Like the traffic on Los Angeles freeways, truck congestion at the unloading docks of retailers' distribution centers is a frustration that never seems to go away.
“I can recall many years ago that Dee Biggs [director, demand fulfillment services, Welch's, Concord, Mass.] said the biggest opportunity we have as an industry is [to relieve] dock congestion,” said Mike Bargmann, senior vice president, distribution and manufacturing, and chief logistics officer, Wegmans Food Markets, Rochester, N.Y. “We've worked on a lot since then, but our docks are still congested.”
Apart from detracting from efficiency and driving up costs for food distributors, dock congestion also takes its toll on employee morale. “Our HR side is so important,” said Bargmann. “One of the top three challenges today is how to keep people interested in working at our warehouses and driving our trucks.”
Bargmann made these comments last month at the Food Marketing Institute's Distribution/Supply Chain Conference in Orlando, Fla. The conference was co-located with the Grocery Manufacturers Association/Food Products Association's Information Systems & Logistics Distribution (IS/LD) Conference — the second year in a row the two conferences were held together.
The co-location of the conferences was reflective of an ongoing effort by food retailers and CPG manufacturers to work together on mutual challenges in the logistics and distribution arenas. In fact, Bargmann's comments were made during a session in which three sets of retailers and manufacturers — Wegmans and Hershey, Hannaford Bros. and Nestlé, and Stop & Shop and Unilever — described a year-long program in which the companies collaborated on addressing nagging problems, such as dock congestion, in “inbound” receiving at retailer warehouses.
The inbound receiving program grew out of an earlier collaborative project managed by FMI and GMA that led to the publication in 2003 of a document on backhaul practices called “Manufacturer & Distributor Customer Pick-Up/Backhaul Fairness Statement.”
“We said we can build off that,” said Gerry Greenleaf, vice president, distribution, Hannaford Bros., Scarborough, Maine, who participated in the conference session with Bargmann. “So we started working on best practices for freight management from the supplier to the [retailer's warehouse] dock.”
Those best practices were put to the test by the three pairs of trading partners during the past year. “Our work was about creating the next generation of efficient inbound logistics,” said Mike Scott, vice president, transportation, Stop & Shop, Quincy, Mass. Scott, another session participant, said the results may form the content of another joint industry white paper.
Bruce Hancock, director, customer service and supply chain collaboration for The Hershey Co., Hershey, Pa., said at the meeting that Hershey was motivated to work with Wegmans on the inbound receiving project partly in response to a video Wegmans produced on the need to improve sales calls made by vendors to retailers.
“I've seen the video several times, and every time I see it I shudder,” said Hancock. “Hershey has too many of those situations where our salespeople talk to [retail] customers about OS&Ds [overs, shorts and damages] and unloading charges instead of about moving products.”
Hershey's work with Wegmans, as well as that of the other two partnerships, followed a process that included face-to-face on-site visits to each other's facilities and sharing of data on all aspects of inbound receiving. During these visits, “I heard many times, ‘I didn't know you did that. I could make a small change and it would have a huge impact,’” said Bargmann. Added Hancock, “If you trust each other and share your warts, you can do things that your company had not had the fortitude to take on.”
The evaluation process also included using a “scorecard” that carefully measured progress in targeted areas such as on-time delivery and order cycle time. “We focused on three or four measures, what we call common goals and measures,” said Bargmann. “This was manual but effective.”
One problem Hershey corrected was in its electronic transmission of advanced shipping notices (ASNs) to Wegmans. “We had some warts in how we were transmitting the data,” said Hancock. “And we didn't understand what Wegmans did with ASNs until they told us.” As a result, Hershey has improved the accuracy of its shipments.
Another area of improvement was data synchronization — something in which Wegmans is an industry leader. “They taught us not only how but why to make this actionable,” Hancock said. Additionally, Hershey was able to reduce its inventory for Wegmans by 23% while maintaining a 99.68% service level in its deliveries.
Perhaps the most surprising change that resulted from the Wegmans-Hershey collaboration — and the one with the biggest impact on dock congestion — was an unorthodox program called “Green Light Receiving,” whereby Wegmans would accept shipments from Hershey without counting them. “For our accounts receiving department, this was heresy,” said Hancock. “They said, ‘You mean they are going to take our word for it and not deduct OS&Ds?’ But we've only had a variance of 12 cases in the last eight months.”
Bargmann acknowledged that Wegmans did see inaccuracies in the early stages of Green Light Receiving, but that today accuracy is at 99.96%. The retailer checks the accuracy via back-office systems. “We have not found anything that might stop us from doing this,” he said. “In fact, we want to do this with more vendors.”
In large part because of Green Light Receiving, dwell time of Hershey trucks at Wegmans' DC in Pottsville, Pa., was cut to one hour, 16 minutes on average, which Hancock called world-class. “For our carrier community, this was a huge win.” Added Bargmann: “We've finally been able to do something about dock congestion.”
In the Hannaford-Nestlé partnership, about a dozen executives participated, including buyers, analysts, and people from distribution operations and logistics. Transportation providers and unloading services were also included in the program. Nestlé focused on baking, candy and nutritional products, said Jack Ryan, director of customer logistics, brands and prepared foods, Nestlé USA, Solon, Ohio. The activity centered on Hannaford's Winthrop and South Portland, Maine, DCs.
In its “get-well plan,” Nestlé identified excess inventory as an issue to be addressed. “Hannaford had two days more inventory than we did, so we got that corrected at our first meeting,” said Ryan. Over the year-long course of the project, Nestlé reduced Hannaford's Nestlé inventory dollars by 20% “by getting the right mix,” he added. Service levels improved by 1% despite the reduction in inventory.
Another change was the conversion from a Nestlé-controlled delivery process to a customer pickup (CPU) arrangement, with Hannaford picking up its goods from Nestlé. Under CPU, third-party carriers were used “with performance, not profit, as the focus,” said Ryan. The result has been a 4.1% improvement in delivery reliability and a two-day reduction in order lead time. “We've saved money on both sides,” he said.
As for dock congestion, average unloading time was cut to one hour and 26 minutes as a result of an “item maintenance update,” said Ryan.
Ryan said Nestlé will apply the lessons learned in the Hannaford collaboration to other Nestlé divisions. “We need to continue our efforts for sustainable and continuous improvement,” he said.
For Stop & Shop and Unilever US, Englewood Cliffs, N.J., service levels and lead time were “not major issues,” said Stop & Shop's Scott. However, carrier “turn time,” measured from the time an order is assigned to the time it is unloaded, was a significant target. In addition, much work was done on logistics efficiencies, such as load maximization and pallet configuration.
Carriers transporting Unilever goods were also experiencing poor levels of on-time performance, as well as long dwell times at Stop & Shop DCs. In part that was because “most appointments were in the afternoon at the highest level of congestion,” said Mark Dolan, customer supply chain manager, Unilever US.
The solution, said Dolan, was to set up off-hour appointments at 5 a.m. and for Stop & Shop to dispatch its fleet directly from its DC rather than use trucks returning from stores. On-time rates improved by 20%, while turn time dropped by 19%. In addition, unloading time has been reduced to about 40 minutes. “With the hours-of-service regulations [for drivers] and constraints on capacity, minutes really matter,” Dolan said.
Data synchronization at the case and pallet level was another area addressed by the partners. Initially, the data for just one-third of Stop & Shop's Unilever items matched Unilever's data. Today, the items are 100% in sync. As a result, said Dolan, “invoice accuracy has improved and we are adding 3.5% more products per trailer.”
In assessing Hannaford's collaboration with Unilever, Scott noted that the project was so resource-intensive that “we couldn't do it with multiple suppliers. We could only handle one or two trading partners in any given year.”
Scorecarding the performance of both parties in the collaboration “was absolutely essential for this work to be successful,” Scott added. Quoting Danny Wegman, chief executive officer, Wegmans, Scott said that effective trading partner collaboration requires “using a common language, sharing [data] on performance and having a strategic focus on growing sales and eliminating disruptions.”
Tips on Scorecarding
Keeping a scorecard on a vendor's supply chain performance is an increasingly popular practice among retailers. But what should the scorecard include?
To give an accurate assessment of performance, a scorecard should strike a balance among various measurements, or metrics, explained Scott Craig, director, supply chain services, Hannaford Bros., Scarborough, Maine, who spoke about scorecards last month at the Food Marketing Institute's Distribution/Supply Chain Conference in Orlando. “It should show a lot of different things,” he said. “Anybody can make one metric look pretty good.”
Hannaford's scorecard, which tracks a vendor's performance on a monthly basis for 12 months, includes such metrics as sales, days of supply for stores and distribution centers, fill rate, on-time delivery, and accounts payable deductions. “Not all measurements are important,” said Craig. “We keep it to one page.” Hannaford plans to add an out-of-stock metric to the list.
After the scorecard is completed, Hannaford sends it to category managers, who share it with the targeted vendors. “We train our category managers on which numbers are good and which are bad and where the opportunities lie,” said Craig. “Scorecards should be part of the conversation with vendors.” Hannaford plans to put the scorecards on its vendor portal.