February 2004 | Case Studies | Reader Profile

Rob James: The Pepsi Challenge--Taking Charge of Inbound

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Promoted to logistics manager at PepsiAmericas' St. Louis plant, Rob James had a revelation. The operation was giving money away. Instead of managing its inbound freight, the plant relied on vendors to book loads and pass on the charges—whatever they happened to be.

Research showed there was plenty of room for improvement. "I quickly found a lot of money sitting out there, depending on what supplier you were talking to," James says.

James is responsible for all inbound and outbound freight at the St. Louis plant, which supplies Pepsi-Cola brands to customers in the St. Louis region and to company distribution centers throughout the Midwest. Before the company created his position, he says, no one at the plant looked into reducing inbound transportation costs.

James learned that for every inbound lane the plant managed, the supplier would issue a credit. If he could find dependable carriers who charged less than the credit brought in, the difference would go straight to the Pepsi bottler's bottom line.

So, starting with deliveries of soft drink bottles, James scrutinized one lane at a time, comparing the supplier's freight allowance with the rates he could get from carriers. He evaluated carriers not just on price, but on whether they would guarantee against late loads and damaged bottles. In return, he offered quick turnaround at his docks.

"If they come in with a clean load, I get them unloaded. I don't make them wait," he says.

James and his team were soon transporting all their own bottle freight and looking for profitable opportunities to manage other inbound packaging materials as well.

Metal can lids posed one of the more interesting challenges. James found he could save about $50 per load by using his own carrier to move lids from his supplier's warehouse in St. Louis. But what would happen, he asked, if he bypassed the warehouse, and moved the lids all the way from the California factory that made them?

James couldn't find a trucking rate that beat the allowance for that move. Then a logistics vendor asked if he had considered intermodal transportation.

"At the time, I didn't even know the definition of intermodal," he confesses. He soon learned though, and found he could save big money by adding rail to the transportation mix.

Inspired by the example in St. Louis, PepsiAmericas is now exploring ways to assume management of its inbound freight in its central and midwestern regions, James says. It could also start making freight decisions on a regional basis, rather than plant by plant.

In taking over his inbound freight, James learned to police each vendor's freight allowance, making sure the credit appeared on his company's books. Otherwise, it might look as though PepsiAmericas was simply taking on a new expense for transportation.

"It's not enough to book the freight and know the credits are coming," he says. "You need to understand all the accounting behind it."

He also learned that in logistics, chances to improve performance are endless. "Never stop looking," he advises. "Not just at new opportunities, but at what you're already doing. There's always something else in there."

The Big Questions

What are you reading?

The DaVinci Code by Dan Brown

Advice to people starting out in logistics?

If you look at a supply chain and think you've figured out a lane or two in that chain and you've gotten all the money out of it, that's a mistake. There's always more money out there somewhere in that supply chain. You've got to keep looking for problems or bottlenecks. Be responsive.

Business motto?

Knowledge is power. If you're going to talk about something, you'd better know what you're talking about. If you know what you're talking about, people will listen to you and you'll have the power to get things done.

What do you do when you're not at work?

My wife and I like to run together and lift weights. We like to work out. It's a way to stay in shape, and it's a good tension reliever.

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