Inside FCP’s New Ecommerce Distribution Center

Humble Beginnings

FCP was established in 1986, by Harry and Kathy Bauer, as a brick and mortar store, in Groton, CT. They set out and served the local European and Asian Import auto parts market for years, making first-rate customer relationships and service, blended with top tier quality products, a priority from day one.

FCP's original location. - Groton, CT

FCP’s original location – Groton, CT

In 2001 their son Nick, noticing customers were venturing online for purchases, began selling the stores inventory on Ebay. This was followed shortly after with a new website.

I joined Nick, in 2002.

Together, with only two computers, five employees, a small 2,000 square foot office, and a tractor trailer filled with inventory, we grew the business to $8 Million in annual sales by 2007. We did this by keeping with the same priorities that the original brick and mortar store had, focusing on customer service, relationships with our community, and only the finest products at the most affordable prices.

sales

In 2008, we moved the business to a 20,000 square foot warehouse and 6,000 square foot office in Old Saybrook, CT.  At the same time, we introduced an order and warehouse management system to the business that allowed us to automate and streamline all of the basic eCommerce functions. This included a point of sale for the call center, automated inventory sourcing for purchasing functions, picking and shipping for the warehouse, inventory management for supply chain and fulfillment improvements, as well as a basic CRM (customer relationship management) functionality. We expanded the business to 33 employees and grew it to nearly $15 Million in annual sales by the end of 2013. All of this was done through re-investments of profits and a small credit facility.

At the time we were headquartered in an old-outdated-manufacturing plant, and it was during this period of growth and expansion, it became apparent that we were quickly outgrowing our current facility. The town was a tough fit for where we were headed. It was not conducive for a strong talent pool and the design and infrastructure of the warehouses and offices were not adequate to support growth.  When this was realized, we began looking for our new eCommerce distribution center.

Space & Building Requirements

FCP’s Square Footage Growth Plan

We then consulted with UPS supply chain solutions in order to help develop an Inventory Square Footage Growth Model based on current and future warehouse operations and growth projections. During this process, UPS conducted interviews with key FCP personnel and analyzed three years of sales and SKU data. By examining SKU and order characteristics, such as order size, lines per order, weight and cubic space per order and SKU, they were helpful in estimating the square footage needed. This was based on our existing racking dimensions and future growth projections. They also proposed new warehouse layouts that included optimized pick locations and cube optimization in our new distribution center.

UPS also assisted in developing a warehouse requirements and document that included specific building requirements, such as the interior layout, plumbing, HVAC, fire protection, general lighting, warehouse floor layouts, vehicle dock doors, general yard, interior, and structural frame of our new distribution center.

The Location

We also hired CTRR, a real estate advisory firm that provides strategic transaction and advisory services to better reduce risk and cost, while increasing value in commercial real estate commitments. These recommendations were based on our warehouse requirements document, produced by UPS Supply Chain Solutions.

CTRR was able to provide site selection and inspection services – financial terms, occupancy costs, geographic parameters, security needs, site infrastructure, accessibility – as well as, test-fits, preparation of offers, negotiation of business and operational terms, financial analysis of term sheets, and negotiation of the final term sheet.

When all was said and done, we settled on Milford CT. It was an excellent location within two hours from both New York City and Boston. This prime location also has quick and easy access to I-95 and the Merritt Parkway and opened us up to a larger talent pool with it’s close proximity to New York City.

Office Design & Furniture

Our overall floor plan layout was designed by RTSPC Pinnacle, an architectural design firm that specializes in commercial space build outs.

They refined the original office area layout by addressing potential conflicts within our existing building elements, provided room configuration plans that accommodate desired furniture and furnishings, as well as furniture plans for the offices, open areas, and meeting and pantry spaces. They also provided power, voice, and data receptacle locations in a plan to correspond with the room configurations.

Reception

FCP’s brand new reception area

RTSPC consulted on the interior design palette for our floor, wall, ceiling, and lighting finishes. They recommended specifications for office furniture and furnishings, including private offices, open area work stations, meeting and pantry furniture, and window film (glass meeting rooms) versus window blinds. By surveying and evaluating our existing furniture and furnishings for potential relocation, they were able to find cost effective ways for us to reuse instead of throw away. They were also able to provide recommendations on custom designed items, including custom millwork and personal furniture specifications, that differed from job function, level of seniority, and personal preferences.  - View FCP’s Final Design Control Document

We went with RTSPC’s recommendation for furniture, which included Allsteel’s Benching Solutions, to better help inspire creativity and collaboration within teams and promote the feeling of community. For seating, we chose the SitOnIt Sona Chair; an elegant-slim-profiled chair, that is ergonomically friendly. For our guest chairs, we chose SitOnIt’s Focus Side Chair and in the conference room sits Compel’s Mojo chair.

FCP's Call Center

FCP’s brand new call center

Echoes and reverberation were a big problem in the call center at our old facility, so we designed the new facility with noise reduction in mind. Fabricmate’s Sound Dampening Acoustical Baffles were brought in to absorb the reflected sound in our new call center. The baffles were suspended from the overhead structure of the call center by cables. They have already proven to provide fantastic sound absorption, even when all of our representatives are on the phone simultaneously.

Allsteel’s Benching Solution complimented the acoustic baffles with sound dampening dividers. This stopped at head height when sitting down to make sure that the room still felt open and collaborative, while providing just the right amount of privacy. - View FCP’s Final Furniture Design Control Document

RTSPC Pinnacle took FCP’s company culture, brand, values, and cultural bottlenecks into consideration throughout the entire design process. This ensured that the final product was aesthetically pleasing while complimenting the brand, as well as functionally designed to cure cultural bottlenecks throughout the organization. Our furniture was provided by The Atlantic Group.

Warehouse Design & SKU Optimization

FCP's new Distribution Center Layout (click for larger image)

FCP’s new Distribution Center Layout (click for larger image)

We went with W&H Systems, a material handling system and warehouse consulting firm, based out of New Jersey, to assist in the layout and design of our new distribution center layout. This was to maximize efficiency and space and avoid any unnecessary re-work in the future. They performed on-site observations, interviews, and time study data gathering, to assess the current flow of material, equipment, space utilization, and processes.

The areas of observation included, receiving of materials, put away, replenishment, pick (freight and small package), pack, ship (freight and small package), and returns. While working with W&H Systems, we developed a layout that improved the receiving and put-away process, optimized the “Just in Time” operation that accelerates our orders, and inventoried the existing racks and shelves, in our Old Saybrook facility for re-purpose.

Racks

Best practices were also discussed in depth, specifically relating to inventory management, equipment, space utilization, and processes (receiving, put away, replenishment, pick, pack, ship, and returns). Highly visible magnetic signs lined the aisles for easy designation  of picking zones as well as a “responsive” magnetic labeling system that allows to expand and contract the amount of locations on any particular shelf to maximize cube optimization. All of this resulted in a layout that was optimized for space. It produced significant labor savings, from the transport of inventory to the order picking to shipping.

The Future

FCP’s growth has mirrored my own growth and the growth of the employees that proudly call our new facility their home.  The employees here continue to educate one another, refine our model, and build great, innovative things.  Just in the first two months after our move FCP has already implemented an Online Pickup Center and built an automotive DIY video studio.

This facility is not the pinnacle for us, it is our foundation for scalability and growth. A long time ago we decided that to build an iconic brand and enduring business, significant investments needed to be made into the company, culture, and customers. It’s not the easiest way, but it’s the right way.

How To Build a Profitable Online Business: The Art of Scalability

The path to success for building an online business isn’t about growth – it’s about your ability to scale. While the two terms are often mistakenly interchanged, there’s a huge difference between growth and scalability. Scalability is key to growth and profitability, but growth is not key to scalability and profitability.

Growth

When you are “growing” a business, you are adding expenses at the same rate you’re adding revenue. Growing for the sake of growing can be really bad and growing bigger is not always better; it can destroy value by exceeding the capacity of your workforce and operations, it can put a stress on your service levels and financial controls, add more complexity and bureaucracy to your organization, and it can accelerate your business into a different competitive space where it will compete against more efficient competition with bigger balance sheets. Growth stresses people, processes and controls and fundamentally changes the dynamics and culture of the business if it’s not managed appropriately.

Scalability

Scalability on the other hand, is when you are adding revenue at a faster rate than you are adding resources. By definition, “scalability” is the ability of a system, network, or process to handle a growing amount of work in a capable manner or its ability to be enlarged to accommodate that growth. In layman’s terms, highly scalable companies demonstrate the ability increase capacity without a huge increase in overhead and have minimal impediments to growth. When you’ve developed a business that can add revenue without having to add resources, infrastructure, or expenses to support that growth  – you’ve unlocked the key to profitability and sustainable online business.

So, what are the keys to scaling an online business? High customer lifetime value and loyalty, low acquisition costs, and high operational efficiency.

Customer lifetime value

Customer lifetime value is a predictor of profitability of during the relationship with a customer. Improving your customer lifetime value improves your profitability and return on marketing investment. In other words, you can afford to spend more on marketing since there is a high likelihood those customers come back repeatedly, covering your acquisition costs. Improving customer lifetime value is often done through loyalty programs and customer service initiatives.

Low Customer Acquisition Costs

Customer acquisition costs are the costs of a business to acquire a new customer that includes marketing expenses, discounts, or incentives. When you develop and innovate your marketing strategies to improve your customer acquisition while reducing the costs to acquire those customers, you have built a scalable acquisition model. Business models fail when comes when the cost to acquire customers exceeds the lifetime value, or the ability to monetize those customers over their average lifespan.

High Operational Efficiency

Improving operational efficiency hash a positive impact on company culture, improves profitability, provides you a more stable cash flow, and allows you to exponentially increase revenue while incrementally adding resources. Process improvements, business process outsourcing, and increased training and development of employees are just a few of the many strategies used to improve operational efficiency.

While both scalable and non-scalable businesses can be successful and grow — only scalable businesses can achieve sustained periods of strong profitability and high-growth characteristics that are attractive to investors and strategic buyers.

Annual Letter to Employees from the President & CEO

As the CEO it’s my job to set the tone of the organization for the upcoming year. For us in 2014 we want to make sure we stay true to our vision and values as well as keep focus on the core business, something that we didn’t do in the past. As a manager or leader of your department or organization, you must set the tone for your team. Nowhere in a business is influence more valuable than where tone is set from the top

Here’s a copy of our annual letter from the President & CEO that we sent out to our 33 employees:

Team,

Nick and I would like to thank you for all of your hard work and outstanding contributions this year. We know how much time and energy this company demands and we deeply appreciate all of your efforts to make it a fantastic success.  Our loyal customers can always count on you, your team can always count on you, and we can always count on you to go that extra mile.  We have to thank you again for all you do for FCP.

2013 was a transformational year for us. We have enjoyed double-digit revenue growth bringing us to nearly $15 million in annual sales, we returned to profitability; and, most importantly, we re-established our values and made significant improvements to the organization developing a solid culture of service, support, and recognition. 

As we grow and become more successful, it tends to attract bigger and better opportunities. As we succeed, a key challenge becomes prioritizing those opportunities, and what we’ve learned from experience is that trying to do too much results in a lack of clarity, over-commitment; and we wind up disappointing people, exhausting ourselves, or simply failing.

To prevent this complexity we have made a commitment to only pursue opportunities that help strengthen our core business, the core that has produced over a decade of remarkable revenue growth, the same one that has helped us through 2013 stronger than ever.

Now, we have a simple goal for 2014: Stay focused, follow our vision, aim for simplicity, and continue building our great team. We have committed ourselves to never lose sight of what we are trying to achieve. We will continue to focus our energy and attention on our vision:  to set the standard for quality and service in the automotive industry. 

FCP is entering a new era, in a new facility, with great talent, and a great plan.

Let’s welcome 2014 as our new home, we’ve all earned it.

Happy New Year,

Nick & Scott

What did you do to set the tone for your department or organization for 2014?

Constructive Criticism: 3 Simple Ways to Give Effective Negative Feedback

Let’s skip the “praise sandwich” and learn how to give candid constructive feedback.

In my previous article, The Power of Positive Reinforcement, I emphasized the importance of recognizing and reinforcing positive behaviors. There comes a time though when delivering negative feedback is inevitable. Most managers in my experience find it very difficult to give negative performance feedback, but if you show that you are motivated by the desire to help and not to punish, it doesn’t have to be an unpleasant task.  Here are three ways that I preface constructive criticism or negative feedback to encourage my employees and keep them motivated:

Let them know that they are valuable enough to invest time and resources into them:

 “I appreciate all you’ve done for us. The company is very supportive of your efforts and committed to putting resources behind your growth and development. There are a few areas where I think we can make some improvements to make an even bigger impact on the organization. “

Let them know that you are supportive of their development and success:

“You’ve shown a lot of commitment to this organization and drive to improve yourself. I know you have ambitions and want to improve so please realize that as your manager, I’ve got to be hard on you. “

Let them know that they contribute to the success of the organization:

“You’ve really made a difference here. I’m glad you joined the team and I’m happy to see the progress you’ve made.  If you put in more time in these areas I know you can add even more value to the organization. “

Remember, the goal of any feedback, positive or negative, is to improve the behavior of the other person to bring out the best in your entire company. Learning how to deliver negative feedback will produce positive results and strengthen the relationships with your employees.

So, how do you give negative feedback? I would love to hear your thoughts!

The Secret to Making Good Decisions in Business

Someone recently asked me “Are you scared your going to make a bad decision and the company will suffer?”

Of course I’m scared. I make bad decisions all the time but when it’s time to make a big decision I almost always get it right.

Here’s the trick – an incredibly important concept discussed by Jim Collins in his book Great by ChoiceBullets Before Cannonballs – first “firing bullets” to gain empirical validation before making a big bet (firing a cannonball).

We shoot lots of bullets before we launch cannonballs. You can consider these “bullets” as low-cost, low risk tests or experiments. Your missed shots are quick and have minimal impact on the company. When bullets hit the mark your load your cannonballs and unleash everything you’ve got.  Successful companies find ways to test the waters before investing large resources into a project or making a critical business decision.

 

 

 

The Power of Positive Reinforcement

A close friend and mentor once told me, “young strong leaders typically aren’t good at positive reinforcement because they don’t need it themselves.” He was right, I was awful at giving positive reinforcement. In fact, I don’t think I gave any of my employees positive feedback or encouragement when they did something right, but I could quickly point out when they did something wrong.  I never quite understood the value of positive reinforcement until it came together for me while reading an excerpt out of the book 212 Degree Leadership.

Imagine you are sitting blindfolded with a tinker toy model on a table in front of you, just out of reach. Your task is to reproduce the model in less than two minutes. You cannot touch the model, but you do have a supervisor who can provide you with limited feedback and you have all the supplies you need. Unfortunately, your supervisor has been instructed to provide you with negative feedback only!

Can you imagine how you might feel? You do not know exactly what to make and every time you grab the wrong part you are told “no” or “wrong.” If you happen to grab the right part, you hear nothing at all. Not very inspiring, is it? Yet the simple demonstration represents the disconnect people all over the world frequently feel when the vision is not clear and they are not supported with positive direction and feedback.

Frustration. Anger. Anxiety. Depression. At that very moment I understood how detrimental and demotivating only giving negative feedback was to my employees. Not an ideal working environment for anyone. Plus, it’s exhausting and stressful for the person delivering the feedback.

Now let’s try another round of the exercise. This time, imagine you are still blindfolded with two minutes to reproduce the model, but your supervisor can now provide you with positive feedback. In other words, if you grab a part you need, your supervisor will say “yes” or “right.”

Self-Esteem. Motivation. Confidence. These are the feelings that come to mind when I’m receiving positive reinforcement, giving me the physiological freedom to be creative and do great things.

We all know that positive reinforcement makes it more likely that the behavior will occur again in the future but we often focus our time on what employees are doing wrong versus reinforcing what they are doing right. As I change and grow, I’m learning the value of giving much more positive than negative feedback. Making this shift in my approach was transformational to the culture of my organization, my employees well being and attitudes, and my own personal development and well being.

Try it for a week. I started small by creating two reminders each day in my Google Calendar reminding me to give positive feedback to an employee that is deserving of the praise.

You can also use the five to one method;  for every time you offer corrective action or constructive criticism to an employee, make sure you acknowledge them for five things they’ve done right.

Just remember to keep it authentic though. Too much positive reinforcement can lead to praise overload, diminishing the value.

Managing Business Growth Stages- A Diagnostic Chart

This diagnostic chart by PricewaterhouseCoopers is a fantastic tool that helps identify your company’s stage of growth as well as the management concerns within those stages. It’s something I have referenced back to throughout the years and gives valuable insight into what you may face at the next stage of your business. Planning is one of the most important parts of running a business, and when you know what to expect you’ll dramatically boosts the odds of your success.

We’ve been online since 2001 with annual revenues of $15 million and 34 employees. Our business currently has the characteristics of survival, growth, and expansion with the majority falling in in the growth stage. I give copies of this diagnostic chart to members of my management team and we compare our assessments. It not only gives my team a road map of things to expect as the business matures but also promotes a healthy dialogue between the group.

Here’s a link to the chart: PWC Diagnostic Chart

Why Do Businesses Fail?

“It’s fine to celebrate success but it is more important to heed the lessons of failure.” – Bill Gates

We all know that making mistakes can be a hugely positive learning experience, so what about business failures? Blogs, books, and podcasts are full recipes on how to succeed but largely silent about how to cope with failure. Why is it taboo to talk about failures in the context of business and leadership? Understanding and learning why business fail can give us greater insight into how to successfully manage and grow our organizations.

So why do business fail?

Is it a lack of leadership or bad management? No competitive differentiation? Shrinking or declining industry? Cash flow problems? Lack of business acumen or financial skills? Lack of planning? In my opinion, business fail for two reasons; it’s either a people problem or a lack of focus. Our 2011 our company was a on the brink of failure because of those exact two reasons.

People Problem (Culture)

The people of your organization, their habits, and values collectively make up the culture, good or bad. Without a strong culture, change initiatives will fail, there will be limited interaction and collaboration between employees and departments, no progress will be made on critical business initiatives, there will be high levels of inconsistency and ambiguity, and there will be a sharp decline in levels of service resulting in a loss of customers. If you don’t have the right people or culture in place, your business will not succeed.

Lack of Focus

The second reason I think business fail is a lack of focus on the core business. As businesses grow and become more successful they often tend to diversify away from their core business. This results in lack of clarity, over-commitment, and improper allocation of business resources. Businesses decide to focus growth on the weaker areas of the business, mistaking them for areas of opportunity, and the core business suffers as a result.

In your experience or opinion, why do business fail?

How Do You Spend Your Time at Work?

Mastering the art of getting shit done takes discipline and lots of planning. As the CEO of a $15 million online business I often get asked how I allocate my time during the working day. Well, here it is:

Employee development – 50%

This  is the most critical part of my job and the one that I allocate the most time resources toward. Investing in employee training and development strategies is critical for the success of any business. It’s the only way to create sustainable and managed growth. As an entrepreneur who’s bootstrapped a business from $0 to $15 Million, there was a time that I did it all; janitor, shipping clerk, customer service, order entry, human resources, purchasing, accounting. It’s debilitating and exhausting, and will only lead to burn out. As a leader, you’ve got to leverage yourself through employees.

Tactical – 20%

This is the day to day, answering emails, talking with employees, putting out fires. Emails usually take up a majority of this time and I try to limit the email to less than 10% but after all, email ” is a game of tetris.

Process Improvement – 10%

I focus on two things here: How can I simplify the process and how can I make the process run better? Typically I will either work directly in the process or scan through email correspondence in my teams email queues or Gmail groups (we have email groups for sales, product team, customer service, products, purchasing, warehouse, and technical support.)  I’ll find the bottlenecks and discuss with the department leads how we can simplify and improve.

Thinking & Strategy – 10%

This is my quiet time which is usually on my commute home. I reflect on the day and assess my performance; did I make improvements to the organization? Did I stay focused on what I set out to do in the morning? Did I get caught up in day to day (tactical) issues that prevented me from allocating my time appropriate? What do I want to accomplish tomorrow?

This time also includes working directly with my leadership team in achieving organizational alignment.  It usually consists of a 2 hour offsite each week.

Professional Development 10%

This includes listening to podcasts and audiobooks, or reading articles and blogs. My commute to work is 45 minutes so it’s perfect amount of time to get into a chapter of an audio book or two 20 minute podcasts.

How do you spend your time at work?

Can You Start an Online Business With Little or No Money?

Yes, you can. In fact you should stop procrastinating and start right now.

We started our business initially with only $9,000 equity.  With that said, you don’t much money, if any at all, to start a business. We turned $9k into $15 million all through reinvestment of profits and a small bank credit facility. We haven’t had to raise any equity from private equity or venture capital and we have no plans to in the future.

So how do you start a business with little or no money? Just start selling, anything.

You can find products through a domestic wholesale marketplace or distributor or international marketplace like Alibaba. Spend a couple hundred bucks on products you think you may be able to resell for a small profit (if you’re lucky, a decent profit). Can’t afford a couple hundred bucks, find something in your closet, garage, or attic you don’t need.

Start selling the product through a site like Ebay, or Amazon that requires no website startup costs but has a large, global reach. Learn how to ship through the US Post Office both domestically and internationally.

Every dollar you make for the first year, plow right back into buying more products to sell. You’ve got to be committed to putting everything back into the company and making little or no money. The primary focus should be growing your customer base at all costs. After a year, you should be at a point where there may be a little profit showing that you can start investing into growing the business.