Trying on a Tailor-made TMS
Ralph Lauren dresses up supply chain operations with a custom-fitted international airfreight transportation management system.
Fashion devotees often endure discomfort for the sake of beauty. So did New York City-based luxury apparel manufacturer and retailer Ralph Lauren each season when its Transport Operations team re-bid airfreight contracts to align with the latest market conditions.
After the work was done, the real pain set in: split lanes that resulted in misaligned volume, confusion among vendors about the most current compliance terms, and capacity constraints. The team had no way to dynamically route international air freight according to the best service and cost options available at that moment, and it showed in inflated shipping costs.
When a market search found no suitable transportation management system (TMS) for international air freight, Ralph Lauren's Transport Operations team decided to take the next logical step: Invent one. One year later, the company was reaping substantial benefits, meeting all the project's objectives, and enjoying a few surprises.
"This tool provides a new way of thinking about air freight," says David Lande, director, international transport and development, Ralph Lauren. "Instead of just point-to-point delivery, it's about customizing our services to meet customer specifications. Air freight is no longer just about speed—it's also about alignment."
Here's how the apparel company developed its tailor-made solution.
A look at Ralph Lauren's organizational structure reveals the source of its supply chain complexity. The company's long list of brands—including Polo by Ralph Lauren, Ralph Lauren Collection, RRL, Chaps, and Club Monaco—are sold through a broad spectrum of global retailers, from Macy's to 630 company stores to high-end department stores. Twenty-six separate divisions support the operation, each with different business process rules and functional ownership. The company is growing by 8.5 percent annually, with revenues of nearly $5 billion.
A diverse set of about 400 vendors supports the business. In addition to high-volume producers in Asian countries—including China, the Philippines, Sri Lanka, and Hong Kong—the company contracts with boutique vendors making one-of-a-kind products in Italy, Morocco, and other locations around the globe.
Within Ralph Lauren, the Global Production department owns those vendor relationships. But the responsibility for moving their goods cuts across a number of departments—Transport Operations is in charge of routing shipments, working in concert with the supply chain and vendor compliance teams, and the company's Global Transport Control Tower in Hong Kong. Because Ralph Lauren is in the fast-moving high-fashion business, it must transport 10 to 15 percent of its North American volume via expedited service using a network of ocean and airfreight forwarders.
Each season, Transport Operations published the terms of its carefully negotiated contracts in a static routing guide. Vendors used it to comply with the company's shipping guidelines. But just like any best-laid plans, they often went awry. Among the challenges:
- Some lanes were split among service providers, so shipment allocations were often misaligned with freight awards. That led to inaccurate volume projections, making it difficult to secure capacity and jeopardizing budgeted freight spend. The static routing guide overloaded some freight forwarders while others were light on capacity.
- Ralph Lauren was unable to hold freight forwarders accountable for service standards and capacity commitments. The company began including a "flex" requirement for providers to ensure they could support volume above average weekly run rates.
- Distribution issues meant some vendors did not receive updated routing guides and ended up using old ones.
- The highest-volume lanes were split between two or three providers to ensure capacity, but each freight forwarder had unique capacity requirements and costing. Shipment costs could vary by 15 to 20 percent.
- Because logistics service providers (LSPs) lacked EDI 850 purchase order information from Ralph Lauren, all origin offices were required to re-key purchase order details on booking, and manually send alerts to their freight visibility partner, resulting in visibility delays.
- Transport Operations had no visibility into the work stream for the eight to 10 days prior to shipment departure dates—and, therefore, little ability to make changes.
Those obstacles were daunting enough; throw in the capacity constraints of late 2009 and operations spun even more out of control, with the company taking a financial hit with every setback.
"Airfreight shipments were delayed at origin with limited real-time visibility," recalls Kathleen King, senior director, international transportation, Ralph Lauren. "We had no visibility to airfreight shipments until they were already in the air—and typically not until 24 hours after departure. All we could do was inform the customer that we were experiencing delays."
Fast-Tracking a Solution
If all these issues were domestic, Ralph Lauren could likely have solved its problems with a traditional TMS. But because the shipments were international, the situation was too complex to be resolved quickly and easily.
In early 2010, Ralph Lauren's Transport Operations department pulled together a cross-functional team to define its needs. Then it searched for a vendor partner to fill them. From a field of 11 candidates, the company selected Charlotte, N.C.-based Acuitive Solutions, an international air and ocean freight transportation management solutions provider.
"Acuitive was willing to invest in the relationship, and develop a solution that would be marketable to other customers," so Ralph Lauren wouldn't shoulder all the development costs, Lande says.
Together, Ralph Lauren and Acuitive set an aggressive goal: go live with a new international airfreight transportation management system by March 2011, the end of Ralph Lauren's fiscal year.
High Risk, High Reward
Everyone involved with the project was aware of the risk involved. "These are our most urgent shipments," says King. "Nothing could go wrong, or we would lose business support. The solution needed to be easy to use. We planned to give vendors extensive training and support, but we needed a backup process in case they couldn't handle the new procedures."
A separate committee wrote the business rules that would be incorporated into the solution, and established short- and long-term business process owners. Faced with the prospect of onboarding more than 400 vendors of diverse needs and capabilities, the team decided to implement in three phases, starting with 16 vendors who had large, repeatable airfreight volume and sophisticated technology.
The three-phase onboarding provided the project team early feedback, which let them refine the system before expanding to additional vendors. One early change, for example, was incorporating live feeds to freight forwarders' host systems to reduce the need for re-keying data. Another was revising the code after too many shipments got kicked back for manual approval. The updates allowed the system to automatically assign most shipments to a freight forwarder according to business rules.
The next step was training employees, educating phase-one vendors on new processes, and onboarding phase-two and phase-three suppliers. The diverse group demanded a range of delivery methods: small group on-site training, Web-based and video training, podcasts, and user manuals in English and Mandarin. A feedback forum held in March 2011 was key to collecting input and making changes.
Today, the completed international airfreight transportation management system functions as an electronic planning, execution, and quality control hub where all Ralph Lauren shipments are dynamically routed based on customer needs, purchase order management, and business rules. Quality data, real-time integrated communications among all internal and external parties, and information sharing prior to shipment drives the routing process.
This transparency, coupled with execution speed and accuracy, ensures that decisions are executed as planned, while allowing all stakeholders to better manage their individual links and responsibilities within the supply chain. International freight activity is recorded in the airfreight TMS for all parties—vendors, freight forwarders, LSPs, and internal Ralph Lauren teams—to see.
Data mapping and integration were key to the project. The vendor-routing portal, freight visibility system, and LSPs all draw from Ralph Lauren's base-level data to provide immediate and reliable visibility. Ralph Lauren analysts now have visibility into the shipping process up to 10 days before ship date, driving a dramatic increase in the use of alternate modes to standard air freight.
Today, at least 30 percent of expedited shipments move via deferred, parcel, sea/air, air/sea, and expedited ocean services, reducing costs and lowering the carbon footprint.
The system has also enhanced collaboration among Ralph Lauren's production, U.S. transportation, customs compliance, supply chain finance, corporate finance, and distribution center operations. The divisions work together to better manage airfreight spend and understand the trade-offs between service and delivery date options.
Measurement tools allow individual divisions to see the positive impact of shipment savings on their profit-and-loss statements—in fact, some engage in friendly competition to attain the greatest savings.
Ralph Lauren's partners benefit as well, through reduced keying and manual data entry, faster payment processing, easy access to required data, and reduced origin fees for small-parcel shipments. Air forwarders also get more visibility into upcoming shipments.
But the biggest benefits come from visibility, driving reduced cost variability, more accurate volume production and capacity planning, increased control, and smarter shopping for rates. One unexpected benefit of the project was providing 10 days of advanced shipment visibility, rather than the anticipated three to five days.
As the international airfreight market began opening up in fall 2011, Ralph Lauren's Transport Operations department took a chance and began spot-bidding expedited shipments exceeding 4,400 pounds.
"We knew that some of our forwarders had space commitments with the airlines, and didn't have freight to fill them," says King. "Even if they didn't have that lane, they might be willing to give us a competitive price. So we started using Acuitive, sometimes acheiving 25 to 50 percent off the contract pricing—which is very competitive to begin with."
Having complete expedited shipment visibility and reporting empowers Ralph Lauren to work creatively with vendors. "It gives us the opportunity to have conversations we couldn't in the past, because we had no way to execute other than looking at a piece of paper, and saying 'Hong Kong to New York is Forwarder A, and Hong Kong to Los Angeles is Forwarder B,'" says King. For example, Ralph Lauren could seek a discount for tendering shipments on days with excess capacity, or offer an advantageous price for a firm, regular-volume commitment.
in full control
By pioneering a dynamic routing platform and portal, Ralph Lauren now enjoys live, 24/7 global communications with its forwarders, carriers, suppliers, and technology partner. And its Transport Operations team truly controls freight spend.
Because Ralph Lauren co-developed the airfreight TMS with Acuitive, the functionality is available to other companies. While the system offers Ralph Lauren a competitive advantage, it wants to see others follow suit.
"In some lanes, we don't have many options between 10 days and 40 days, and we'd like to have 20- or 25-day service," says King. "If more companies could segment their demand, the market would develop services that aren't yet available."
That kind of flexibility would look good on anybody.