Dive Brief:
- Funko said delays in transitioning to a new enterprise resource program is pushing up labor costs, as the maker of bobblehead-like pop culture collectibles is forced to operate a key facility without warehouse management software.
- The company paid $5 million in excess warehouse labor during the third quarter to operate a consolidated fulfillment center without the intended software. “We had to put more bodies to get the goods out the door versus having the systems in place to do so,” CFO Jennifer Fall Jung said on a Nov. 3 earnings call.
- Funko’s ERP transition is expected to be completed next year, according to CEO Andrew Perlmutter. The company decided to open the fulfillment center last quarter without the technology in order to meet elevated demand for its action figures and collectibles.
Dive Insight:
Funko has amassed a cult-like following for its vinyl figurines of comic book characters and other pop culture icons, but the company is now hitting snags as it works to scale operations and meet demand.
The toymaker announced in April that it would consolidate several distribution centers in Washington state into a single facility in Buckeye, Arizona. Funko opened the facility in Q2 without the intended ERP software because the company did not want to transition to “a platform that we felt wasn't yet fully ready to support our business,” according to Fall Jung.
Funko had built the Arizona facility to run on a warehouse management system. But with the delay of ERP implementation, the transition to the new warehouse software was also pushed back.
“When the ERP was delayed, it came with the extra work around having to create manual processes to optimize that warehouse, which would normally have been done in an operating system, but unfortunately, we didn't have [it],” said Perlmutter.
To operate the facility, the toymaker has had to pay more for labor and for additional machinery. Funko also added third-party logistics and co-packer warehouses to assist with throughput.
With ocean shipping rates down, the company additionally plans to aggressively source out of Asia to boost inventory and offset some of the higher operational costs. Funko also plans to mitigate costs by expanding price increases.
“We are doing everything we can to fix our operational hiccups,” said Fall Jung, adding that the company will continue to take on higher costs until the ERP transition is complete.
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