SCE Restructures Logistics Operations at a Frozen Foods Manufacturer and Distributor
A top manufacturer and distributor of frozen foods was experiencing double digit increases in transportation costs and sought SCE's help in reversing that trend.
SCE's analysis of the business showed a lack of understanding of logistics operations, an inefficient distribution network, unskilled personnel in critical roles, antiquated business systems, and reliance on some long-term local carriers.
TSCE took over the carrier tendering process, managed a refrigerated LTL and TL RFP, and suggested other internal changes that would save the company in excess of $2 million annually.
A frozen foods manufacturer in the Midwest, supported by a network of 13 distribution centers around the country, shipped around 20,000 TL and LTL trucks annually at a cost of over $20 million. Their pricing going into 2018 had risen nearly 30%.
SCE did a thorough analysis of the historical data that was available and reviewed processes at both the manufacturing site and selected distribution warehouses. SKUs at the various warehouses were not unique and customers did not allow splitting of orders. As a result, there was a significant amount of shipments going from one DC to another to construct complete orders. The cost of these shipments was about $2.5 million. The company was also being impacted with fines from Walmart for On Time In Full (OTIF) discrepancies.
Analysis also showed that a considerable amount of LTL shipments would have been lower cost if they had been sent as TL. An arbitrary rule was being used that had a 16-pallet cutoff for LTL. The LTL shipments lacked the flexibility of the TL shipments because of the LTL carriers fixed sailing schedules.
Shortly after the start of our project, the Logistics Director and Manager both left, leaving nobody skilled enough to handle day-to-day operations. SCE arranged for the outsourced daily management of carrier selection and load tendering. SCE also arranged for the installation of a modern TMS that would allow for both more efficient operations and better collection of data.
The first step was to reduce the number of distribution warehouses from 13 to 2. Although there was some overlap of SKUs in the 2 facilities, each facility was assigned to specific customers. In doing so, inter-DC shipments were eliminated entirely, cutting costs by at least $2.5 million.
RFPs for both frozen TL and LTL were issued to a mix of brokers and asset-based carriers with the goal of increasing the percentage of asset-based carriers. Although several of the large national carriers chose not to participate, the TL carriers’ rates allowed the company to select a mix of carriers that not only lowered costs but also provided improved regional coverage. The LTL business was split between two of the carriers based on state destinations.
SCE provided guidelines for transforming the company into a “Shipper of Choice”. This was meant to provide easy interface between carrier and shipper, and to avoid instances where detention charges had been occurring.
The company now had the potential to save in excess of $2 million in pure rates and additional savings from correct assigning of loads to TL or LTL carriers. This did not include the $2.5 million in the avoided inter DC shipments.