take control

by Canadian Shipper

CT&L: Let’s begin our discussion by defining exactly what we mean by an inbound program?
Payne: An inbound program is where a company decides that they want to control all the freight coming into their facility. It’s one area companies have not really looked at in their overall supply chain. A lot of companies have left their inbound productivity to their vendors. Now, with the current economy, there is a movement of companies wanting to be able to manage their complete supply chain. In other words, they want to change the terms of payment and control from the issuance of the PO including when it gets picked up and when it gets delivered into their own facility, including carrier selection, payment, etc.

CT&L: You mentioned that inbound is an area that companies have not really looked at in their overall supply chain. Why is this an area that is typically neglected?
Payne: Companies traditionally concentrate on their own customers and deliveries and focus on achieving this directly. Usually it comes down to a lack of resources, may it be people or systems. But the most important resource needed is data. Without data you can’t gain the insight necessary to reap the benefits.

CT&L: What would you say are the benefits of an inbound program?
Payne: It increases supply chain efficiency in a variety of ways. It allows you to aggregate smaller shipments into larger shipments with a single vendor or multiple vendors. It allows you to co-load across vendors with the ability to consolidate light and dense commodities to maximize cube, minimize deliveries and reduce the number of loads required. It also provides increased visibility of your total freight coming to your dock. Many companies do not know what they will be receiving until it has arrived; this causes congestion and affects efficient processes. An inbound program increases buying power with outbound carriers, utilizing inbound carrier capacity for outbound distribution. Any time you start to do that you are not only improving your efficiencies but driving out costs for the carriers. The better you utilize your carriers the lower your costs go. Finally, an inbound program helps reduce greenhouse gases and carbon emissions. With all these benefits combined you can really improve your execution.

CT&L: Which types of companies would benefit the most from such a program?
Payne: Everyone should be looking into their inbound transportation and working to understand it. But traditionally it works best when companies have critical mass; multiple SKUs and consistent shipping volumes. That being said, there are many variables to an inbound program and we have seen it work with all ranges of companies.

CT&L: Let’s take an in-depth look now at the Tim Hortons story. Richard, the Tim Hortons success story is well documented. From your end of things, however, can you tell us how transportation has contributed to that success?
Zwolak: Transport of goods is the “life line” for the TDL organization and our restaurants. We continually introduce new promotional products to our restaurant menus. We need to be sure to hit all promotional time lines – for example, Roll Up the Rim, monthly donut/bagel promotions, etc. And “customer service is paramount” is one of our organization’s core values. If we as an organization do not provide the goods when they are needed, we tarnish the Tim Hortons image and the trust of our restaurant patrons.

CT&L: Why did TDL decide to launch an inbound program?
Zwolak: We identified cost savings opportunities as it relates to freight allowances versus lane rates. And we wanted more control of inbound freight to optimize operations efficiencies at the DC productivity level. We also want to improve
on-time performance at the scorecard level and improve consolidation of freight.

CT&L: How extensive is the scope of the inbound program and what are the goals you have identified?
Zwolak: Prior to the “go live” with the  inbound program, TDL only managed 15% of total inbound goods to our 5 TDL DC locations and 9 third-party distributor outlets across Canada and the US. We want to attain as close to 100% control of all inbound freight throughout the entire supply chain. The scope of the program includes all vendors, all suppliers, our 5 DCs, the 9 third-party distributor outlets I mentioned and 900 stores across Canada and the US. Financial targets have been outlined as they relate to revenue obtained through freight allowance versus true cost of transport. The inbound program is a long term commitment for the organization. We will continually look at solutions that best fit our business model to ensure viability and sustainability within the organization.

CT&L: What efficiencies would you say have been achieved?
Zwolak: We have better utilized the TDL fleet, we’ve improved load and equipment utilization and we’ve started co-loading vendors.

CT&L: Obviously this is a project of considerable size and scope. How does it fit in with TDL’s core business?
Zwolak: The efficiencies obtained through tighter inbound freight controls will be aligned with TDL’s strategic plan. The revenue driven from this program will be rolled up and shared with our restaurant owners. TDL’s DC operational success is always measured against score carding and targets set. The inbound project is another example of how we, as an organization, are always striving to raise the bar on all applications of the business.

CT&L: Why did you decide to outsource this?
Zwolak: We did not have the resources in terms of head count or the transportation management system (TMS) to initiate such a project internally. We realized all of our resources were busy with other projects and we did not have the bandwidth and expertise available to take on a project of this magnitude so we looked for assistance.

CT&L: We’ve spoken about the efficiencies gained through the implementation of the inbound program. If we take an overall look, how has this been for TDL?
Zwolak: Financially we set a target at the onset of the year and we feel we will be close to reaching that goal. Operationally, I feel the real opportunity has been that we’ve been able to identify inefficiencies with the way we report our cost of goods and freight allowances. This project has allowed us to conduct a self audit if you will. Costing data is shared between four departments. This has essentially allowed us to audit our processes and the pricing inputted into our organization’s SAP reporting systems.

CT&L: It sounds like the inbound program was very beneficial for Tim Hortons. For companies that would consider a similar investment, what would you advise to consider in determining if such a program is right for them?
Zwolak: They need to consider if there is a need and critically assess the potential efficiencies. Are they going to be able to capture these potential benefits? They also need to consider if they have a solid business case and if they have organizational support.

CT&L: Doug we’ve heard Rich explain in some detail why the inbound program was right for TDL, how they went about implementing it, and also provide some advice on what to consider. Nulogx, of course, works with a number of companies in implementing such inbound programs. What would you say needs to be considered in getting started?
Payne: First and foremos
t, you need to determine what your goals are. Once you have identified your goals, figure out if you have a plan – what are you looking to achieve from an inbound program? Then ask yourself, what resources are available? What human and system resources do we have in place that could take on this project. And finally, and perhaps most importantly, determine if you have or could get executive buy-in.
Zwolak: In addition to what Doug has mentioned, it is also important to understand your vendor relationship. What role do they play within your organization? You need to understand what the potential savings are in both hard and soft dollars. And also determine what sort of organization support you need in way of purchasing, distribution centres, etc.

CT&L: What tools are necessary?
Zwolak: You need a really good system to be able to manage the program and you need really good data and you have to have good data integrity in order to make this program work.

CT&L: Can we clarify exactly what is meant by data integrity in this case?
Payne: Data integrity is having information that is accurate and readily available. Does it make sense? Is it in a format that can drive the analytics? Is it in one location or is it spread across multiple offices? All of those components are critical to understand. Once you have data integrity you then need a good TMS system to take the data to the next level.

CT&L: That begs the question, what if you don’t have good data or data integrity. It’s well known that for many companies in the Canadian market this is an obstacle. How can that be overcome?
Payne: Our people, combined with our systems, have the capabilities to clean and validate the data to overcome this problem.

CT&L: So we’ve spoken of the tools necessary, the need for executive buy in, and the need for data integrity. Is there anything else that is needed for success?
Payne: Both parties involved must jointly identify the quick wins then communicate those wins to everyone. You want people to know the program is working because that is how you get people on board.

CT&L: Doug, how do you know where the quick wins are?
Payne: It’s a collaborative project where the two parties work jointly together to find quick wins that we replicate and communicate.
Zwolak: We needed to be ready to communicate everything we are doing internally, have reasonable objectives and have a plan. It goes back to the whole crawl, walk, run approach. You need to have a plan and be consistent. Don’t get thrown off course.

CT&L: What are the costs involved and how quick is the ROI in your experience Doug?
Payne: The costs vary depending on each individual company’s needs but there is no upfront capital investment and you get access to a state of the art TMS system and its reporting. All of your data is now in one place. You have total flexibility on the way you want to price the program. You can easily go from a fixed to a variable cost on transaction based pricing, which generates savings and results in immediate ROI.

CT&L: We touched on this earlier but I would like to revisit it one last time because it is an important consideration. Many companies reading this will likely conclude that an inbound program is worth further investigation. They may also consider, why not do it on our own? In your view Rich, why was it important to bring in a third party?
Zwolak: It allows our resources to continue to focus on their current projects as the third party is providing the expertise, the systems and the carrier relationships necessary to succeed in an inbound program. It really helps you avoid the pitfalls, because there are many to consider when implementing an inbound program. CT&L 

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