Diamond Comic Distributors has now been shipping new product to pop culture stores from its new Memphis distribution center for about three weeks, and the transition has caused some problems, according to both retailers and Diamond VP Operations Cindy Fournier, with some improvement in sight. 

 

Diamond relocated its Sparta distribution center to Memphis at the beginning of the year (see 'End of an Era -- Diamond Closing Sparta'), and closed its Atlanta warehouse and began servicing those accounts from Memphis at the end of February (see 'Diamond Closes Atlanta Warehouse'). 

 

Both Fournier and retailers we talked to described similar problems.  Shortages and damages were the most common issues, with transportation delays an issue for customers that had formerly picked up at the Atlanta warehouse.  The increase in the shortage and damage rate was substantial, with all retailers we spoke to saying that the rate of problems was a significant multiple of what it had been before the move to Memphis.  Damages sounded like primarily the result of inexperienced packers, with comics alternated in a box with smaller trade paperbacks and over-packed figures that were damaged in the packing process typical complaints.  Fournier estimated that the initial error rate out of Memphis had been two to four times higher than it had been when books were packed in Atlanta. 

 

Both retailers and Fournier told us that Atlanta had been a very accurate packing warehouse, with a very low error and damage rate that made it harder to adjust when new pickers and packers began preparing the shipments and the error rates went up.  In fact, Fournier said that prior to the shutdown, Atlanta had the lowest rates of shortage and damage of any of Diamond's warehouses. 

 

Predictably, affected retailers were not happy.  Cliff Biggers of Dr. No's Comics and Games in Marietta, Georgia described the situation as  '...bad, but improving.'

 

Similarly, Jim Iding of Heroes Ink in Kennesaw, Georgia said, 'It's not good at all, and that's putting it nicely.'

 

Jimmy Taylor of The Reader's Choice in Rocky Mount, North Carolina said 'From chewed chewing gum in the boxes...to shipping comics one to the box, I hope I have seen it all.'

 

But although the experience was not universal, in general things seem to be improving with each successive week.  Fournier said the error rate had dropped 20% between the first and second week of Memphis packing, and she was awaiting the third week numbers.  Biggers said of his shipment, 'The first week was nervewracking, but the second week was much smoother than I thought it would be.'  All concerned have said that Diamond has been responsive in trying to correct problems, air-shipping replacements when available.  Unfortunately, not all books (e.g., Marvels) have been available for replacement. 

 

To add more experience to the mix in Memphis, Diamond has been rotating management staff from all of its other locations through Memphis in two week stints to help get the new warehouse on its feet.  There have also been a larger number of relocations to Memphis from other Diamond warehouses than expected, with thirteen employees relocating from Sparta, Illinois to Memphis, two from Atlanta, and three from Plattsburgh, New York. 

 

It was inevitable that there be some problems with a move of this magnitude--a 225,000 square foot distribution center with mostly new employees is going to take a considerable length of time to run as smoothly as the operations it's replacing, even if the improvement in the space provides greater efficiencies.  Over-all, the level of problems at Memphis is fairly typical for a big distribution move.  If it stays typical, progress will likely be incremental, with no quick fix that's going to make everything perfect overnight.  
 
The underlying distribution rationale for this consolidation--to increase scale to increase efficiency and cut costs, and to centralize inventory to make better use of it--is sound and ultimately can benefit retailers.  It's also worth noting that since Diamond is an acquisition-minded company, this management team has done consolidations and moves many times before, some at large scale (the integration of Capital in 1996 comes to mind).  Given these factors, we expect that service for the affected Southeastern US retailers will get back to normal in the coming weeks, with some long-term improvements beyond past levels possible.