For some retailers, it may seem early to headline back-to-school issues, but for Music & Arts Centers this is the beginning of a summer-long symphony of unique demands across its supply chain.
Music & Arts Centers, founded in 1952 and acquired by Guitar Center in 2005, has 107 stores in 21 states. The privately held niche retailer caters to emerging musicians, schools and music educators. (Guitar Center was purchased by private-equity investor Bain Capital last year.)
In addition to a diverse merchandise mix of musical accessories, Music & Arts Centers rents and repairs instruments. At the end and beginning of each school year, typically in June and August, the retailer receives, refurbishes and re-distributes musical instruments across the country. Therein lies its biggest logistics challenge, a typical rental volume of 200,000 instruments per year and end-of-school returns to the tune of 150,000 instruments.
Pat Wiegand, senior distribution manager for Music & Arts Centers, said the company has already begun shipping instruments for the coming school year from its main distribution center (DC), located near the company headquarters in Frederick, Md., to its 16 support DCs around the country.
“We use a hub-and-spoke distribution model so we can build inventories close to where our customers are and orchestrate rapid fulfillment when school starts,” he said. “The company has developed an extensive sales history over the decades and can forecast demand fairly accurately for the markets we serve. The return rate on rental instruments is also very predictable, about 60% each year, and we keep a bumper stock to begin building inventories at each [regional] DC in May.”
Returned instruments usually arrive by the third week in June, and most can be refurbished in time to distribute before schools resume in August or September.
The rental business, which accounts for as much as 75% of Music & Arts Centers’ revenue, relies on multiple sales channels including in-store purchases; on-line orders; affiliate retailers that are typically small, locally owned music shops; and a Music & Arts’ sales team that visits schools and sells through the band programs and music classes.
Rental instruments are delivered to customers through store locations, schools and home delivery. The challenge is making sure all the instruments arrive in perfect condition and in plenty of time for the first class or band practice.
Distribution is further complicated by the fragility of products—string instruments are particularly vulnerable to intransit damage—and by the sizes and shapes of products, which range from flutes to tubas and cellos.
“We developed a reusable ‘uni-pack’ box that will hold approximately 45 instruments and is perfectly cubed so we know precisely how many will fit on a truck,” explained Wiegand. “We can seal each box so it is tamper-proof, and unique packaging protects the instruments inside the boxes.
“This is extremely cost-efficient because we can better utilize the trucks. Also, the uni-pack boxes, which cost about $100 each and have a typical three-year life, are collapsible so we store them at the [regional] DCs and use them for returning instruments at the end of the year.”
There are also instances when the uni-pack boxes are utilized on the inbound side.
“Recently we had a large shipment coming from Yamaha and timing was essential,” stated Wiegand. “We absolutely had to have the merchandise picked up from the Yamaha dock doors just as soon as they gave us the marching orders.”
Music & Arts Centers relies on third-party provider TBB Global Logistics, New Freedom, Pa., to arrange cost-effective and timely transportation.
“TBB’s truckload division, Smokin’ Stampede, arranged the shipment for us and it felt like a stampede was arriving at our DC—we received 10 truckloads in two days, which is a lot by our standards,” he continued. “Another of the advantages of the uni-pack boxes is that, when vendors use them, we can unload trucks faster because we don’t have to worry about how the product was packaged.”
OfficeMax 1Q sales fall on weak economy
NAPERVILLE, Ill. OfficeMax announced that for its first quarter ended March 29, total sales decreased 5.5% to $2.3 billion compared to the first quarter of 2007. Net income increased in the first quarter of 2008 to $63.3 million, or 81 cents per diluted share, from $58.5 million, or 76 cents per diluted share, in the first quarter of 2007.
OfficeMax Retail segment sales decreased 5.5% to $1.11 billion in the first quarter of 2008 compared to the first quarter of 2007, reflecting a same-store sales decrease of 8.7% partially offset by sales from new stores. Retail same-store sales for the first quarter of 2008 declined across all major product categories due to weaker U.S. consumer and small business spending and the negative impact of the Easter holiday occurring in the first quarter of 2008.
IKEA to open first U.S. manufacturing facility
DANVILLE, Va. IKEA, through its subsidiary Swedwood, announced that it will open its first U.S. furniture manufacturing facility on May 21 in Danville, Va. The 930,000 square-foot Swedwood factory will produce a variety of wood-based IKEA products, the company reported.
“We made excellent progress on construction last year and our installation of equipment and machinery has gone very smoothly,” said Bengt Danielsson, North American president of Swedwood. “Now our primary objective is to complete appropriate operational training for 175 coworkers as well as to ensure a seamless production and packaging process.”