US companies commit to European market

Despite the European economic downturn, that market remains vital to U.S. companies with a big presence there. Given changes to the market, however, companies have been looking for ways to shave their logistics costs and become more efficient. This effort did not start with the economic crisis. It follows a tradition of locating near major seaports and airports and adjusting logistics venues to meet market needs and those of customers. U.S. companies with a presence in Europe are particularly keen in streamlining their transportation and distribution processes, as well as hard and soft costs of land, electricity and labor. Manhattan Beach, CA-based SKECHERS exemplifies this model. A billion-dollar global leader in the lifestyle footwear industry and a high-performance footwear brand, SKECHERS is in a fast growing mode. With foresight in anticipating increased European market share, SKECHERS opened a distribution center (DC) in Liège in the Belgium region of Wallonia nearly eleven years ago. SKECHERS chose to come to Liège after studying locations in Amsterdam, Venlo, Antwerp, and southwest Germany. “One of the main reasons we are here is the availability of land,” says Sophie Houtmeyers, SKECHERS vice president, Distribution Operations, EDC. But Wallonia’s high unemployment rate also benefits the company by making it easy to hire good workers that are flexible and loyal. Liège also offers proximity to customers. “We needed to have a place close to our customers,” she says. “Because we are a European DC, we need to be close to all of the European countries.”

At one time, SKECHERS had a very small European presence but were looking to do their own distribution. Today the Liège facility is approximately 418,500 square feet in size and operates as the company’s biggest DC outside the United States. All totaled, SKECHERS has five DCs around the world. Its North American DC, located in Rancho Belago, CA, is a massive 1.82 million square feet and is the largest Gold-LEED certified building in the United States. The others are located in Brazil, Chile and Japan. “Our supply chain is global, which is the most cost efficient way to run things,” she remarks. While Germany and the United Kingdom are SKECHERS’ two largest European subsidiaries, the company ships to Iberia, Italy, France, the Alpine region, across Benelux, and many other European countries—all from Wallonia.

That reason in particular, makes Liège, Belgium, ideal. Some five to 35 trucks leave the DC daily. Those going to the UK use the ferry via the Flemish Port of Zeebrugge, which is only about one and one-half hours away. Today, Zeebrugge growing business is competitive with ports from Hamburg to Le Havre. Zeebrugge handles a volume of 45 million tons on an annual basis, which is less than the Port of Antwerp’s approximate 184 million tons, but as Houtmeyers says, “Antwerp is nearly full, although they are expanding.” All shipments are delivered by truck direct to customers in all European countries, even to Russia where a Russian distributor handles the product. The exception is Switzerland where sometimes shipments must be put on rail because of that country’s nighttime Alpine truck restrictions. “We deliver to our customer’s stores and DCs,” she says. “We pre-pack everything.” SKECHERS is even doing e-commerce in Germany and the UK where customers can buy on-line. “This means we ship directly to the customer.” SKECHERS uses its own transportation dispatchers. “It’s more cost efficient to outsource trucking companies,” Houtmeyers says. “We select them based on location.” As for sourcing the footwear, SKECHERS obtains most of its footwear from China with some coming from Bangladesh and Vietnam. Products arrive via container ships. All ocean transport is handled by a third party logistics provider. Only emergency shipments are flown. “In the beginning we brought everything through Rotterdam,” Houtmeyers reveals. “But a few years ago we switched to the Port of Antwerp.” The Port of Antwerp is closer to Liège (one and one-half hours), and traffic between the port and Liège is much less congested than that surrounding Rotterdam. This is important since all shipments are trucked to the Liège DC. Houtmeyers reveals that she is considering shipping containers all by water from Antwerp via barge to Liège via the Albert Canal. There is a growing effort in Europe to use “greener” transport venues. Plus with Europe’s roadways becoming ever more congested, barge can offer an alternative. A plus, the Albert Canal connects with the Ports of Antwerp and Zeebrugge. Antwerp is 14 navigation hours from Liege’s inland ports; Rotterdam, 24 hours; Dunkirk, 48 hours, and Zeebrugge, 24 hours. The Liege Port Authority manages 32 ports located along the Meuse River and the Albert Canal in Liege Province, and has direct links with major European seaports of Northwest Europe. “The only reason we are not using barge yet is the fact it takes an extra day for the boxes to arrive in Liege,” she says. The cost is the same, and there’s even a new container terminal being developed. “But right now we need a barge here every day,” she adds. Another advantage for SKECHERS is the fact the company is designated as an Authorized Economic Operator (AEO)—a regional trade facilitation program similar to the C-TPAT program that is recommended by the World Customs Organization to ease trade and customs clearance for tax compliant and prominent importers and exporters. For SKECHERS, this means that once its containers are unloaded off the ship, they can be taken immediately by truck to its DC. Cooper Vision Cooper Vision, headquartered in Pleasanton, CA, is a good example of a global company with wide European exposure within its global footprint. The bulk of Cooper Vision’s contact lenses are manufactured in Puerto Rico, where it operates one of the largest contact manufacturing facilities in the world. That business is supplemented by manufacturing sites in Scottsvile, NY; Hamble, Warren Close and Delta Park in the United Kingdom, and a small facility in Spain. The company’s operations are basically divided into four regions: the United States; EMEA (Europe, Middle East, Africa); Asia Pacific; and Russia and Turkey.

According to Michele Bosa, European logistics director and general manager in Liège, Cooper Vision plans to open operations in Russia and Turkey next year. All lenses are packaged as finished goods at three packaging centers in Puerto Rico, Scottsville, NY and Hamble, UK, then sent to DCs for distribution. The company operates four DCs in Continental Europe: Liège, Belgium; Milan, Italy; Budapest, Hungary, and Madrid, Spain. From these, contact lenses are distributed to the European marketplace. The United Kingdom is treated separately. Cooper Vision DCs there serve that market. “The DCs keep the lenses in inventory in order to fulfill the needs of the customers,” reports Bosa. “We do customer fulfillment for the local market.” Cooper Vision used to operate more DCs around Europe – the result of numerous acquisitions, but consolidated them to create efficiencies and support wider growth. The company operates its largest Continental European DC in Liège, which it opened in 2005 after considering Germany, France, Italy and the UK. The reason, Bosa explains, is Wallonia’s central location in Europe’s primary markets of France, the UK, Italy, and Germany. Germany is Cooper Vision’s largest market. “We considered other options, but Liège also offered a logistics culture that is well developed,” Bosa adds. Originally the DC encompassed a 55,000 square foot DC, but was later doubled to 120,000 square feet in 2012 because product requirements and shipments were becoming more complex. “For one, we do private labels and to do that you need space,” he says. “Customers are also changing requirements. Whereas the service used to be standard, now customers are becoming more creative. Home delivery is the new trend, as well as customized shipping, and the inclusion of wearer specific information.” While the home delivery business is still small and not Cooper Vision’s fastest growing segment, Bosa explains distribution requires new technology and machines. “For instance, our IT system knows if you have received your lenses and that in three months or so you will need more. It automatically renews the order,” he explains. While the Liège facility does not provide customer service or sales, it collects orders from call centers. The Liège facility receives orders in real time and fulfills them to big chains, doctors, hospitals, etc. “We ship within 24 or 48 hours from order receipt,” he says. “We run solely a distribution operation.” Not only are the contact lenses shipped from Liège to European markets, the DC is also part of Cooper Vision’s EMEA region. “We provide services to countries that are located within this geographic area,” he says. “We also ship into the Middle East and Eastern Europe. We use local distributors where we do not have a direct presence.” For obvious reasons, Belgium shipments go by truck, but for shipments farther afield, such as the Nordics, Cooper Vision uses air freight. “The decision depends on geographic distance and geographic preference,” Bosa states. Air shipments depart from Brussels Airport, not Liège’s airport that is served by TNT. “We do not utilize express services,” he reveals. “It’s too expensive. We prefer to use commercial airlines.” That means SAS for the Nordics, and Brussels Airlines for much of Europe and some locations beyond. Brussels Airlines flies to 65 destinations in 20 European countries as well as long-haul flights to North America and East, Central, and West Africa. “We use air freight because there is no weight and little volume,” Bosa says. Speed of delivery is also a major consideration. Johnson + Johnson Since 2007, Johnson + Johnson’s Medical Devices and Diagnostics (MD&D) group has been operating its European DC in Courcelles, also in Belgium’s Walloon region. The state-of-the-art, 355,000+ square foot facility serves as the European and worldwide hospital distribution hub for products such as sutures, knee, hip and spine implants, drug-eluting coronary stents and other medical products for surgery procedures. The service is direct via next day delivery. Inbound, the devices arrive at the J+J facility from suppliers in 11 countries worldwide, including the United States, Switzerland, and Israel. Outbound, they are shipped direct daily or weekly to hospitals in Europe and elsewhere in the world as well as other J+J logistics centers in China, Brazil, Japan, and Memphis, TN.

Forty percent of the shipments are for direct distribution; 60 percent for export replenishment. Six percent of the direct shipments go to countries like Iraq, Iran, Yemen, and Morocco. J+J uses Europe to ship products for replenishment because J+J has many suppliers who manufacturer their products there. “We consolidate all of the shipments and ship them,” reports Zeger Vercouteren, executive director, J+J, Worldwide Government Affairs and Policy. In 2012, the company delivered 1.3 million orders, representing 6,000 boxes a day. It handles 65,000 different products, 50 percent of which are sutures. “We do not ship big orders,” Jean-Charles Farrand, explains the facility’s senior manager for Distribution Services. “In Europe, our biggest business is in Germany, France and the UK. We ship approximately 30 pallets every day for the UK and Italy.” The Belgium DC is the company’s second largest for MD&D distribution behind Memphis with its 770,000 square foot facility, 100,000 square feet of which is refrigerated. The fact the location is only two hours from Charles de Gaulle Airport (Paris) and one and one-half hours from Cologne/Bonn Airport (Germany) gives it an advantage, especially since the shipments are trucked to the airports then distributed using eight different carriers, including DHL and UPS. The company also uses Liège Airport, home to express carrier TNT. “Our stock of shipments also arrives from Europe, the United States “Connectivity is key,” says Farrand. One interesting product it handles is its OrthoKit, surgical instruments that are returned for repairs. “We clean, but do not sterilize them,” he says. “We then ship them out again.” CEVA Logistics, one of the world’s leading supply chain companies, handles the entire logistics infrastructure, staff and operations at the Courcelles facility. Their work is solely for J+J, including all picking, packing and shipping.