August 2009 | Case Studies | Casebook

Supply Chain Sustainability: What a Difference a Day Makes

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Canadian office supply retailer Grand & Toy sells 48-hour delivery as a sustainable go-to-market philosophy. And customers are buying it.

Green leanings are manifest everywhere in the supply chain, from raw materials sourcing and product design to reverse logistics and asset recovery—and countless transportation and distribution touches in between. For some companies, such as Canadian office supply retailer Grand & Toy, using green to reduce costs, create new revenue, and attract customers is becoming a hallmark.

Toronto-based Grand & Toy has refashioned its corporate mission around sustainability. The company recently launched a "What a Difference a Day Makes" campaign to offer customers a more eco-friendly delivery option when placing orders.

On the surface, the new marketing gimmick is straightforward: allow businesses the opportunity to select 48-hour delivery instead of next-day service, thus improving order quality, shortening delivery routes, and reducing carbon footprint. But for Grand & Toy and its customers, the impact is far more penetrating.

The retailer operates one of the largest distribution networks in Canada, making 8.4 million deliveries in 2008 alone. This adds up to a lot of next-day miles. Recognizing an opportunity to make a difference, Grand & Toy's supply chain and marketing departments worked together to brainstorm a customer-facing, value-added strategy underpinned by reducing carbon emissions.

A pilot program conducted in early 2009 proved the merit of offering customers a shipment priority choice. Grand & Toy anticipates it will ship 50 percent of all orders second-day by December 2009, with the long-term expectation that 48-hour delivery will become standard across its geographic footprint.

Before the retailer initiated the program, 48-hour and next-day delivery options were only available to online customers in certain populous regions. Now, customers located within a six-hour radius of major trading areas will have the eco-friendly option.

"We were exploring ways we could make our supply chain more efficient. Now it's blossoming into a supply chain sustainability platform for our entire Canadian distribution network," says Kevin Edwards, vice president of marketing, Grand & Toy.

"Our biggest weakness is our carbon footprint," he adds. "Our trucks deliver to thousands of addresses every day. We offer a solution to our customers and they make that decision voluntarily. It creates a stronger sense of partnership around sustainability."

CHALLENGING THE STATUS QUO

Posing such a simple question to customers has yielded overwhelming and surprising reception. Grand & Toy is essentially challenging the existing paradigm of next-day delivery.

"We had never looked at the operating rules of our business to determine whether they match those of our customers," says John Scheel, vice president of supply chain, Grand & Toy.

The company's green campaign creates a passive entrée into learning more about customers—their expectations, perceived demands, and actual needs. The intrinsic value of encouraging businesses to reconsider their purchasing needs and transportation requirements touches many points within Grand & Toy's enterprise as well.

"In terms of transportation, we offer 24-hour guaranteed delivery for next-day orders, so we have no alternative but to use 100 percent of our fleet to fulfill these shipments," adds Scheel.

With its second-day delivery option, Grand & Toy can add density to outbound transport movements, using other transportation options and partners as necessary, to be more efficient and productive.

"We were operating with a 100-percent fixed-asset base because of delivery need. Many customers who were already receiving UPS deliveries wondered why we didn't piggyback with them," says Scheel. "Now we can optimize our private fleet when and where we need it."

In the warehouse, the advantages are equally transparent. By lagging inventory an extra day, Grand & Toy has batches ready to pick, instead of waiting for stock to incrementally build up. This allows the company to better allocate dedicated resources to manage more predictive flow. In some of its larger facilities, Grand & Toy has been able to eliminate an entire eight-hour production shift.

More than anything else, Grand & Toy is building mindshare with its customers and driving internal visibility and collaboration around its green marketing campaign.

"We're helping customers work toward a right-day delivery model as they think about how and when they place orders and maximize deliveries," says Edwards.

For some larger customers, Grand & Toy is able to capture ordering patterns and determine how to optimize future procurement with better planning.

Beyond that, the campaign stimulates a more productive conversation between the retailer and its customers. "If a client's RFP calls for 24-hour, full-service delivery, we can engage them with the 48-hour program," says Edwards. "The client can then look at its own purchasing and consider why someone is ordering a certain supply every day."

Another benefit is the communication cultivated among internal operating departments—business development, finance, marketing, and supply chain, among other areas. Everyone is looking at barriers to cost control throughout the organization; everyone has a seat at the table; and "every dollar we save in the supply chain flows to marketing or the customer. That is how you grow your brand," says Edwards.

This communication also impacts other parts of the enterprise—for example, managing corporate policies across operating demographics. In the past, Grand & Toy handled returns inconsistently throughout Canada. It needed to make the process more predictable to better manage expectations and service levels.

"Sending a unified message was important," adds Edwards. "In partnership with supply chain and sales, we established and implemented procedures and training for our sales team. We all came together to help streamline the returns process and establish clearer guidelines for customers."

Increasingly, Grand & Toy and its many customers recognize the cascading impact and value sustainable efforts can bring to their respective supply chains. But it can't be static, and businesses need to continue pushing the green envelope.

"We don't put numbers up on the board and strive to meet them because that limits our potential. Who knows what those numbers can be?" says Edwards.

To that end, neither Edwards nor Scheel perceive Grand & Toy's sustainability platform as simply a root to better cost control. Instead they see it as a new underpinning for the brand.

"We've taken sustainability and brought it to life," Edwards says. "We're living green."

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