A Healthy Bottom Line

When Glen Pirie came to Swanson Health Products four years ago with a background in retail operations he was used to serving big customers like Wal-Mart and Home Depot. But he soon realized that for a consumer catalog, “A lot of the same business principles apply—like giving customers what they want.”

The difference in the catalog field, he says is that there are “a lot more customers when you’re dealing with catalog orders. At Swanson, we have about 750,000.”

Today, Pirie overseas purchasing, receiving, manufacturing and logistics at Swanson, which markets about 6,000 vitamin and health supplement products, including national and proprietary brands, in addition to healthcare-related items and books.

Swanson’s business is 90-percent catalog; it also has one retail store in Fargo, ND, and a small but growing online business. All product fulfillment is handled from one distribution center. Recently, I asked Pirie how he creates a productive and profitable back-end operation.

Catalog Success: What are your fulfillment goals?

Pirie: To push out every order in an eight-hour time period. Everyone here is committed to that end. Last October we built a new facility to enable us to grow to double our sales. Our old facility didn’t lend itself to that. Previously, we operated out of a two-building facility. We had to double or triple touch every product before it shipped. Now, the whole thing is wireless. Orders flow seamlessly from one end of the building to the other.

CS: Presently, only 8 percent of your business is online—less than most catalogers. How are you integrating the Internet into your business?

Pirie: Swanson serves mostly older customers age 45 and older. And we’ve found that they’ve been somewhat slower to adapt to the Web than other demographic groups. We think that will happen, but slowly.

One trend we’re seeing is as young adults want newer, faster and better computers, they’re passing their older systems to their parents, and so more of them are now getting online. So we’re gearing up for more online business.

With Internet access to information, consumers are becoming more educated. We’ve increased the amount of

information we put online, so customers can use the Web as an information tool, for instance to find out about pill sizes or product label information.

E-mail also has worked extremely well for us in communicating with existing customers, sending them offers and information.

CS: What’s the relationship between marketing and operations at Swanson?

Pirie: To maintain our high fill rate—98.2 percent—we work closely with marketing. Planning is key. We have a committee of six that meets once a week to discuss budget projections, order projections, and how many books will be mailing and when. Representatives from our call center, MIS, accounting, operations and executive management also are involved, with the intent to share information.

CS: How large a role does technology play in the operations side of your business?

Pirie: The bigger we get, the more technologically advanced we need to be. Right now, we’re in the midst of a big technology project installing radio frequency technology. This will allow paperless stock transfers and item-by-item location of products, which will enable us to better plan space requirements and track all products to consumers. It also will enable us to eliminate some physical inventory, reduce keying errors and cycle inventory more efficiently.

We also look to improve our inventory turns above eight per year, even though we’re already at a 99.6-

percent accuracy rate on inventory in the building.