How to Create Value through Supply Chain Synergies
Synergy: the interaction or cooperation of two or more organizations, substances, or other agents to produce a combined effect greater than the sum of their separate effects.
How to create value through supply chain synergies
As shippers look to implement strategic initiatives to operate leaner, they are looking for additional avenues to gain multiple viewpoints and tap into wells of synergies from outside sources. A leading food and beverage manufacturer in the United States determined they needed a strategic partner to assist them with creating a stronger, more efficient supply chain. As many large manufacturers do, this company grew by way of acquisition over the course of several years. With each acquisition, they grew in size, capability and power but lacked one key element…visibility over their supply chain. The lack of visibility created a supply chain that often operated disjointedly and segregated in their operations.
A strategic partnership became an essential requirement to scale the company’s supply chain and deliver visibility and synergies back into the heart of this network. This manufacturer determined the optimal partnership for them was to transition from a technology relationship to a Managed Transportation Services (MTS) partnership with LeanLogistics. They had leveraged LeanTMS technology for many years but had limited success in scaling their network’s platform due to the rapid growth they were experiencing. An MTS partnership between these two parties began to develop and a laundry list of goals soon emerged.
Primary goals this partnership set out to achieve:
- Visibility of 3rd party freight across network
- Analyzing trailer utilization
- Controlling accessorial costs
- Visibility of customer’s private fleet movements across network
Visibility of 3rd Party Freight
The first item that would ensure the success of all future projects was to gain visibility of all their 3rd Party (common carrier) freight movements across their network. To accomplish this, a team of individuals from both sides of the partnership formulated an implementation process that would be replicated across 40+ facilities. This process took into account 4 different ERP systems and all manufacturing facilities, warehouses, co-packers and satellite locations. This process also needed to be simplistic enough to gain the trust and willingness to participate from hundreds of individuals within this network.
With a little luck and a lot of hard work, a total of 47 facilities were successfully implemented within 16 months…the doors to network visibility were finally wide open!
Analyzing Trailer Utilization
Immediately following the network implementation, cost saving synergies became immediately obvious through the data. The LeanLogistics MTS team partnered with all levels of the manufacturer’s team and began the study conversion of maximizing each truck that left the docks. This “load factoring” initiative paved the way to a $1mm savings, freed up capacity and forever changed the way the business operated. Before long, facilities had internal stop-gaps in place to ensure all loads moved at maximum capacity unless appropriate approval had been gained.
Controlling Accessorial Costs
Further steps were taken to accurately control carrier assessorial costs. Rate parameters and documentation for certain fees became a standard across all carriers. Additionally, the LeanLogistics MTS team worked with each facility to determine underlying causes for high detention charges and created solutions to minimize the occurrences of detention happening. Under the new procedures, facilities ran smoother, carriers were more willing to move freight and transportation costs went down. The collaboration enabled this manufacturer to have the capability to work with their carrier partners to gain a competitive rate as their volumes continue to ride and the market tightens.
Visibility of Customer’s Private Fleet Movements Across Network
The remaining piece of this supply chain puzzle was to additionally gain visibility to the movements that are occurring with their own private fleet. Knowing where their own drivers were operating has allowed them to additionally leverage their own assets to control costs on lanes that have seen large rate increases from the 3rd party carriers. In addition, this has proven a wise strategy in reassigning 3rd party carriers to lanes that do not work well for the private fleet. Synergies across the entire network can now be recognized and adopted.
It’s been said “you can’t do today’s job with yesterday’s methods and still be in business tomorrow”. More companies are realizing this truth and are collaborating with strategic partners who can bring an infusion of cost savings into their network and strengthen their overall supply chain in the process. As we move collectively into this arena, I am amazed at the possibilities that exist as we unite to help customers build better supply chains together.
Tagged LeanLogistics, Logistics, managed transportation, managed transportation services, MTS, Supply Chain, TMS, Transportation