Top shippers leveraging technology to boost supply chain efficiency
June 28, 2012
Leading manufacturing and retailing companies are leveraging technology improvements for greater supply chain efficiency, leading to increased profits and smoother, cheaper transportation costs.
That’s according to three top U.S. manufacturers, who recently illustrated their changes before a group of leading transportation officials at the SMC3 annual meeting in Chicago.
Keith Hartlaub, vice president of distribution services for Sargento Foods, said such improvements helped the cheese distributor win supplier of the year awards from Wal-Mart and other retailers after recently updating its transportation management system (TMS). It uses a centralized distribution model from its Plymouth, Wis., headquarters.
The results have been impressive. It has reduced its trucking costs per pound by 15 percent (excluding fuel surcharges). Sargento now knows in advance all truck-related fees (including accessorials and fuel surcharges). Costing is available in real time. Reporting of exceptions is easier, with much less effort, Hartlaub said.
Sargento’s goal is to increase its full truckloads, and use less LTL. It also utilizes a 36-truck private fleet, for use mostly in the Eastern United State.
It moves about 7 million pounds of cheese a week. LTL freight shipments have dropped from 7.5 percent to about 4 percent currently. LTL costs are about double what full TL costs are so any reduction in LTL goes right to the bottom line.
“We get a whole slug of orders we have to combine into LTL shipments or pool distribution for full truckload,” Hartlaub.
Sargento suffered from an outdated TMS system, which it recently scrapped. Cost reporting was difficult and metrics such as on-time performance had to be performed manually, a time-intensive process, Hartlaub said.
Resolutions that used to be handled via fax and telephone are now handled electronically, Hartlaub said. Trucking costs are identified up front, thanks to a TMS freight optimizer that finds the most efficient mode and method for delivery.
Carey Skoglund, national logistics manager for Ace Hardware, which has won the J.D. Power award for customer service six straight years. He spoke at the SMC3 annual meeting in Chicago. Ace recently installed SAP to manage its 14 distribution cents and five import/export centers in North America for delivery to its 4,400 retail stores.
Ace has saved $18.6 million in freight savings since 2006, thanks to the efficiency achieved by using optimized mode and routing efficiency, according to Skoglund.
Ace uses regional and national common carriers as well as a private fleet, which also secures backhauls. Prior to its changes in 2007, most LTL freight was routed by vendors. But since installing a RFP procurement tool, Ace has utilized a lane-by-lane procurement process.
It uses a web-based SaaS model, which has eliminated much manual work. For transportation management, it uses LeanLogistics, which keeps a history of all transport movements and rates over its 1.7 million truck moves a year.
Through that, Ace can compare hundreds of carriers across tens of thousands of freight lanes across the country—in about three minutes. “Manually, it would take days to do that,” Skoglund said.
Skoglund said decisions are made solely on cost. He said changes are made mostly on capacity and transit times, as rated by carriers’ historical on-time performances. Carriers are encouraged to put in their TL rates as well as their intermodal rates.
“We’ve been surprised at what’s available in intermodal lanes,” said Skoglund, adding that some lanes as short as 600 miles.
Dee Biggs, director of customer logistics for Welch Foods, the juice co-op processor and marketer, said his company is trying to use business intelligence to save money.
“Information is money,” Biggs said
Welch’s spends more than $50 million on transport annually, mostly TL. It ships from four manufacturing warehouses and, Welch said, “We literally ship nothing LTL.”
Biggs said under previous transportation management systems, it lacked the necessary tools to analyze its transport moves. It needed a system that was cheap and able to show visibility through its ongoing operation performance through key metrics.
Biggs said improved technology improvements have resulted not only in improved truck rates, but improved service. It has wrung out inefficiencies throughout the supply chain, he said.
“We had a (positive return) on ROI in six months,” Biggs said.
“We’ve saved millions and millions of dollars by having the right information.”
While Welch’s does utilize large national carriers such as Swift Transportation, J.B. Hunt and Schneider National, it also uses scores of smaller regional-type carriers. That’s because of the nature of the origin of grapes.
“Grapes are grown in the middle of nowhere,” Biggs explained.
Subscribe to Logistics Management magazine
entire logistics operation. Start your FREE subscription today!