A Digital Logistics System for Growth
Being profitable from day one as an e-commerce company? That would be an awe-inspiring accomplishment. Royal Design managed this very feat in 1999, and they also managed to stay the course for another 15 years of profitability. How did they do it? What does a company need to sow to harvest organic growth?
It all started when Anders Ekberg and his colleague Hans Bengtsson wanted to sell high-end Swedish brands online in the United States. The demand for exclusive design items was good. But, the year was 1999, and contrary to what IT consultants of the day wanted to believe, the digital infrastructure was more like a horse and carriage traveling on a cobble-stone road than a Tesla zooming down a highway.
Their company still managed to do well, really well, in fact. Royal Design started to make a profit on day one. Not even the aftershocks of the IT-crash or the stock market collapse stopped these Swedish entrepreneurs.
-Getting any sort of financial backing was impossible, so we had to come up with a business model that would make money start flowing in right from the start. Ekberg explains that the might have been more like a traditional mail order company at first where the customers paid with a credit card and accepted a 14-day delivery.
-That was standard back then and provided us with a reversed cash flow. We were also good at coming up with successful marketing strategies.
Today, a company must start by building a warehouse. The customers expect the orders to be delivered in one or two days and 50 % prefer payment by invoice.
The company got the money before the goods were shipped and could thus pay the suppliers directly. If the customer did not pay upfront, the goods were not sent.
The warehouse is the heart of the e-commerce business
Thanks to the lower expectations and customer demands of the day, Bengtsson and Ekberg ware able to start their business even though their financial resources were initially limited.
-It doesn’t work like that anymore, Ekberg stresses.
-Today, a company must start by building a warehouse. The customers expect the orders to be delivered in one or two days and 50 % prefer payment by invoice.
Royal Design ships between 3,000—5,000 packages per day from their central warehouse in Orrefors in southeastern Sweden. Depending on where in Sweden the customer lives, delivery takes 1―3 days. International deliveries take 3―7 days.
If we are going to be able to keep growing and be able to handle a two-billion SEK turnover, we need systems that are up to the task.
This places a lot of demands on the shipping software platform the company decides to use. Today, Royal Design has chosen to integrate LogTrade into their ERP system.
-Our warehouse is 20,000 square meters, says Ekberg and explains that it is important for Royal Design to have excellent inventory control. Therefore, a 3PL solution is not an option for them.
Everything has gone well for you from day one, but hasn’t it been difficult and challenging in some ways too?
-Of course. Running a business is being in constant problem-solving mode. Last year, we changed ERP systems throughout the entire organization. That gave us our first deficit.
Ekberg explains that changing systems was a necessary and important investment.
… extremely important to have a digital logistics system that is linked to all other parts of our business processes and operates in real time...
-We have grown so much, and our yearly turnover is 600 million SEK at this point. If we are going to be able to continue growing and handle a two-billion SEK turnover, then we need systems that are up to the task.
The Goal is Growth, and the Propellant is Synchronized Systems
Royal Design uses Microsoft Dynamics NAV, or Navision as Ekberg calls it.
-The difference between then and now is that everything from the ERP system to LogTrade’s digital logistics system is synchronized.
The fact that the financial system is linked to the ERP system is important because it makes it easier to handle a growing demand for reports.
-Creating monthly reports for the board and partners is much quicker now, and we are also able to notice any deviations directly.
We Have Found a Much More Reliable TM System in LogTrade’s Digital Logistics Software.
-It is important to have a shipping software that is connected with the other parts of your business processes and operates in real time, says Ekberg and explains that in the long run, everything is about growing as a company. A good digital logistics system is an important piece of the puzzle of growth, especially for an e-commerce company like Royal Design where the warehouse and shipments going in and out are the heart of the operations.
A Logistics System Developed For Large-Scale Operations
We have found LogTrade’s digital logistics system to be a much more reliable system compared to previous TM systems we have used. That is very important to us. If there is any kind of disruption, everything comes to a complete standstill, and we do not make a dime.
-LogTrade is also better equipped to handle large-scale operations and also comes with more API integrations than to our previous systems
The latter part of that sentence means that LogTrade comes with a large number of features. LogTrade has also been integrated into the PDAs used in the warehouse. Royal Design has been able to increase the number of items picked per minute substantially thanks to this.
-I like LogTrade. There is rarely any reason for us to contact them because their system and Navision (Microsoft Dynamics NAV) play so well together, but when I do talk to them, they are always helpful and easy to work with.
FROM E-COMMERCE TO E-TAIL
- Anders Ekberg and Hans Andersson begin selling glass from Kosta Boda and Orrefors glassworks in southern Sweden.
- Ekberg and Andersson move on to selling everything that has a place on your dinner table. Today, their company has expanded and sells design items for your entire home, including furniture.
- Royal Design has moved from being purely an e-commerce store to embrace the whole e-tail concept with brick-and-mortar stores that inspire customers and also boost online sales.
- The company is currently present in 13 different geographical markets and 14 different physical stores in Sweden under the brand names se and RUM21.
- Ekberg and Bengtson are both still active in the day to day operations.