Regional LTLs are hitting the target

July 1, 2004
Regional LTLs are hitting the target Although dealing with narrow delivery windows, Fred Boehler, director of supply chain for bookstore chain Borders

Regional LTLs are
hitting the target

Although dealing with narrow delivery windows, Fred Boehler, director of supply chain for bookstore chain Borders Group, generally has a bit of leeway in terms of time on both inbound and outbound logistics. On the other hand, Robert Colucci, corporate officer, vice president, Harte-Hanks Inc., has to hit very tight deadlines in moving newspaper preprints, circulars and mail for most of the major retailers in the country.

For both companies, success and failure depends largely on making the right choices when dealing with regional less-than-truckload (LTL) carriers. And one of the secrets of success is establishing and maintaining a true collaborative relationship with the carriers.

Although Borders does some shipping direct to stores from publishers, that amount is very small. The company has traditional warehousing in which it maintains stock.

“We carry 30,000 titles and replenish out of the warehouse,” explains Boehler. “We do have regional flow-through centers that basically act as cross-dock, with some processing. Product is shipped in bulk to those regional facilities, then packed, and allocated to the associated stores. From that point it flows right back out — it's more of a pass-through directly to the stores.” Distribution centers (DCs) are located regionally based on population and store count, he explains.

Harte-Hanks, meanwhile, covers a wide range of service offerings for the direct marketing of products. One of the groups Colucci heads is Harte-Hanks Logistics, which was founded in 1982, primarily to move time-sensitive materials.

“In some cases we move product from a printing plant,” notes Colucci, “but I'm also responsible for a number of letter shops across the country. So we move the freight that comes out of our letter shops as well as newspaper preprints and circulars from major printers across the country.” About two years ago, Harte-Hanks also got into the business of moving general commodities.

For Borders inbound, Boehler notes the supply chain in the publishing industry is fairly loose. “We'll place an order and publishers have 60 days to fill it, for example,” he says. “There's no telling when the order is going to come in. It's a very low turn business.”

The bulk of the company's freight is handled by LTL from DC to store. For outbound store replenishment from its DCs, Borders relies on its carriers to hit their transit times. “We have set ship schedules that are static on a weekly basis,” Boehler explains. “We deliver to the stores the same number of times on the same days of the week, every single week. We have pre-established cut times with the appropriate carriers. We load up the trucks — we're processing every day — and off they go. Their on-time performance is the key.”

Through discussion with the carrier, Boehler establishes what two-hour delivery window can be met consistently and that becomes the target for both shipper and carrier. The two-hour time frame is particularly critical for Border's mall stores, the Walden Books chain.

Harte-Hanks' final customers include, on the preprint side, the country's 3,000 to 4,000 newspapers. The company uses a good portion of the U.S. postal network in servicing its mail customers.

“Major retailers in the country use both newspaper and mail as a direct marketing vehicle,” notes Colucci. “We save a significant amount in postage every year for our major clients across the board — whether it's standard mail or bound printed matter — thanks to our technology edge. We have proprietary software that analyzes where to drop the product to give clients the maximum discount. In many cases it's been a boon to the LTL carriers because we can split up the loads, moving from truckload into LTL.”

There are any number of customers for the commodities side of Harte-Hanks' business. “We move everything from bottled water and Gatorade to bedding and ticking,” says Colucci. “We've moved into the general commodities world because we bring a sense of urgency and a time-sensitive nature to an industry that probably didn't have that sense of urgency before. Our goal is always on-time every time.”

Colucci continues, “Our system bridges from web-based order entry into our proprietary transportation management system and then into a track and trace system, permitting a client complete visibility to their freight from the time it's tendered through pickup to delivery and confirmation.”

In evaluating carriers, Borders' Boehler has a special vantage point on guaranteed products, especially for regional carriers. “When guaranteed services first came out,” he says, “it seemed all right to pay an up charge. Well, their on-time performance is still the same — how much better are you going to get than 99%?”

The approach that two of Borders' primary carriers take is the one that has won over Boehler. “FedEx Freight said that their service is so reliable that they would guarantee that shipments would get to destinations on time, and if they don't, we would get our money back. We don't have to pay an up charge for that. As a corporate customer, with our relationship, we don't mess with the whole claim game. If they have 1% failure rates, we're not going to nickel and dime them for every failure.”

Although FedEx is the exclusive carrier for Borders in the West, handling deliveries from its Ontario, Calif., DC, the company also does business with Saia, New England Motor Freight, USF Holland and some niche carriers.

Where previously Borders was using a large number of carriers and a multiplicity of rates, Boehler sought simplification. Borders began using SMC3's CzarLite base rates.

“Where before we were using everyone's individual tariffs,” he explains, “we got a fresh look at the playing field. At the same time, we looked at different regions of the country. Instead of having two different carriers going to the same states, or not conjoined states, for example, we went to a regional focus. We built lanes for a carrier. Then went to the market explaining we were looking for a carrier to handle these given states and these pre-established lanes. We told them our volume and asked for one rate for any state the carrier served.”

For Colucci, having fewer carriers and creating true partnerships are important. For Harte-Hanks, Saia fills its needs very well.

“We have a set of metrics for judging carriers,” Colucci says. “Obviously price is a consideration, but value is more important. Service is clearly our business because our preprints and mail are every bit as time-sensitive and dated as produce. If a newspaper circular is a day late and doesn't get into the paper and our clients can't get the lift in terms of sales, then we've failed. Service standards and delivery performance are paramount for us.”

Harte-Hanks handles about 99% of its LTL data electronically, so the company needs a carrier capable of dealing with electronic transaction sets and EDI. “Saia has filled that bill,” says Colucci. “We are in almost constant two-way contact with Saia. Not only electronically — because most of our shipments are tendered electronically — but also when exceptions arise, we are on the phone to their terminals and our on-site person.”

Borders has developed a report card for its carriers that is used every year.

“We have a full-blown appraisal that has 14 different key metrics on it,” says Boehler. “Each metric is weighted a little differently based upon importance. We evaluate each of our carriers on those metrics. Those that are falling below in specific metrics are talked to from an appraisal standpoint. If it's something that's a critical factor, they need to work it out and make adjustments.”

One of the things Colucci wanted to do in crafting carrier partnerships was to reduce the number of LTL vendors. “We want to be in a relationship where volume and revenue are not only steady but growing, and instead of always worrying about nickels and dimes we can be focused on efficiency,” he says. “So we host two LTL carrier meetings each year where we review overall performance with the group, talk about where we've been and where we're going and our vision for the future. Then we break out into individual sessions where we talk to each individual carrier about their performance and how they stand — not only relative to their peers but also relative to the goal.”

Boehler has a similar approach to carrier relations.

“We don't negotiate every year,” he says. “Instead of just taking annual general rate increases, our energy is focused throughout the year on how we can make the business operate better. So collaboratively we and our carrier partners are working to find ways to drive out cost. We want to eliminate enough cost from the equation so the carrier doesn't need to hit us with a rate increase.”

Ultimately, Borders looks at each of the carrier's cost models to determine where the burden of the cost is within that carrier's metrics. “We try to determine all the factors that drive this cost, then work together to attack it,” Boehler says. LT


Borders Group

FedEx Freight

Harte-Hanks Inc.

New England Motor Freight


Southern Motor Carriers Rate Conference Inc. (SMC3)

USF Holland

July, 2004

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at a glance

This article looks at companies who are using regional LTL carriers to meet tight delivery windows.

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