Economic Strategy of Patagonia’s Transportation and Distribution

Transportation/Distribution The bottom line for any business is to increase profits.  Without the goal of making money, a business will fail and no longer exist.  A simple practice that many companies often use to maintain efficient business is to periodically evaluate the process in which they operate.  In 2011, Patagonia re-evaluated the way their transportation network was set up, and it has proved to be quite profitable. Patagonia had their distribution tracked and evaluated.  Over 60% of their products are manufactured in Asia.  To get them to their warehouse, the products (i.e. the jacket which was purchased by Point Loma Nazarene University Spiritual life) was (up until 2011) shipped to the Port of Los Angeles/ Long Beach harbor.  Shipments would come in from Shanghai, Manila, Haiphong and other Asian cities where Patagonia products are made.  From the Port of Los Angeles, product must be transferred to their distribution center.  When Patagonia began, this was in Ventura at the headquarters.  In 1996 the distribution center was relocated to Reno, NV as the company grew.  Reno is 523 miles away from the Port of Los Angeles.  The re-evaluation of this transport determined that this distance caused unnecessary costs.  Shipping via truck has higher fuel costs than those of boats.  There are also regulations that require truck drivers to rest for 10 hours after 11 hours of driving.  This regulation can potentially cause delayed deliveries.  There are also potential mechanic breakdowns, weather conflicts, and other unexpected interferences that can occur during long distance shipping via truck. There were reasons for Patagonia keeping their port in Los Angeles, such as: grown relations over many years, reasonable costs, convenience of “vessel sail times”, flexibility of three separate trucking routes in the case of weather or other unpredictable interferences, among other things.  As a part of their 2011 evaluation, Patagonia had their freight forwarder company “Expeditors” analyze the transportation route.  As a result, Expeditors suggested that Patagonia move their receiving port up to the Port of Oakland.  While this move allows trucks only one route from Oakland to Reno, the greater proximity has proven to substantially improve other costs.  Fuel and maintenance costs have greatly decreased, and drivers are capable of making the 229 mile drive well within ten hours.  This allows drivers to avoid lengthy truckstop layovers, and provides for more timely and predictable delivery. There are so many different aspects that go into the whole of a company.  It is easy for companies to continue with operations that have been a part of the company for many years.  While many companies overlook the foundation of their routine, re-evaluating all processes can prove to be very profitable.  Ten months after Patagonia shifted their receiving port to Oakland, they saved an estimated $324,000.  As a company that is also environmentally conscious, the move also reduced their carbon footprint by 31%.  For such a simple adjustment to the company, Patagonia has been pleased with the resulting economical and environmental improvements in their decision to move receiving ports.

-Taylor Langstaff

Source: http://www.patagonia.com/us/patagonia.go?assetid=79365

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Economic Strategy of Patagonia’s Transportation and Distribution

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