What made LifeWay Christian Resources stand out among other nominees for the NASSTRAC Shipper of the Year award was not how well it handles large volumes of small shipments. Nor was it the way it uses information technology and materials handling systems for efficient and accurate logistics operations, or even the way it successfully partners with carriers. Although it certainly excels at those tasks and more, so did other nominees, all of which operate successful logistics organizations that make important contributions to their businesses.

What did make the LifeWay nomination stand out to the editors of Logistics Management was the scope and breadth of the transformation of its logistics operations. Over the last seven years, LifeWay has shifted from what was almost entirely a manual operation to an automated one that its managers consider practically world class. The result has been greater efficiency, greater accuracy, and lower costs, among other improvements, at a time when the number of shipments soared and staffing levels remained basically unchanged.

The numbers speak for themselves. Today, LifeWay moves 97 percent of its shipments within company standards, inventory accuracy is at 99.9 percent, and fulfillment accuracy is a few thousandths of a percentage point short of perfect. Staffing is two-thirds what it was a decade ago. In 1995, the logistics department spent $8.5 million to support $257 million in sales. This year, the department will spend about $8.2 million to support $423 million in sales.

LifeWay, which is the publishing arm of the Southern Baptist Convention, ships more than two million packages a year with its small-package carriers. It is among the world's largest publishers of religious material, with more than 188 monthly and quarterly publications. In addition, it has more than 4,000 undated products, to which it adds 300 or more every year. Along with shipping to its own 110-store chain, LifeWay ships to about 60,000 churches and about 20,000 trade accounts. It also has between 15 million and 20 million individual residential customers who order direct. Sales last year totaled $403 million, a $19 million increase from the previous year, and sales have continued to grow at a similar pace this year.

Of LifeWay's 2,600 employees, 200 work for the company's logistics department, about 75 in its distribution center (DC) in Nashville, Tenn., which handles literature shipped to customers on a quarterly basis, and about 100 in the DC in Lebanon, Tenn., which handles less-predictable, more time-sensitive shipments. The remaining 25 employees work in Logistics Support, the third arm of the department, which includes transportation, corporate purchasing, industrial engineering and quality control.

But LifeWay's logistics operations haven't always been organized this way. Previously, the company operated on three floors in a single distribution center, with people and shipments moving from floor to floor via two freight elevators. During peak seasons, operations fell behind by as much as three weeks.

Nor has the company always been on the leading edge where technology is concerned. "In the early '90s, we recognized that our technology would not sustain us much longer," says Randy Brough, manager of support planning for LifeWay. "We had 30 different applications to get an order out the door."

Under the guidance of LifeWay's IT director, the logistics department began a search for best-of-breed systems. As it found systems that met its needs, the company implemented them and integrated their operations over the course of several years. As a result, LifeWay's logistics operation today relies on an integrated set of best-of-breed software programs, including some developed in house. That system tightly links the entire process from order entry through shipping.

Integrating the new technology proved challenging in some ways, but the problems were more cultural than technical. "We had more problems making the process and the personnel fit than with integrating systems," says Brough. "We went from a manual system to a warehouse management system; we went from an undisciplined system to one that dictates discipline. We discovered we had a lot of bad habits. We have also learned that we cannot train employees enough on a new system prior to implementation or explain too often what the change means to them. You need a change management plan: Change management is paramount."

But there was more than just technology involved in the transformation. As Brough puts it, "It comes down to three elements: people, processes and systems." The LifeWay transformation addressed all three. "We've done a lot of upgrading of skills through both on-the-job experience and education," he reports. "Around the issue of systems, we went from an old IBM mainframe and early '70s technology to a more client-server type of technology, and we upgraded our warehouse and transportation systems. We did a lot of internal programming to make sure the packages did what we wanted them to do for our business."

The shift from a largely manual system to a largely automated one enhanced by best-of-breed technology did not come cheaply, of course. Mike Harry, director of logistics for LifeWay, estimates that over the last seven years, LifeWay has spent about $15 million on systems and facilities. But the investment paid for itself in about 15 months. "Though our net expense has not changed much," he adds, "we're supporting almost twice the business we used to."

How does the new, automated LifeWay logistics system work? At the root of the operation is a British-developed enterprise system called VISTA. A system used primarily by publishers, it provides functions for order entry, accounting, royalties and product development. "It met our need to get the order in and the product set up," says Brough.

The VISTA order-entry system contains customer profiles, which include information on preferred carriers for both small-package and less-than-truckload (LTL) shipments. In addition, it allows customers to designate non-preferred carriers and submit invoicing instructions.

The system also lets customers enter their shipping preferences. (Some large trade accounts, for instance, require LifeWay to consolidate orders and release them on designated days.) Once that information is in place, the VISTA system is programmed to select the shipping method that best meets customer requirements. It will, for example, consolidate small package shipments into an LTL shipment or ensure that same-day shipments get out the door on time.

After orders have been received and processed, the VISTA system releases them to LifeWay's warehouse management system. LifeWay selected the UNIX-based MK Advanced Warehouse Management system. (At the time, the MK system was a product of the interBiz division of Computer Associates. Earlier this year, Computer Associates sold interBiz to SSA Global Technologies, a Chicago-based enterprise software company.)

The MK system handles receiving, inventory control, parceling and returns functions for LifeWay. Once the allocation and parceling process is completed, the data move to a system called STEALTH, which LifeWay developed internally. STEALTH gives shipments vendor-provided tracking numbers, performs pick planning, and prints invoices and packing lists.

The pre-assigned tracking numbers allow both LifeWay employees and its customers to track shipments even before they leave the distribution center. "As the orders come out of MK, we already know the cube, weight and parcel type," Brough says. "STEALTH can identify all the parcels for a particular invoice, knows the shipment is going to customer 'X', and knows the aggregated shipping weight and shipping method."

At this point, dated shipments (like periodicals) are processed in a pick-to-light system from Real Time Solutions. All parcels are then processed by either LifeWay's own freight consolidation system or by the manifesting system from Aristo Computers (Aristo is now part of Kewill Systems, a British-based shipping and supply chain software business with U.S. headquarters in Marlborough, Mass.). The Aristo system diverts small parcel shipments, while the freight consolidation system makes sure that no bill of lading is closed until all parcels in the shipment have been processed.

The freight consolidation system provides clear graphic guidance to employees consolidating shipments, with a direct link to numbered positions on the DC floor. The diagram even features color coding: Empty spots available for consolidations appear in blue on the computer screen; consolidations in progress appear in red; and those that have been fully reconciled appear in yellow. The screen also indicates the bill of lading number for each consolidation and the number of parcels consolidated along with the total number of packages in the shipment. Employees can pull up a screen giving details on any of the consolidations, showing the current status of each parcel. That allows employees to see the progress of shipments and helps in transportation planning.

Order visibility is available throughout the process. The STEALTH system allows users to make queries by bill of lading number, invoice number, parcel identification number, customer account or purchase order number, carrier tracking number or individual stock-keeping unit number.

LifeWay's comprehensive logistics system also plays a role in carrier selection, an important activity for a company whose annual transportation bill amounts to $20 million. Information on the company's preferred carriers and the types of shipments and routes they are eligible for is built into the software. LifeWay can also accommodate requests to use a customer-selected carrier if the customer is willing to pay freight collect charges, says Diane Bean, LifeWay's manager of transportation.

Currently, LifeWay has a preferred national carrier, regional carrier, and niche LTL carrier, plus backups for the national and regional carriers. Its parcel carriers are FedEx and UPS, which move 73 percent of the company's shipments; the national LTL carrier is Roadway Express; and the regional carrier is Saia Motor Freight Line. The secondary national carrier is Overnite Transportation, while the backup regional carrier is FedEx Freight (formerly American Freightways). The backup carriers have major responsibility for shipments moving directly from LifeWay vendors to LifeWay customers, which accounts for an additional $5 million a year. All of the preferred carriers have three-year agreements with the company. (For a breakout of the company's modal use, see box at right.)

LifeWay's tight management of shipments doesn't end once the shipments leave the DC. To ensure that it is getting top-quality service, LifeWay measures its carriers' performance. Using a variety of metrics, the company compiles daily reports on shipping standards, inventory accuracy, stockouts, customer response cards and employee performance.

Its Perfect Order report, for instance, looks at any factor that might affect an order, including warehouse or carrier failures, back orders or order entry mistakes. The company tracks all service failures by carrier, with the reason for the failure, and retail store managers are asked to rate carriers on several categories. The company's shipment standards report also tracks shipments sent within 24 hours and those held for 24, 48 or 72 or more hours.

But in an interesting twist, LifeWay asks the carriers to measure its performance as well. One of LifeWay's innovations is what it calls a reverse survey, which allows carriers to rate LifeWay's shipping and receiving operations and to suggest improvements. "We've worked on improving the information we provide to carriers and on our response time to requests they make to us," says Bean. "They've also helped us with packaging. We've talked about damage and about scheduling inbound appointments." Adds Harry: "We see the carriers as an extension of ourselves. We're looking at ways to quantify what their service means to our customers."

These measures—both of carrier performance and of LifeWay's own operations—confirm and enhance the company's continuing efforts to make its logistics performance more effective. And it's an effort that has paid dividends beyond developing more efficient, accurate and timely operations.

The transformation has brought major benefits for LifeWay, Harry says. "The leadership in our organization has seen that we can make logistics not only a core competency, but also a driver of competitive advantage."