Kid Brands has entered into an agreement with National Distribution Centers — a warehousing and distribution division of NFI, which is a fully integrated supply chain solutions provider — to address certain third-party logistics for the company's warehousing and distribution operations.
NFI will provide storage, handling, inventory management, transportation management, shipping, receiving, repackaging, order processing and related support services for Kid Brands and its subsidiaries. Throughout the next several quarters, Kid Brands intends to consolidate its five existing distribution facilities into one centralized location of an aggregate 515,000 sq. ft. operated by NFI on its Chino, Calif., campus. NFI currently provides third-party logistics services to the company's LaJobi subsidiary. Upon full implementation of the third-party logistics agreement, the company anticipates an increase in overall efficiencies and sustainable long-term benefits to operating margin.
"The consolidation of our five distribution centers across the country into one centralized location is further testament to our commitment to transform the business and streamline our operations,” said Kerry Carr, EVP, COO and CFO. “As we continue to critically assess our operational platform, we remain diligent in seeking out methods to drive sustainable efficiencies and cost savings, as well as improve the overall effectiveness of our supply chain. Our efforts thus far have already yielded tangible results, both operationally and financially, and we intend to continue our relentless pursuit to drive a higher level performance across almost every aspect of the company's business."
Carr explained that the company’s agreement with NFI as an important step toward achieving improved service, capacity, speed and accuracy at a reduced cost. Carr added that the enhanced relationship with NFI will better position the company to serve the growing e-commerce channel of distribution through drop-shipping fulfillment capabilities for its customers, and provide improved service to its entire customer base, including enhancement of service to the specialty channel.
Kid Brands anticipates that once fully implemented, the new distribution arrangement will generate more than $2 million in savings annually, with initial savings expected to begin in the second half of 2014. The company will pay $1.5 million to NFI in startup costs throughout a nine-month period beginning in the fourth quarter of 2013, offset in part by reduced fixed costs over the initial term of the third-party logistics agreement. The initial term of the agreement will continue through March 1, 2019, with automatic renewals for successive 12-month periods (up to an additional 5 years) until terminated pursuant to the terms of the agreement. The consolidation and transition to operations under the new agreement is currently expected to be completed in the second quarter of 2014.
Kid Brands' current operating subsidiaries consist of Kids Line, LaJobi, Sassy and CoCaLo. Through these wholly owned subsidiaries, the company designs, manufactures (through third parties) and markets branded infant and juvenile products in a number of complementary categories including infant bedding and related nursery accessories and décor and nursery appliances (Kids Line and CoCaLo); nursery furniture and related products (LaJobi); and developmental toys and feeding, bath and baby care items with features that address the various stages of an infant's early years, including the Kokopax line of baby gear products (Sassy). In addition to its branded products, the company also markets certain categories of products under various licenses, including Carter's, Disney, Graco and Serta.
NFI is a fully integrated supply chain solutions provider. NFI owns facilities globally and operates in excess of 20 million sq. ft. of warehouse and distribution space. Its company-owned fleet consists of more than 2,000 tractors and 7,000 trailers, operated by more than 2,500 company drivers and 250 owner-operators. Its business lines include transportation, distribution, warehousing, transportation brokerage, intermodal, real estate and solar services.