Transportation as the change agent in Supply Chain innovation

Here’s a great article from our archives.  Written for a 2007 issue of Inbound Logistics by our now President & CEO, John Simourian II. 

For many years, transportation offices were considered the backwater of the business world.  However, over the last decade, those companies who identified transportation as a driving force for change realized increased profits and improved customer service throughout their individual supply chains.  Many stories have been written about Wal-Mart’s use of distribution to become a dominant player in retailing, in fact they’ve been doing it for more than just a decade. But what about other companies, companies that may not have the resources or expertise in house to use transportation as a change agent for the rest of their business?

 Lets take a look at a few companies who fit this model that turned to outsourcing to secure the expertise, resources and most important, mandate for change.

 In upstate New York, a corrugated manufacturer, replaced it’s local trucking company with a dedicated contract carrier to focus on reducing transportation cost and maintain or improve customer service. The dedicated carrier brought with them a developed methodology of metric tracking, analysis and goal setting. Integral to their success was management of on time delivery exceptions, customer delivery delays, and the extremely important MSF (manufactured square foot) per load. The data collection, analysis and management intervention (all part of The Platform for Continuous Improvement) was reviewed at regularly scheduled operating meetings between the on site carrier manager, his support team and the customer. Solutions as basic as revised routing and more difficult such as altered delivery times due to chronic and documented delays were reviewed and action plans put in place. The results have been a change in the when and the way the plant manufactures product as well as how transportation is viewed by the operations and sales teams. No longer is transportation told who and when to deliver. Today transportation works with customer service reps and operations managers to plan when to manufacture thus improving delivery times and volumes. The cost per MSF has been reduced by 12% and the MSF per load has increased every year by an average of 16% Customer service ratings are at the highest level ever.

 On the New England coast a world famous chocolate company with peak seasonal shipping patterns had been employing multiple LTL carriers to move its products throughout the year and during the extreme peak demand period. This manufacturer built a relationship with a dedicated contract carrier that could dedicate a stable force of drivers throughout the year and then augment that driver group with additional dedicated drivers and temperature controlled equipment to respond to the peak shipping demand. The dedicated carrier brought several abilities to the relationship. One was reporting on Key Performance Indicators (tracking delivery data) not previously provided which benefited the carrier and manufacturer by allowing both parties to accurately forecast the seasonal demand peaks as well as track and ensure that all deliveries are made on time. The dedicated carrier provided additional assets during the peak demand season that resulted in a 400% increase in drivers and specialized trucks. Even more notable was the added benefit that the customer received enabling them to tie the delivery of chocolates to the predelivery of display kiosks at the seasonal outlets which are added during the peak season and then return those kiosks at season’s end. These good transport practices provided by the dedicated carrier enabled the chocolate company to reduce transportation cost, more quickly deploy its products and increase sales volumes.

 An hour outside of Philadelphia a box manufacturer had just moved its operations to larger surroundings to accommodate their growth. Service and cost issues surfaced as a byproduct of the move and additional volumes. Management realized the need to improve their transportation system. Once that link in the supply chain was repaired it became apparent that their manufacturing and customer service operations were in trouble. Here’s some detail to the story:

The local carrier who was failing under the additional volumes and changes in logistics needs was replaced by a dedicated carrier empowered to manage the process from the time it was loaded and later to the actual management of the shipping area. This dedicated carrier took the role of tracking the deliveries; setting the delivery appointments and directing the load building to maximize trailer cube. In addition, at regular operating meetings, the carrier provided tracking data and options to increase the load volumes to better utilize the transport assets (drivers and equipment) resulting in lower transportation costs while improving customer service. Transportation took the lead and helped direct manufacturing and customer service as the company’s defacto Change Agent. The company was able to recover from the move and increase its business’s top and bottom line.

These are just a few examples of good transport practices that can make transportation the Change Agent for a company. Empowered transportation management only occurs after transportation has proven itself capable of leading. Whether transportation is in-house as at Wal-Mart or out-sourced as in the preceding examples, there is one consistent denominator that must always be included and that’s data tracking, reporting and action. Those departments that employ a Platform for Continuous Improvement allowing them to track, report and take action based on data to continuously improve their results are the ones that are recognized by executive management. They are usually the ones that are empowered to help drive company success.  They have become the Change Agent of the enterprise.

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