Published November 30, 2011
Client Overview
Founded more than 30 years ago, Restoration Hardware is a leading purveyor of premium home furnishings.
The company has more than 100 retail and outlet store locations in the U.S. and Canada, as well as a rapidly growing direct-to-consumer (DTC) business that includes stand-alone catalogs and e-commerce sites. Its range of products includes home furnishing, outdoor, bed and bath, and gift items.
Challenge
Restoration Hardware performed store replenishments out of distribution centers (DCs) on the East Coast, in Baltimore, Maryland, as well as on the West Coast, in Tracy, California. The company shipped DTC from its third-party-operated facility near Nashville, Tennessee.
With aggressive growth plans, the retailer expected to quadruple its store count in five years. These growth plans caused them to re-evaluate their logistics network and assess how they could best serve their growing customer base.
As a result of the current structure, the company began experiencing growth-related capacity issues and had trouble executing its fulfillment plan efficiently and profitably. It also recognized sub-optimal service levels with its Logistics Service Provider (LSP) DTC facility and sought to bring the operations back in house by obtaining a new facility that would also accommodate additional product lines.
Overall, Restoration Hardware needed to address:
- Business Processes – Reengineer outdated processes to align with best practices.
- Technology Applications – Replace outdated systems with new applications and integrate them throughout the organization.
- LSP Fulfillment Facility – Reconsider the DC for conveyable product.
- Layout for Two Furniture DCs – Redesign inefficient layouts
Tompkins’ Role
Tompkins was hired to develop and implement a long-term strategic plan to improve Restoration Hardware’s fulfillment and distribution operations.
The plan included:
- Operational Excellence (OE) and Best Practices/Project Management Office (PMO) Development
- LSP Facility Phase Out
- Warehouse Management System (WMS), Order Management System (OMS) and Tompkins Control System (TCS) Implementation and Integration
OE and Best Practices / PMO Development
Tompkins and Restoration Hardware agreed upon a path to OE and best practices through a comprehensive analysis of the company’s existing supply chain processes and systems along with an audit of its internal capabilities.
By assessing the relative value and offering alternatives to certain assumptions considered non-negotiable when the project began, Tompkins was able to develop an OE solution that offered even greater opportunities than envisioned. This created real opportunities that could be implemented and real benefits that could be achieved.
The OE solution included developing the PMO, a department within the company that manages projects, programs and teams. The new department prioritized projects, effectively managed resources, and communicated project status and their rollouts in a deliberate and collaborative environment.
LSP Facility Phase Out
Previously, Restoration Hardware’s order management and fulfillment was outsourced to an LSP. However, the LSP did not slot the DC effectively and its WMS did not support industry best practices.
By not having the customer service function for the conveyable DTC orders in house, the company also had a blind spot, which created a gap for handling customer service issues. Although service level agreements (SLAs) were in place with the LSP, Tompkins helped Restoration Hardware reign in the DTC operations and virtually eliminated the LSP.
Tompkins analyzed the sourcing of product, volume of shipments to the LSPs, and the services provided to the stores. A network analysis model, using the CAPS Supply Chain Designer, was developed and validated. A number of alternatives were tested, including reducing the number of third-party locations, adding Midwest and East Coast distribution points, and varying the stocking locations by product family.
The recommended solution was to relocate the West Coast DC to a larger location where all Asian and West Coast sourced product would be received. The solution also included adding a DC on the East Coast that would receive all European and Eastern U.S. products. This would allow the number of third-party stocking locations to be dramatically reduced, while expanding direct-to-store delivery.
To replace the LSP facility, Restoration Hardware signed a lease for an 800,000 square-foot DC in West Jefferson, Ohio. By Tompkins’ design, this facility utilizes several picking and storage location methods based on product type and velocity.
Product is picked either from reserve locations and taken by lift trucks to high-volume packing areas, or it is picked from shelving/flow racks and conveyed in totes to packing areas. Once packed, the cartons are conveyed to a sliding shoe shipping sorter and diverted down a shipping lane based upon “ship via” and “destination.”
Tompkins also designed the layout and installed rack for the California and Maryland furniture DCs.
Systems Implementation and Integration
Working with Restoration Hardware, Tompkins also assisted with the design of a new automated distribution facility and designed and implemented an OMS for data entry, processing and visibility. A WMS was also selected and implemented across three DCs to integrate all of these systems, along with the Warehouse Control Systems (WCS).
TCS was installed to add an extra element of integration and provide real-time control between the WMS and all other material handling equipment (MHE). It is a scalable system that helps improve existing facility automation, centralize automation controls, reduce labor requirements and increase DC floor visibility.
As part of the final implementation, Tompkins provided training to operations and maintenance personnel on the new processes and equipment.
The Results
By working with Tompkins on designing the new automated distribution facility, implementing the new OMS and WMS, and integrating these systems with the TCS, Restoration Hardware has more control of its operations.
The company has greatly improved service levels, reduced distribution costs, boosted supply chain visibility in terms of customer orders and inventory, increased flexibility and responsiveness to change, and produced a highly attractive return on investment.
Total supply chain operating costs have been reduced, and the company now has the capacity to meet projected long-term volumes as well as develop new product lines.
Today, Restoration Hardware’s customers have greater confidence in the company’s ability to have available inventory, deliver as promised and address any changes that may arise in the order-to-delivery cycle. Customers’ experiences will also be greatly enhanced due to the supply chain visibility that the customer service team now has at its fingertips.
With the improvements to its infrastructure, business processes and technology applications, the company is poised to become the leader in high-end home furnishings and accessories.
