Swa 2009 Outsourcing 091909 Bill Stankiewicz Office 678 364 3475


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Outsourcing pointer on 3PL Operations.

Best Regards,

Bill Stankiewicz
Vice President and General Manager
Shippers Warehouse of Georgia
Office: 678-364-3475
Sustainable Consumer Packaged Goods member
CPG Branding and Forum Member
Please consider the environment before printing this e-mail
“Change doesn\'t start on the surface. It\'s generated from consciousness.”
Deepak Chopra

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Swa 2009 Outsourcing 091909 Bill Stankiewicz Office 678 364 3475

  1. 1. “ Outsourcing: All, Some or None….” SURVIVAL DURING TOUGH TIMES 9-19-09
  2. 2. Presentation Goals <ul><li>How do we know if we should outsource all, some or none? </li></ul><ul><li>How do we assess our companies readiness? </li></ul><ul><li>How do we find the right 3PL? </li></ul><ul><li>How do we take our 3PL relationship to the next level? </li></ul>
  3. 3. Presenters Background <ul><li>Andy Dishner </li></ul><ul><ul><li>VP, Sales & Marketing - TMSi Logistics </li></ul></ul><ul><ul><ul><li>[email_address] </li></ul></ul></ul><ul><ul><li>Operations management/high volume fulfillment (1992 to 1998) </li></ul></ul><ul><ul><li>General Manager 3 rd party logistics company/consumer and industrial accounts (1998 to 2005) </li></ul></ul><ul><ul><li>3PL sales/solutions (2005 to present) </li></ul></ul><ul><ul><li>B.S. Logistics and Transportation (University of Tennessee 1991) </li></ul></ul><ul><ul><li>MBA (University of Tennessee 2009) </li></ul></ul>
  4. 4. Definition of Outsourcing <ul><li>“ the strategic use of outside resources to perform activities traditionally handled by internal staff and resources”. </li></ul>SOURCE: “Current Trends in Production Labor Sourcing”  Rob Handfield, NC State University, SCRC
  5. 5. Definition of 3 rd Party Logistics <ul><li>“ the use of an external company to perform logistics functions that have been traditionally performed within an organization”. </li></ul>SOURCE: Edward H. Frazelle, Ph.D.
  6. 6. Where Are We Today? <ul><li>21st Century </li></ul><ul><ul><li>The current stage in the evolution of outsourcing is the development of strategic partnerships. </li></ul></ul><ul><ul><li>Focus today is less on ownership and more on results. </li></ul></ul><ul><ul><li>How can we Leverage our Network? </li></ul></ul><ul><ul><li>Who is in the best position to: </li></ul></ul><ul><ul><ul><li>Lower Costs </li></ul></ul></ul><ul><ul><ul><li>Increase Service “Experience” for end customer </li></ul></ul></ul><ul><ul><ul><li>Drive efficiencies Year over Year </li></ul></ul></ul>
  7. 7. What functions should I outsource? <ul><li>If you answer yes, it might be a good candidate. </li></ul><ul><ul><li>Is the process or operation highly complex? </li></ul></ul><ul><ul><li>Is it a commodity? </li></ul></ul><ul><ul><li>Are we just not very good at it? </li></ul></ul><ul><ul><li>If I keep this function in house, is my business at risk? </li></ul></ul><ul><ul><li>Can someone do it better? </li></ul></ul><ul><ul><li>Can someone do it cheaper? </li></ul></ul><ul><ul><li>Does it utilize a high % of temporary labor? </li></ul></ul><ul><ul><li>Are we a very small fish? </li></ul></ul><ul><ul><li>Is the function highly seasonal with heavy volume fluctuations? </li></ul></ul><ul><ul><li>Does the work requires more resources than we have/can afford? </li></ul></ul><ul><ul><li>Does it require highly specialized knowledge, training, and tools? </li></ul></ul><ul><ul><li>Are we better at execution or managing execution? </li></ul></ul><ul><ul><li>Does a provider and you make a better team than you alone? </li></ul></ul>
  8. 8. <ul><li>A “less than productive” </li></ul><ul><li>Partnership </li></ul>
  9. 9. Outsourcing Key Facts & Figures <ul><li>Transportation and Warehousing remain the most outsourced. </li></ul><ul><li>89% of users surveyed in 2008 said that 3PL partnerships represent a strategic, competitive advantage. </li></ul><ul><li>Nearly 50% of companies that currently do not outsource are contemplating outsourcing at least part of their logistics in the future. </li></ul><ul><li>Over 33% of respondents do not outsource because they see logistics as a core competency. </li></ul><ul><ul><li>In addition, they do not believe they would save costs if they outsourced. </li></ul></ul><ul><li>The study shows more companies are using 3PL services. </li></ul><ul><ul><li>First 6 years of the study 72% are users of 3PL services </li></ul></ul><ul><ul><li>The past 4 years 78% to 80% are users of 3PL services </li></ul></ul><ul><li>North American % of current logistics expenditures directed to outsourcing is 49% (flat over the past several years) is expected to grow to 56% in 3 to 5 years. </li></ul>SOURCE: 2007/8 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com.
  10. 10. Commonly Outsourced Functions SOURCE: 2008 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com.
  11. 11. Factors Contributing to Successful Outsourcing <ul><li>74% - Personal relationships on an operational level </li></ul><ul><li>60% - Carefully drafted contracts with detailed descriptions of services and performance tracking </li></ul><ul><li>55% - Clearly measured improvement in service levels to customers </li></ul><ul><li>54% - Peer-to-peer relationships on executive level providing guidance and sponsorship </li></ul><ul><li>48% - Clearly measured cost reductions </li></ul>SOURCE: 2008 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com. There are clearly 2 drivers of outsourcing success - Relationships and Measurements!
  12. 12. Users Report Continuing Problems with 3PLs During 3PL selection, question your potential providers to avoid these issues cited by other users. SOURCE: 2008 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com.
  13. 13. Results Experienced by Users of 3PL Services <ul><li>12% to 15% COST reduction. </li></ul><ul><li>Over 20% FIXED ASSET reduction. </li></ul><ul><li>20% to 30% ORDER CYCLE reduction. </li></ul>Year after year users report 3PLs are delivering impressive cost and service results. SOURCE: 2008 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com.
  14. 14. Top 3 reasons cited for NOT Outsourcing Logistics <ul><li>Core competency </li></ul><ul><li>Cost reduction cannot be realized </li></ul><ul><li>Control diminishes </li></ul>SOURCE: 2008 Georgia Tech and Capgemini, LLC - State of Logistics Outsourcing @ www.3plstudy.com.
  15. 15. Fear of Outsourcing and Loss of Control <ul><li>Do you have more control over how a steak is cooked to your order at HOME or at a RESTAURANT? </li></ul>
  16. 16. Outsourcing Readiness <ul><li>Are we ready to be a good partner? </li></ul><ul><ul><li>The customer must put some time and thought into this question. </li></ul></ul><ul><ul><li>Each area and affected party needs to chime in with expectations. </li></ul></ul><ul><ul><li>If these expectations are not shared…..stay out of the way! </li></ul></ul><ul><li>Establish aggressive, but reasonable expectations </li></ul><ul><ul><li>Great relationships exist that deliver year over year results, but only happen with a mutual agreement on specific actions and timing. </li></ul></ul><ul><ul><li>All great relationships are forged thru dealing with tough issues and establishing mutual respect. </li></ul></ul><ul><li>It takes Two to Tango! </li></ul><ul><ul><li>Two parties are needed for a 3PL relationship to deliver exceptional results. </li></ul></ul><ul><ul><li>A 3PL who drives continual performance and challenges you to gain cross functional support. </li></ul></ul><ul><ul><li>A customer who buys in to the concept and is committed to sharing in the responsibility of success. </li></ul></ul>
  17. 17. Outsourcing Readiness <ul><li>Where does Logistics rank in our organization? </li></ul><ul><ul><li>To produce outstanding results, the entire company must be committed to supporting the outsourcing relationship. </li></ul></ul><ul><ul><li>Includes supporting capital projects and cost-out initiatives. </li></ul></ul><ul><li>Do we have any forms of outsourcing now in our company? </li></ul><ul><ul><li>What are the relationships? </li></ul></ul><ul><ul><li>Why do they work? </li></ul></ul><ul><ul><li>Why do they not work? </li></ul></ul><ul><ul><li>Any lessons learned? </li></ul></ul><ul><ul><li>How supportive have we been of the process? </li></ul></ul>
  18. 18. Outsourcing Scorecard/Readiness Indicator
  19. 19. Outsourcing Logistics Decision Making Process <ul><li>Assess current strengths & weaknesses </li></ul><ul><li>Determine requirements to be the best </li></ul><ul><li>Perform Gap & ROI Impact Analysis </li></ul><ul><li>Build, buy or partner? </li></ul><ul><li>Risk Assessment </li></ul><ul><li>Understand internal issues and pressure </li></ul><ul><li>State Financial performance objectives </li></ul><ul><li>Document realistic Expectations of Transition and Steady State </li></ul><ul><li>Define Success (Write it Down) </li></ul><ul><li>Undo Button </li></ul><ul><li>To Act or Not to Act….What are the consequences? </li></ul>
  20. 20. Last Minute Outsource Checklist <ul><li>Have you asked your current suppliers to raise their game? </li></ul><ul><li>Challenged your own team to raise their game? </li></ul><ul><li>How successful can you be with the wrong network? </li></ul><ul><li>How will outsourcing and automating your bad processes with new technology work? </li></ul><ul><li>Are you willing to admit ,“You don’t know what you don’t know”? </li></ul><ul><li>Are you outsourcing just to get something off your plate? </li></ul><ul><li>How much time are we willing to invest to make this decision? </li></ul>
  21. 21. Common Outsourcing Missteps <ul><li>Fire </li></ul><ul><li>Ready </li></ul><ul><li>Aim </li></ul>Could your last RFP be better described as….. Really Far from the Purpose?
  22. 22. Vendor Selection <ul><li>Know what you want before you buy? </li></ul><ul><ul><li>Asset vs. Non-asset </li></ul></ul><ul><ul><li>Dedicated vs. Multi-tenant vs. Public </li></ul></ul><ul><li>Set Objectives, Goals and Criteria </li></ul><ul><li>Formal or Informal/Blind RFI </li></ul><ul><li>Send out RFP to short list from RFI </li></ul><ul><ul><li>Respond to your own RFP! </li></ul></ul><ul><li>Invite vendors for an in depth visit of your operation </li></ul><ul><li>Evaluate Vendor RFPs </li></ul><ul><li>Conduct Site Visits (as many as feasible) </li></ul><ul><li>Vendor Negotiations (more than 1) </li></ul><ul><li>Award Contract/Partnership </li></ul><ul><li>Commit resources from both sides for success </li></ul>
  23. 23. 3PL Success Evaluation Form 1 - Use this process and force your team to pick 1 provider in each category. 2 - Document the comments your team discussed to arrive at the decision. 3 - Do it often, separately or as a team, and a true winner will emerge.
  24. 24. 6 Warning Signs of a Bad 3PL Relationship <ul><li>It is the 3PL’s problem now – “BIGGEST MYTH”. </li></ul><ul><ul><li>“ It is amazing how many people think you just throw all your problems over the fence and they become 100% your 3PL’s problem” (SVP of National Retailer who outsources). </li></ul></ul><ul><li>Absence of trust and respect. </li></ul><ul><li>You communicate only when there are problems. </li></ul><ul><li>When one or both parties feels the need to always refer to the contract. </li></ul><ul><li>Absence of Cost-Out and Continuous Improvement. </li></ul><ul><li>One or both parties spent less time evaluating the relationship than buying their last home. </li></ul>
  25. 25. Pump up Performance and Profits <ul><li>Convey high expectations </li></ul><ul><li>A Relationship that is a partnership – lines are blurred. </li></ul><ul><li>Create a performance-based culture and workforce </li></ul><ul><li>Accomplish a quarterly meeting rhythm </li></ul><ul><li>Implement incentives that drive behavior </li></ul><ul><li>Change metrics to meet future plans vs. comparing to last year! </li></ul><ul><li>Build the foundation for long term performance </li></ul><ul><li>Invest in continuous improvement – time and capital. </li></ul><ul><li>Expand your view of the supply chain – Up and down. </li></ul><ul><li>Make the hard decisions together and faster! </li></ul>
  26. 26. Takeaways <ul><li>The Devil is in the Details </li></ul><ul><li>Every company has an Achilles heal, your job is to find it. </li></ul><ul><li>The Selection Process Works </li></ul><ul><li>3PL relationships are like marriages. You get out what you put in. </li></ul><ul><li>The price will never be low enough to overcome a poor relationship. </li></ul><ul><li>Every outsourcing decision becomes a statistic. Decide what kind of statistic you want your outsourcing to be and act accordingly! </li></ul><ul><li>Think Right to Left. Begin and proceed with the end state in mind. </li></ul>
  27. 27. Resources <ul><li>Georgia Tech and Capgemini, LLC - 13th Annual 3PL Study www.3PLstudy.com </li></ul><ul><li>WERC Benchmarking Study (6 th Annual Workplace Study) - www.werc.org </li></ul><ul><li>CSCMP Process Standards – www.cscmp.org </li></ul><ul><li>Armstrong & Associates (Guides & Research) - www.3plogistics.com </li></ul><ul><li>Supply Chain & Logistics Institute (3PL Program) - www.tli.gatech.edu </li></ul>
  28. 28. Outsourcing – The Leader’s Approach <ul><li>“ Outsource Logistics but do not outsource </li></ul><ul><li>Logistics Management.” </li></ul>
  29. 29. APPENDIX
  30. 30. Fulfillment & Distribution <ul><li>Situation </li></ul><ul><ul><li>A start up high-end, regional furniture retailer with both Web Fulfillment and Store channels. </li></ul></ul><ul><ul><li>Distribution was in sourced for the first 6 months. </li></ul></ul><ul><ul><li>Ecommerce took off much more than the stores business and it required home delivery across the nation. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Find a quality national 3PL provider with furniture experience </li></ul></ul><ul><ul><li>Develop a comprehensive RFP/Selection process. </li></ul></ul><ul><ul><li>Selected the highest service level 3PL which happened to be the highest cost 3PL. </li></ul></ul><ul><ul><li>Transitioned all warehousing and transportation to the 3PL in 1 month. </li></ul></ul>SOURCE: Johnston Stephens Consulting
  31. 31. Fulfillment & Distribution <ul><li>Results </li></ul><ul><ul><li>Logistics costs reduced by 38% from current LTL delivery. </li></ul></ul><ul><ul><li>A new service level of “White Glove Home Delivery” was now available (not available when in sourced). </li></ul></ul><ul><ul><li>The national coverage area demanded by customers was achieved. </li></ul></ul><ul><ul><li>Supported a 500% increase sales volume the first year. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>The RFP selection process works when followed completely. </li></ul></ul><ul><ul><li>“ A picture is worth a thousand words”. Make sure you take the site visits to see what your potential 3PL partner is offering in their nice PowerPoint proposal. </li></ul></ul><ul><ul><li>Believe your instinct and gut. </li></ul></ul><ul><ul><li>You get what you pay for. </li></ul></ul>SOURCE: Johnston Stephens Consulting
  32. 32. Outbound Transportation/Store Delivery <ul><li>Situation </li></ul><ul><ul><li>A retailer had tried several options with LTL carriers, UPS and FedEx to improve service to the stores and reduce cost. </li></ul></ul><ul><ul><li>The logistics operation needed to support a store growth plan with ever expanding geography and a merchandising/go-to market strategy that said customers will reward us with repeat business when our stores are refreshed daily with new and replenishment merchandise. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Developed a partnership with a pooled distribution carrier to replace UPS. </li></ul></ul><ul><ul><li>Retailers footprint and growth plans would become the foundation of the carrier’s network infrastructure and allow the carrier to take on new customers with higher profit margins. </li></ul></ul><ul><ul><li>Retailer and carrier would accommodate each other’s requests for the good of the partnership. </li></ul></ul>
  33. 33. Outbound Transportation/Store Delivery <ul><li>Results </li></ul><ul><ul><li>Outbound transportation costs reduced by 13%. </li></ul></ul><ul><ul><li>Stores receiving next day delivery increased from 38% to 88%. </li></ul></ul><ul><ul><li>Supported use of returnable totes that save over $1M annually. </li></ul></ul><ul><ul><li>Truly a win – win for the retailer and the carrier. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>Do not accept the services/solutions currently on the street. Dare to create a new one on your own! </li></ul></ul><ul><ul><li>Smaller providers can be more flexible, may require more effort at times but being the big fish can be a rewarding spot in the pond. </li></ul></ul><ul><ul><li>Invest and commit to mutually beneficial partnerships but always have options. An RFP is the best way to let your current partner and other providers know you are serious about getting the best. </li></ul></ul>
  34. 34. Order Picking <ul><li>Situation </li></ul><ul><ul><li>A tool manufacturer with retail and direct to consumer distribution had several challenges with their direct and temporary labor order pickers. </li></ul></ul><ul><ul><li>High wages and benefit costs were contributing to high costs. </li></ul></ul><ul><ul><li>The existing direct labor force was not very flexible and able to respond to volatile demand. </li></ul></ul><ul><ul><li>The high error rates of the temps were resulting in rework, returns and charge backs as well as low customer satisfaction. </li></ul></ul><ul><ul><li>The low productivity of this critical area was reducing facility throughput. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>The company decides to pilot transitioning a small area of the operation to an outsource provider who provides guaranteed cost/unit pricing, accuracy, cycle time and throughput. The solution also includes; </li></ul></ul><ul><ul><ul><li>Six Sigma methods to address root cause of accuracy errors </li></ul></ul></ul><ul><ul><ul><li>Engineering support to drive ongoing productivity gains </li></ul></ul></ul><ul><ul><ul><li>Motivational employee pay plan that aligns with clients’ objectives </li></ul></ul></ul>SOURCE: Insource Contract Services
  35. 35. Order Picking <ul><li>Results </li></ul><ul><ul><li>Cost/unit reduction of 40%. </li></ul></ul><ul><ul><li>Productivity (UPMH) improved 57%. </li></ul></ul><ul><ul><li>Order accuracy improved 48%. </li></ul></ul><ul><ul><li>Facility throughput goals met or exceeded to avoid adding space. </li></ul></ul><ul><ul><li>The pilot was successful and expanded within the operation. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>The customer was pleasantly surprised by the unexpected benefit of Peer Pressure Performance. Quality and productivity increased for the company order pickers as well as in other areas of the facility because the outsourced team raised the bar on performance. </li></ul></ul><ul><ul><li>We discovered there really is a limitation on how much performance and quality you can achieve with a high temporary workforce model even with the very best of managers. </li></ul></ul><ul><ul><li>Managers should remember they are judged on bottom line performance not on how much work is done in house. </li></ul></ul>SOURCE: Insource Contract Services
  36. 36. Inbound Freight Management <ul><li>Situation </li></ul><ul><ul><li>An apparel retailer/cataloguer realized they were not efficiently managing company’s interests related to Inbound Trans. </li></ul></ul><ul><ul><li>They were not paying attention to the charges and what options were available. </li></ul></ul><ul><ul><li>They did not have the expertise in-house to effectively manage and achieve best in class performance. </li></ul></ul><ul><ul><li>Management believed the program needed to be managed better, but did not require a full blown Traffic/Transportation Department. </li></ul></ul><ul><ul><li>Knew they could save money by outsourcing to a 3PL. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Hired a Capable Freight Management Company to negotiate rates, pay bills, audit and provide web tracking using an abbreviated/ad hoc selection process. </li></ul></ul><ul><ul><li>3PL provider guaranteed savings of 20-30%. </li></ul></ul>
  37. 37. Inbound Freight Management <ul><li>Results </li></ul><ul><ul><li>Initially achieved reduced IB freight charges of 20%+ </li></ul></ul><ul><ul><li>Relationship good at first, but quickly deteriorated, as Sales and operational staff were not on the same page </li></ul></ul><ul><ul><li>Once sale process was over, the service was sub-par and frustration set in </li></ul></ul><ul><ul><li>Reporting capability was less than desired </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>Poor good job up front with vendor selection and due diligence. </li></ul></ul><ul><ul><li>Did not verify providers capability to meet requirements through demonstration or reference checks. </li></ul></ul><ul><ul><li>Secure at least 3 bids. Used more of a file collection process over a period of years. Went with most persistent salesperson. </li></ul></ul><ul><ul><li>Discuss cost challenges with current transportation providers, challenge them to reduce rates and find solutions. </li></ul></ul><ul><ul><li>Conduct expectation exchange with Ops/Merchandising teams. </li></ul></ul>
  38. 38. Parcel Negotiation <ul><li>Situation </li></ul><ul><ul><li>An international training company had witnessed a sharp increase in the cost to ship training materials and supplies to each of its learning centers over the years. </li></ul></ul><ul><ul><li>The company’s logistics team had concerns that they weren’t receiving competitive discounts on their shipping volumes. </li></ul></ul><ul><ul><li>Corporate headquarters used one primary transportation carrier while satellite offices and training centers used a hodgepodge of different carriers. </li></ul></ul>SOURCE: NPI Financial
  39. 39. Parcel Negotiation <ul><li>Solution </li></ul><ul><ul><li>Create a new contract with stronger discounting with their primary and a secondary transportation carrier. </li></ul></ul><ul><ul><li>International shipments - reduced the minimum shipment fees required to receive discounts and improved overall discounts by more than 30%. </li></ul></ul><ul><ul><li>Air shipments – doubled the discount rate for all air shipments. </li></ul></ul><ul><ul><li>Ground shipments – pressed the carrier to provide a 25% improvement over previous discounts. </li></ul></ul><ul><ul><li>Consolidated carrier selection across more than 50% of the satellite training facilities with same corporate discounts. </li></ul></ul><ul><ul><li>Conduct ongoing contract and bill auditing of parcel carrier’s bills to ensure accuracy and compliance with contracted discounts. </li></ul></ul>SOURCE: NPI Financial
  40. 40. Parcel Negotiation <ul><li>Results </li></ul><ul><ul><li>In just 90 days, transportation spend was reduced by 34% </li></ul></ul><ul><ul><li>The customer will continue to realize these savings month after the month over the course of the 3 year contract. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>It costs us nothing and saved us hundreds of thousands of dollars annually. </li></ul></ul><ul><ul><li>All carrier salespeople will tell you are getting great or our best rates. </li></ul></ul><ul><ul><li>Carrier contracts and billing are so complex today and are very dynamic as well. Very tough to stay on top of everything. </li></ul></ul><ul><ul><li>It is almost impossible to have this level of visibility unless you work with an insider. </li></ul></ul><ul><ul><li>Whoever has the best information, wins! </li></ul></ul>SOURCE: NPI Financial
  41. 41. Vendor Compliance <ul><li>Situation </li></ul><ul><ul><li>A national retailer encountered with vendors’ shipments were improper merchandise packing; misprinted packing slips; improper style, color and size substitutions; damaged goods and late shipments. </li></ul></ul><ul><ul><li>These trouble shipments had to be removed from the normal processing flow, and additional staff, space and resources were required to resolve the problems. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Selected a vendor compliance software service provider to implement the Retail Compliance Management Solution (RCMS). </li></ul></ul><ul><ul><li>Implemented throughout the entire distribution system, rCMS immediately illuminated an array of vendor routing, shipping and packaging violations. </li></ul></ul>SOURCE: Compliance Networks
  42. 42. Vendor Compliance <ul><li>Results </li></ul><ul><ul><li>Increased distribution center capacity & enabled more cross dock </li></ul></ul><ul><ul><li>Reduced distribution cost/unit by 8 percent </li></ul></ul><ul><ul><li>Boosted distribution center productivity by 14 percent </li></ul></ul><ul><ul><li>Cut distribution center cycle time by more than 40 percent </li></ul></ul><ul><ul><li>Eliminated 63 percent of problem shipments </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>A pilot or “free analysis” can be eye opening and help you sell the solution/partnership to the skeptics. </li></ul></ul><ul><ul><li>We thought we could do better ourselves or find another cheaper partner and we didn’t. Wasted time and money. </li></ul></ul><ul><ul><li>The resource requirements from our own internal IT group was much less than expected. </li></ul></ul>SOURCE: Compliance Networks
  43. 43. Distribution Network Analysis <ul><li>Situation </li></ul><ul><ul><li>A division of a Fortune 250 Diversified Technology and Manufacturing Leader needed to evaluate their distribution options and national footprint </li></ul></ul><ul><ul><li>They wanted to serve customer base more efficiently with lower total landed costs. </li></ul></ul><ul><ul><li>They did not have the experience, modeling tools and expertise to conduct all network modeling in-house, but knew transportation analysis was a strength. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Used a vendor selection process with a 3 phased approach </li></ul></ul><ul><ul><li>Phase 1 - Sent out RFI to 10 providers. </li></ul></ul><ul><ul><li>Phase 2 - Conducted site visits for top 3. Compared pricing, service levels, reputation, current clients. </li></ul></ul><ul><ul><li>Phase 3 - Made decision on multiple factors. </li></ul></ul><ul><ul><li>Accepted the results of the study and validated the transportation rates by using in-house expertise. </li></ul></ul>
  44. 44. Distribution Network Analysis <ul><li>Results </li></ul><ul><ul><li>They did a great job to convert LTL to TL on the Dedicated Network. </li></ul></ul><ul><ul><li>Determined lowest cost network to meet service commitments. </li></ul></ul><ul><ul><li>In-house transportation analysis proved KEY to optimizing network. </li></ul></ul><ul><ul><li>Reduced network costs in excess of 10%, with slight reduction in cycle times. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>Make sure that you, the customer, totally understand your business model. </li></ul></ul><ul><ul><li>Ask questions to validate that your potential partners understand your business model and your expected outcome for the project. </li></ul></ul><ul><ul><li>Never discount cost vs. service trade-offs. There is a cost for service. Know what this is and adjust your model accordingly. </li></ul></ul><ul><ul><li>Understand Cause and Effect. </li></ul></ul>
  45. 45. Freight Bill & Audit <ul><li>Situation </li></ul><ul><ul><li>A Fortune 500 Packaging Supplier questioned in-house expertise and ability to effectively manage freight bill payment and audit. </li></ul></ul><ul><ul><li>They knew that performing in-house would require hiring the right staff, training, benchmarking, developing SOP’s, etc. </li></ul></ul><ul><ul><li>Used activity-based costing to determine internal cost/transaction and knew right partner could lower. </li></ul></ul><ul><ul><li>The company’s executive management team acknowledged being competent with freight bill payment and audit but did not see the function as a core competency and was not a part of the Strategic Plan. </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Hired an experienced, capable Freight Bill and Audit company using an RFP process. </li></ul></ul><ul><ul><li>Identified capable clerical support and management oversight. </li></ul></ul>
  46. 46. Freight Bill & Audit <ul><li>Results </li></ul><ul><ul><li>Reduced total cost of managing this function in excess of 10%. </li></ul></ul><ul><ul><li>Freed up internal resources to effectively manage other freight related issues. </li></ul></ul><ul><li>Lessons Learned </li></ul><ul><ul><li>There is NO substitute for Due Diligence </li></ul></ul><ul><ul><li>Make sure that the bidding process is not all about price. Make sure that you are comparing VALUE. </li></ul></ul><ul><ul><li>“ You get what you pay for……maybe, but you never get what you don’t pay for”. </li></ul></ul><ul><ul><li>Find out what each function of the business (Operations, Finance, Executive level, etc.) wants out of the relationship before you make the decision. </li></ul></ul>