November 2007 | Case Studies | I.T. Toolkit

Making the Right Connection

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Bon-Ton gets extra mileage from its transportation management system by linking it to a vendor compliance system.

Automating key supply chain functions to make your operation more efficient is a good move. Making the data you capture as part of those functions do double-duty elsewhere in your enterprise is a great move.

That's the kind of improvement The Bon-Ton Stores Inc. worked toward this year when it integrated a new transportation management system (TMS) with its vendor compliance management system (CMS).

The automated link between the two systems helps Bon-Ton more quickly spot and solve vendor performance problems and more efficiently capture freight cost information.

When Bon-Ton acquired the Northern Department Store Group from Saks Inc. in March 2006, it doubled its retail location count to 279 department stores operating under eight names in 23 states.

To help integrate its supply chain, Bon-Ton adopted Saks' legacy systems for warehouse management, purchasing, accounts payable, and merchandise. These systems now manage processes across the entire, expanded enterprise.

For company-wide vendor management, Bon-Ton decided to stick with its CMS from Compliance Networks, Sugar Land, Texas, which the retailer has been using since 2000.

TMS Manages Inbound

To manage inbound freight from vendors, the retailer implemented a TMS from Shippers Commonwealth (ShipComm), Charleston, S.C. Bon-Ton and ShipComm got the TMS up and running Aug. 1, 2006.

ShipComm optimizes transportation by determining the most effective ways to move freight; it also helps manage execution.

Although other TMS solutions offer both functions, ShipComm distinguishes itself in two ways, according to Lori Kesten, director of sales and marketing at the software developer.

First, it offers a vendor-hosted solution. Second, it maintains a close, long-term relationship with customers to help them meet supply chain challenges.

"Our solution is successful because we have real logisticians on our team; we're not just systems people," Kesten says.

As part of their long-term relationship with ShipComm, this year Bon-Ton officials turned their attention to having the TMS data flow automatically into the CMS.

Bon-Ton uses the Compliance Networks system to monitor vendor performance in areas such as shipping frequency, purchase order fill rates, item ticketing, and advanced shipment notices (ASNs).

"It's an automated process," explains Bob Yates, vendor relations manager for The Bon-Ton Stores. "The system contains our purchase orders, looks at the receipts coming in, and measures vendor performance against our metrics."

The CMS also provides numerous vendor performance reports.

"For example, the system lets us determine how long it takes to deliver an order from door to door," says Bob Hook, Bon-Ton's vice president, transportation. "It also provides an overall vendor scorecard and metrics, and helps benchmark how vendors perform against one another."

Bon-Ton staff members use those reports when they sit down with vendors to talk about improving performance.

The Backlog Backlash

In the past, Bon-Ton employees spent a great deal of time entering vendor activity data into this system. "We manually keyed every freight bill and bill of lading we had into the CMS," says Hook.

That practice created several problems. One was the lag between the time Bon-Ton received a shipment at one of its distribution centers and the time the CMS received information about that shipment.

"People can only key so fast. We would be backlogged trying to get those entries caught up," says Yates.

Sometimes, the manual process would send data of dubious quality into the CMS. "If someone keyed inaccurate data, the system would still accept it, because there were no checks and balances in place," Yates says.

To feed the CMS the information it needed without labor-intensive data entry, ShipComm developers and Bon-Ton's information technology department got together to work on integration.

ShipComm built an interface to push freight bill data into the CMS, while internal IT staff built one for purchase order data from the company's legacy management application.

A significant challenge lay in the fact that several systems included in the project were new to Bon-Ton. Developers had to figure out where to obtain all the information they wanted to import.

"It took us some time to go through all the data feeds that we knew we had to get into the CMS and TMS," says Yates. "But we had to understand where all that data was originating in our new system. That was the biggest hurdle we faced."

Going Mainstream

The project required close cooperation among Hook and Yates, Bon-Ton's IT department, ShipComm developers, and programmers from a Compliance Networks partner, Mainstream Technologies, Little Rock, Ark.

At one point during the development, Mainstream Technologies provided a link that allowed Bon-Ton personnel to monitor activity as the TMS, installed at a test site, sent data to the CMS. This view made it easier to work bugs out of the system.

"We were able to test data as we were trying to start implementation, and correct problems as we were testing," Yates explains. "We could identify issues, go back to shippers or to our IT department, and ask them to make corrections."

In some cases, vendors had to modify their own software so it would transmit data in a format that Bon-Ton's applications could use correctly. "It was a huge collaboration on everybody's part," Yates says.

Bon-Ton started using the link between the CMS and TMS on Aug. 1, 2007. Now that the systems share data, it takes much less time to find out whether vendors are delivering products to the four DCs according to Bon-Ton's instructions.

"Each night we get information on what the DCs received that day," Yates says. "That can literally be several hundred files that we're getting into the compliance system."

Receiving this information soon after Bon-Ton receives the freight, rather than waiting for data entry clerks to catch up on their work, makes it easier to allocate freight costs correctly.

"In the past, we didn't always get freight cost information," Yates says. "One prerequisite that we built into the system was that freight cost information had to be there."

The nightly data transmission also helps Bon-Ton nip vendor performance problems in the bud. "Now we can generate timely feedback to vendors for problems that may be occurring," says Hook.

The transmission also ensures that data entry errors don't distort vendor feedback. "When vendors create a non-compliance event, we feel confident that the data we're pushing back to them is accurate because we've removed the human element," Yates says.

Besides integrating the TMS and CMS, Bon-Ton worked with ShipComm to add a cost allocation function to the TMS. This module addresses the challenge that companies face when trying to allocate freight costs to different departments.

A retail organization keeps separate financial records for different departments—for example, men's dress shirts, women's blouses, and women's sweaters. "We want to have good profit and loss (P&L) statements for those departments, and freight costs play a major role," Hook explains.

When products for several departments arrive on the same truck, however, allocating transportation costs can be tricky.

Today, Bon-Ton performs a preliminary freight cost allocation in advance of a delivery, using the anticipated freight charge. After the delivery, when it receives the actual freight bill, it adjusts those figures. When it pays the freight bill, the actual cost is compared to data in the TMS and to the receipts. The cost is then allocated based on actual receipt information.

Now that ShipComm has added the allocation function to the TMS, Bon-Ton can tie together product receipt, freight charge payments, and cost allocation much more tightly. "This combined freight costing data builds greater accuracy into the P&L statements," Hook notes.

The Payoff

For the future, Bon-Ton is working with ShipComm to create a single, integrated view of all information related to a shipment or purchase order, using data drawn from all the retailer's applications.

Bon-Ton and ShipComm also are working on a way to use TMS data to evaluate carrier performance, similar to how the company now uses the CMS to evaluate vendor performance.

Now that Bon-Ton has been using the integrated TMS/CMS for several months, the end-to-end connectivity—from receipt of goods through performance analysis—is starting to pay off.

"The end objective is to have the strongest possible supply chain in place," Hook says.

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