While price never leaves the collective consciousness of shippers and their core carriers, with end customer demands for reliable, speedy delivery, the cost of moving freight is just one factor in their relationship.
This is particularly true for David McGill, transportation manager for Schering-Plough Consumer Health Care Products (Memphis, www.sphcp.com). Corporate headquarters for the global science-based health care company are in Kenilworth, N.J. (www.scheringplough.com). The company's retail products include familiar household brands: from head (Afrin and Claritin) to foot (Dr. Scholl's and Tinactin) and much in between.
Schering-Plough's consumer healthcare products nationwide are distributed from the company's two Memphis-based distribution centers (DCs). Product moves to the DCs from factories across the United States and one near Montreal. The primary mode of movement for inbound cargo is truckload. For outbound, the company's predominant mode is less than truckload (LTL), parcel and truckload when it's feasible during the division's peak season from January through June.
Most of the company's shipments go to customer's DCs. Those customers include Wal-Mart, Target, Sam's Club, Walgreen's, CVS and the like. These retail end customers are very concerned about not having any empty product shelf space. For that reason, the company has to work with carriers that McGill describes as "retail-savvy."
Schering-Plough has maintained the same group of core LTL carriers for a number of years. While there are a number of key performance indicators (KPIs) at work in the relationship, McGill has two basic tenets that need to be met: on-time delivery and "pick-up-to-delivery." This latter standard is aimed directly at servicing Schering-Plough's end customers must know when they are going to receive their orders. Where trucking companies tend to submit delivery times based on workdays, McGill uses calendar day standards that include weekends and holidays.
"We look at performance averages, using them as the criterion to work against," claims McGill. "When we sit down with our carriers—whether it's a conference call or face-to-face—we go over those reports, talk about pickup and delivery for the month and about their on-time deliveries.
"Consistent delivery without variability is what we're after," continues McGill. "We also look at standard deviations. If on one shipment you're taking eight days and another you're taking three, that's not where we want to be because it's difficult to set lead times. In that situation it's hard for the folks on the buying end to issue their POs and know when they're going to get their product. So we work very closely with our carriers to keep the standard deviation small and certainly work meeting the requested arrival date, which is given to us by our customers."
Managing the volume of orders and customers and products offered by Schering-Plough can be a daunting task, but one that's eased through effective use of technology. The company makes extensive use of EDI 214 (Transportation Carrier Shipment Status) protocol linked to all of its core carriers. Data generated flows into the company's SAP R/3 system.
"We can run any date range we want for pickup to delivery times or for ontime performance, for days or months or a year if we want to," explains McGill. "We use that information to report back to the carriers on how they are doing."
Shipment visibility and early alerts on any changes in shipment delivery times is extremely important to McGill. "The best job that gets done for any shipper is when we collaborate," says Joe DeLuca, director of Marketing Services for ConWay Inc. (Ann Arbor, Mich.-www.conway.com), one of Schering-Plough's core LTL carriers. "We offer maximum desktop visibility, allowing management from initiating a pickup, through every phase of movement all the way to final invoice. As we monitor the shipment, if there is a possibility the delivery date may be altered, we automatically generate an email alert to our customer."
In establishing metrics and ways in which to measure them, both DeLuca and McGill agree on agreeing. "It's not only moving the freight from A to B," says DeLuca, "but it's good communication, sitting down and understanding what the customer needs. And from the shipper's perspective it's understanding what the shipper can do."
Schering-Plough, too, believes in close partnerships with its carriers and constant two-way communication. "If a carrier has an issue about a consignee or about our operations, we want to know about it and address it and at the very least, meet them halfway," claims McGill. "We work very hard to be professional and want to be a preferred customer for our carriers."