Inbound Visibility

MICHAEL GARRY

Making an appointment with Penn Traffic has become a lot easier.

In the past, transportation carriers hired by Penn Traffic would call up or send a fax to make an appointment to deliver goods to its two warehouses in Syracuse, N.Y. But starting last February, phone calls and faxes have been replaced by a collaborative system that allows carriers to go online to schedule appointments.

Penn Traffic, which operates 108 supermarkets under three banners, as well as a wholesale business, belongs to an online network of retailers, carriers and CPG manufacturers that allows them to collaborate on making dock-door appointments for inbound deliveries to retail and wholesale warehouses. The network is the creation of One Network Enterprises, Dallas.

“We set up blocks of time for appointments,” said Tim Cipiti, Penn Traffic's vice president of distribution and manufacturing. “We can manage the flow better than before; it makes the process smoother.” In a few months, Penn Traffic will open its other two warehouses in Pennsylvania to the scheduling system.

One Network's collaborative appointment scheduling system comprises hundreds of carriers and manufacturers, along with such food distributors as Kroger, Safeway, Food Lion, Publix, Spartan Stores, Smart & Final and Bozzuto's, in addition to Penn Traffic. It now accounts for 25% of the inbound movement of goods from suppliers to retailers in the supermarket industry, with much of the growth coming in the past two years, said Greg Brady, chief executive officer at One Network.

Eighty percent of Penn Traffic's carriers make use of One Network's scheduling system, noted Cipiti. Some small carriers still call Penn Traffic for appointments, but they are charged a fee for not using the scheduling system.

Automated appointment scheduling is one example of how retailers, wholesalers and their trading partners are achieving greater visibility into their transportation network. This visibility, made possible by online networks from providers like One Network, Lean Logistics and Descartes, as well as such technologies as RFID and global positioning systems, are helping companies realize long-term supply chain goals ranging from reduced inventory and out-of-stocks to a more efficient inbound receiving process.

“The biggest thing we're looking to get is visibility [into inbound shipments] that you can't get with a manual system,” said Cipiti.

Penn Traffic is beginning to see a number of operational improvements as a result of the appointment scheduling system, said Cipiti. For example, it has been able to reassign one of the two employees who had handled appointment scheduling to another area.

In addition, the company is able to track the performance of carriers much more easily than in the past. The system automatically creates a scorecard of deliveries, allowing Penn Traffic to focus its attention on carriers that are chronically late. As a result, “inbound on-time performance is much better,” said Cipiti. Overall, automation has reduced the workload by 75%, he added.

“In the past, we would know a carrier was not good and just call and complain,” said Cipiti. “But now it's in black and white. We can say, ‘You're only on time 60% of the time. Unless you improve we're going to switch carriers or impose fines.’”

Long-term, Cipiti sees the scheduling system helping Penn Traffic to keep lower inventory levels in its warehouses. “You can manage your inventory better, because you are getting close to on-time deliveries.”

Cipiti acknowledged that it has been a challenge to get Penn Traffic employees accustomed to the automated system. “You have a sense of control when you're taking the appointments yourself,” he said. “This is different. But we've overcome that.”

For “prepaid” shipments, which are controlled by CPG manufacturers rather than by Penn Traffic, the manufacturers are also using the scheduling system to make dock-door appointments rather than making phone calls. “We set up the parameters to make sure that they get in at the right time,” said Cipiti. Between 70% and 75% of Penn Traffic's prepaid vendors use the online network, “and it's growing,” he added.

One Network's Brady observed that suppliers and carriers are attracted to the scheduling network because it offers multiple retailers simultaneously. “They don't want to deal with 100 scheduling engines,” he said.

The network is also starting to help Penn Traffic convert prepaid shipments to “collect,” whereby the retailer arranges and pays for inbound delivery, typically at a reduced cost. With prepaid manufacturers' points of origin and pickup allowances compiled in the system, Penn Traffic can more easily determine whether it would be cheaper to tender an online bid to a carrier for a given shipment.

LOAD CONSOLIDATION

Appointment scheduling, including related applications such as carrier tendering, is the initial functionality in One Network's automated transportation management system (TMS) that Penn Traffic is rolling out. The next application, in its early stages of adoption, is multi-stop consolidation, also a product of the visibility the system affords. Cipiti expects to get more value out of this application than any other.

“In the past, a buyer would create a purchase order and the product would just show up,” he said. “Now, for every purchase order, we can see over the network where it's coming from.” As a result, instead of orders from Buyer A and Buyer B coming on two separate LTL (less than truckload) trucks, Penn Traffic can arrange for them to come on one full-truckload truck, at a much reduced cost. “That's where the real benefit is,” Cipiti observed.

John Blanchard, director of transportation services for consulting service TranSystems/Esync, Toledo, Ohio, agreed that the most value in a TMS is in inbound consolidation. “If you do fewer LTL shipments and more multi-stop truckloads, that's where you find hard dollar savings,” he said. “You need a system that suggests this in a few seconds, vs. humans working on it all day.”

Cipiti envisions collaborating with other retailers — even competitors — in the One Network system to consolidate shipments. The presence of large retailers in the system, such as Kroger and Safeway, should also help push for improvements in the network that smaller retailers like Penn Traffic can benefit from, he noted.

Greater visibility is also enabling Penn Traffic to do more backhauls, using its own fleet to bring back manufacturers' goods after a store drop-off in what would otherwise be an empty vehicle. “Now we will know that we have a store with a manufacturer located five miles away,” Cipiti said. “We might not have seen that before.”

One Network makes its TMS technology available to retailers like Penn Traffic via an “on-demand” scenario, whereby they pay a monthly fee rather than making a large up-front investment in licensed third-party software. “It's more affordable and a better solution for us,” said Cipiti, who declined to divulge the cost. Penn Traffic, he added, started to see a payback on the appointment scheduling application in its first month of operation.

The average in-house implementation of a third-party TMS, said Blanchard of TranSystems/Esync, is rarely less than $1 million. Though it's far more common for food retailers to develop their own TMS, Blanchard said he is seeing more interest in commercial packages in the last three years than in the previous 10.

Whether on-demand or in-house, TMSs are drawing more attention as a way to counter rising transportation costs. In addition to spikes in fuel prices, labor costs are going up as a result of federal hours-of-service constraints, said Blanchard. “C-level executives are noticing these logistics expenses and looking at what they should do.”

Some food retailers are approaching inbound transportation by forming collaborative relationships with specific manufacturers. In March, Hannaford Bros., Wegmans Food Markets and Stop & Shop described how they are partnering with specific CPG companies at the Food Marketing Institute's Distribution/Supply Chain Conference. (See “Unclogging Traffic,” SN, April 23, 2007.) Representing FMI and the Grocery Manufacturers Association, those companies have worked on developing a Blueprint for Effective Collaboration to define best practices for inbound freight management.

At FMI's Productivity Plus conference earlier this month in Dallas, John Patriquin, director of logistics, Hannaford Bros., and Jack Ryan, director of customer logistics, Nestlé USA, elaborated on the partnership between their companies that helped improve the inbound movement of goods from Nestlé to Hannaford.

In their Productivity Plus presentation, Patriquin and Ryan said the companies focused on the following areas: Hannaford's purchase order generation; Nestlé's order processing; both companies' freight management process; and Hannaford's receiving process at its warehouse.

In what they called a “Get Well Plan,” Patriquin and Ryan said the companies worked on reducing unloading time at Hannaford's warehouse, improving delivery reliability and shortening lead times. They also implemented a customer pickup program to channel prepaid shipments to collect shipments.

As a result of their efforts, between March 2006 and February 2007 Hannaford and Nestlé were able to reduce inventory dollars by 20% and unloading duration by one hour and 26 minutes, while improving inventory turns by 70%, warehouse service levels by 1% and delivery reliability by 4.1%.