship between carriers and shippers. Shippers sought to reduce transportation costs by concentrating shipments among a smaller base of carriers. That meant carriers had to offer better, and more efficient, services to be included in the select few firms chosen by a shipper.

Logistics became even more important as third-party providers entered the picture offering to handle the entire distribution process or a select portion of it so companies could return their focus to their core business.

The 1980s also saw an increased demand for the ability to rapidly communicate, trace shipments and exchange data. With more information, companies could further integrate their logistic functions, compress time and eliminate costs. Just-in-time scheduling grew even more popular.

Increasing globalization, corporate restructuring and an emphasis on quality also impacted logistics during the 1980s.

To that end, companies consolidated their distribution centers. Instead of having several facilities in different parts of the country, some companies boiled them down to one or two centers in strategic shipping locations such as Memphis and Louisville, Ky.

That continued in the 1990s. The concept of supply chain management grew, whereby companies began to integrate the distribution processes of their suppliers and customers with their own in order to reduce costs and leverage resources.

That has opened the door for FedEx, Atlanta-based United Parcel Service Inc. and others, allowing them to sew into the very fabric of their customers' supply chains instead of merely delivering shipments.

Also, as technology has grown, so have concerns about finding a technologically savvy labor force, and in turn that has led to greater automation in distribution centers, now often referred to as E-fulfillment centers.

Michael D'Amico, a consultant with Ohio-based Sedlak Management Consultants, sums it up saying, "It's all about getting the right product to the right place at the right time to the customer's expectation."

One gets an idea of what it takes to make that happen inside Chicago-based uBid.com's 400,000-square-foot Memphis distribution center under construction on Holmes Road. When it becomes operational in mid-April, it will replace the company's current distribution center, on Shelby Drive.

uBid.com is an Internet auction retailer that allows consumers to bid on everything from computers and televisions to clothing and jewelry.

Bill Beyer, uBid.com's facilities manager, said the new facility uses labor-saving methods. For instance, workers will use picking modules to reduce the time it takes to gather orders off inventory racks and start shipping them.

"The faster you get to a product, the faster you can ship it," Beyer said. That makes customers happy, he said.

But do people really care about the whole process?

Dwight Burton, senior operations manager for SubmitOrder Inc., the Columbus, Ohio-based firm that handles orders for Major League Baseball, Belk Stores and Kmart, said he believes so.

"I think they want it done right," Burton said during a recent tour of SubmitOrder's 629,000-square-foot distribution center on Lamar. Because, he added, "If we miss a delivery, we're in trouble."