March 2006 | Case Studies | Casebook

Crafting a Strategy to be Proud of

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Hammered by pressure from Home Depot, cabinet maker Mill's Pride overhauls its logistics strategy, and shuts the door on untimely deliveries and customer complaints.

Sibling rivalry can be a good thing, such as when a business follows the successful example set by a sister company. That's what happened when Waverly, Ohio-based Mill's Pride Cabinetry borrowed a winning logistics strategy from KraftMaid Cabinetry.

Mill's Pride and KraftMaid are both owned by MASCO Corp., a $12-billion consumer products conglomerate based in Taylor, Mich. But while Mill's Pride and KraftMaid are both in the cabinet business, distinct differences exist between the companies and their logistics operations. Unlike KraftMaid, which offers custom cabinets installed in customers' homes and businesses, Mill's Pride specializes in ready-to-assemble (RTA) cabinets that consumers purchase directly and install themselves.

"The companies operate in different markets targeting different customers," says Kreig Rugh, vice president of logistics operations for both firms.

Mill's Pride's largest customer, by far, is Home Depot, which accounts for 95 percent to 98 percent of the cabinet maker's business. The Staples office supplies chain and sister MASCO companies consume the rest of Mill's Pride's output.

"We ship to every Home Depot store, both in the United States and Canada, almost every week," he says.

A New Game Plan

With the bulk of its business going to Home Depot, Mill's Pride has to meet the do-it-yourself giant's demands—something it previously had trouble doing. In the past, some shipments took up to 21 days to arrive at Home Depot stores.

Home Depot was pressuring Mill's Pride to slash turnaround time by adopting a seven- to nine-day replenishment cycle—measured from the time a store placed an order until it arrived on site.

Ultimately, Mill's Pride had no choice but to upgrade its logistics operation. Seeking narrower delivery windows and a third-party logistics provider (3PL) that could streamline and expedite operations as well as provide logistics-optimizing technology and infrastructure support, Mill's Pride began planning its new logistics strategy in April 2004, on the heels of KraftMaid's initiative.

The sister company's game plan, implemented several months earlier, focused on finding a 3PL that specialized in both home deliveries and managing dedicated fleets.

Though home delivery wasn't an issue for Mill's Pride, which ships virtually all its products to stores, Rugh realized that Concord, N.C.-based Cardinal Logistics, the 3PL that was helping KraftMaid reach its goals, was also well-suited to provide dedicated delivery services to Mill's Pride.

"Ultimately, we chose Cardinal to help revamp Mill's Pride's logistics strategy because it was doing a good job with KraftMaid," Rugh says.

Working closely with its new 3PL partner, Mill's Pride began to radically change its shipping strategy, starting by expanding its distribution network beyond its Waverly, Ohio, manufacturing and warehouse base. It also added technologies to simplify routing, speed shipments, and ensure on-time deliveries.

"Mill's Pride had spotty replenishment performance throughout the United States," recalls Jerry Bowman, Cardinal's president and CEO. "The farther customers were from the Waverly facility, the longer it took to ship products to them. Some stores were receiving shipments in 14 to 21 days, simply because of their distance from Waverly. Replenishment times for stores west of the Mississippi River were unacceptable."

Spinning a Web of Warehouses

To shrink turnaround times without driving transportation costs through the roof, Mill's Pride and Cardinal decided to expand the number of replenishment sites and move them closer to Home Depot's prime markets. That meant creating a web of warehouse and crossdock sites at strategic geographic locations across the country.

"Part of our solution was to put warehouse operations in southern California and in the Northeast," says Bowman. Along with these facilities—located in Cranberry, N.J., and Fullerton, Calif.—Mill's Pride continues to maintain a scaled-down warehouse operation at its Waverly manufacturing plant.

Cardinal also contributed a chain of crossdock facilities to Mill's Pride's logistics network. Located in Arlington, Texas; Atlanta; Denver; Fontana, Calif.; Jacksonville, Fla.; Kansas City, Kansas; St. Louis; and Seattle, the crossdock facilities are receiving locations where the company takes product that is mass loaded at a warehouse, and puts it on delivery trucks for regional and local destinations.

The Jacksonville crossdock, for example, receives a combination of one-way truckload and intermodal shipments that are placed on Cardinal's dedicated fleet for delivery into Florida—one of Mill's Pride's largest markets.

Outbound Changes

The new outbound delivery network is a major change for the company. With its previous network, Mill's Pride serviced all customer sites in the United States and Canada from Waverly via third-party truck carriers.

"Mill's Pride used about 45 different carriers, which it had to manage closely every week due to changing volumes," says Bowman.

Volume spiked up and down in response to Home Depot sales and promotions, complicating planning and routing. "Our ability to meet deadlines suffered," notes Rugh.

By reshaping its transportation model, Mill's Pride took most of the slack out of its supply chain. "Now, nearly all shipments are picked up from one of the warehouse locations and loaded on a truck for delivery within 36 hours," Bowman notes. "Thanks to the new warehouse and crossdocks, Mill's Pride has also reduced its total inventory."

In addition, the new sites enable the cabinet maker to significantly slash turnaround times—from the previous average of 14 days to a current average of 6.5 days, easily beating Home Depot's demand, according to Bowman.

Mill's Pride ships products from Waverly to the new facilities via a combination of transport modes, including dedicated delivery trucks and rail.

"The West Coast is primarily replenished by rail cars. We ship some West Coast orders via intermodal, depending on rail capacity, because of the shortage of U.S. truck capacity," explains Bowman.

Most warehouse/crossdock-to-store deliveries are made overnight, during "spy hours" between 6 p.m. and 6 a.m. "This approach allows us to take advantage of faster transit times and disrupt customer operations less," says Bowman.

Despite its success with the dedicated fleet setup, Mill's Pride still uses a group of contract carriers to deliver about 30 percent of its shipments moving to areas Cardinal can't cover as efficiently. "But, instead of the previous 45, we now use 12 core carriers," says Rugh. "Using a dedicated fleet and some core carriers is a mix that works well for us."

While faster turnaround was its prime objective, Mill's Pride also hoped to put a lid on costs. With ongoing changes and rate increases in the truckload market, the company's delivery expenses spiraled out of control.

Improved efficiency proved to be the key to cost savings. "Under the former model, which relied heavily on one-way truckload carriers, Mill's Pride experienced double-digit inflation from carriers because of rising rates," says Bowman.

Favorable Rates

Due to its unfavorable delivery structure, Mill's Pride also had trouble negotiating fair rates.

"Mill's Pride wanted carriers to pick up a trailer and make four stops between 6 p.m. and 6 a.m.—that is not the kind of business truckload carriers like," says Bowman. Mill's Pride worked with Cardinal to engineer the dedicated delivery system that helped it change and improve its service without driving up costs.

Perhaps most importantly for Mill's Pride's bottom line, Home Depot is satisfied with the results of the new logistics strategy. Fill rates are now at 99 percent, while on-time deliveries are in the high 90-percent range, says Rugh.

New technology has also helped Mill's Pride more effectively meet customer needs. MyLogistics routing software, combined with a PeopleNet monitoring system, keep Mill's Pride's shipments on schedule. MyLogistics is the primary tool Cardinal uses to perform routing for its dedicated carriers as well as outside carrier routes. Mill's Pride schedules and tenders loads for the remote markets its contract carriers serve.

Another key technology tool Mill's Pride uses is a wireless handheld scanning system based on Symbol Technologies hardware and Agentek software and GPS support. Before it overhauled its logistics strategy, Mill's Pride didn't have any shipment visibility once the truck's door was slammed shut at the loading dock. With the new, handheld scanning solution, the company receives in-transit ETAs as well as real-time visibility and event management updates by SKU at the time of delivery.

Overall, technology has played a crucial role in Mill's Pride's logistics turnaround. "Previously, we weren't meeting our deadlines, and we weren't making deliveries on time," says Rugh. "It is hard to track every load with third-party carriers if you're not using common communication tools."

Compatible Cultures

But while technology hurdles can be a lot to overcome, meshing respective corporate cultures to reach a common goal is perhaps the biggest challenge facing shippers such as Mill's Pride that team up with a third-party provider.

"Companies often don't focus enough on the compatibility between their culture and the culture and values of the company they partner with," says Bowman.

Finding a compatible 3PL partner can be a daunting task for even the most diligent logistics manager. "It's easy to measure a potential partner based on an RFP, line-item costs, and rates for certain services," says Bowman. Yet these considerations represent just the tip of the iceberg.

"The amount you pay from day one often fluctuates, because business is not static," he says. "Operations and requirements change, so companies need to pick a partner they can trust."

Focusing on core competencies is also important to a successful 3PL partnership. "In our case, focusing on competency means building RTA cabinetry," says Rugh. "For a 3PL, competency means helping shippers cut costs and satisfy customers."

The Mill's Pride partnership with Cardinal Logistics appears to fill both goals.

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