Business growth can be a double-edged sword. Increased orders and production are exhilarating because a boost in revenue follows. Yet with growth comes a complex concern: accommodating the increase with limited resources.
For Alexander J. Keechle, CEO, and Rick Sukkar, COO, of Monster Moto, a minibike and go-kart company, accelerated growth was exciting but exhausting.
“We’re really good at making, marketing and servicing minibikes,” Keechle says. “But we are not good at supply chain and logistics.” With growth, the company faced a new set of supply chain and logistics problems involving transportation costs and concerns around inventory, warehousing and delivery. And when these issues threatened to impede Monster Moto’s success, Keechle and Sukkar turned to UPS.
One of the people who helped them maintain their growth was Mark Modesti of the UPS Customer Solutions Group. We talked with Modesti about the challenges small businesses like Monster Moto encounter when facing rapid growth and about solutions.
Q: Monster Moto opted to rethink its supply chain and bring its manufacturing back to the U.S. from China. What are some of the issues surrounding that move?
Modesti: China is a world leader in manufacturing. The downside? The country is an ocean away from the States. For a lot of companies like Monster Moto, being assembled in the USA means a lot – and so does faster time-to-market. Even though labor costs to manufacture will be higher here, the best way to offset that cost increase is to streamline the end-to-end supply chain. Significant state and local tax incentives are also usually available, making this kind of a move even more attractive.
Q: Are there specific technology dilemmas that fast-growing companies face?
A lot of small companies automate accounting or order entry and stop there. They will continue to use spreadsheets for inventory or manual data entry processes in shipping, which can slow down throughput and affect customer service. For Monster Moto, we integrated its internal systems with WorldShip® technology so that shipments and costs are both tracked effectively. It’s more efficient than the typical patchwork system that some companies piecemeal together.
Q: Did you encounter any difficulties with inventory management at Monster Moto?
Inventory management became more complex at Monster Moto because it receives component parts from China and assembles bikes here in the U.S. When shipments don’t arrive on time, or you’re out of #8 bolts, that production line can come to a halt. A robust inventory management and forecasting system is, therefore, essential.
Two key indicators that you might need outside help are back orders and lost orders. Both drain away profit margins. How often are my products on back order? How often is my company running out of key components?
Q: What are some issues around inbound and outbound logistics?
Logistics is a small component of overall supply chain management. At UPS, we talk to customers about synchronizing the flow of goods, funds and information. Products need to move smoothly in and out, along with billings and, of course, accurate and timely information about the process. If the in and out movements of goods are not managed in this way, companies can run out of room, face customer service issues and even have difficulties with cash flow.
Q: Is it really necessary to expand warehouse space to accommodate growth?
We’ve worked with several growing companies that haven’t set up their warehouse space efficiently or that hold on to old inventory. One of our warehouse engineers conducts a “white glove” test to find inventory that’s gathering dust. It’s not uncommon that we open up 30 percent more space afterward. Because we rethought their efficiency, one company we worked with was able to put off an expense involved in expansion for an additional three years.