Merging the distribution operations of two auto parts suppliers should have been as easy as replacing a windshield wiper blade. But it turned out to be more like an engine rebuild.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Creating one company from two after a merger or acquisition is a bit like assembling a jigsaw puzzle in which not every piece is designed to fit. Almost invariably, the companies involved end up having to rework a few of those pieces before everything falls into place.
That was certainly the case when O'Reilly Auto Parts, a large auto parts distributor and retailer based in Springfield, Mo., purchased the 1,340-store Phoenix-based CSK Automotive Inc. in July 2008. From a geographic standpoint, the CSK acquisition made eminent sense for O'Reilly—O'Reilly's stores are located mainly in the Midwest and Southeast, while CSK's are mostly in the Upper Midwest and West. But the purchase also brought with it the need to unite two disparate operations. And one of the merger's biggest challenges arose out of the fact that the two companies had very different distribution models.
Almost from its founding in 1957, O'Reilly has pursued what it terms a "dual market strategy," serving both the do-it-yourself market (customers who do their own auto repairs) and the do-it-for-me market (garages and repair shops). The two markets carry very different service expectations: While the do-it-yourselfer may be willing to wait for a part, an auto technician with a car on the lift doesn't have that luxury. He wants the part no later than tomorrow. So O'Reilly had designed its distribution network to provide daily replenishment to both its stores and professional installer customers. Among other things, that meant it had a fairly extensive DC network (the company currently operates 19 facilities in 15 states), with sites strategically located within overnight reach of customers.
By contrast, CSK had built its business around the do-it-yourself market—a model in which weekly replenishment was deemed sufficient. That was reflected in its distribution network, which included just four main DCs at the time of the acquisition—DCs that were set up to handle bulk picking, not the piece picking that typically takes place in O'Reilly's DCs.
Tick tock!
It was a given from the start that O'Reilly would convert the CSK network over to its distribution model, rather than vice versa. The company considers its daily replenishment capabilities to be a key market differentiator. "One competitive advantage we have is the ability to provide overnight service to our stores," explains Greg Johnson, O'Reilly's senior vice president of distribution operations. "That's what we've built our reputation on. To run our fleet of 350 tractor-trailers nightly is costly, but we are confident that this more costly model continues to provide the highest level of service to both our do-it-yourself and do-it-for-me customers, and therefore continues to drive higher revenues for both our company and our shareholders."
It was also clear from the outset that the team charged with overseeing the distribution network integration would be working against the clock. O'Reilly is committed to completing the project by the end of next year, so that it can move forward with plans to expand its business in the former CSK markets. "We cannot grow the wholesale model to its fullest extent until distribution is in place," explains Johnson, a 27-year O'Reilly veteran and one of the key executives involved in the CSK integration. "We cannot go to installers and say 'We deliver once a week' and expect them to make us their primary supplier."
Adding to the challenge was the need to carry out the integration project while simultaneously overseeing a long-planned expansion. So far this year, O'Reilly has opened a new DC in Greensboro, N.C., and moved its Kansas City distribution operations into a new, larger facility. In addition, the company is on track to open 150 new stores in 2009.
Network news
In order to meet the aggressive network integration timeline, the team began planning months before the acquisition was completed, says Johnson. The first step was to conduct an overall network evaluation to determine where the company would need to add DCs and what should be done with the existing CSK facilities. At the time of the acquisition, CSK was operating four main DCs— located in Arizona, California, Michigan, and Minnesota—plus four smaller facilities.
Based on its network review, O'Reilly decided it would need to add four more centers, to be located in Seattle, Denver, Salt Lake City, and Moreno Valley, Calif. The Seattle DC is scheduled to open in November, with all four scheduled for completion by June 2010.
That left the question of what to do with the four CSK sites. After some review, O'Reilly decided to close CSK's Minnesota facility, consolidating its operations with those of an existing O'Reilly DC in the Minneapolis/St. Paul area. O'Reilly has also decided to relocate operations at the former CSK facility in Dixon, Calif., to a larger DC in Stockton, Calif., that will give it more room for growth.
But not all of the former CSK facilities are slated for closure. O'Reilly decided to keep but remodel the Michigan and Arizona DCs, installing additional automated equipment to support the company's daily delivery model and to accommodate projected growth. The Michigan remodel was completed in April; work at the Arizona facility is under way.
In both cases, the conversions have involved upgrading the facilities' material handling systems to shift from bulk picking to piece picking. For instance, the Michigan remodeling included the addition of a three-level pick module, conveyor, automated sortation equipment, racking, seven shipping lanes, and a new returns area.
Down to business
At the same time, planning was getting under way for the new DCs O'Reilly would open. With deadlines looming, the team got right down to business, reports John T. Giangrande, a senior account executive for Fortna Inc., the systems integrator and supply chain consulting firm that's working with O'Reilly on the DC remodeling and construction program. "We took a look at the time frames and broke those down into site selection, design, engineering, and implementation phases and go live dates," he says. "We worked through all that in the first few weeks."
Despite the time constraints, O'Reilly opted against the one-size-fits-all approach to DC design. "We cannot build 'cookie cutter' DCs because we design our DCs based on market potential," Johnson says. "The last five or six are similar, but no two are alike."
The design work has truly been a team effort, involving input from Fortna, O'Reilly, and managers from the former CSK. Larry Ellis, former senior vice president of logistics for CSK and current Western divisional vice president of distribution for O'Reilly, praises his new colleagues for their open communication. "The O'Reilly team has not only worked with us to... teach us the new systems," he says, "but they have also included the West Coast distribution team in the numerous planning meetings through each phase of the conversion."
All the planning has paid off. The project continues on schedule well into year two, putting O'Reilly in a strong position to move ahead with its expansion. When the integration is completed, O'Reilly will have a total of 23 DCs—and enough capacity to give the planning team a short breather. "Prior to the CSK acquisition, we were on pace to open a new DC about every 18 months," Johnson says. "With this plan, we will have the capacity in the distribution network to take us out for a couple of years."
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”