2006: Forward Ho!

If there's one piece of advice that material and distribution managers should take to heart as they plan for 2006, it's not to follow the herd. Just because a particular strategy or technology is hot, doesn't mean it will pay off for every company or application.

"A few years back the solution to everything was 3PLs [third party logistics providers]," says Ted Augustine, director of logistics and product supply for Goodyear Tire and Rubber Co., (Akron, Ohio). "They're not the solution to everything. Do 3PLs have their place? Absolutely. Does offshore outsourcing have its place? Absolutely. But is it a silver bullet? No way."

Augustine's primary concern as he looks to the coming year is transportation. His group is constantly reviewing contracts and challenging fuel surcharges. They are working to build relationships with their core carrier group. But when capacity is the issue—of trucks, at the ports and on the railways—there's a limit to what they can do.

"The continuous shortage of drivers is really impacting the whole domestic transportation arena, both long and shorthaul," he says. "There's a lot of consolidation going on in those ranks too, which is fine for that industry, but the ripple effect to the user community just translates to higher rates."

One lesson from 2005 that he's carrying through to next year is the need to have contingency plans in place in the event of catastrophic events. All of Goodyear's natural rubber comes from Asia through Morehead City (N.C.), New Orleans and Pascagoula (Miss.). The latter two ports were both impacted by hurricanes.

"One of the short-sighted things that most U.S. companies do is never really plan for those types of contingencies. I think every company needs to do better contingency planning," says Augustine.

Transportation capacity is also the top concern of Brian O'Donnell, director of technical operations and planning for Liz Claiborne (New York). He says truckers are making appointments but they aren't showing up until a day or two after they are supposed to arrive because there aren't enough trailers or tractors.

"The biggest thing we can do at this time is work with our customers' logistics departments to give them a better forecast of what we'll be shipping them, when it will be arriving in our DC, and when we plan to ship it out to them, so they can try to make some capacity commitments as early as possible," says O'Donnell. To manage the capacity constraints at the ports, Liz Claiborne is moving some freight to different ports, away from Long Beach.

Channel Synchronization
Through the first three quarters of 2005, wholesale shipments accounted for 76% of Liz Claiborne's total sales. To reduce its dependence on the wholesale channel, the company has been expanding its retail presence. It opened 89 outlet and specialty stores during the past 12 months. Fulfilling the orders of its traditional wholesale customers, which are geared toward end-of-month shipments, and the growing number of retail outlets presents some distribution challenges.

"We have to try to do both well within the same distribution center. Our network isn't really changing physically, more systemically to handle this type of stuff," says O'Donnell. His organization will also be moving to integrate a number of acquisitions; prAna, a Vista, Calif.-based wholesaler of climbing, yoga and outdoor apparel, being the most recent. These organizations need to be brought up to speed on Liz Claiborne's core infrastructure systems and reporting structures.

Looking within the four walls, David Lockman, manager of engineering for the distribution operations of L.L. Bean (Freeport, Maine), says they will be working to improve picking activity in 2006.

"We started attacking our constraints one by one and found that we were pinballing back and forth between sorting and packing," says Lockman. Today he sees opportunity to improve picking, not necessarily by buying any new technology, but in how they send orders to the floor.

"Just as most organizations do, we have some fairly aggressive financial goals that we need to hit. As we look at what our overall opportunities are to hit them, the low hanging fruit is pick and pack still," says Lockman. "We've done a fairly decent job automating some of our packing operations but we realize there are some other opportunities that exist and we're going to go after it."

One of the core strengths that L.L. Bean will continue to nurture in the New Year is its family-friendly, outdoororiented culture. Lockman says employees at the family-owned company share the same core values, and the company is very dedicated to its people, who tend to stick around longer than at many other companies. This helps productivity, and the company's improvement initiatives.

Financial and operational goals are driving a renewed focus on the entire supply chain at Ace Hardware ( Princeton, Ill.). "It's always been an initiative, but at this point it's been brought to the front burner to review everything and improve efficiencies wherever we can," says Laurie Nauman, supply chain coordinator for Ace.

"Reducing the labor, protecting the product from being damaged while in transit, supplying shipping information in advance on any possible substitutions, etc., allows for both business partners to improve upon the profits, and decrease costs," she adds.

Specifically, Ace has challenged manufacturers to verify the accuracy of product data. Synchronizing such business data will reportedly help the distribution operation maximize efficiencies and improve service to retailers and end customers. In support of such efforts, the company will continue to offer special web-based training and host suppliers at special meetings at its regional distribution centers throughout the year.