The show must go on

The show must go on

Approximately 130 million times a year, someone sees a product pitched on QVC's television show and picks up the phone to order it. Somehow, those products - 107 million packages last year - must be delivered to the customer. That's where Paul Day and his team come in.

Day is international transportation manager for QVC, the television shopping channel that operates 24 hours a day, 364 days a year - Christmas is the sole day off. About 1,700 products are displayed on the company's television shows each week, including 250 that are new. More than 90 percent of orders placed to eight QVC phone centers or over the Internet are shipped within 48 hours by UPS or the U.S. Postal Service.

"The closest comparison I can make is to a seasonal retailer," Day said. "But our deadlines are continuous. They never stop."

QVC's transportation team falls within the company's supply-chain group, which encompasses distribution, transportation, and planning and logistics. The supply-chain group works closely with other branches of the company; it doesn't do QVC any good to offer a product it can't deliver.

The transportation group is responsible for providing transportation and duty information for buyers to help determine sourcing costs from various countries. When the company's buyers consider a purchase from an overseas source, they check with the transportation unit to determine costs and schedules.

"Different divisions will ask, 'Where's the product? The air date is coming up,'" Day said. "My group and I do our best to keep everyone informed of any potential problem. Product doesn't go on the air unless it's available for sale. The whole supply chain has to be working, from how the buyers buy and set up dates on their purchase orders, to how we receive the orders."

QVC's product breadth and diverse, ever-changing supplier base present challenges. Company suppliers range from some of the world's biggest companies to an entrepreneur who invented a barbecue sauce in his garage, Day said.

One day early last month was typical. The QVC channel featured apparel, and to meet demand, Day's group managed the transportation and customs clearance of 600,000 items generated from 150 purchase orders, 80 of which were direct import, with QVC taking possession of the goods overseas. Goods sent by air were trucked from New York, with ocean freight trucked from the Port of Hampton Roads, Va., to the company's 700,000-square-foot distribution center in Lancaster, Pa. It arrived a week before the apparel was shown on television. That's the optimal time to get product to a distribution center to allow enough time for processing, Day said.

"The item goes on the air, it's shown in five different colors, and it sells out in five minutes," he said.

The company's main logistics initiative over the past year has been to install a Web-based transportation-management system developed by an enterprise-software company that provides more accurate tracking of shipments. "We want to improve visibility from origin to destination," Day said. "It's an ongoing rollout." The company's previous system was adequate, but was implemented at different times, so systems had difficulty communicating with each other, he said.

QVC, based in West Chester, Pa., is a subsidiary of Liberty Media Corp. Its initials stand for quality, value and convenience. Since hitting the airwaves in 1986, QVC's revenues grew to nearly $4.9 billion in its most recent fiscal year.

QVC wasn't the first shopping channel (Home Shopping Network is older by about a decade), but it's the biggest. Based on its 2002 revenue, QVC was the 51st largest U.S. retailer, according to the National Retail Federation. Its revenue places it third among television networks, behind only NBC and CBS, according to Broadcasting and Cable magazine. The QVC channel is available in 85 million U.S. households, and more than 95 percent of cable homes. It has also gone international. QVC Deutschland, QVC Japan, and QVC UK are seen in a total of 50 million households.

The channel is best known for its jewelry and apparel programs, but it also has sold $80 million worth of Dell computers in a single day. One popular show sells auto-racing collectibles, attracting a primarily male audience.

Any logistics manager will confirm that the complications of a supply chain tend to be directly related to the number of individual items moving through it. On top of normal complexities, QVC also has a stringent by-hand product-inspection process that frequently triggers last-minute adjustments. "Nothing ships unless it is quality-inspected first," Day said. "Since our product is going business-to-consumer, there's no way to fix or change a product-related problem."

Items that are direct imported are inspected twice, once at point of origin, and again at the distribution center. "Whole purchase orders are sometimes canceled, so we have to constantly monitor availability of product," he said. Fifteen percent of products pass inspection on the first try, while a third fail completely.

QVC's partners are responsible for returns of products that don't meet purchase-order specifications. Sometimes, if QVC has a long-term relationship with the supplier, QVC will arrange return transportation to the supplier's consolidator. The returns are handled at the end of each month. "It's not a huge challenge," Day said.

In 2002 and 2003, QVC's peak shipment months were August, September and October. The company shipped about 48 percent of its goods during those three months. But the peak seems to be flattening out. The normally slack months of February and March were noticeably busy this year, Day said. "Like-to-have-products are becoming need-to-have products," he said.

QVC has eight phone centers and eight distribution centers worldwide. These centers have a combined floor space of 3.8 million square feet. All four of QVC's U.S. distribution centers are along the Eastern seaboard, in Suffolk, Va.; Rocky Mount, N.C.; Lancaster, Pa., which handles mostly apparel; and West Chester, Pa., which handles jewelry.

Day, who joined QVC eight months ago after serving as international logistics manager at apparel wholesaler And 1, has begun implementing standards for performance measurement. The first two measure how well vendors meet their agreed-upon shipping windows, and measure communication between QVC and its carriers and forwarders. Day said his goal is to implement 25 performance measurements.

QVC moves its jewelry items by airfreight. Imports from Asia make up 90 percent of the company's 9,000 TEUs a year in ocean volume. Unlike most importers from Asia, QVC relies on all-water service to the East Coast, primarily Hampton Roads. Last year, QVC contracted last year with six ocean carriers - MOL, Hyundai Merchant Marine, Yang Ming, "K" Line, P&O Nedlloyd and Lloyd Triestino. "We like all-water. It reduces the number of times cargo has to be handled," Day said. QVC uses Century Distribution for consolidation services, and two NVOs to handle smaller shipments.

Day is negotiating carrier contracts for the coming year. "We negotiate based on our commodity mix," he said. "But our negotiating strategy has changed. Before last year, it was to try to get better rates. But carriers had to have a correction. Carriers say they want to hold the line, and not have any dramatic swings in either direction. So we project that for the next three to five years, carriers are going to keep rates at a pretty consistent basis."