Transportation Performance: The Measure of Success
Measuring transportation performance is a critical link in Joann Stores’ supply chain strategy.
It’s a challenge any business would welcome. JoAnn Stores, a Hudson, Ohio-based retailer, had established itself as an industry leader in crafts and fabric retailing through a combined strategy of acquisitions and aggressive merchandising, including the introduction of megastores. The result was nearly 1,000 stores with millions of end consumers nationwide.
With this rapid expansion came a corresponding growth in shipping volume and lanes, vendors, carriers, and product mix.
As JoAnn Stores’ senior vice president of supply chain management and logistics, Tony Dissinger was charged with getting the company’s transportation strategy under control.
Under the status quo, Dissinger reasoned, an increase in transportation expenses could easily offset the benefits of growth. He concluded that the company needed a new model to respond to this dynamic environment. To achieve that objective, however, JoAnn Stores would have to entirely transform its transportation organization and operations.
“We wanted to create a new transportation structure,” Dissinger says, “built on operational excellence in five areas: improved processes; expense control; better carrier performance; greater leveraging of information systems; and more sophisticated measurements. And we wanted to parlay this foundation into our ultimate goal of providing superior service. We wanted to be customer-centric while being extremely cost conscious.”
A Measured Approach
Mike Royle, JoAnn Stores’ director of transportation, went to work overhauling every transportation process and system that impacted product flow: from vendors through product receipt at every JoAnn store. Carrier performance and contracts were closely reviewed and, where necessary, changes were made.
But while The JoAnn Stores team was making progress in four of the five pillars of the transportation strategy, it still had to build the fifth pillar: measurement systems.
As someone well versed in the Six Sigma approach to total quality management, Royle knew that measurement systems are critical to achieving operational excellence in any functional area. The mantra of Six Sigma played loud and clear: “If something can’t be measured, then it eventually can’t be effectively managed.”
Unfortunately, the data needed for an effective measurement database and system did not exist in an appropriate format for the kind of standards, metrics, and reporting system that the transportation team desired.
Mining or Minefields?
“You hear a lot these days about data mining, Royle says. “Sure, we could mine it, but it would be like having to blast through layers of bedrock, then digging like heck to get it out. It could be done, but is that productive or cost-effective?”
Complicating matters were two factors. First, JoAnn Stores had recently outsourced its freight bill payment process to a third-party service. This service generated a significant amount of the data that the company needed, but it wasn’t in the right format for the measurement database. Besides, other data would still need to be integrated from sources outside the payment service.
Second, the transportation team had the option of building the measurement database and system by itself. But although they had the right mix of operational and technical skills to do this, their mission was to manage transportation, not databases and application systems.
JoAnn opted to partner with an outside firm that could extract the required transportation data from its various sources and integrate it into a single historical database.
Taking a Snapshot
After a thorough search-and-evaluation process, JoAnn Stores selected Decision Spectrum Services (DSS), Atlanta, Ga., to implement the performance measurement system it needed to complete its transportation transformation.
DSS went to work on site at JoAnn headquarters. First, it developed a detailed work plan in conjunction with the JoAnn Stores’ transportation team. Next, it conducted a detailed cost recovery process called SNAPSHOT. This entailed a comprehensive review of transportation processes, carrier contracts, data sources, and operational practices—going so far as to board the trucks of small package carriers to examine their loading efficiency and cube utilization.
Once the SNAPSHOT review was completed, DSS prepared a document identifying and quantifying opportunities for process improvements and expense reduction. It also provided the data requirements and specifications needed for the performance measurement system. This included an extensive analysis of critical data from the third-party freight bill service.
The SNAPSHOT process review yielded three benefits:
- It identified a six-figure cost recovery in transportation expenses based on an analysis of pricing and packaging with selected carriers.
- It “filtered” the data transmitted from the freight payment service to ensure that accurate data went into the measurement system.
- It defined data sources and information flows that paved the way for implementation of the transportation measurement system itself. By using this system, which DSS calls OPTICS, companies save the cost of building an application from scratch. Conversely, by customizing the data interfaces and unique user requirements, companies eliminate the overhead and constrictions of off-the-shelf packages. An added advantage is that DSS maintains the OPTICS database, thus liberating JoAnn’s transportation staff.
JoAnn Stores continues to expand and enhance its use of DSS and its OPTICS system. By creating what Peter Pray, president of DSS, calls “operational visibility,” the transportation team has identified significant cost recovery and process improvements. This includes savings due to packaging reconfigurations, vendor sourcing decisions, and discovery of carrier billing and data errors in the freight payment process.
Several strategic benefits have also resulted. Use of OPTICS has been extended to the accounting team. Unifying operational and financial data into a single source has greatly improved communication and cooperation between these two functions. The budgeting process now can be conducted with greater precision—and with fewer surprises at month’s end.
The cost and service metrics from OPTICS have armed JoAnn Stores with the operational intelligence that gives it an advantage in carrier negotiations and contract management. In the future, the transportation staff intends to use the data generated by OPTICS for transportation network optimization, lane analysis, and what-if planning.
JoAnn Stores now has a transportation strategy that measures up to any standards.