With the advent of trucking deregulation two decades ago, most large corporations began to transform the way they did business with their motor carriers.

Emerson, a $15.5 billion industrial giant, was no exception.

Then called Emerson Electric Co., the corporation moved quickly to take advantage of the new freedoms allowed under deregulation. For instance, it immediately began to develop contracts with its major less-than-truckload (LTL) providers.

Now, Emerson is revisiting some of the ways it manages freight. A program started at one large division, Emerson Tool, takes advantage of Web-enabled technology to consolidate LTL shipments from several divisions, cutting costs while providing both Emerson and its customers with better shipment visibility.

Emerson developed the program, called Emerson Express, with a third-party logistics provider, Logistics Management Solutions or LMS. It unites the purchasing power and freight density of five divisions of Emerson's appliance and tools business segment—representing $3.5 billion in revenues—to create a more efficient program than any one of those divisions may have been able to do on its own.

Making this change entailed a cultural shift for the businesses. "Emerson is composed of more than 60 autonomous divisions," says Robert White, the company's director of global transportation, referring to the electronics and telecommunications, process control, industrial automation and other businesses the company runs in addition to its appliance and tools units. "Emerson's strength is its autonomous P&Ls [profit and loss statements]," he says. "We achieved record profitability for a long time."

But as the company grew, White explains, management began to rethink the benefits of autonomy, eventually making some changes. Beginning with procurement across multiple divisions, the corporation began centralizing some functions, which resulted in substantial savings.

"We started to look at freight costs and logistics costs as well," White continues. "One of the programs that popped up was domestic LTL. We understood where that industry was going, and we felt we needed to do something different."

A corporate core carrier program that the company had developed over the last 20 years had provided substantial benefits for Emerson's operating divisions, allowing them to negotiate discounts off corporate-developed base levels but preserving their freedom to use other carriers as well. That project proved so successful that by last year, the Emerson divisions were moving 89 percent of their LTL freight with 16 carriers.

That success notwithstanding, Emerson managers decided that the time was ripe to re-examine the corporation's LTL program. "There's a lot of excess capacity in the marketplace, but we know the pendulum is going to swing back," White says. "When it does, prices will go up and they will go up at a time when we cannot [absorb] increases. When we looked at how to prevent that, we decided to look at a mode shift."

It was then that managers began to look closely at a successful pool distribution program developed at Emerson Tool by Steve Dale, director of division logistics, and his team. Rather than consigning LTL shipments directly to the carriers, Emerson Tool was consolidating shipments into truckloads for shipment to LTL carriers' facilities near the point of final delivery. "Steve had been telling everyone about the savings," White says. "When we began looking at this in depth, we said, 'By God, that does work.'"

Dale explains that his initiative was sparked by a comparison of the company's sales and freight bills. His analysis showed that while most of the company's manufacturing and distribution activity was based in locations east of the Mississippi, in excess of 40 percent of the demand came from the West Coast. "We looked at how we could serve our retail customers on a timely basis," he says. "We put together a pool distribution program to serve customers in those regions and quickly saw extreme reductions in freight costs."

The next logical step was to expand the initiative to other divisions within the tool group, where 80-plus percent of the business is domestic and the divisions shared a large percentage of common customers and common sales terms. But the complexity of melding freight operations across multiple business units meant more resources would be required. This eventually led Emerson to seek a third-party logistics provider (3PL) that had systems sophisticated enough to orchestrate the new strategy.

To select a third party, five Emerson divisions—Emerson Tool, InterMetro Industries Corp., Closet Maid/Clarison Co., In-SinkErator and Ridge Tool—compiled an entire year's worth of freight payment data and information on their freight's characteristics. They then sent the data to five 3PLs that were bidding on the business, asking them to suggest ways to manage the combined freight. After analyzing the responses, Emerson selected LMS and created Emerson Express, a partnership between the two.

Launched last September, the program is similar in some respects to traditional pool consolidation programs, though it is significantly enhanced by technology that identifies consolidation opportunities across the multiple divisions.

Under the arrangement, the participating divisions send shipping information and advance shipping notifications to Emerson Express, where the information is received into TOTAL, the LMS transportation management system. The LMS system captures shipment data throughout the day as shipments are built at each division before sending the information via electronic data interchange (EDI) to the appropriate cross-dock, allowing workers to plan loads before the freight arrives from the divisions.

Each division consolidates its LTL shipments into full truckloads that are hauled to one of Emerson Express's two cross-dock operations, which are located in St. Louis and Columbus, Ohio. But in virtually every case, the information arrives well ahead of the freight. "The actual information flow moves ahead of the freight flow," says Julie Batschelett, the LMS manager who oversees Emerson Express. "Once [the information is] in TOTAL, we use our cross-dock module to build the outbound routes to the pool based on final destination ZIPs," she reports. LMS sends EDI notifications to the LTL delivery network, which allows the carriers involved to make delivery appointments with consignees. The LTL network sends EDI delivery status notifications back into the TOTAL system, allowing LMS and authorized Emerson employees to track and trace shipments over the Internet. The shipments from the cross-dock operations then move in full truckloads to distribution points, where they are deconsolidated into LTL shipments to their final destinations.

Emerson Express uses Overnite Transportation, a multiregional LTL carrier, to deliver most deconsolidated shipments to final customers. (The Emerson/LMS joint venture will soon ask for bids from prospective carriers on the West Coast, which Overnite does not service directly.)

Every shipment gets an Overnite PRO—or carrier tracking—number prior to leaving the cross-dock. These individual PRO numbers allow shipments to be tracked through every step of the process. Overnite sends Emerson Express an EDI notification upon delivery. Emerson Express then sends flat file data to the Emerson divisions.

With the pooling program in place, Emerson Express is meeting or exceeding LTL direct shipment transit times, Dale says. In many cases, he adds, it makes deliveries the next day. Costs are down as well. Emerson expects to reduce its LTL costs by about 10 percent through the Emerson Express program.

In fact, the program's initial success has led Emerson management to consider rolling it out to other divisions. Today Emerson spends about $110 million a year on LTL; eventually, as much as $50 million of that could move through Emerson Express.

Just as important as the efficient management of the freight is the information that Emerson is able to extract from the system.

"The sharing of information is a big issue," says Dale. Prior to implementing the Emerson Express system, tracking a shipment was difficult once it was handed off to a pool consolidator. The system now in place uses a Web-based portal to keep the participating Emerson divisions informed of the status of individual shipments.

White expects the program to yield even greater dividends as it progresses. "When we get this thing debugged, we plan to expand it to non-Emerson customers," he says. "The potential is enormous."

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