Manufacturing and Shipping

By Sean Gallagher  |  Posted 2003-03-01 Email Print this article Print

Every year, American Greetings churns out 20,000 new cards to meet every need of "social expression" it can imagine. But the life and death of each of those cards is hardly determined by the pen of an artist and the gut of a chief executive.

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Manufacturing and Shipping - Day 161 to Day 242

Once cards make it through the approval process, they are routed to American Greetings' digital graphics department, which prepares the cards for manufacturing. The digital graphics department is essentially the company's pre-press operation—turning working files into a set of electronic masters, with exact specifications for color and alignment on printing presses.

In some cases, a mainframe application creates a list of AGINs to be shipped out; this list triggers the transmission of the matching card files over a high-speed digital content distribution network run by WAM!Net Inc., to staging servers at the printing plants. American Greetings operates all its own plants—its primary card lithography plant is in Corbin, Ky., and envelope manufacturing takes place in Greeneville, Tenn.

Card number 18100-83962's arrival at and trip through the printing plant is orchestrated by custom planning and scheduling systems built with artificial intelligence software from Fair, Isaac & Co. The program, called Blaze Expert, uses a technology known as neural networking to mimic processes of the brain. Based on sets of rules captured in code, the system reacts to stimuli such as competing demands on getting different cards out of existing facilities; plans out how and when each card will be printed; and schedules the resources required to do so.

The software helps American Greetings reduce waste from print runs and efficiently use plant employees—squeezing further efficiency out of the process.

It works well enough that the company isn't in any rush to change its production planning system. James Taylor, Fair, Isaac's director of product marketing, says that American Greetings is not upgrading to Blaze Advisor, a newer version of the neural rules engine with additional functions.

There's reason to be cautious. The timing of card manufacturing has to be carefully planned around the seasonal demands of the "social expressions" industry. American does almost half its business every year during four key holidays—Christmas, Valentine's Day, Easter, and Mother's Day. Nonseasonal cards like birthday cards are squeezed into the production schedule around those demands.

When finally printed, cards are sent to American Greetings' distribution centers in Arkansas, Kentucky and Tennessee. From there, the cards needed are shipped to more than 90,000 retail outlets across the country, including about 5,000 Wal-Mart, Target and Kmart stores. An estimated 52% of cards are sold through major discount outlets, another 30% through grocery chains and drug stores, and the remainder through American Greetings' stores.

To get products to those stores' display shelves—shelves that American Greetings makes itself—the company spends about $37 million annually on shipping. The company uses software from Logility to maintain a database of its shipping rates negotiated with trucking and logistics companies and to audit freight bills. This Voyager software has cut shipping expenses by 2% to 3%, according to Logility. Not insignificant. Recently, such savings can spell the difference between loss and profit at American Greetings.

Scheduling of those shipments is driven largely by data collected from the retailers' shelves. Sales data from American Greetings' biggest retailers, Wal-Mart and Target, comes directly back to the company through a new scan-based trading system.

In a new form of "scan-based" trading, American Greetings doesn't get paid for the cards in stores until the card is actually sold (see "Online Exclusive"). The company covers the cost of placing inventory on retailers' shelves. Daily sales data automatically triggers invoices and authorizes payment by the retailer as cards are sold. As soon as the sales data is received, it is passed on to the order management system and its data warehouses for analysis.

American Greetings uses a scan-based trading system installed by viaLink (see Dossier). While the actual software and integration costs were just under $30 million, the company had to change the way it accounted for cards already in affected stores. That meant a $65 million decline in net sales in the first quarter the system was used (October to December 2001). While $10 million was saved in labor, materials and production costs, according to the company, the project ended up costing American Greetings $84.4 million that quarter.

The savings will continue, but there are limits to the value of the marketing data that comes from retailers, which is based on the standard Universal Product Code bar codes printed on the back of each greeting card.

Like area codes, there are not enough numbers. The UPC code is 11 digits long; the first six digits identify the manufacturer. The last five digits identify the item.

If you're making grocery products, then 99,999 items are probably enough to cover the products you sell.

But American Greetings adds more than 20,000 new greeting cards a year, and also sells gift wrap, party supplies, and other products. That means many cards in the same category (like standard-sized birthday cards) may be marked with the same 11-digit UPC number. In order to get any value out of the UPC data, American Greetings has to carefully match it with the data that its own merchandisers collect from the field.

Sean Gallagher is editor of Ziff Davis Internet's enterprise verticals group. Previously, Gallagher was technology editor for Baseline, before joining Ziff Davis, he was editorial director of Fawcette Technical Publications' enterprise developer publications group, and the Labs managing editor of CMP's InformationWeek. A former naval officer and former systems integrator, Gallagher lives and works in Baltimore, Maryland.

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