Managing a Customer-Driven Supply Chain

Tags: 3PL, Supply Chain Management, Customer Service

When it comes to customer service, shippers want their carriers and 3PLs to provide the complete package.

In today’s complex supply chain environment, customer service between shippers and their logistics providers means more than just a friendly voice on the line when something goes wrong. It is more than the ability to track a shipment or expedite a delivery. Today, shippers expect their logistics providers to take a “cradle-to-grave” approach to customer service, providing insight, strategic guidance, and a wide range of capabilities from the very beginning to the very end of the supply chain. From transportation of inbound raw materials to vendor management to outbound deliveries and everything in between, shippers depend on their providers to execute flawlessly, while acting as an extension of their company.

Automotive parts and service chain Pep Boys, for example, sets high customer service standards for Agility, its global third-party logistics (3PL) provider. “We expect Agility to be on top of each part of our supply chain, every day,” says Joshua J. Dolan, director of global logistics and U.S. customs compliance for Pep Boys. “We depend on them for cradle-to-grave management.”

To meet these types of expectations, logistics providers must take the time to truly understand their shippers’ supply chains, to know the complexities of the industries they function in, to design their functionalities around desired outcomes, and to determine how to ease their customers’ customers’ pain points. It is a big job, and one that is likely to get bigger.

“With so much change in the supply chain environment, shippers increasingly need logistics providers to better support their businesses going forward,” says Dr. C. John Langley, author of the 2010 3PL Report, conducted in conjunction with Cap Gemini, which examines the global market for 3PL services. “Operational effectiveness has always been imperative, but it is underscored now because shippers are trying to run leaner and meaner without compromising service to their own customers.”

Stepping Up the Game

3PLs and carriers are responding to increased shipper demands by stepping up their games, pushing customer service to the forefront. Many providers have adopted service-centric cultures to ensure they meet shippers’ service requirements— and to gain a competitive advantage in the crowded outsourced logistics and transportation field.

“From our drivers all the way up to our CEO, service is the culture at C.R. England,” says Mike Tucker, general manager, Chicago Regional, for refrigerated trucking company C.R. England. “When new drivers join our regional fleet, the importance of customer service is the second thing we talk about— after safety— because if we don’t satisfy customers, we don’t stay in business.”

At C.H. Robinson, an Eden Prairie, Minn.-based 3PL, employees are “asked each day to develop a thorough understanding of customer expectations so we can deliver unique solutions,” says Jim Butts, senior vice president, C.H. Robinson. “It’s only when we truly understand our customers’ needs that we can develop a plan, based on our technology and experience, to help them achieve a competitive advantage.”

Service Gets Strategic

Shippers are also turning to logistics providers for a wider range of services, and expect results on all fronts. Vendor management, inbound and outbound transportation, contingency planning, network design and optimization, and the technology systems to manage it all— these types of strategic services are being outsourced more regularly.

“Shippers are becoming more aware of ways in which providers can help them strategically,” says Langley.

One major factor in fostering satisfactory customer service is building the right shipper/provider relationship. Shippers that take a strategic and collaborative approach to logistics outsourcing— rather than viewing it as a commodity play— often form more effective partnerships, leading to improved customer service throughout the supply chain, Langley notes.

“Working closely with providers facilitates service improvements because it helps them gain detailed knowledge of shipper requirements,” he explains. “It also makes it easier for providers to determine what issues are most important to their customers.”

Keeping providers abreast of major business changes, for example, can help minimize service disruptions.

“Customers working collaboratively with us let us know when they are considering an acquisition or opening a new distribution center,” explains George Abernathy, executive vice president and COO of Transplace, a logistics and technology provider based in Dallas, Texas. “Having that information in advance allows us to determine what the changes will mean to their network and what we need to alter to continue serving them effectively.”

Eliminating inefficiencies, reducing costs, and improving service to your customer’s customer are what cradle-to-grave customer service is all about.

To truly emphasize its focus on collaborative customer service, Transplace maintains a Customer Advisory Board made up of a rotating group of about 15 customers. The goal is to facilitate discussion and brainstorm about service and technology improvements that can help Transplace better serve the shippers it works with.

“At our last meeting, for instance, we shared next year’s technology development calendar and asked the board for feedback and suggestions,” says Abernathy.

Customer Advisory Board President Craig Boroughf, director of transportation for USG Corporation, sees the board as a way to “keep abreast of where Transplace is investing technology and innovation resources so we can determine if those plans match our service needs and business requirements.”

Another key aspect of serving shippers strategically and collaboratively is making sure to always operate with customers’ customers in mind. Because supply chains are interconnected at every level, bad service at one link will ricochet throughout the chain, ultimately impacting the end user.

“It is imperative that we understand what our customers’ customers are looking for in order to align our services, processes, and people to those goals,” Abernathy explains. “Determining our customers’ customers’ needs is our first priority, whether we are prospecting for potential customers, designing solutions for new customers, or reviewing goals with existing customers.”

C.H. Robinson’s Butts likens the idea of serving the customer’s customer to a “neighborhood watch,” logistics-style. “A big part of our role is to prevent bad things from happening,” he says. “Establishing and monitoring the correct performance metrics, reporting and analyzing to identify root causes, then taking corrective action allows providers to have a positive impact throughout a customer’s supply chain. In turn, the customer is able to make better decisions in other areas.”

Butts cites the reporting that C.H. Robinson provides on inbound vendor management as an example. “Shippers can use that information to help eliminate inefficiencies in the transportation process, which can help reduce their costs and, potentially, the costs to their customers,” he says.

Eliminating inefficiencies, reducing costs, and improving service to your customer’s customer are what cradle-to-grave customer service is all about. Here are three examples of this new service mode in action.

Success Story | Pep Boys & Agility: Putting The Pep Back Into Ocean Freight

“Pep Boys’ vision is to be the automotive solutions provider of choice for the value-oriented customer,” says Pep Boys’ Dolan. To achieve this vision, the company must be able to deliver on its promise of providing high service levels and a value-proposition cost that works in both good and bad economic times.

“We can’t keep that promise to our customers if we don’t have product on the shelves, or parts stocked in the back room for car repairs,” Dolan notes.

Keeping that storied service promise of “right product, right place, right time” has become easier since the company— which operates more than 600 stores and 6,100 service bays in 35 states and Puerto Rico— consolidated its ocean freight management in 2007. Previously, Pep Boys worked with three different non-vessel-operating common carriers (NVOCCs), each of which was performing brokerage, forwarding, origin title management, and ocean shipping services for the company.

“Because the services were not consolidated, it was very difficult to wrangle all the data to a point where we could retrieve any actionable intelligence,” Dolan says.

At the time, the ocean freight market was volatile, and Pep Boys experienced daily capacity issues. “Spike and capacity challenges occurred throughout the year if we didn’t forecast right,” Dolan recalls.

Today, Pep Boys depends on Agility for all its ocean freight needs, including origin cargo management; customs brokerage; freight forwarding and document flow; and procuring ocean carrier capacity. Agility takes Pep Boys’ cargo from a vendor at origin, for example, and books it with the appropriate carrier while ensuring that the cargo is loaded and shipped to the ultimate port of discharge.

In a few lanes, Agility manages the trucking as well, making sure shipments are transported from the ports to a Pep Boys distribution center. “For some of their vendors, we even physically load the cargo at our warehouse, manage the process, then ship it into a third-party warehouse in the United States for distribution to a Pep Boys DC,” explains Mike Walker, migration project manager for Agility. Until recently, Walker was the on-site Agility representative at Pep Boys, working at the company’s headquarters three days a week. Another Agility representative has taken over that role.

“We receive and monitor Pep Boys’ purchase orders, make sure the orders ship within the designated window, verify the goods are what Pep Boys requested, and check the quantity and quality,” says Len Dunleavy, director, strategic accounts for Agility. “Also, we maximize the cube in the containers to reduce their ocean freight costs.”

Having Walker on-site at the Pep Boys headquarters was an added customer service bonus, Dolan says. His presence reaffirmed Agility’s commitment to Pep Boys and improved the level of communication and engagement between the two companies.

“Mike spent a lot of time tracking our POs,” Dolan says. “He checked to see if the orders left when they were supposed to leave, and whether the vendor booked the PO in time to make the shipping window and our delivery deadline. If there were problems, he went back to the vendor to determine why the shipments had not been released yet.”

The result, Dolan says, is a far more effective approach to managing ocean transportation, a dividend that paid off in spring 2010 as ocean capacity tightened and many companies faced capacity shortages and shipment delays. To combat the capacity crunch, Agility’s Ocean Product team diversified its carrier profile and leveraged its relationships with carriers to ensure that Pep Boys’ cargo was not held up in costly delays.

“Pep Boys experienced very little disruption during the capacity shortage. If one carrier couldn’t take a booking, we made sure we had three or four other carriers that could provide the space,” Walker explains. “We also were proactive in managing the situation, making sure to keep Pep Boys informed, and providing suggestions about how other retailers were combating the situation.”

Those customer service measures proved extremely successful for Pep Boys. “Only one or two of our containers were delayed— a stark contrast to what other companies experienced,” Dolan says. Agility’s handling of the ocean freight capacity shortage allowed Pep Boys to continue meeting the all-important “right product, right place, right time” customer service objective.

“The level of customer service that Agility affords us helps us better serve our customers,” Dolan says.

Success Story | McCain Foods & C.R. England: French-Fried Transportation

Fast-food customers get used to hearing, “Would you like fries with that?” Making sure the fries are on hand to be served to eager diners at McDonald’s, Burger King, and Wendy’s is the responsibility of McCain Foods and its carrier, Salt Lake City-based C.R. England.

Based in Canada, McCain Foods is the world’s largest manufacturer of French fries, serving the major fast-food chains as well as food service corporations such as Sysco and U.S. Foodservice. Because its products are perishable and therefore time-sensitive, reliable transportation has always been a must for McCain to meet its customer service requirements.

“It is important for us to be able to communicate to our customers when we will ship our product and when it will arrive,” explains Vito Parise, senior director, distribution for McCain Foods USA. “Many of our customers operate in a just-in-time environment, so on-time performance is key.”

McCain has long depended on C.R. England to help it meet these time-sensitive transportation demands. Throughout their nearly 10-year partnership, C.R. England has consistently provided McCain with nationwide longhaul service, racking up on-time delivery rates as high as 97 or 98 percent. The carrier is now also helping McCain with inbound transportation, delivering raw materials such as potatoes, onions, and spices to McCain’s production facilities.

“C.R. England is proactive with us,” Parise explains. “It understands our service requirements. If delays occur, its operations team will notify us, or if needed, notify our direct customer if a shipment will be late or if they expect any issues upon arriving at destination.”

McCain also relies on C.R. England to deliver high service levels when unexpected circumstances or last-minute orders crop up. While the food manufacturer generally asks customers for a 48-hour lead time on orders, the need for expedited freight does arise.

“We might tender a shipment to C.R. England that is already in-transit when a customer requests a regular Friday delivery to arrive on Wednesday,” Parise explains. “C.R. England has been able to put team drivers in play and expedite loads in these situations, even after an order leaves origin.”

Performing services such as securing extra trailers, or helping to pre-load trailers so shipping is smooth and drivers get to the delivery point on time, has proved key in continuing to meet service demands. “We are focused on successfully working through these logistical processes with McCain to provide the best service so it can pass that on to its customers,” says Mary Palmer, director of sales, Midwest region, for C.R. England.

The carrier is also expanding its Chicago Regional capabilities to better serve customers such as McCain that conduct a lot of short-haul business in a 250-mile radius around the greater Chicago area. “Our customers requested this regional service,” explains Mike Tucker, Chicago Regional general manager. “They need it to keep up with changing distribution patterns to better serve their own customers.”

Both McCain and C.R. England attribute their partnership’s success in meeting customer service requirements to the importance both companies place on communication. They meet each quarter to review business strategies and perform what McCain terms its 360 carrier-shipper performance review.

“We look at our load acceptance rates, on-time pickups and deliveries, and in-transit and billing information flow, among other factors,” says Palmer.

“We share information about our volumes, what we’ve gained and lost, and we want that same type of feedback from C.R. England,” adds Parise. “Our partnership is about removing the inefficiencies from the system together, which requires frequent communication and a close relationship.

“C.R. England understands our business and, in turn, we have a good grasp of their network, how it benefits McCain, and, ultimately, how it benefits our customers,” he adds.

Success Story | USG Corp. & Transplace: Technology as Customer Service Enabler

When you serve the country’s largest home improvement retailers, you need to be adept at the on-time delivery aspect of customer service. The home improvement retail channel maintains tight one-hour delivery windows, and suppliers know they miss those windows at their own risk.

This is the transportation norm for USG Corporation, a manufacturer of building materials best known for producing Sheetrock brand wallboard panels. Serving a variety of home improvement retailers, the bulk of USG’s transportation activity is outbound shipments of finished goods direct to store via full truckload flatbed.

“The second-largest channel for our product is specialty dealers, which are similar to lumber yards,” explains Craig Boroughf, director of transportation for USG. “We ship to them in full truckloads and they bundle our products with other construction products and deliver to the end customer.”

The specialty dealers also have tight service requirements that USG must meet: delivery timeframes of three to four hours, as well as a desire to receive orders early in the day.

“A concentration of early morning requirements makes it difficult to get the efficiencies we could if we had windows spread throughout the day,” Boroughf explains. In addition, USG has inbound transportation needs— receiving raw materials such as paper used to manufacture its products.

Keeping this transportation trifecta functioning smoothly in order to meet customer demands is a transportation management system (TMS) from Transplace. USG and Transplace worked together closely to design and implement a solution that has allowed USG to improve service to both its retail and specialty dealer accounts.

“Our primary focus when developing the TMS with Transplace was efficiently tendering and tracking our shipments,” Boroughf explains. “We needed an efficient process to notify carriers that their loads were ready, then track those loads to the customer and refine the delivery performance.”

“USG chose Transplace because we have a key focus on customer service— not only for USG, but also for USG’s customers,” says Transplace’s Abernathy. “We strategically approached USG’s needs and customized a solution that brought their service levels to new heights with the benefit of automation and visibility.”

Using EDI, the Transplace TMS solution has allowed USG to automate 100 percent of its shipment tenders to its carriers, then track them from pickup to delivery— a capability that has helped USG improve performance on its customers’ vendor scorecards.

“Prior to this solution, we didn’t have transparency to our shipment data or shipment performance,” Boroughf says. “For vendor scorecard purposes, it is important that we have access to objective information about our performance and can confirm that data.

“We are able to much more objectively measure, monitor, and report on our delivery success— which includes our highest on-time delivery results to date, and is critical to being our customers’ preferred supplier,” he adds.

Becoming a preferred partner is no easy task, for shippers or for service providers. But logistics providers who work to understand shippers’ needs and smooth over trouble spots show that, when handled with care, every partnership can be a customer service success story.