Surprise Package

Often, UPS must overcome customers' justifiable reservations about entrusting their products to an outsider. Last year, Infocus Corp., a digital-projector company, decided to hire SCS to run its supply chain--"the whole damn thing," says Kyle Ranson, president and chief operating officer. "It passed the logic test." With an increasing number of competitors breathing down its neck and profit margins shrinking amid constant demand for better, smaller projectors, InFocus needed to focus on developing new products. Ranson says it was also eager for more "velocity," getting parts and products in and out of inventory faster and holding less inventory, period. It couldn't afford to wait, and SCS already had the answers.

InFocus had no problem imagining UPS picking products and parts out of inventory and coordinating shipments. But repairs? SCS had never fixed digital projectors. "We were excited about their willingness to get up to speed, but we wondered, Do they have the personnel to repair one of these things?" says Ranson.

Enter Jason Bennett, a 23-year-old lead technician at SCS. Bennett can do it all--laptops, printers, in-vehicle monitoring system, and now digital projectors. Last fall, he and two team members traveled to InFocus headquarters in Oregon to learn about the machines. They attended classes and performed repairs alongside InFocus engineers. "I saw what they were doing, and I know we can do better," Bennett says. "This is my baby." Back in Louisville, he began designing the training program and repair process for SCS technicians, including a step-by-step worksheet.

So far, InFocus is pleased with the repairs. In fact, says Ranson, it's thinking about offering a new warranty in which customers would pay extra for a two-day turnaround, instead of the standard five to seven days. But there's no denying the risk in putting a major chunk of your operation in someone else's hands. That's why the handoff took InFocus six months. "When you're outsourcing the entire logistics of your business, it's something that has to be 100% dependable," says Ranson. "They [SCS] can't say, 'Sorry, it didn't work today' or your business shuts down."

Much of SCS's work occurs behind the scenes, so this arm of UPS is largely invisible to the public. Call Nike to ask a question or order shoes, for example, and you might get a Nike employee in Beaverton, Oregon. Or you might end up talking to someone in an SCS call center in Las Vegas. You won't know the difference; you're not supposed to. The handoff of this particular bit of the supply chain wasn't quite seamless, though. The UPS phone reps were a tad too formal for Nike at first, so the team flew up to Beaverton for training and exposure to the laid-back Nike way. "We want the sale, but if that's not what a customer is calling about, that's okay," says Ann Mullaly, director of consumer services for Nike.

ONE OF THE ATTRACTIONS of SCS is that it allows small companies to have a big-league supply chain. Take AND 1, a sports-apparel company based outside Philadelphia. Despite its modest size ($175 million in revenue in 2002), it has logistics experts around the globe, the latest inventory tracking technology, and two state-of-the-art warehouses in California and Kentucky. That's because SCS's resources are AND 1's resources, which is what persuaded AND 1's chief operating officer, Christina Houlahan, to give SCS her entire supply chain. "I compete on how rapidly I get our product out the door of the manufacturer and in the store," she says. "I'm at war with Nike."

The last skirmish was in November. The drop date for the company's latest shoe, the Rise Mid, was November 5. The shoe was scheduled to go on sale that morning across the country. TV ads featuring the Phoenix Suns' Stephon Marbury would air later in the day. If UPS didn't get thousands of cartons of the Rise Mid from manufacturers overseas to retailers in time, there was going to be hell to pay.

SCS didn't drop the ball. At the warehouse in Louisville, employees scanned the bar codes on incoming merchandise and compared it to what AND 1 had requested from the manufacturer. Then they tailored the orders to meet the requests of various retailers. Some require that shoes of the same size go in the same carton. Others require labels in a precise location on a box, so they can be easily scanned at the retailer's distribution center.

Without SCS, AND 1 would have shot an air ball the week after the Rise came out. Foot Locker, its biggest customer, called for more shoes. Ordinarily, AND 1 doesn't make extra inventory. The SCS team checked the computer system anyway and discovered a canceled shipment to another retailer. The software pinpointed the shoes' location in the warehouse, and SCS rushed them directly to hundreds of Foot Locker stores around the country.

AND 1 won the battle. The Rise became a best-seller. While design obviously had a lot to do with its success, Houlahan insists that a fast, reliable, coordinated supply chain was every bit as important. In that sense, AND 1, which outsources everything but its design, sales, and marketing, has the ideal partner in SCS. "We can't put stuff in boxes better than someone who does it for a living," says Houlahan. "It would be a nightmare for us to hire and manage a staff of pickers and packers--whoa."

But not for UPS. One company's nightmare is just another opportunity to deliver.

Chuck Salter (csalter@fastcompany.com) is a Fast Company senior writer.