"Lean has the network they can leverage and they bring their professional services and expertise to the table. But Sterling is looking not necessarily to differentiate themselves with services, but to integrate their TMS as part of their larger suite of offerings, saving customers money on integration."
Change is ahead for HighJump as well. 3M has announced that it has entered into an agreement to sell HighJump to Battery Ventures, a technology venture capital private equity firm based in St. Paul, MN. The transaction will result in a stand-alone company focused on providing supply chain solutions to a global customer base.
"3M's track and trace business is refining its approach to providing comprehensive track and trace solutions for high-value assets and people that deliver customer value through asset utilization, safety and security," says Lemual Amen, vice president and general manager, 3M Track and Trace Solutions division. "Therefore, we believe HighJump will have more opportunity to maximize its potential with Battery Ventures." Terms of the transaction, which is expected to be closed in the second quarter, were not disclosed.
So what will push forward these on-demand TMS initiatives? Connaughton believes the answer hinges on how well traditional TMS vendors are able to convert their SaaS offerings to products companies can use. "These vendors are looking at this as an area of opportunity and they are simplifying their applications and making them more modular so they can roll them out in this environment. Once these vendors get it right, it will change the dynamics of the industry for the positive."
CASE IN POINT: PINNACLE FOODS GROUP
Reducing Costs, Gaining Visibility
Pinnacle Foods Group in Mountain Lakes, NJ, wanted first and foremost control and visibility, says Gregg Bostick, vice president of transportation. The company-a $1.5 billion manufacturer and distributor of familiar grocery brands-reduced its annual outbound freight bill 19 percent and its delivered cost per case by 17 percent through 2005 to 2007 using LeanLogistic's On-Demand TMS product, deployed about two years ago.
Further savings include five percent from procurement; four percent from standardizing accessorials; and another three percent from proper routings, plant-direct shipping and carrier lane assignments.
Pinnacle wanted to centralize command and control over its logistics activities and costs. This was especially critical because of its acquisition growth, which meant it was handling several different processing centers.
"We wanted that control and visibility from the time an order arrived in our system until the time we tendered it out to a carrier and then to the time our customer or warehouse received the order," says Bostick. The company handles 70,000 shipments annually on the managed freight side of its business-and another 25,000 shipments on customer pickup.
In addition to having the ability to execute its orders, Pinnacle Foods also required data visibility. "We wanted to know at all times what were our ongoing lane costs and our accessorial costs," explains Bostick. "We also wanted to have the fuel surcharge calculated automatically so we didn't have to bother with that every week. Now, our system updates to the DOE report every Monday at 4 p.m. Having all this data allows us to build nice metrics and KPIs so we get to see trending information in our transportation component."
This kind of information is powerful for keeping the pipeline fluid. For example, if there are bottlenecks anywhere along the supply chain-like delays at DCs or at customers' locations-Pinnacle can deal with those problems immediately. "The data allow us to see what the problems are, as opposed to guessing what they are. We have that information as close to real time as possible-as opposed to getting reports a month or so later," says Bostick.
In addition to visibility throughout the supply chain on the operational side, Pinnacle also has visibility on the financial side of its business operations. "We can see the invoicing piece and the accounting piece, for example. And we see all of this data daily, which allows us to pull metrics based on customer or by lane. When we have promotions, we can manage and track these activities more efficiently."
Furthermore, the available metrics are a valuable benchmarking tool. For example, the company is currently in the midst of a national freight bid. "We can now include in our bid things like weighted averages on lane rates, accessorial rates and fuel rates," Bostick says.
Knowing last year's rate helps them know whether to accept a particular rate from a carrier. Bostick adds the company was able to do this on 1,000 lanes so far. "We found further savings using the benchmarking data because we were able to procure much better freight rates from a variety of carriers."
The TMS is integrated with Pinnacle's order management system and its finance system. Once orders are entered into the order management system, the TMS tenders out the loads. Carriers' responses route to the order management system and the TMS is updated with appointments and the respective carrier name. On the financial side of things, once a carrier closes out a load, that activity initiates the accounts payable cycle and the carrier is paid through the finance system.
The TMS solution costs a flat fee every month. Hundreds of people can access the system, whether it's once a day or once a month. Bostick notes the company is continually looking for additional opportunities to reap savings in its inbound operations. A case in point is the company's current project, dubbed "the nuts and berries loads."
"We are looking at bringing in walnuts and blueberries for our brownies and muffins," explains Bostick. "In just these two lanes, representing about 55 loads' worth, about $120,000 in spend, we already found $40,000 in savings. We have about $50 million worth of inbound activity, so there are huge savings potentials there, in addition to what we have already achieved." -A.T.