Lots of Shipments, Loads of Savings

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Big Lots nets bigger savings and biggest efficiencies by optimizing less-than-truckload shipments.

With more than 1,400 stores in 47 states, and a varied and ever-changing inventory, Big Lots Stores has a greater need for advanced transportation management than most companies.

Columbus, Ohio-based Big Lots is the largest U.S. broadline closeout retailer, with annual revenues exceeding $4 billion. The company sells a wide range of brand-name products, including consumables, seasonal merchandise, furniture, housewares, toys, and gifts, all at closeout prices.

Big Lots claims it offers merchandise at prices 20 percent to 40 percent less than traditional discount retailers. Founded in 1967, the company employs more than 38,000 associates across the United States.

Working with more than 3,000 vendors, Big Lots operates five regional distribution centers, ranging in size from one million to three million square feet, strategically positioned across the country. The centers are located in Columbus, Ohio; Tremont, Pa.; Montgomery, Ala.; Durant, Okla.; and Rancho Cucamonga, Calif.

The company also operates a pair of furniture distribution facilities, located in Columbus, and Redlands, Calif. Almost all its stores feature a furniture department ranging from 700 square feet to as large as 4,000 or 5,000 square feet.

Complex Deliveries

Big Lots uses automated, state-of-the-art systems to receive, prepare, load, and ship merchandise from suppliers to its stores. The company's delivery systems rely on common carriers and various third-party carriers. Big Lots requires approximately 1,500 inbound and 1,400 outbound shipments each week.

"We average 1.2 trips a week per store," says Katy Keane, Big Lots' vice president of transportation services. "Some stores may receive two trucks per week and some stores only half a truckload."

Replenishment deliveries from a core vendor group make up approximately 25 percent of Big Lots' inbound traffic.

"Some of those deliveries are imports, but we have established relationships with core vendors who send us multiple shipments every week," says Keane. "We receive many loads every week, and we are constantly reordering, trying to keep the same products in stock."

More than 20 percent of Big Lots' inbound traffic is less-than-truckload (LTL). Some of that LTL comes from overflow. "If a shipment totals one and a half trucks, it may be a more viable option to move the overflow via LTL," says Keane.

Conserving Costs

Often, the company uses LTL to accommodate costly merchandise that doesn't consume a great deal of space. "We sell expensive watches and electronics, so sometimes it makes sense to use LTL," she explains.

Still, LTL is an expensive way to ship merchandise, and given the nature of its business—rock bottom-priced retailing—Big Lots must conserve costs wherever possible. To optimize its operations, the company turned to Unyson Logistics, a third-party logistics provider (3PL) located in Downers Grove, Ill.

When it began working with Unyson, Big Lots was managing its transportation services with Oracle Transportation Management, a transportation management system (TMS) software application.

"We were optimizing between different modes, but Unyson goes one step further and optimizes our actual LTL shipments," Keane says.

Before partnering with Unyson, Big Lots relied on a single LTL carrier for all its inbound shipments. But the retailer realized the arrangement wasn't providing full value for the money it was spending.

"Big Lots had a vision to reduce its inbound transportation spend," says Donald Maltby, Unyson's executive vice president. "We performed modeling of Big Lots' data to look at how we could consolidate orders and use crossdocking, then went back to them with anticipated savings."

After examining Big Lots' transportation strategy, Unyson's team was able to identify opportunities to consolidate shipments and create unique crossdock operations in six key markets.

The plan reduced the amount of carrier handling. Big Lots' suppliers now ship directly to a crossdock facility where Unyson consolidates shipments. The new process both reduces LTL expense and expedites deliveries.

The new transportation game plan went live Feb. 23, 2006. Unyson now optimizes all LTL shipments for Big Lots. Through consolidation, the 3PL is often able to transform short-haul LTL deliveries into long-haul truckload (TL) shipments.

"Unyson utilizes its TMS application to seek the best routing alternatives, then tender the orders—LTL and TL," Maltby explains. "First, we seek consolidation opportunities, next we select the lowest-cost option, and finally, we look to find the best service alternative."

Throughout the process, Unyson strives to give Big Lots and its suppliers full visibility. Unyson uses its TMS technology to provide complete supply chain visibility throughout the order cycle. Updates are available 24/7 via UNYTE, a secure, password-protected web site.

"We need complete visibility to every shipment," Keane says. "We can watch the product move and know when to expect shipments to arrive at our distribution center."

Big Lots mostly uses its own fleet for deliveries from its distribution centers to local stores. "These are either one- or two-stop truckloads," Maltby notes.

All outbound shipments to stores are routed by Penske Logistics, and managed by either Penske or Hogan, a transportation services company based in St. Louis.

"We also use one-way carriers to deliver to stores farther than 425 miles from a regional distribution center," Keane says.

Additionally, if a store isn't serviced by one of Big Lots' dedicated carriers, and is more than 425 miles from a regional distribution center, Unyson manages the return move from the store back to the distribution center. "All other returns are picked up by our dedicated fleet," Keane says.

After studying Big Lots' supplier network, Unyson determined that most of the retailer's vendors were located in specific geographic concentrations, including the Northeast, Southern California, and Chicago.

"Rather than move individual shipments from, say, Los Angeles to Columbus, Ohio, with an LTL carrier, we recommended crossdock operations," Maltby says. "This way, instead of shipping directly to Columbus, suppliers ship locally to Los Angeles."

There, the shipment can be consolidated with other vendors' deliveries headed to Big Lots' Columbus distribution center.

Unyson currently dedicates two crossdocks, located in Elizabeth, N.J., and Buena Park, Calif., to Big Lots. It plans to open a third crossdock later this year in the Southeast. "Big Lots has so many orders coming in; we're always looking for consolidation opportunities," Maltby says.

Generating Savings

Technology makes it easier to squeeze extra value out of transportation spending. New systems are leading to increased flexibility.

"In the old days, large national carriers dominated, but they didn't have technology in place to help shippers optimize their processes," Maltby says. "With transportation management systems and optimization tools, companies can manage transportation a lot more effectively than they did 10 years ago."

For LTL purposes, Unyson relies on web-based bidding technology from Peachtree City, Ga.-based SMC3 to help it find Big Lots the best service at the lowest price.

When a request for proposal is distributed, all carriers involved in the bid receive the same, complete description of the shipper's needs so they can respond with their best, most accurate offer. In turn, Unyson receives uniform responses from each carrier so it can make the right decision in awarding the Big Lots business.

"We give carriers approximately two weeks to respond to the electronic bid," Maltby says. "When the data comes back, we make recommendations to Big Lots, then we negotiate with the carriers directly."

Unyson keeps Big Lots involved in the bidding process without burying the company under routine or superfluous work, Keane says. "Unyson managed, either on-site or via conference call, carrier questions before the final bids were submitted. That made us comfortable with the underlying carriers, and able to give final approval," she explains.

"Unyson categorized the finalists by region for us to talk with," she adds.

For Unyson, involving Big Lots in the bidding process was important to ensuring the selected carriers fully met the retailer's requirements.

"We had to introduce a carrier base that would support Big Lots' network," Maltby explains.

While Big Lots retains the final say for bidder selection, Unyson handles all the routine work. "We manage the carriers with regard to service expectations, electronic data interchange (EDI) capability, visibility, and any of Big Lots' other requirements," notes Maltby.

Big Lots uses an entirely different system for negotiating TL rates and terms, however. It chooses from three different Unyson tools, based on the particular need. International transportation requires yet another tool.

Provider Synergies

The fact that Unyson is a division of Hub Group, a Downers Grove, Ill.-based consolidated transportation services provider, makes the partnership even more convenient.

"Unyson is the logistics arm of Hub Group, and we have excellent trucking capacity commitments from Hub," Keane explains. "Hub is one of 20 core carriers we use for inbound transportation."

With Hub's cooperation, Unyson can ensure that even small shipments arrive at their destination on schedule.

"If need be, Unyson can use Hub as an intermodal carrier to move one of our LTL shipments and still meet the required delivery date," Keane notes. "Then Hub will transport the shipment via rail with some of our other merchandise, or with another company's merchandise."

Big Lots' new optimized system operates like clockwork, says Keane. She describes the typical LTL shipment as an example of precise coordination between Big Lots, Unyson, and various carriers.

"If we move three pallets from Los Angeles to our Tremont, Pa., distribution center, for example, the load automatically tenders to Unyson," she explains.

At that point, Unyson receives a pick-up order and calls the vendor 48 hours before arriving to retrieve the shipment. "They send data about that pick-up appointment back to us via EDI," says Keane.

Simultaneously, Unyson has visibility into all of Big Lots' LTL shipments. "Unyson can see that three pallets are coming in from Los Angeles; four pallets are being shipped from our Rancho Cucamonga facility; and seven pallets are arriving from somewhere else, for example," Keane says.

Using the information, Unyson brings all the shipments together at a consolidation point.

Unyson might, for example, consolidate all the shipments at its Buena Park, Calif., crossdock, then place them onto a rail carrier and ship the products to the designated DC.

"The container is dropped in our yard. Then our DC can receive all the individual pallets and, ultimately, distribute them to the stores," Keane says.

Goal Achieved

Big Lots had to work with all its carriers to help them understand the service commitments required by the new optimized system. "It was hard to get them up and running, and explain where to pick up the paperwork and other procedures," she says. "It took some retraining."

In Keane's eyes, Unyson has lived up to its promise to optimize Big Lots' LTL transportation network. "Unyson is meeting its savings projection," she says. "And we have cut LTL costs by one third compared to what we spent years before with our single provider."

That doesn't mean there isn't still room for improvement. "You can always do better," Keane notes. "We have a Unyson employee on-site who works with our team, putting together scorecards and answering questions."

Companies pursuing similar optimization goals need to keep their options open and seek opinions from people both inside and outside their company, Keane believes.

"My advice is to treat carriers as your partners, and leverage their experience and insight into your business," Keane says. "You can work collaboratively to develop win-win solutions."

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