Supply Chain Digest interview with Gough Grubbs SVP at Stage Stores, and report on our successful inbound optimization program at Stage Stores
As Reported in Supply Chain Digest – October 30, 2003
Taking Control of Inbound Freight - Part 2
How Stage Stores is Doing It
By Dan Gilmore, Editor-in Chief
Last week's "First Thoughts" column on taking control of inbound transportation generated a fair amount of feedback.
Those who disagreed followed three main themes: (1) one company's inbound is another's outbound; (2) companies should collaborate with suppliers to find lowest total transport cost, which may come from the supplier consolidating shipments, not you; and (3) the transportation savings obtained from taking control of inbound will show back up in the price of goods anyway.
Good points. My quick response, in order:
1. Yes, and some larger companies (e.g. Procter & Gamble) will only accept prepay and add orders. But as master of your supply chain you need to look at what's best for you. And many companies are already using routing guides - the problem is they don't really allow inbound consolidation.
2. In theory we should collaborate with suppliers to find the lowest total cost way, but there are huge barriers to doing that in practice.
3. Even thea supplier's material prices rise to compensate for lost transportation "profits", it's better to clearly know the cost of materials and transportation to make the best sourcing and logistics decisions.
I also spoke last week to Gough Grubbs, Sr. VP of Logistics for Stage Stores, a company that has successfully taken control of inbound transportation, for insights on keys to success.
Stage Stores is a mid-sized retailer of western items (about 400 retail locations) that decided to focus on inbound several years ago, providing static routing guides to its base of some 700 vendors. Next they took an interim step of doing consolidation on a manual basis; suppliers were required to fax in information about planned shipments: origin, cube, weight, etc. Stage Stores planners then manually looked for consolidation opportunities.
After providing the model, but needing more automation, Stage Stores implemented a hosted TMS solution from Shipper's Commonwealth, which provides a collaborative vehicle for exchanging PO/shipment details and carrier information with vendors, then optimizing inbound shipments. According to Gough, a significant percentage of inbound shipments are consolidated into either multi-stop truckloads or shipped via inbound pooling, with commensurate savings over LTL.
"Change management" is always a challenge for taking control of inbound, both internally and with vendors. Although Grubbs isn't sure if he had to do it over again he would take the manual approach first, it did make the processes of automating the process with TMS substantially easier.
This is just one example, and retailers with heavy inbound LTL shipments probably provide the best scenario for taking inbound control, but in Stage Stores' case the savings have been very real.
Please continue the feedback on "taking control of inbound". Is it a best practice and significant source of potential savings, or are we simply moving supply chain costs around? Does it make sense to pilot first with manual methods?
Let us know your thoughts.
|
