Revival Parts sells parts for motorcycles from the ‘70s and ‘80s, a niche market that limits its options when it comes to purchasing. That makes it harder to establish the redundancy central to many supply chain resilience strategies.
But the ecommerce business has still found ways to be less dependent on overseas partners. Revival buys its products from manufacturers in Japan, China, Taiwan and, to a lesser extent, Europe and Australia. For years, those manufacturers would also design new parts for the company.
A few years ago, the business hired an engineer with deep industry knowledge to take over product development. The engineer uses a 3D printer to see what parts look like and if they fit properly before sending a design to overseas manufacturers. 3D printing has become popular in business because it has many potential uses for companies—about two-thirds of U.S. manufacturers use it, and 51% use it for prototypes and production, per PwC.
Engineering new products domestically shrunk Revival’s product development time from 12 months to three months. That ability to engineer and ultimately receive products more quickly should help the company capitalize on sudden sales growth. Demand increased about 25% in the second quarter across Revival’s four ecommerce sites—Mikes XS, Dime City Cycles, Z1 Enterprises and Randakks Cycle Shakk—since the pandemic started.
Jerry Marks, director of business analytics and project management at Revival, believes the last few months mark the beginning of a major shift in retail. He noted that inventory has grown faster than sales over the past 20 years as countless online retailers emerged but only a small number of brick-and-mortar retailers closed.
“I think there’s going to be a massive structural change that’s for good,” Marks said. “I don’t know if we’re always going to be growing at the rates we’re growing, but I do think that you’re going to see a lot of brick and mortar close and a lot more online purchases happen.”
Marks believes Revival can capitalize on the opportunity by focusing on one key metric: gross margin return on investment (GMROI). GMROI measures the rate at which inventory contributes to gross profit by looking at margin and turn, and the company tracks all of these KPIs in NetSuite. As GMROI for a part or category goes up or down, Marks can determine what to order and in what quantity. It also helps the retailer identify opportunities to develop new products.
Revival believes sales data, which it needs to calculate GMROI, is critical to its success. That’s why it doesn’t sell on any third-party marketplaces that could then see this information.
“The key to the ecommerce space is your sales history, to know what products you can buy and get a suitable return on investment on,” he said. “That’s what’s going to allow you to adapt to any shifts that are happening in any supply chain—knowing what drives your business, [which is] gross margin return on investment.”
In addition, that sales history helps Revival with demand planning. NetSuite allows the business to see demand for specific products as well as components used in assemblies. Revival can use that data to calculate appropriate safety stock levels or determine if it makes financial sense to order the vendor’s minimum quantity for a certain Kawasaki air filter.
Understanding these numbers will help the business deal with unexpected obstacles. If one manufacturer closed, Marks said he would put that capital toward other products that could generate comparable GMROI. It’s worth noting that Revival is in a different position than businesses that sell commodities because its inventory turns very slowly.
Revival is proof that resilience comes in many forms. It’s not limited to supply redundancy or finding onshore suppliers and manufacturers, and creativity is key as companies look to make changes that will minimize the impact of the next disruption. What works for one business may not be possible or effective for another, but all have room for innovation.
“The biggest thing I would continue to focus on is look in the mirror,” Marks said. “Within almost every organization, there’s a million opportunities to make yourself better, and if you just put metrics around it, you come up with some ideas and you track it every week … you’re going to see your results get better, no matter what environment you’re in.
Localizing Your Supply Chain: A Cost-Benefit Analysis explains the advantages and challenges of moving sourcing and production to North America and the steps organizations should take if they want to make this transition. Get your copy of the white paper here.