How CDW Delivers on the Back End

Doug Eckrote, senior vice president of operations for the technology products and service provider CDW, provided a blueprint to how CDW — which had $8.1 billion in annual sales last year — handles its product distribution in a session at the recent Internet Retailer Conference & Exhibition in Chicago.

Competition=Savings
With the abundance of freight options available (FedEx, UPS, DHL, USPS), CDW contracts with them all, Eckrote said, to get customers the best rate. The company’s Web site lists every shipping choice for customers after a purchase, with pricing included. Invariably, customers select the lowest price, Eckrote noted. “If a carrier raises its prices, it’ll see a drop in business,” he said. “Our account managers will tell customers to pick the lowest cost.”

CDW customers also have the ability to decide whether they want their products drop-shipped from the manufacturer and can choose overnight or deferred (ground) delivery.

Groundhog Day
CDW ships most of its products same day (on average, 45,000 units per day), leading to a fresh start each morning. “Nobody goes home till everything is out the door; it’s like starting a new business each day,” Eckrote said, noting that 88 percent of orders are shipped on the same day they’re received, and 95 percent are shipped within 24 hours. It accomplishes this through its two main distribution centers, one at the company headquarters in Vernon Hills, Ill., and its newest site in North Las Vegas.

For CDW, the North Las Vegas distribution center site was chosen strategically in collaboration with its suppliers and distributors. California accounts for more of CDW’s business than any other state.

While not wanting the distribution center in the state of California, for reasons Eckrote wouldn’t disclose, the Las Vegas location was ideal. “Next day delivery can now be shipped on the ground, which is a tremendous cost savings,” he said. “Customers could care less what warehouse the product comes out of as long as it gets there when they expect it.”

The decision has paid off. Express shipping costs are down 40 percent, and carrier compliance went from 10 percent to 98 percent. The average time in transit for a product is now 2.4 days.

Eckrote advised the audience to consider the following factors when choosing a location for their distribution centers:
* proximity to suppliers and customers;
* cost of living and labor pool in that community; and
* cutoff times for delivery.

Automation in the Warehouse
CDW has gone to a paperless system to fulfill orders in its two warehouses. The fulfillment process is barcode-driven, Eckrote said. The automated system predetermines the shipping box size needed, serial numbers are captured from the order history and the product is speed-picked. The boxes are then sent to the print and apply scan tunnel, where the barcode is read and assigned the order and applied the shipping label.

“We have to do a lot of presorting to get the latest cutoff times,” Eckrote said, but it’s worth it because it “improves the customer experience.”

Work Together
CDW collaborates with its carriers regularly, Eckrote said. “Use your carriers as partners,” he said. “Compare both reports [quarterly business reviews] to make sure you’re on the same page.” He also noted that CDW engages in annual contract negotiations with its carriers, provides a quarterly business review of their performance, negotiates the best (i.e., the latest) cutoff times with them and uses account managers to shop for the best rates.