master distributor relationships. We currently have more than 1.6
million square feet of leased or managed warehouse space domestically and internationally to store
and process our clients inventory. We receive client inventory in our distribution centers, verify
shipment accuracy, unpack and audit (a process that includes spot-checking a small percentage of
the clients inventory to validate piece counts and check for damages that may have occurred during
shipping, loading and unloading). Upon request, we inspect for other damages or defects, which may
include checking fabric, stitching and zippers for soft goods, or testing power-up capabilities
for electronic items. We generally stock for sale within one business day of unloading. On behalf
of our clients, we pick, pack and ship their customer orders and can provide customized packaging,
inserts and promotional literature for distribution
with customer orders.
Our distribution facilities contain computerized sortation equipment, highly mobile
pick-to-light carts, powered material handling equipment, scanning and bar-coding systems and
automated conveyors, in-line scales and x-ray equipment used to inspect shipment contents for
automatic accuracy checking. Our international distribution complexes include several advanced
technology enhancements, such as radio frequency technology in product receiving processing to
ensure accuracy, as well as an automated package routing and a pick-to-light paperless order
fulfillment system. Our advanced distribution systems provide us with the capability to warehouse
an extensive number of stock keeping units (SKUs) for our clients, ranging from large high-end
laser printers to small cosmetic compacts. Our facilities are flexibly configured to process B2B
and single pick B2C orders from the same central location.
During 2004, we warehoused, managed and fulfilled more than $1.5 billion in client merchandise
and transactions. Much of this does not represent our revenue, but rather the revenue of our
clients transactions for whom we provided business process outsourcing solutions. See
Managements Discussion and Analysis of Financial Condition and Results of Operations.
Based upon our clients needs, we are able to take advantage of a variety of shipping and
delivery options, which range from next day service to zone skipping to optimize transportation
costs. Our facilities and systems are equipped with multi-carrier functionality, allowing us to
integrate with all leading package carriers and provide a comprehensive freight and transportation
management offering. In addition, an increasingly important function that we provide for our
clients is reverse logistics management. We offer a wide array of product return services for our
clients, including issuing return authorizations, receipt of product, crediting customer accounts,
and disposition of returned product.
Domestic clients of PFSweb enjoy the benefits of having their inventory assets secured by a
network of trained law enforcement professionals, who have developed and continue to operate a
world-class security network from our security headquarters in Memphis, TN. As part of our services
are for the United States Government, our security plans and procedures are under constant
evaluation and evolution. Continual validation ensures that we employ the latest in security
processes and procedures to further enhance our surveillance and detection capabilities.
Facility Operations and Management. Our FOM service offering includes distribution facility
design and optimization, business process reengineering and ongoing staffing and management. Along
with our high-volume fulfillment center in Mississippi and our automated fulfillment center in
Tennessee, we also manage an aircraft parts distribution center in Grapevine, Texas on behalf of
Raytheon Aircraft Company. Our expertise in supply chain management, logistics and customer-centric
fulfillment operations extends through our management of client-owned facilities, resulting in cost
reductions, process improvements and technology-driven efficiencies.
Kitting and Assembly Services. Our expanded kitting and assembly services enable our clients
to reduce the time and costs associated with managing multiple suppliers, warehousing hubs, and
light manufacturing partners. As a single source provider, we provide clients with the advantage of
convenience, accountability and speed. Our comprehensive kitting and assembly services provide a
quality one-stop resource for any international channel. PFSwebs kitting and assembly service
includes light assembly, specialized kitting and supplier-consigned inventory hub either in our
distribution facilities or co-located elsewhere. We also offer customized light manufacturing and
Supplier Relationship Management (SRM) for Fortune 1000 and Global 2000 manufacturers.
We will work with clients to re-sequence certain supply chain activities to aid in an
inventory postponement strategy. We can provide kitting and assembly services and build-to-stock
thousands of units daily to stock in a Just-