For many years the wholesaler now trading exclusively under the name TMO Sports was better known by the name of its sister company, Velo Vita.
But things started changing early last year when the lease for their combined warehouse / office space in the inner southern suburbs of Sydney was up for renewal.
This area is possibly the most tightly held and expensive industrial real estate in Australia and they were looking at a rent increase of between 25% to 40%.
As TMO Sports co-founder Manfred Otto explained, they were faced with some tough choices.
“We couldn’t absorb that rent increase,” he explained. “But if we had relocated to areas where the rent was similar to our previous level, we would have had to move a long way from here.
“All of our staff are pretty local, so for them there would have been a much longer travel time and I really didn’t want to lose the team because the team is what the company is.”
So rather than move way out to the western suburbs, TMO Sports did the opposite. They moved even closer to the city, to the top floor of a modern, large multi-storey premises that they share with a wide range of corporate tenants.
The catch? Instead of doing their own warehousing and order fulfilment, they’ve now contracted this out to a third party logistics (3PL) specialist, who is miles away where the rent is more affordable.
TMO Sports now only needs office space, so their space requirement dropped dramatically.
3PL has been popular with complete bicycle wholesalers for many years. It’s relatively easy when everything comes in similar-sized cartons.
But things are more complex for a P&A specialist like TMO so they’re possibly the first major Australian P&A specialist to have taken this step.
“It was a challenge finding the right partner,” Manfred conceded. “Some of the bigger companies we spoke to struggled. If it’s in a box with a barcode they can manage fine, but if it goes deeper than that, they tend to struggle.
“So we knew we had to find a partner that was big enough to handle our volume, but small enough to give us the service we required.
Custom cut Sapim spokes was our biggest challenge. We need to pick thread the spoke blanks according to our dealers orders. We transferred our spoke cutter to the 3PL and they are managing the whole process for us.
Overall, Manfred says that they’re really happy with their new structure. TMO Sports can now focus upon its core activities of product sourcing and ordering, importing, sales, marketing and dealer support.
Their new 3PL partner has more staff and capacity, so on days with big orders, whereas previously their internal team may not have managed to turn around every order the same day, the new warehouse can cope.
They also no longer have to worry about how much warehouse space they need at any given time and the constraints of ever-increasing rent in inner city Sydney.
But another change they had to make in order for 3PL to work was to no longer trade through two separate company structures, as had long been the case. Therefore the Velo Vita company has ceased operations and all invoices to dealers now solely come from TMO Sports. Manfred said that a year after making the change, they’re still receiving a few payments into their old Velo Vita account, which they’ve kept open to receive these wrongly directed payments, but asked that all dealers now only pay into the TMO Sports account.
Keeping On Top During Covid
Like every Australian wholesaler over the past year, TMO Sports has faced huge challenges, with the combined impacts of surging demand but problematic supply chains.
“Effort wise, it’s been huge,” said Manfred. “Every goal post that has been there during our business history over the past 28 years has moved!
“To have the right stock at the right time has been a challenge. And that challenge, to be honest, for 2021 looks like it’s increasing rather than decreasing over 2020.
“Luckily, we’ve got great suppliers who are good to work with. So we’re working very closely with them to resolve these new challenges.
“Every category has challenges. Pumps haven’t gotten any easier but, the toughest one has been saddles. Simply because the lead times have blown out dramatically. The changes came so fast that no-one could prepare adequately.
“Getting products made, then shipped to Australia is no longer as predictable as it once was.
“Shipping costs have increased. In addition to higher freight costs, we’ve had congestion charges from the Port of Sydney of about $1,000 per container.”
What’s Coming Next?
Manfred says that 2021 is still busy. “Demand has been strong,” he reported. But it’s a little bit hard to gauge the demand when I don’t have sufficient stock at the right time! I think our stock availability will improve. People understand that it’s a global challenge.
“I always encourage our customers to put in a back order, because our company policy is that we do not dispatch a back order without checking with the dealer first. They can always amend or cancel a back order.
“I am not finding that people are canceling backorders. They’re happy to take their backorders because I think they’re realizing that you can’t sell what you don’t have!”