This document discusses breaking down barriers between purchasing and logistics teams to reduce inbound logistics costs. It describes how US Foods implemented a continuous planning process across both teams using a SaaS technology platform. This allowed real-time collaboration, monitoring of freight against plans, and corrective actions. As a result, US Foods increased the amount of freight under management and exceeded cost savings goals for existing freight. The keys to success included communication, engagement, and accountability across teams and locations.

1. Breaking the Barrier to a
Lower Cost Inbound
Logistics Program
Bill Michalski, ArrowStream
Steve Hobbs, US Foods

2. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
Agenda
• Barrier? What Barrier?
• What it Means for US Foods
• How To “Break on Through”
• How Did US Foods Succeed and What Did They
Learn?
• Implications for the Future

3. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
Barrier? What Barrier?

4. Why Do We Manage Inbound
Freight?
We manage inbound freight if we are better positioned than our
suppliers to move this freight efficiently
• Volume Leverage
• Network Density
• Backhaul
• Logistics Expertise
• Carrier Relationships
Supplier’s Freight Allowance
– Your Cost
Logistics Savings (or freight margin, or cost reduction, or…)

5. How Do We Maximize Inbound
Freight Savings?
• Carrier Sourcing / Negotiation
• Consolidation
– Multi-stop routes
– Mode Shift from LTL to Truckload /
Intermodal
– Cross-dock / Pooling / Redistribution /
3PL
• Backhaul/Fleet Utilization
Reality Check: These are logistics tactics based
solely upon network size and volume. None are
Inbound Logistics tactics.

6. What Makes Inbound Logistics
Different?
• The company that is managing the freight also
manages purchasing
• Why is this important?
The size, timing, and frequency of purchase
orders are the single biggest determinants of
inbound freight cost

7. Case Study: Creating Better Consolidations
New
• 6 total inventory turns • 8 total inventory turns
• 4 trucks, Avg. 99 % Filled
• $6150 a month
• 2900 miles a month
Order/Route
Current Replenishment Pattern
Current
State
1,980 cs
1,980 cs
992 cs
1,210 cs
880 cs
1,650 cs
Plan
99 %
99 %
99 %
99 %
M T W R F M T W R F M T W R F M T W R F
New Replenishment Pattern
M T W R F M T W R F M T W R F M T W R F
90 %
90 %
45 %
55 %
40 %
75 %
Origin 1
Origin 2
990 cs
990 cs
990 cs
990 cs
1,183 cs
1,183 cs
1,183 cs
1,183 cs
Chicago, IL
Indianapolis, IN
Atlanta, GA
• 6 trucks, Avg. 67 % Filled
• $7700 a month
• 3600 miles a month
 Reduced Freight Cost by 20%
 Increased Turns by 33%
 Reduce Dock Congestion
 Increased trailer utilization
 Reduced emissions by 19%
The Buyers do this…so Transportation does this. We set a new plan…that reduced inventory AND freight cost.

8. The Barrier
The barrier to a lower cost inbound logistics
network is ineffective coordination between
purchasing and logistics teams

9. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
What It Means for US Foods

10. Inbound Logistics at US Foods
US Foods Network
• 345 million cases / 7.8 billion pounds of product transported
• Freight visibility over 50,000 lanes
• 12,000 weekly POs / ~3500 IB loads per week
• 5th largest US private fleet in the country
– 5200 tractors, 6500 trailers, 320 straight trucks
• 60+ Divisions in 8 regions
60+ Distribution Centers 5,000 Supplier Ship Points

11. How was this opportunity initially
pursued at US Foods?
• Blueprinting Program
– Began in 2007
– Centralized logistics planning team
– Finding solutions in Excel
– Working with Purchasing at local level to determine and
convert lanes to managed
– Blueprints built to establish buying patterns that would
drive equipment utilization

12. Some Challenges Faced
• Reached plateau in finding new managed freight opportunities – 52% managed
– Unmanaged freight without profitable solutions
– Previously identified solutions fall apart without constant review
– Constantly changing network causes rework to maintain freight under management
• No single process and communication tool to develop and initiate solutions
– Measurement of the process – throughput, yield %, errors, etc
– Systematic measurement of incremental opportunity for the network
– Multiple spreadsheets and process flow, multiple groups working independently
• Difficulty in maintaining a regular process improvement focus
– Exception alerts for shipment not meeting target to fix prior to tender
– Regular reporting against targets action immediate development of new solutions
– Root cause reporting to rationalize behavior changes to maintain margin

13. Initial Process
Buyer Transportation
Ordering Guidance
• Business Rules
• POs
• Inventory
• Sales
• Supplier Master
• Item Master
Planner
• Shipments
• Carrier Rates
Logistics Planner
1. Solutions found manually
Orders
5. No tracking of freight
margin vs. plan
6. No feedback loop to
address issues
– one lane at a time
2. Based on partial/aging
OMS TMS
Commitments
Sales
Loads
Tendered
3. No visibility if plans are being followed
4. No ability to correct course
data
OMS TMS

14. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
How to “Break on Through”

15. What Do We Need to Get This
Right?
A continuous planning process…
• …spanning both teams,
• …supported by full and timely information visibility,
• …supported by rapid analysis tools,
• …embedded within the execution process,
• …so we can monitor behavior,
• …measure results,
• …and change course as needed.

16. Bridging the Silos: Recommended Process
SaaS Technology
“Bridge”
Buyer Transportation
Ordering Guidance
• Business Rules
& Constraints
• POs
• Inventory
• Sales
• Supplier Master
• Item Master
• Shipments
• Carrier Rates
Logistics Planner
Sales
Commitments
Forecasts
Loads
Planned
Master Data
(Integration)
Rates
(Integration)
Monitor
Non-Compliance
Adjust to preserve margin
Orders Orders
Measure
Impact Measured
Corrective Action Tracked
Shipments
Improve
Corrective
Actions
Corrective
Actions
Planning
OMS TMS
Order
Routing Guidance
Load
Tendered
Plan
Optimal flow plan that balances
inventory and transportation
costs

17. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
How Did Us Foods Succeed and
What did they Learn?

18. The US Foods Journey
• 2012 live pilot
– size the opportunity
– define the process
– define roles
• 2013 phased rollout
– new freight conversions
– managed freight optimization
• 2014 network-wide
full monitoring and measuring

19. Results
• Full adoption of continuous planning process by
cross-functional, cross-division team
• Increased freight under management beyond
previous ceiling
• Exceeded goals for increased savings on existing
freight

20. Keys to Success
• Communication
• Engagement
• Accountability

21. Advice to Others
• Phase it out, and start simple
– “Restack the blocks”
– Roll out by location
• It’s not just about managing more freight, it’s about
managing the right freight
– Analysis must keep up with the changing business
– Find alternate solutions for lanes falling short
• Solutions that fail are almost as valuable as those that
succeed
– Expose real limitations vs. perceived limitations
– Assign costs to behaviors/decisions

22. Advice to Others
• Tap into your Tribal Knowledge
– A structured communications platform breeds a healthy supply
chain that learns from its mistakes
• Understand process backlogs
– Build response time accountability
– What gets measured, gets done

23. Breaking the Barrier to a Lower
Cost Inbound Logistics Program
Implications for the Future?

24. Where We’ve Been
• Connected but separate
• Defined by our system footprint
• Competing incentives
• ERP creates consistency, but not enough coordination
Purchasing /
Inventory Mgmt
Purchasing / Order
Mgmt Inventory
Mgmt System
Transportation
TMS
The result:
• Inefficiency, higher cost
• Difficulty in executing supply chain planning
Warehouse Mgmt
WMS
Sales
Demand Planning /
Forecasting
System
ERP

25. Where We’re Going
SaaS-based Bridge Solutions
• “Connectivity” is not enough
• “Visibility” is not enough
• “Collaboration” is not even enough
This type of process/personnel alignment requires:
• Cross-functional planning and execution
– Continuous planning
– Today’s rapid communication support
– Live monitoring of execution vs. plan
– Performance measurement on the common objective
– Workflow to correct course
• Software-as-a-Service (SaaS) model
– quickly deployed
– small IT investment
– without supplanting or changing existing systems
– evolving with the business
Planning
Silo 1 Silo 2
Execution

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