Locking Out The Competition
For most companies, the struggle for brand awareness is an ongoing battle. How can your company's name be on the tip every consumer's tongue? Manufacturers of facial tissues have to contend with Kleenex. Copy machine users treat Xerox as both a noun and a verb. And, when consumers think of padlocks, the Master Lock name invariably pops into their heads. Market research confirms that the Master Lock name has achieved 97% brand awareness among consumers. This fact, in no small way, has helped the company become a leader in domestic padlock sales.
Maintaining its brand recognition dominance is a task left to the marketers at Master Lock. However, an entirely different group of Master Lock employees are charged with delivering their well-known products to retailers and commercial businesses around the world. From its corporate headquarters in Milwaukee, WI, Master Lock monitors its entire enterprise, which includes a distribution facility in Louisville, KY, manufacturing plants in Milwaukee and Mexico (Nogales, Sonora), and a sourcing operation in Asia.
"Ultimately, we've had to answer several critical questions. How do you decide where in the supply chain particular products will be produced? Will the component manufacturing be outsourced or performed in-house?" relays Mark Gams, vice president of logistics at Master Lock. "We used to make those decisions based on unit cost. Now, we are looking at the total supply chain cost associated with the entire process."
For a company like Master Lock, maximizing efficiency across the entire enterprise can pay big dividends. Master Lock is an operating unit of Fortune Brands, Inc., which reported $5.2 billion in revenue in 1998. In addition to Master Lock, Fortune Brands is also involved in a broad range of manufacturing markets, such as distilled spirits, golf equipment, and home products. Some of the company's popular name brands include Jim Beam, Titleist, and Moen. Currently, more than 1,300 employees work at the 800,000-square-foot Master Lock headquarters in Milwaukee.
ERP System Joins Separate Business Units
One might think that Master Lock only sells through retailers to reach its consumers, but that's not the case. The company is divided into three business units, and each serves a segment of Master Lock's customer base. The retail business unit typically consists of mass merchandisers and retailers. The commercial/industrial business unit services major distributors and locksmiths. The OEM (original equipment manufacturer)/institutional business unit provides products such as trigger locks that are sold with handguns to other manufacturers. "The business units are really focused on customers and marketing. We call that the front end of the business," explains Gams. "The supply side of the company is somewhat independent of the front end of the business. Each business unit handles similar products. For that reason, supplying products crosses over into the different business units."
To maximize its effectiveness in dealing with each business unit, Master Lock began replacing its legacy order management system near the end of 1995. Initially, the company implemented an Oracle database and Oracle applications as its ERP (enterprise resource planning) system. Currently, Master Lock is running Oracle's order entry, inventory, and accounts receivable applications. In an effort to determine and reduce total supply chain costs, Master Lock is implementing more Oracle applications. For instance, the company is considering replacing its current manufacturing, purchasing, and financial systems with applications from Oracle. "We are modeling the business processes with the idea of supporting that model with a more complete enterprise tool. We know this tool will be Oracle. We have a substantial investment in the Oracle modules at this point, and our intention is to leverage that investment more fully," says Gams.
In trying to determine total supply chain costs, Master Lock must consider outsourcing some manufacturing to China. However, cost equations of this type are very involved. "On one side of the equation is the lower cost of labor and packaging in China. On the other side is increased costs in transportation and carrying inventory in China," states Gams. "When you get right down to it, those numbers will drive the decision."
Outsourcing Warehouse Management Operations
Whether the products are manufactured in the United States, assembled in Mexico, or imported from China, most are distributed from Master Lock's distribution facility in Louisville. The company's distribution center was originally located in Milwaukee, but Master Lock eventually outgrew that warehouse. The move to Louisville was largely based on the fact that it was approximately 20% closer to the company's customers.
Before the move, Master Lock was running DOMS (Distribution Operations Management System) from Genco, Inc. as its WMS (warehouse management system). The same system was implemented at the Louisville facility. "This allowed us to start up the operation very quickly, and we accomplished that," states Gams. He adds that Master Lock then discussed Genco's role as a possible third-party logistics provider at the Louisville facility. As such, Genco supplies the workforce for the Louisville warehouse and manages the operations of the facility. The 25 to 30 Genco employees at the Louisville facility are responsible for picking, packaging, shipping, and building customer displays for some retailers.
DOMS was also attractive to Master Lock because the software product had already been integrated with Oracle. Genco is a CAI (certified application interface) partner with Oracle, which means there are established, set contacts and application interfaces between the two systems.
In addition to DOMS, the Louisville facility also uses RF (radio frequency) technology supplied by LXE Inc. (Norcross, GA). Employees use the handheld and truck-mounted RF scanners to receive and pick inventory more accurately. The entire warehouse is standardized on the Code 128 linear bar code symbology. All of the labels in the Louisville facility are generated by Zebra Technologies (Vernon Hills, IL) printers. To ensure accuracy, products are scanned and weighed as they proceed on a conveyor to eventually be packed. If an order does not meet the proper weight requirement, it is rejected and inspected.
EDI Expedites Order Fulfillment
For Master Lock's larger retail customers, orders come to the company through EDI (electronic data interchange) transmissions. "Most of these orders are for out-of-stock items. They come in through the EDI interface and go into the order management system. That system interfaces with the system at the Louisville facility, and the orders are processed. Confirmation comes from Louisville back to Milwaukee (headquarters), and the invoicing cycle is triggered," relays Gams.
Since opening the facility in Louisville, productivity is "materially better," as measured by cases per hour flowing through the distribution center. "As a start-up operation, the goal of the Louisville facility is to have 95% of all orders shipped within 24 hours," explains Gams. "Improved distribution cycle time is one of our goals. Our ultimate objective is to have the orders come in by noon and shipped out by 4 p.m."
A number of Master Lock's large customers also receive advance shipping notices (ASNs) through an EDI transmission. This process allows customers to accurately and quickly check the merchandise they are receiving. As the order is received, employees scan the products and check them against the ASN that preceded the shipment.
Business Intelligence Tool Helps Customers Select Products
To better understand its customers and the services it provides them, Master Lock uses a business intelligence tool called PowerPlay from COGNOS (Toronto). Through the Oracle order management system, Master Lock has accumulated sales data that is stored in an extensive data warehouse built by the company. This business intelligence tool allows Master Lock to recommend product listings that would be most effective for certain customers. For example, steering wheel locks may be a hotter product in one region of the country than in another. In this case, Master Lock retailers will be advised of this fact and can adjust their orders accordingly. "This tool helps us advise customers about the products we think they can sell more effectively and, ultimately, make more money on," states Gams.
The business intelligence tool is also applicable to Master Lock's supply chain. The company is planning to extend its capabilities to analyze this aspect of its business. "We don't have a lot of tools to look at our supply chain and analyze it like we would like to," explains Jim Johnson, director of information services at Master Lock. "As we implement Oracle modules in the future, we want to use business intelligence tools to analyze any historical information about our supply chain. This will help us manage our supply chain more effectively."
Managing Data From A Central Location
While Louisville is the site of Master Lock's main distribution facility, there is very limited hardware at the location to manage data storage. Instead, the company has created a centrally located data storage system that serves other facilities through a WAN (wide area network). The Louisville facility has a DEC Alpha server to support its LAN (local area network). Applications such as e-mail, for example, are all served from the servers in Milwaukee (headquarters).
"We have an architecture that includes DEC Alpha servers and Compaq NT servers. It depends on the application that is running on the particular server," states Johnson. "However, we are upgrading our Oracle applications and will be moving to Oracle's three-tier architecture. As part of that, we are implementing Compaq's StorageWorks, which will allow us to better integrate our database and application servers.
Connecting Suppliers Through E-Commerce
Because Master Lock is a manufacturer and distributor, its Web site is not designed to sell products to potential consumers. Instead, Master Lock uses its site to provide product information to customers. That may change slightly in the future as the company has recently begun to evaluate marketing plans to help it reach out to potential customers on the Web. At this point, however, most of the company's e-commerce initiatives have been business-to-business related.
Other e-commerce initiatives involve improving communication and service throughout the company's supply chain. Johnson says Master Lock will allow customers to have limited access to the company's system. For example, a retailer may be allowed to contact Master Lock via the Web in order to check shipment status and order information. "In the future, we certainly want to become more involved with our suppliers. We want to exchange more information between the suppliers and our companies," adds Johnson.
While Master Lock may not sell its products on the Web like its retail customers, the company still strives for connectivity — in its supply chain and the company itself. For example, the company's WAN allows transmission of data and video between headquarters and other locations. "Louisville is connected with headquarters because video, voice, and data (including RF) run over the WAN," states Johnson. "Weekly meetings are conducted through video conferences, and that has saved the company a lot of money in terms of travel and lodging costs." Now that Master Lock has connected its internal operations, the company plans to connect every member of its supply chain.
Ed Hess