Transportation Best Practices: Sargento’s finely-aged TMS upgrade
July 01, 2011 - LM Editorial
About five years ago, Sargento Foods realized that its distribution planning, like a fine block of Swiss, had some holes in it. So, the Wisconsin-based, family-owned converter and packager of cheese products decided it was time to make some long-term, strategic changes.
Like many shippers in the early 2000s, Sargento was coping with an antiquated transportation management system (TMS) that did not have the ability to meet the company’s changing operational requirements. For example, when its logistics team was planning its orders for shipments, the old software did so without considering cost, service, or contractual shipments to its carriers. Accessorial costs were simply ignored.
“Simply put, there were operational problems,” says Keith Hartlaub, general manager of Sargento Transportation, LLC. Chief among those issues was the inability of the old software to take orders and combine them into efficient, point-to-point truckload moves.
Instead, loads moved through more inefficient and costly less-than-truckload (LTL) moves by carriers that were not always the most efficient on any particular lane. Carrier selection was hampered, and Sargento had a difficult time creating an accurate recording of its actual transportation costs.
It was time to change TMS providers, and by January 2006, Sargento was well into its search. “We knew we had to spend money to be more efficient,” says Hartlaub, “but the question was how.”
At the time, says Hartlaub, the key to Sargento’s decision-making process was whether to build its own TMS system or go with a Web-based, on-demand solution. Upfront costs were certainly a major factor, but so was the ability of on-demand providers to add innovations cheaply in this rapidly changing technology.
“We thought the world of on-demand software was the way to go,” recalls Hartlaub. That was due to the potential for an on-demand solution to build efficiencies into Sargento’s
network quickly and economically. “I was familiar with a company called Nistrevo Corp in Eden Prairie, Minn. It was one of five software providers interviewed, and finally was the winning bid,” says Hartlaub. Nistrevo has since been purchased by IBM, and rebranded as Sterling Transportation Management System, an IBM company.
And while there was a big cultural change in store for Sargento and its transportation department, the results speak for themselves. The company has been able to reduce its LTL shipments by nearly 30 percent due to the new system that allows Sargento’s logistics team to “bundle” those more expensive LTL moves into full truckload moves.
There was also a 60 percent savings in overhead costs by automating freight bill payments, as well as an improved allocation of costs to more accurately reflect the precise cost of each shipment. Now, let’s take a look at how Hartlaub and the Sargento logistics teams was able to realize these savings.
After the decision was made to change in the early months of 2006, Sargento set three major goals. First, it wanted an on-demand solution that was connected to a larger logistics network. Second, the team demanded strong TMS functionality that included comprehensive automated freight billing capabilities. And third, they knew the over all outcome of the upgrade needed to improved overall logistics efficiency.
“It was intense, but fairly painless,” says Hartlaub of the three-month implementation period that ran from April to June 2006. Some work processes had to be changed, and there were many employee hours spent entering data before Sargento went live with the TMS. Previously, much reporting was done on paper, but now needed to be entered into computers. Phones and faxes were out, online data was in; employees had to be retrained; and trucking partners had to be informed of Sargento’s new way of conducting business.
Somewhat complicating matters was the fact Sargento has a 36-truck private fleet covering the eastern half of the country. It wanted to retain that private fleet for many multi-stop routes out of its three Wisconsin manufacturing sites in Kiel, Hilbert, and its headquarters in Plymouth. The majority of its distribution is out of Plymouth, about 60 miles south of Green Bay, and the company ships about 200 loads a week out of that location.
Under the old system, there was much more manual input, with freight invoices being done by hand. That system was scrapped in exchange for new electronic data interchange (EDI). There is much less faxing and phone calls and more keystrokes. And while these cultural changes were necessary, Hartlaub says he was sensitive to employees’ resistance to too much change too quickly.
So the decision was made to keep all employees well informed of why these changes were made. They were told Sargento’s business practices had to change to become more efficient in the highly competitive world of food distribution.
“All people are adverse to change to some degree,” says Hartlaub. “There was a little bit of resistance that we had to get past, but it only took a short period of time. Our staff openly accepted it and moved on.”
Now that the integration and cultural hurdles over the new TMS methodology were cleared, Sargento enjoys much more efficient shipment planning, execution, and freight payment abilities. It’s now able to track performance of its more than 30 carriers, allowing them to identify areas to cut costs and increase efficiencies. Hartlaub’s team is also able to use the system for visibility and planning purposes and to accurately allocate transportation costs to its customers.
“It really is night and day,” says Hartlaub. “We understand the cost of a load before it’s tendered. We see the same rates as the carrier, fuel surcharges are identified up front, and when accessorials occur, the carriers can add that to the invoice—but we know it in real time. We have the opportunity to approve or reject it up front and that has reduced billing errors substantially.”
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