Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
When Victor Tam bought a condo in 2010, he wanted to furnish it in Scandinavian style without falling for the familiar trappings of IKEA. Looking around, he found that many retailers were “ridiculously priced,” with sofas so costly he thought he could otherwise furnish an entire room.
Studying the marketplace, he found a world of markups as furniture passes through the hands of manufacturers, importers, distributors and retailers. So he partnered with some old friends from the e-commerce sector to launch a company that cuts out the middlemen.
The result was Rove Concepts, launched in 2011, a primarily Web-focused furniture company that oversees everything from design to delivery. The Vancouver-based firm purports to have generated $20-million (U.S.) in revenue in its last fiscal year, selling Scandinavian-inspired, mid-century modern furniture at a relatively low cost across North America.
The company tries for price points that would make them the fast-fashion of the furniture world – Mr. Tam invokes trendy clothing retailer Zara – but with the flair of a coveted boutique. To achieve this, Mr. Tam and his partners say they need to focus on making its small-firm customer service consistent across the vast continent.
“There’s no point in thinking that one day we’ll be the next Crate and Barrel,” says Mr. Tam, the company’s chief marketing officer. “They’re doing well in their space. We see ourselves as flying under the radar and capturing the audience that doesn’t want to run with the masses.”
Mr. Tam and co-founders Arthur Lee and Brendan Burscough began by manufacturing replicas of high-demand furniture, such as the classic Eames Lounge Chair. The company has since rolled out its own exclusive product lines. Rove works with co-operative factories in China and Vietnam and sources handmade rugs from India, Mr. Tam says. They have recruited designers who partner directly with the factories.
Rove imports its products to sell across North America – primarily online, though they do have a showroom in Vancouver. The company has four warehouses, two in Canada and two in the United States, and works with a third-party logistics firm that has more than a half-dozen warehouses of its own.
Improving logistics and distribution is the next frontier for Rove, Mr. Tam says. Some past customers would be inclined to agree; the company has dealt with negative feedback on websites such as Yelp.
Working with a third-party distributor is necessary for a company the size of Rove, the co-founder believes, in order to get its relatively small number of orders to far-flung cities. But improving the delivery process is top of mind.
“The final mile is where the customer is actually getting that last experience with your company – the guys showing up to the door, delivering it and unpacking it and giving that service,” Mr. Tam says. “That’s the challenge: giving that consistency of service across the continent.”
The Challenge: How can a small company like Rove Concepts improve its supply chain to ensure high-quality delivery no matter where the customer is?
THE EXPERTS WEIGH IN
Gal Raz, associate professor of operations management, Ivey Business School, University of Western Ontario, London, Ont.
The furniture supply chain is unique in its challenges and causes of defects, due to many supply-chain touch points, the bulkiness of the items and the chain’s complexity. The key issue for Rove is supply chain control. There are two ways they could approach this.
Right now their furniture is built to order elsewhere. But if instead Rove could get raw materials to assemble in their own warehouses, they would have more control, resulting in less damaged or incorrect goods. Holding raw materials is cheaper, too.
Another option is to keep the current supply chain but align its goals and incentives around quality and standardization. Having multiple quality checkpoints (at the port and the warehouses) is more costly, but achieves more accountability with respect to the problems’ origin. You have to align incentives with the chain for both the risks and the revenues. Revenue-sharing contracts can make sure partners guarantee quality.
Rick Cleveland, director of education and accreditation, Supply Chain Management Association, Toronto
The first rule of supply chain is to understand how you add value for the consumer. Rove has found a niche with Scandinavian styling priced for an online-savvy niche market. They need to ensure the members of their supply chain are selected for the value they add through responsiveness, quality or cost, but it must be viewed from the impact to the consumer, not the next step in the chain.
There may be issues with customer delivery expectations, as shipments from Asia, where low-cost labour is available, require long lead times. But depending on when replenishment orders are triggered from consumer Web browsing or purchases, this delay can be mitigated somewhat.
The “final mile” becomes the critical differentiator. The customer experience of delivery and setup can enhance or detract from the sense of having made the right purchase – buyer’s satisfaction vs. buyer’s remorse. With the use of a third-party (or fourth-party) logistics partner, the outbound delivery teams should be contracted to receive training from Rove or at the very least an overview of the company position and expectations.
Ensieh Daniali, a certified Supply Chain Management Professional and procurement officer for Elmira Pet Products, Elmira, Ont.
I’m not sure what their core competency is: distribution or manufacturing? In retail industry each of these two need different metrics to evaluate business success. What about service level? Is there an assessment system to show you the percentage of customer satisfaction?
A tighter focus can help. What kind of competitive advantage are they focusing on? Low price? High quality? Luxury goods? Each customer category has its own definition of expectation.
In terms of logistics and distribution, they need to find the tradeoff when it comes to centralized or decentralized warehousing. Have they ever done a process analysis to identify deficiencies and gaps? They may or may not need a new warehouse location or new resources but will have to review their chain and find the bottleneck within their processes, systems and people.
THREE THINGS THE COMPANY CAN DO NOW
Rove could add quality checkpoints in places such as ports and warehouses to assure quality.
Make the chain rewarding
Building an incentive program with suppliers and partners would encourage them to ensure quality.
Since Rove can’t handle delivery themselves, they could enact a training program for the people representing their brand across the supply chain.
Interviews have been edited and condensed.
The Globe and Mail
Published Tuesday, Feb. 21, 2017 4:53PM EST
Last updated Thursday, Feb. 23, 2017 1:28PM EST