Launched in Australia in 1997, LG Electronics, providers of whitegoods, browngoods, mobile phones and IT products, have utilised 3PL until 2003 when they had totally revamped their supply chain strategy. The move to in-house distribution proved beneficial for LG, with the business enjoying strong retail sales growth of around 30% per annum.
During the past couple of years, LG Electronics have moved quickly to establish their own logistics network including major distribution centres in Sydney, Melbourne, Adelaide, Perth, Brisbane and Townsville. Key partners for LG during this period of rapid growth have been Dematic’s storage equipment division Colby Storage Solutions , that have designed and equipped all of LG Electronics’ distribution facilities.
LG’s National Supply Chain Manager, Tony Harris explains why the consumer electronics specialist has made the switch. LG Electronics carried out a fairly extensive analysis of the impact that bringing the 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.
He adds that the consumer electronic goods market is competitive and the effectiveness of the supply chain has a huge affect on sales in Australia. He also gives an example that if a customer is shopping for a product like a flatscreen TV, and if the brand they like the look of is not available, then they will probably buy something else.
The improvements made to customer service levels by bringing distribution in-house have been instrumental in the LG Electronics’ business achieving better than the expected sales growth. Their service levels to regional areas have also improved substantially.
LG Electronics not only had to develop a plan for building the distribution centres around the country, but also had to build the team of people who would run the facilities on a day to day basis.
For this, LG Electronics worked solidly in both areas for around six months before opening their first DC in Melbourne in October 2003. From that point on, LG Electronics were rolling out a new distribution centre every couple of months, until a few weeks ago when they had commissioned a new Townsville DC, which services customers in Far North Queensland.
LG Electronics have recently completed their sixth distribution centre design and fit-out with Colby Storage Solutions, who have the ability to add value through their innovative approach to solve LG Electronics’ material handling and distribution challenges.
Right from the start, Colby Storage Solutions took the time to get to know LG Electronics’ business and to really understand what the imperatives were for them from a logistics perspective. They have worked closely with LG Electronics at all times to deliver solutions rather just equipment, constantly modifying their approach.
Colby Storage Solutions’ products for LG are really tailored to meet their needs. Most of their facilities incorporate several different types of storage systems to provide an efficient way of storing and handling different types of products.
LG Electronics have drive-in racking for fast moving browngoods, double deep racking for other high volume products, selective racking for slower moving goods and raised storage areas that maximise the use of overhead space. LG Electronics also utilise the block stacking where appropriate.
Whenever LG Electronics’ storage requirements have altered due to changing market forces, Colby Storage Solutions have always provided an appropriate solution.
As a result of much stronger than expected sales growth, LG Electronics had to extend the warehouse areas at their Sydney, Melbourne, Adelaide and Perth DCs, which was completed by Colby Storage Solutions.