When imported merchandise arriving on the West Coast can’t be sold due to some type of problem, such as incorrect labeling, loose threads, minor damage and the like, Quality Corrections & Inspections (QCI), a company with a base in Henderson, resolves the issue, quickly returning the merchandise to first quality and the supply chain. In doing so, QCI mitigates the potential supply chain disruption and saves retailers the costs of merchandise that otherwise typically would get sold wholesale, liquidated or thrown out.
“Anybody that imports, it’s not a question of if they’re going to have a problem; it’s when. We’re the creative, problem-solving experts,” said Randy Burk, QCI’s executive vice president.
For example, when a retailer placed an initial order with a manufacturer in Vietnam for 100,000 various handbags and they got to the western U.S., the inadequate packaging presentation meant the retailer couldn’t sell the merchandise. QCI inspected all of the handbags and repackaged the ones that needed it, saving the batch for sale.
With facilities in Henderson and Pennsylvania, QCI’s logistics role is helping get companies’ products through the supply chain to consumers.
This inspection, repair and rework company began serendipitously on the East Coast in 1986 when Randy’s father Ron Burk, a shoe manufacturer, helped importers who received subpar merchandise from an overseas supplier. QCI extended its footprint to Southern Nevada in 2003 by adding its current 42,000 square foot location to serve companies importing goods via the West Coast ports of entry, including Los Angeles, Long Beach, Seattle and Houston.
QCI chose Southern Nevada for its favorable business and tax climate, available workforce, ease of getting merchandise in and out of the region and quality of life, Burk said.
Today, the company specializes in reworking and repairing shoes, apparel, accessories and consumer goods and serves manufacturers, importers, retailers and distributors. QCI’s growth at its Henderson location has been “pretty steady over the years,” he added, in large part due to the increasing number of companies that could use its services popping up in the area. QCI is one of a significant number of Nevada logistics firms that, in some way, contribute to the storage and movement of goods, services or information within a supply chain between origination and consumption. Logistics has burgeoned into one of the Silver State’s key industries, according to the Governor’s Office of Economic Development (GOED).
Coming Into Its Own
Demonstrating that growth in logistics and operations, the Silver State added 20,912 logistics jobs between 2000 and year-end 2018, a 32.5 percent increase and more than double the national average of 14.6 percent, according to the labor market analysis firm Emsi. At the end of 2018’s fourth quarter, Nevada’s jobs in the sector totaled 85,353 versus 64,441 in 2000.
Job numbers grew the most, by 233 percent, in Storey County, home of the Tahoe Regional Industrial Center. The Reno Metropolitan Statistical Area saw 40.4 percent growth, adding 8,010 jobs, during those 18 years. The Las Vegas Henderson-Paradise MSA added 12,264 logistics jobs for a 31.7 percent increase. In contrast, Mineral, Lander and Churchill counties lost jobs during that period.
The industry had a particularly strong 2018 due to uncertainty surrounding potential trade wars and tariffs, particularly relating to imports from China and Mexico. Consequently, U.S. companies imported and stocked more merchandise than usual, said Scott Pruneau, CEO of ITS Logistics in Reno and Sparks.
“There was a massive haul on logistics. Rates were going up, margins went through the roof,” he added, noting that the flow leveled off since.
Generally throughout Nevada today, the industry continues to expand, experts said, in part due to the continuing influx of manufacturing and distribution companies. This is evident in the state’s number and diversity of industrial buildings to support, from a logistics perspective, all sizes of companies.
“People who manufacture and distribute goods need different kinds of help all the time,” Pruneau added.
Companies are drawn to Nevada, for several reasons, among them a favorable tax environment, business friendliness and strategic location. For QCI, its Southern Nevada location, on major freight routes, enables immediate east and west access to California via I-80, I-70 and I-40 and north and south access from Mexico to Canada via I-15 and the CANAMEX Trade Corridor, Burk said.
For ITS Logistics, Northern Nevada is ideal for West Coast distribution, Pruneau said. It’s centrally located, port access is good and rail access easy. ITS can get products to seven of the western states in one day and to the remaining four in two days.
“For companies around the world and the U.S. that want to distribute to the western 11 states, this is a pretty good spot to do it from,” he added.
Headquartered in Sparks and with locations in Reno, Phoenix and Los Angeles, ITS Logistics provides more traditional logistics services than QCI in the south. One is warehousing and distribution, storing and getting products to customers in the western U.S. Another is e-commerce fulfillment, filling and transporting orders of everything from books and office supplies to furniture and clothing.
The company’s third service prong is its freight brokerage division, a network of transporters who step in to run merchandise for other companies lacking a fleet in a particular area. For example, if Starbucks, one of ITS’ clients, needs product carried from Florida to Seattle, ITS, with no trucks of its own in Florida, would contract a company in that state and local area that could transport the goods, but ITS would remain responsible for the shipment. ITS launched ITS National in 2011, and now it is 120 local (Reno) employees strong and ranked as the #44 freight brokerage firm out of more than 20,000 registered freight brokers in the United States.
“We hired five to six people a month in the last year and a half, and we have no plans to stop,” Pruneau said.
Overall, ITS Logistics’ business grew an average of 15 to 30 percent annually since its founding in 1999, but in the last four years the rate accelerated, Pruneau said. The company expects 2019 revenue to reach $300 million.
The logistics firm now is six months into rolling out its three-year strategic business plan that involves further growth and geographical expansion. ITS is striving to reach $1 billion in revenue over that period and take its workforce to 750 people from its current 500. To do both, it will invest in the people and the technology necessary to enable its own and its customers’ success.
“We’re figuring out how we continue to replicate this [Northern Nevada model] in other marketplaces over the next three to five years,” Pruneau added.
The Logistics Giant
Amazon is an e-commerce company involved heavily in logistics with eight facilities throughout Nevada. They are a sorting center, delivery station, and Prime Now fulfillment center in Las Vegas; a robotics fulfillment center for small- and medium-sized products, a fulfillment center for large products and a return center in North Las Vegas; and a fulfillment center for large products in Reno.
Amazon chose Nevada for these operations for the ample regional customer demand, a “dedicated and talented workforce and great local support,” said Ashley Wedlund, general manager of one of Amazon’s North Las Vegas fulfillment centers.
“Our fulfillment centers in Nevada allow us to reach more customers throughout this great state.”
At those facilities, where the process of getting a customer’s ordered goods to them begins, products arrive on trailers and are moved on conveyor belts inside, where millions of other products are stored at the ready.
A major trend within Amazon is its use of robotics, which occurs at its North Las Vegas fulfillment center. Mobile robots, for instance, lift movable shelves of product and deliver them to associates at work stations. They also shift inventory between the center’s floors and stack product containers on pallets for the next stage of fulfillment.
“Robotics increase efficiencies, enabling us to process orders and get customer packages on trucks faster with quicker delivery times to customers,” said Wedlund.
To fill a customer’s order, robots help pick the items, taking them to an associate. Once all of the merchandise is picked, it’s put on and moved along a conveyor belt for packing. En route and by computer, the order is scanned, its progress tracked. After packing, the box is weighed to ensure a correct order then labeled. It’s sent to one of several trailers for transport based on its shipping method, delivery speed, and destination.
The company attributes its growth to sticking to its Day 1 approach: “to make smart, fast decisions, stay nimble, innovate and invent, and focus on delighting customers in Nevada” and to its more than 4,000 employees in the state who make it happen.
As for Amazon’s next couple of years in the state, Wedlund said, “We look forward to growing here in Nevada and continually engaging the communities where our great associates live and work.”
Trending in the Industry
Supply chains continue to evolve. Twenty years ago, the term was barely used as the chain contained few links, Pruneau said. A company would order goods, hire a carrier to move them to the company’s only, roughly 1 million-square-foot warehouse, from which the merchandise would be distributed across the U.S. This model no longer works because it’s too slow.
“Supply chains today require very quick turnaround,” Pruneau said. “The way inventories are managed and the way commodities are traded dictate a shorter delivery schedule.”
Amazon, for instance, in select areas and on certain items, offers one-day or same-day delivery. The use of inland ports is one way turnaround is quickened, said Pruneau. It shortens the transit time of goods by moving the place of distribution inland, where the distances to the ultimate destination are shorter. Now, instead of merchandise being broken down and distributed from coastal ports, they now send it to inland ports, Reno and Las Vegas for instance, for breakdown and distribution there.
With the pressure on retailers and, thus, the logistics industry for delivery speed and diverse inventories, today’s supply chains look much different from yesteryear’s and continue to evolve. For instance, Amazon in June announced one-day delivery on more than 10 million items for Prime members.
Supply chains are fully integrated, Pruneau added, meaning they take into account all kinds of available information, such as the defined customer base, the location for sourcing raw materials, best places for manufacturing and storing goods, how customers consume goods, delivery speed and method. Technology and data sharing make that possible.
QCI is seeing diversification in the supply chain, specifically with regard to global sourcing of merchandise. More and more retailers have started obtaining goods from manufacturers in Vietnam and Cambodia instead of or in addition to China, Burk said.
Another trend is reverse logistics, the delivery and processing of returned, unwanted merchandise, said Burk. With free shipping and returns, e-commerce returns are far greater than brick-and-mortar returns due to consumers’ buying habits, like buying several sizes and styles of one item, then returning most of them. A major challenge for companies is how to manage them.
“It’s good for the customer’s experience, but it’s not so good for the retailers,” he added. “Logistics operations are seeking internal and external solutions for dealing with the volume of returns.”
Because many returned items are still of good quality and may need just repackaging or minor reworking, QCI is expanding into that segment of the logistics industry.
“Our company is trying to help companies recover more of the upside of the returns versus going the liquidation route,” Burk said. “We’re putting some new programs together where can do inspections and repackaging and make [merchandise] factory fresh so [retailers] can resell it as new.”
No Stopping in Sight
For the next few years at least, Nevada’s logistics industry should continue to flourish, expand and adapt to meet customers’ and consumers’ needs and demands, according to the experts.
“Even if we hit an economic downturn, the need to deliver goods to people within one to two days’ transit time isn’t going away,” Pruneau said. “It’s going to get more accentuated. That’s great for this marketplace.”