Interview: Edward Witlox of RHIEM Services: Logistics for Mass Customization … for Build-A-Bear Europe and others

Courtesy of RHIEM Services, www.rhiem.com. all rights reserved!Mass customization companies are different from "normal" ones in a number of ways, like their need for a very well working webshop/ configurator that lets the consumer configure his dream-product in an easy yet powerful way. Or the special logistics setup required to produce/ assemble a customized product right after the customer submitted his order and to ensure timely delivery to his doorstep.

From my experiences with MC companies, especially small and medium sized ones, these logistical matters can be a serious barrier when ventures reach a critical number of sales and need to scale up their fulfillment and/ or webshop system.

Witlox, EdAt the MC2012 conference in June I had the pleasure of meeting Edward Witlox, Director of Business Development & Sales at RHIEM Services, a German company originally founded as a printing service provider which has since then successfully evolved into an alround e-logistics expert. As part of their efforts to positon themselves as a partner for MC companies they are, amongst others, responsible for a lot of steps in the logistics chain of Build-A-Bear, famous seller of individualized plush bears.

Edward was so kind to agree on giving us an interview about his views on the logistics aspect of MC, barriers faced and ways to overcome them, and why it can be mission critical for expanding companies to get a strong (e-)logistics partner in time.

FTP: Edward, you told me that RHIEM Services sees itself as a B2B service provider for all logistical needs of mass customization companies. This is an interesting value proposition. So what is it in more detail?

EW: RHIEM is a so called 3PL+ or Value Added Logistics Service Provider, offering, directly and indirectly, a complete of set of logistic services, e.g. (bonded) central warehousing incl. B2B & B2C fulfilment (pick, pack & ship), handling of returns, and of course all shipping. But we also developed into offering customized assembly and production of products for each individual consumer of our clients. And we can manage the complete e-commerce platform or a shopping cart plugin for existing web shops.

FTP: This sounds impressive, but how scalable are your customization services?

EW: Based on a very robust logistic process design (in terms of structure, systems, skills, staff, strategy, style and shared values) RHIEM offers services, scalable to the changing needs of its customers, allowing organizations with no warehouse capacity or without a large enough staff or expertise to manage inventory and orders, saving them costs, while offering a degree of flexibility. As a result, companies of all types are serviced with unlimited scalability.

Several of our current customers which started working with RHIEM while they were a start-up considerably grew during the years, also due to a very good cooperation between parties.

FTP: Pretend I was an entrepreneur on the MC market. How do I profit from contracting with a large company like yours?

EW: Entrepreneurs acting on the MC market will face a momentum to consider whether they remain doing the logistics themselves or decide to outsource. In the later case they will need a partner with a robust logistic process being capable of seamlessly aligning to the processes of the customer company. Being scalable in every facet, without any minimum restrictions to organizational size, turnover or storing volumes to start the cooperation, RHIEM guarantees entrepreneurs an enduring long term logistic solution. RHIEM is such a Service Provider.

As an ecommerce company, MC companies are still acting as a niche player, because their customer base will be mainly exist out of early adaptors of their products. These companies might extend their market, by going cross border. In those cases there are very few LSP’s, offering a scalable ecommerce platform with payment methods for every European country with features like multi-languages, multicurrency and VAT handling; completely integrated with a warehouse management system.

FTP: In your company you are especially responsible for MC clients. From your professional experience in the last years, what separates a mass customization company from a "traditional" one in terms of logistics needs?

EW: From out of a logistic perspective MC companies have a more demanding, intensive and complex logistic process, which also changes over time more rapidly. In general, offering a broad variety of product attributes or combinations to realize a customized product, results in a more complex manufacturing and assembling process, demanding more resources, with a bigger risk on mistakes, resulting in higher costs.

By provisioning flexible, but robust logistic processes, RHIEM is capable of matching complex customization demands, eliminating the risks, against slightly higher logistic costs.

FTP: One of your larger clients is Build-A-Bear Germany. What exactly do you do for them?

Buildabear workshopEW: RHIEM operates the complete B2C e-logistics for BAB, hosting and managing the web shop in terms of e-fulfillment. Actually we host the complete product catalogue and shopping cart. In practice this means that we handle the orders and take care of the financial receipt. After the payment is received, we do the picking of the chosen bear and its attributes, followed by the assemblage. Before packing the product in an eye-catching shipping carton, a fully personalized birth certificate of the bear is printed and added to the bear. Finally, we take care of the distribution of the parcels in Germany, Austria, Switzerland as well as in the Netherlands, Belgium and Luxembourg.

Besides this, we also take care of the B2B fulfilment, by replenishing the BAB stores.

Both logistic flows are being preceded by the main logistic product flow from the manufacturer towards our central warehousing, with RHIEM taking care of these flow as well as the customs clearance for entering Europe.

FTP: Can you give any other interesting examples of MC clients you are working for and what was/is special about your cooperation?

EW: RHIEM services several clients with our Full Color Digital Print-On-Demand techniques, producing high quality individualized marketing materials.

FTP: Do you see logistics as a barrier for growing MC companies which did or are about to make the jump from a few dozen to several thousand sold articles each month? What can be done to overcome this barrier?

EW: All companies jumping from a few to numerous sold articles per month will face a momentum that logistics will become a big hurdle. Especially for MC companies, offering a large variety of product attributes, this hurdle is becoming an even larger barrier. To overcome such a barrier, MC companies do have to make a strategic decision, to ‘make or buy’. Because for many MC companies logistics are not their core competence, seriously hampering their organizational growth, it is wise to consider outsourcing in an early stage or invest heavily in resources and gaining logistic knowledge to do themselves.

FTP: MC is definitively a trend. What does it mean for logistics companies like RHIEM?

EW: With its ambition to become a Mass Customization Logistics Expert, RHIEM will have to extend their e-manufacturing and e-assembly capabilities, like embroidering and engraving to align with several kinds of modularity methods.

FTP: Which changes are you awaiting in the coming years and how do you adapt to best position yourself?

EW: While Europe is still experiencing a delay in cross border ecommerce (on avg. 4-6% of total sales) this situation is changing due to the reduction or even elimination of cross border barriers. RHIEM already has a major competitive advantage in handling cross border fulfilment. Now also optimizing its reverse logistics capabilities it will cover the complete forward & reverse logistics internationally.

Specifically on the MC trend we will face more and more companies adapting any type of mass customization, emerging from segmented standardization into tailored or even pure customization. RHIEM will align with these developments by anticipating and proactively investing in the resources, essential for deploying its manufacturing and assembling activities efficiently and effectively, resulting in the fact that RHIEM continuously will be able to stay tuned with changing customer demands.

FTP: Did you (have to) adapt a lot to satisfy the needs and wishes of your MC clients?

EW: Adapting to satisfy the needs and wishes of our clients is one of our core competences. Historically RHIEM transformed from originally a printing company into a Value Added LSP by adapting to changing customer demands. Nowadays this is one of RHIEM’s values, actively investing based on customer demand or trends to ‘Stay One Step Ahead’.

FTP: From your observations and experiences with MC companies so far, which tips and advises would you like to give in regards to the logistic challenges they are/ will be facing?

EW: The success of MC is in the execution

[not only in the concept]. The logistic process is essential in this stage and crucial for satisfying the customer. Due to the fact that technologies follow each other even faster and customer demands are changing more rapidly in the future, it will be mandatory for a MC company to adapt to these developments. Logistics will thereby become more and more one of the key differentiators between success and failure of a MC initiative.

By focusing on marketing, sales and customer service, MC companies will have a daytime job to deploy these activities well. In those cases, they need to rely on a proactive flexible, but robust logistic partner. RHIEM is ready for it, to fill in this role successfully on behalf of the customer!

FTP: Edward, thank you very much for these interesting insights and outlooks! Im definitively looking forward to follow your work in the coming years and see which ways you come up with to improve e-logistics for MC companies.

More information about RHIEM Services at their company website and also on twitter.

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.