Award-winning Red Stag shoots for error-free shipping

Does it matter how many orders a fulfillment company ships, if the merchandise is lost, broken, or simply wrong?

That’s what local e-commerce investors Jordan Mollenhour and Dustin Gross asked, and decided they’d like to be fast — but would rather be right.

That focus resulted in Red Stag's ranking this month at No. 89 on Entrepreneur.com's list of the "360 Best Entrepreneurial Companies in America.” Red Stag is the highest ranked of four Tennessee companies on the list. The other three are all in Nashville, with A Head For Profits coming in at No. 94, Concept Technology at No. 177, and Crosslin Technologies at No. 208.

Several of the companies in which Mollenhour and Gross were involved used third-party delivery services, but didn’t have great experiences with them — deliveries were slow or inaccurate, said Eric McCollom.

So in 2013 they started their own: Red Stag, at www.redstagfulfillment.com, with McCollom subsequently hired as president.

"If we were going to do this right, what would we do?" was the basic question, McCollom said. They started from scratch to build a logistics business attuned to e-commerce. If they could do it profitably for themselves, they could do the same for outside clients, he said.

"Day One, we made some errors," said Jake Rheude, Red Stag director of marketing. But when the sources of problems were found, the company quickly changed processes to fix them, he said. Video cameras, placed “everywhere” around the warehouse, helped spot flaws that led to errors, Rheude said.

Many e-commerce firms have only a few employees and no inventory space, so they need a partner like Red Stag to handle their merchandise, McCollom said. Some clients are in the United Kingdom, Singapore and Australia, but they can watch their products be unloaded and shelved via video.

"We invest a lot in security," McCollom said. That’s why the cameras were set up, but they’re used far more for quality control, tracking every step of the shipping process, he said. If a problem does arise now, managers can rewind the footage to spot what happened.

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That included building their own software for warehouse management, tailored to Red Stag’s processes, McCollom said. After about six months of experimentation, they began seeking additional clients.

Red Stag had 52 clients at the start of 2018, and has 20 new ones signed up to start this quarter, said Vice President of Client Relations Tony Runyan.

Client kudos

One longtime client is Knoxville-based Ore Mailboxes.

“We’ve been using Red Stag I guess a little over two years, I guess two and a half years now,” said Myron Mullins, company president.

His company makes high-end, heavy-duty secure mailboxes, which weigh 76 to 130 pounds each, according to the Ore Mailboxes website. Mullins uses Red Stag for inventory storage and shipping to retailers nationwide. Ore Mailboxes’ website says orders ship in 24 to 48 hours.

“They’re typically shipping for us every day, and at any one time we’ll have between 120 and 150 pallets worth of merchandise in their warehouse,” he said.

Mullins said he’s friends with the founders of Red Stag and has worked with them on a few other things, but didn’t move his business there due to that relationship.

“When they started Red Stag, I went and toured it,” he said. “I’ve owned a lot of distribution companies over the years, and I was totally blown away by what I saw.”

He was impressed by Red Stag’s responsiveness, integration of his inventory management, and compatibility with the systems of companies such as Lowe’s and Home Depot.

“When we analyzed our business and really looked hard at it, we just could not set up our own in-house distribution and be anywhere close to the cost-effectiveness we get using Red Stag,” Mullins said. “Their ability to customize that for us has really been fantastic and its helped us grow our business significantly.”

All of Red Stag’s executives are University of Tennessee graduates, Rheude said: himself, McCollom, Runyan, Vice President of Business Development Chris Molitor, and Vice President of Operations Brad West.

Aiming for perfection

So where did the name “Red Stag” come from? It’s just a memorable name, McCollom said. The owners didn’t want to call it something humdrum that could be confused with other fulfillment companies, he said.

Their aim was to compete on speed and quality, offering on-time delivery with “zero errors,” McCollom said. That efficiency is generally credited to the original seller, so Red Stag markets its service as a way for those sellers to make themselves look good, he said.

Clients care about the end results of speed and accuracy, not how Red Stag does it or how many they employ, McCollom said. So their focus was on quality, not employee productivity.

Other fulfillment centers set tough goals for the number of items workers pick and pack each day, but Red Stag is more interested in making sure each order is right, even if that takes more employees to do on time, McCollom said. Employee incentives too are based on quality service rather than volume, he said.

The company has high expectations for employees, and in return wants to make Red Stag the best possible place to work, McCollom said.

"It's what they do that we sell," he said. Uniform shirts, jackets and hats are free, and when weather turned cold, the company bought all its employees a matching winter coat, McCollom said.

Most fulfillment firms have a 1 to 2 percent loss acceptance built into their contracts, requiring clients to forgive that much error, he said. Red Stag offers a 100 percent inventory guarantee, paying for anything lost or broken, plus paying the client an extra $50 for any loss, misdelivery or late delivery, McCollom said.

"The reason we can afford to pay that is because we don't lose stuff,” he said.

A fulfillment company previously used by one of Mollenhour’s and Gross’ other firms had $300,000 of the e-commerce company’s merchandise lost, damaged or stolen in a year, McCollom said. By contrast, Red Stag records less than $200 lost per month — and repays its clients for that.

The company’s north Knoxville facility recently went nine months without an error, shipping 223,000 packages accurately and on time, he said.

Packing for growth

Ataya Vandiver packed long wires into a matching long box, readying them for shipping. She has been a “picker and packer” at Red Stag since August. Vandiver used to assemble vehicle airbags, but her husband got a job at Red Stag and she already knew many employees.

"Everybody was so friendly and talked so highly about the job I just said ‘Hm, I want to give it a try,’” she said.

When Vandiver arrives, she either picks orders off shelves or packs already-selected merchandise for shipping. Workers rotate between those tasks. Red Stag is Vandiver’s first warehouse job, and it’s a “laid-back, friendly place to work,” where she intends to stay, she said.

"I want to move up as far as I can move in the company,” Vandiver said. “I want to see how far it actually grows. It has grown since I've been here."

Red Stag employs 40 to 70 in Knoxville — holiday volume brings lots of variation — and 10 to 15 in Salt Lake City, McCollom said. The company also outsources a good bit of staffing, he said.

The company started with a 50,000-square-foot warehouse in north Knoxville, McCollom said. Now Red Stag’s two Knoxville facilities total 255,000 square feet, and the company has a 40,000-square-foot satellite operation in Salt Lake City, which it wants to increase to 125,000 square feet in the next few months, McCollom said.

He followed Corey Smith around the warehouse to show how the system works. Smith, a picker and packer, pushed a cart with separate bins through the aisles, following smartphone directions and scanning bar codes on items.

"It's three scans per pick," McCollom said.

When a client gets an order, it registers automatically on Red Stag’s web-based warehouse system, he said. If an order comes in by 5 p.m., the company guarantees it will ship out the same day. Red Stag uses FedEx primarily, but also ships by UPS and the postal service, McCollom said.

In some ways Red Stag is the anti-Amazon, he said: it focuses on bigger and heavier items such as boxed furniture and bags of pet food. Eighty percent of what Red Stag ships is 10 pounds or more, instead of Amazon’s average of 5 pounds or less.

Janitorial supplies are a specialty, as are items such as batteries that require special packing for safety.

"It's a good business for us," McCollom said.