Optimizing Private Fleet And For Hire Moves Simultaneously

Posted: Feb 27 2014, 7:01am CST | by , Updated: Feb 27 2014, 8:19am CST, in Technology News


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Optimizing Private Fleet and For Hire Moves Simultaneously

Guy DeFlorio, the CIO at Mutual Materials, recently spoke at the Oracle Value Chain Summit 2014 about how his company implemented a Transportation Management System (TMS) from Oracle and were able to simultaneously optimize both the private fleet and for hire carriage moves.

Mutual Materials is a leading manufacturer and distributor of masonry products in the Pacific Northwest. The company makes and distributes bricks, pavers, natural stone, and outside living space products from 12 factories. The goods move to market from warehouses attached to the factories and 16 branch offices. Their private fleet currently consists of 45 flatbeds, 40 trailers, and forklifts capable of being mounted on a trailer. Their customers include large home improvement retailers, contractors and homeowners. Many deliveries are made to job sites.

The transportation department felt like the private fleet was a competitive advantage, but as the cost of the private fleet rose, others in the company were asking “is it worth it to keep the private fleet? Why not just have common carriers deliver everything?” Mutual Materials did not have the data to answer that question intelligently. The company decided to implement a TMS in 2010 to both answer that question and to be able to make optimum moves no matter how they decided to configure their transportation department. They were an Oracle EBS shop, so OTM (Oracle’s TMS) was a natural solution, although they did look at other best of breed solutions.

Following an eight month implementation they were able to change the question to “when does the private fleet make more sense, and when would it be better to move goods on a common carrier’s truck?”

Up to a certain number of miles, roughly 100, the fleet is predominantly cheaper. On certain more competitive lanes, like the I-5 corridor, carriers are anxious to get loads and it often makes sense to tender those moves out.

To come to these conclusions, they needed to carefully model their network inside OTM. The OTM model has a number of carrier cost components associated with it. Parameters such as cost per stop – based on truck-loading time – or cost per mile, as wells as the costs of various types of accessorials. They used many of those same cost parameters to model the cost of their fleet. They were using the Oracle Fixed Asset solution and thus already had a very good handle on their depreciation and maintenance cost components; those cost components flow right into the OTM private fleet cost model.

Another key aspect of implementing OTM is to be able to do better routing based on intelligently designed network operating rules. So for example, they put in place rules such as “deliveries to the Portland branch office should always come from the Portland warehouse if the inventory is available at that warehouse.” This model also needs to understand driver’s home locations and the fact that drivers typically do not travel overnight. An intelligently designed network allowed them to more fully load their trucks.

Further, the way they have configured the solution has also made backhaul opportunities more visible and practical. Orders are dropped into OTM with 2-5 day delivery windows. This order flexibility gives them the ability to pull orders in or push them out a bit to facilitate back haul moves. Further, they have actually become a small carrier on the backhaul portion of their moves and they generate several hundred thousand dollars in revenues from this new ancillary business.

Mutual Materials has achieved some great results. Their truck utilization – which they define as how fully loaded the truck is – went from the low 60s to 85-87 percent. The cost of using their fleet is down by half a million dollars despite the fact that the fleet is hauling 4.6 percent more tonnage and 6.4 percent more pallets. They saved about one million dollars by more efficiently moving goods within the internal supply chain – between a warehouse and a branch, for example.

Guy was quick to point out that not all of these savings can be solely attributed to the OTM project. This project also involved a major culture change component. Branch managers learned that if they ordered something, they would get it, so just in case inventory orders were greatly reduced. There were also more stringent rules put in place about what the permissible branch minimum/maximum orders by product type were.

Finally, it should be pointed out that the TMS has also improved their ability to service their customers. They attained cost savings while maintaining a very high service level, they are performing better on retail customers score cards, and they can now provide very quick answers to customers on the status of their loads.

But a CIO’s work is never done. The next step is to allow customers to log into OTM and get visibility to their loads without having to talk to reps or the call center.

Source: Forbes

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