Launched in Australia in 1997, LG Electronics utilised 3PL until 2003 when it totally revamped its supply chain strategy. The move to in-house distribution has certainly paid off for LG, with the business enjoying strong retail sales growth of around 30% per annum since.
During the past couple of years, the company has moved quickly to establish its own logistics network including major distribution centres in Sydney, Melbourne, Adelaide, Perth, Brisbane and Townsville. A key partner for LG during this period of rapid growth has been Dematic’s storage equipment division Colby Storage Solutions, which has designed and equipped all of the company’s distribution facilities.
LG’s National Supply Chain Manager Tony Harris, explained why the consumer electronics specialist made the switch.
“We carried out a fairly extensive analysis of the impact that bringing distribution in-house could have on the business, and the results indicated benefits ranging from significant cost reductions to substantial improvements in customer service levels,” said Mr Harris.
“The consumer electronic goods market is fiercely competitive and the effectiveness of your supply chain has a huge affect on sales in Australia,” he said.
“If a customer is shopping for a product like a flatscreen TV, chances are, if the brand they like the look of is not available, for whatever reason, they will probably buy something else.
“To make sure we minimise the possibility of that happening with LG products, our focus is on making sure we provide the highest levels of customer service,” he said.
“The improvements we have made to customer service levels since bringing distribution in-house have been instrumental in the business achieving better than expected sales growth.
“We now accept orders up to around lunchtime most days and provide customers with guaranteed next day delivery in all metro areas. Our service levels to regional areas have also improved substantially.
“The feedback from customers is that we are now up there with the best in the industry, if not the best, when it comes to service.”
“It really is quite amazing to think none of this existed just a couple of years ago,” added Mr Harris.
“Because we had used 3PL services, we had very few people in the business who understood logistics. We not only had to develop a plan for building the distribution centres around the country, we also had to build the team of people who would run the facilities on a day to day basis.
“We worked solidly in both areas for around six months before we opened our first DC in Melbourne in October 2003. From that point on we were rolling out a new distribution centre every couple of months, until a few weeks ago when we commissioned our new Townsville DC, which services customers in Far North Queensland.”
“Our success is a credit to everyone in the logistics team at LG and to our various contractors and suppliers who have given us great support over the past couple of years.”
Having an efficient distribution network requires efficient distribution partners, said Mr Harris.
“We have just recently completed our sixth distribution centre design and fit-out with Colby Storage Solutions and have been consistently impressed by their performance and ability to add value through their innovative approach to solving our material handling and distribution challenges.
“Right from the start, Colby Storage Solutions took the time to get to know our business and to really understand what the imperatives were for us from a logistics perspective. “They have worked closely with us at all times to deliver solutions rather just equipment, constantly modifying their approach as our business has grown over the past couple of years.”
Commenting on the wide range of storage solutions recommended by Colby, Mr Harris said: “Colby’s solutions for LG are really tailored to meet our needs. Most of our facilities incorporate several different types of storage systems to provide the most efficient way of storing and handling different types of products.
“For instance, we have drive-in racking for our fastest moving browngoods, double deep racking for other high volume products, selective racking for slower moving goods, raised storage areas that maximise the use of overhead space, and we also utilise block stacking where appropriate.
“As well as ensuring we have the best combination of storage systems to give us the necessary flexibility to meet our distribution requirements, Colby Storage Solutions has also provided us with valuable on-going support during the past couple of years.
“Whenever our storage requirements have altered due to changing market forces, Colby has always been ready with an appropriate solution. For instance, when it became apparent we were beginning to outgrow some of our facilities, Colby came in and reconfigured some of our racking to give us greater storage capacity to tide us over until we were able to implement a longer-term solution.”
“As a result of much stronger than expected sales growth, we have already had to extend the warehouse areas at our Sydney, Melbourne, Adelaide and Perth DCs, and again this was done with the minimum of fuss by Colby Storage Solutions.
“The net result is integrated storage solutions that support our marketing strategy of quality products backed by quality customer service, and which enable us to do so at a cost that helps us maintain our competitive retail pricing and further grow our market share."
