October 2001 | Case Studies | I.T. Toolkit

Online Routing Guides: Who Wants Yesterday's Paper?

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Electronic routing guides promise timely information, easy distribution, and widespread access.

A day-old copy of the New York Times is useless when you want to track world events as they unfold. But check the newspaper's online edition, and you'll find fresh reports throughout the day.

Online routing guides offer similar advantages. Companies can update their requirements as often as they need to and rest assured the information will reach suppliers. That makes it easier, as business conditions change, to steer freight toward carriers that offer the best prices.

"If a carrier offers a good rate on a single day, online routing guide users can take advantage of that opportunity and broadcast that change to all their vendors," says Alan Miller, president, RoutingGuides.com, a web-based service headquartered in Bohemia, N.Y.

ONDEO Nalco, a leader in the manufacture of water treatment and process chemicals, used to revise its routing guides two or three times a year. It would have made changes more often if that hadn't been so difficult, says Dave Fiore, senior logistics supervisor at the company's headquarters in Naperville, Ill.

Printing and distributing the guide to vendors who send as many as 12,000 shipments per month into ONDEO Nalco's production plants "was a nightmare," Fiore says. "If we had to change or update anything, it would involve the same process all over again."

Once the company mailed its guides, "there was no ready method to ensure that vendors had the correct information, until we started to see they were using carriers that were not approved," he says.

If You Mail It, Will They Read?

Gary von Plewe, director of distribution and materials at Culligan Inc., agrees it's hard to get printed instructions to the people who need them. Based in Northbrook, Ill., Culligan is a leading manufacturer of water treatment equipment for home and commercial use.

The company included routing instructions in its purchase orders, von Plewe says. In addition, "we issued printed routing guides, and we knew those probably got as far as the customer service desk. But rarely did the shipping departments of our vendors know, or have access to, what we really wanted."

"Vendors who don't comply with the routing guide cost their customers millions of dollars annually," Miller notes.

ONDEO Nalco and Culligan have both moved their guides to the web with the help of third-party services. As a result, they're getting their instructions to vendors more efficiently, and they're seeing higher levels of compliance.

Web-based routing guides augment methods companies already use to help suppliers understand their requirements, says Richard Hastings, an economist with the New York-based Vendor Compliance Federation. Big retailers, for example, hold regional conferences to communicate their needs directly to vendors. "What you're seeing online is an expansion and an opening of this knowledge," he says.

Quick Startup, Fast Payoff

Since August, vendors have been able to access ONDEO Nalco's shipping instructions through RoutingGuides.com. To convert from paper to the Internet, ONDEO Nalco signed up for the service at its web site and followed a series of prompts to enter its information. It took "a couple of weeks" to get up and running Fiore says.

RoutingGuides.com offers companies great flexibility in defining their instructions, Miller says. They can choose different shipping and handling instructions for different kinds of products—one set of instructions, perhaps, for lumber shipped to a home improvement warehouse and another for boxed hardware. They can define origins by states, ZIP codes, city names or other geographical references, and they can assign different carriers for different weight categories or shipping modes.

Along with carrier assignments, Miller says, guides can include "rules of engagement," such as instructions for preparing a bill of lading, sending an electronic data interchange (EDI) transaction or designing a shipping label. Users go online to make changes to their guides any time they need to and can make as many changes as they want.

The rate a company pays to use RoutingGuides.com varies with the number of guides it sets up for individual distribution centers (DCs), Miller says. A company with up to five DCs would pay $250 per month, and one with more than 20 DCs would pay $950 per month, putting the annual cost between $3,000 and $11,400. Vendors pay nothing, and an unlimited number can participate.

To spread the word about its new electronic routing guide, ONDEO Nalco has been mentioning the system in printed and electronic documents as it negotiates new procurement agreements with vendors. About a month after launching the new guide, Fiore says use by vendors is picking up and "we're starting to see a little more employment of preferred carriers."

Since it launched the guide with instructions for its major plants, it has enhanced it with routing instructions for some of its manufacturing sites that receive less volume.

Fiore can track vendor usage because the system keeps a log of their visits. "RoutingGuides.com can provide us with information about who is accessing the guide, so we can start monitoring compliance up front," he says.

ONDEO Nalco also uses the electronic guide internally, Fiore says. Purchasing staff refer to it when they place orders, so they can remind vendors how to route the goods. They might have used the printed guide for the same purpose, but they like the online version better, he says.

Full Service

Like ONDEO Nalco, Culligan traditionally had trouble getting vendors to ship with approved carriers, even through its printed guides spelled out the instructions. Culligan also needed to make sure vendors followed its requirements for packaging, labeling and other procedures.

The company decided to entrust its routing guide to Frontline Logistics of Lima, Ohio. While RoutingGuides.com touts the fact that users can set up and revise their guides themselves, Frontline promotes the full-service approach.

To get started, a new customer gives the company a copy of its printed guide plus any changes it wants to make. Frontline's staff converts the text to a database on its web server, then notifies all vendors that the guide is available online. The process takes anywhere from three to 12 weeks, says Amy Buddelmeyer, operations manager at Frontline Logistics.

When the issuing company wants to make an update, it sends the change to Frontline Logistics by phone or e-mail. "We'll make the change within the database. But the issuer has the ultimate approval," Buddelmeyer says. Once the issuer reviews the change online and approves it, the system automatically notifies the company's registered vendors via e-mail.

Vendors who don't have Internet access can obtain versions of the routing database and updates via fax.

Some of the categories in the Frontline Logistics database are transportation, packaging, labeling and palletizing. The issuing company pays an annual fee of $5,000 to $25,000, depending on factors such as its size, annual sales, number of shipments, and number of suppliers. Each vendor also pays a fee, generally ranging from $150 and $300 per year. The vendor can give access to the system to as many employees as need to use it.

Culligan moved its routing guide to Frontline Logistics' system about a year and a half ago, starting with 25 of its top suppliers. It now has about 200 vendors on the system.

Better Compliance

"We absolutely have better compliance these days," von Plewe observes. "We made a major switch in our small package carriers from UPS to FedEx Ground in the midst of this process. Frontline Logistics did a tremendous job of getting our vendors to find that information," including instructions for obtaining a FedEx Ground account number if needed.

With vendors using only the carriers Culligan chooses, the company saves labor on its loading dock as well as money for transportation. Instead of 22 carriers trying to deliver one skid apiece each day, "we have one carrier to bring in all the freight for the LTL capacity, and one small package carrier," von Plewe says. "We know their scheduled delivery times. We can put our labor pool there then, unload it, sort it, put it away, receive it and then put those resources back to take care of other activity in the building."

Frontline Logistics recently added a function allowing vendors to send the equivalent of advanced shipping notices (ASNs) through the web site without implementing electronic data interchange (EDI), von Plewe says.

Bringing It In-House?

Of course, not every company that wants to develop an electronic routing guide turns to a service provider: some maintain those guides on their own web sites. For ONDEO Nalco and Culligan, though, that wasn't feasible.

"We thought maybe we'd put it on our own web page," but getting onto the IT department's to-do list would have been a major challenge, von Plewe says. "There were 100 other projects that had higher priority."

At ONDEO Nalco, the problem was the same. "We're a huge corporation. The project probably wouldn't get very high priority," Fiore points out.

Outsourcing was a welcome alternative, he says. "The tool was right there and we could put it to work quickly."

Tired of paper? Maybe it's time to try an online routing guide.

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