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Out in the open

Feb. 3, 2004
Out in the open Visibility is one of those logistics buzzwords that seems to take on a different meaning relative to the given situation. For James Hutchinson,

Out in the open

Visibility is one of those logistics buzzwords that seems to take on a different meaning relative to the given situation. For James Hutchinson, senior vice president, supply chain integration with wine and spirits producer Brown- Forman Corp., visibility means knowing where his bottled goods are, at all times.

“When we import from another country, we need to know whether goods are at the dock, on the ship, in the U.S., or still in Customs,” Hutchinson explains.

When shipping containers of Jack Daniels overseas, Hutchinson's team uses what he admits is a rudimentary tickler system. “If normal travel time is 30 days, the file reminds us to check on it if we don't see a receipt notification by then,” he says.

Even though Brown-Forman does its own bottling, product is handed off to what Hutchinson calls “third-party land.”

“Very little information resides in our internal system, so we manage by exception,” he says. “If something doesn't happen, we follow up.”

Hutchinson longs to have affordable online tracking for his goods in transit, to reduce blind spots and communication breakdowns. For example, the State of Washington, a customer Brown-Forman serves from Lynchburg, Va., reported running out of stock in its warehouse last November, but Hutchinson knew a load should have been there.

“It turns out the local warehouse manager didn't like the local trucking company we used so they never talked to each other,” he laments. “The load had been dropped two weeks earlier and was in the back of the parking lot.”

In terms of visibility, at a minimum Hutchinson wants the ability to go online to track major issues. “Ideally, that tracking information comes into my system so I can alert planners of exceptions. It's currently available, but in pieces and with a high price tag.”

Many shippers would love the kind of integrated global system built internally at office products supplier Ricoh Corp. According to Mike Duciewicz, vice president supply chain with Ricoh, “Once a purchase order is placed in the system, we know the production schedule, the estimated time of arrival (ETA) at the port of departure and the receiving port, offloading of the container, and ETA at our distribution center (DC).”

Through an internal non-vessel operating common carrier (NVOCC), responsible for shipping and coordinating Ricoh's international movements, Duciewicz receives online information from carriers.

“The key point is that most product is manufactured by our own family group,” notes Duciewicz. “The purchase order is generated by data put into the system and goes to the manufacturer as a standardized process. With outside vendors, we don't have that kind of visibility. We have a gap from purchase order date to receipt date. Lacking online capability in these cases, we do manual follow-up.”

To minimize information gaps, Limited Logistics Services has its own people monitoring production in Asian factories and monitoring flow into the U.S., notes Nick LaHowchic, president and CEO of the wholly-owned subsidiary of apparel retailer The Limited.

“To maintain speed and reliability, we assess supply chain events before goods leave the factory,” LaHowchic explains. “We work with key logistics suppliers to make sure we have needed capacity, especially during peak season. We get continuous feedback from the factory and the Asian consolidator, and daily reports from our ocean carrier.”

If he needs to expedite certain goods scheduled to move by ocean freight, he can identify which container to expedite.

“Stuff doesn't stay within our four walls very long,” asserts LaHowchic. “Via air, it's 72 hours from Hong Kong to our Columbus, Ohio, DC. In 36 hours, we transform it in the DC. Then, in a maximum of two-and-a-half days, we can reach all 5,000 of our stores in the U.S. We spend a lot of time thinking about where product should be, a fair amount of time getting system information on where it is, and a small amount of time dealing with exceptions.”

On the East Coast, The Limited uses a highly automated transfer center. From there, delivery agents include pool carriers who deliver to malls where most Limited stores are located. Each store has a delivery appointment every day, within a two-hour window. “We automate to make delivery paperless and use radio frequency to validate delivery,” adds LaHowchic.

LaHowchic's people monitor compliance to the promised delivery date. “We target 95% reliability into our DCs and 98% time definite to stores within a two-hour window. We also link logistics flow with staffing in those 5,000 stores,” he explains.

For Bill Kenney, vice president logistics planning and productivity with retail giant Sears, Roebuck & Co., the focus is on replenishing inventory as fast as possible. Sears has two kinds of inventory flows. Replenishment goods need to rush to the store as quickly as possible. Merchandise for advertised promotions, on the other hand, should arrive at precisely the right time.

“In both cases, if you can't manage transit moves predictably, you will tend to buy more inventory than you need,” Kenney observes.

Even though Tim Mathien, director of product planning with frozen food manufacturer Rich Products Corp., claims to manage finished goods inventory well, he is striving for continuous improvement.

“We operate with less than 20 days finished goods inventory on hand, including what is in transit,” Mathien states. “Over the last two years, we brought inventory levels down 10% to 15%, so we need to do an even better job of managing goods in transit. We need to know what is on the truck and when it will arrive, down to SKU-level detail.”

While Mathien claims to have good visibility, he feels a lack of reliability. “We've been measuring in days, but we need to measure in hours and reduce lead time,” he says. “In 2004, we will focus our efforts on better metrics, developing reliable tools to measure on-time loading and unloading to the hour. And we'll turn on some of those capabilities that already exist in our ERP system.”

Rich Products will combine available information in its SAP enterprise resource planning (ERP) system and a stand-alone database to chart carrier on-time rates. “With the database, we will also log the number of loads tendered to our primary carrier and note how many they take — it should be around 95%,” says Mathien. “We'll also track their on-time achievement real-time.”

Mathien's team plans yet another proactive step — booking delivery appointments. “To improve reliability, we will designate pickup and delivery times when we tender the load,” he adds. “We want that visibility at the plant level, so plant managers can tender loads. The person who places the order will see all the open appointments and will know the priority of the shipment.

“We're looking at how movement of inventory throughout our network needs to be managed, eliminating the handoff of information in the current system,” claims Mathien.

Handing off more accurate information to vendors is the key to reducing lead time between vendors and DCs for Bill Parry, vice president logistics with grocery store chain Giant Eagle. He claims the food retailer is already efficiently moving goods from the DCs to its 215 stores. They measure that lead time in hours rather than days.

“Some stores receive goods in 12 hours or less. All stores receive deliveries in a day or less,” Parry notes.

Giant Eagle's work on the vendor-to-DC process already has reduced lead time from more than a week down to two or three days with select vendors, according to Parry. “Today, we are working with a limited number of vendors on reducing lead time to one day,” he says. “Looking at service levels, we share information with vendors on a daily basis. That often means exchanging information outside the electronic data interchange (EDI) system.”

With vendors who have achieved a one-day lead time, Parry notes the process includes more manual steps than is desirable long-term. “But we're proofing the process, making sure every detail is received,” he explains. “Down the road, as we develop confidence in the process, we will depend more on electronic communications.”

Giant Eagle's resources include use of a logistics management system from solution provider G-Log Inc. The web-based solution is designed to automate and improve processes for inbound transportation, reduce cycle times and provide increased visibility, control and collaboration. G-Log's system provides visibility to any groups in the supply chain — buyers, carriers or suppliers. Giant Eagle is moving toward taking full advantage of G-Log's item-level detail capability.

“Our goal was to see how reducing lead time affects inventory. Once we have lead time where we want it, we can attack safety stock in the DCs. We've had success in frozen foods, with substantial turn increase, and we were able to reduce use of outside storage,” notes Parry.

“Our turn numbers with a large dog food vendor went from 19.8 to 31.7 at 99% service level while reducing lead time from eight days to four,” he adds. “A grocery vendor reduced lead time by two days and improved turns from 5.6 to 22.2.”

When accurate information flows between parties in the supply chain, everyone wins. LT

Direct to store

Most personal products for The Limited's Bath & Body Works and Victoria Secret Beauty are manufactured in the U.S. In 1997, The Limited designed a direct-to-store (DSD) process for these products.

“We studied, modeled activity, analyzed and asked ourselves why did it need to stop at the distribution center,” says Nick LaHowchic, president and CEO of Limited Logistics Services. “We asked how can we configure where and how product is made and how it is packaged. With suppliers both east and west, we realized we could make common product on both coasts and supply direct to stores.”

With the new bifurcated manufacturing approach, The Limited took out major blocks of time and inventory. “When you think about introducing new product, every channel has a block of stock,” says LaHowchic. “If you can reduce that backlog, you get the new goods to market faster.”


Brown-Forman Corp.

Giant Eagle Inc.

G-Log Inc.

Limited Logistics Services

Rich Products Corp.

Ricoh Corp.


Sears, Roebuck & Co.

State of Washington

U.S. Bureau of Customs and Border Protection

Extended enterprise solutions outpace other tech projects

Although overall spending on information technology projects was sluggish in 2003, an overwhelming percentage of those IT dollars went to extended enterprise solutions. According to analyst firm Yankee Group (www.yankeegroup.com), the portion of the IT budget allocated to extended enterprise projects grew by 75%, while the overall IT budget grew only 3.7%

One area attracting a good deal of attention from shippers, according to Yankee Group, is spend visibility — applications that help companies understand what they buy and how they buy. The analyst firm has the following recommendations for companies seeking help in this area:

  • Develop a spend data rationalization strategy as part of any sourcing or procurement technology project.
  • Clean up your back office mess. However, most companies are unwilling or unable to do this, as it involves considerable time and expense.
  • A more realistic option is to leverage a sourcing application that works with existing (and expensive-to-integrate) enterprise resource planning (ERP) systems.
February, 2004

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