Logistics: Does Trucking Get It?

The value of logistics rflects the eye of the beholder. Whether viewed as a buzzword or a watchword, logistics is here to stay. If defined as finding the best way to move freight around, logistics is not news to truck fleets, either.What is new is the widening range of transportation solutions American business is employing to tighten up -- and even leverage -- the supply chains serving its manufacturing

The value of logistics rflects the eye of the beholder. Whether viewed as a buzzword or a watchword, logistics is here to stay. If defined as finding the best way to move freight around, logistics is not news to truck fleets, either.

What is new is the widening range of transportation solutions American business is employing to tighten up -- and even leverage -- the supply chains serving its manufacturing and distribution operations.

Following are profiles of five companies that are leveraging logistics from several angles, and sometimes even from several at once.

Two of these firms mix their private fleets with outside logistics providers to deliver the goods.

One fleet applies logistic approaches to its route-delivery operation. Another private carrier went so far as to have tractor-trailers designed from the ground up to support a single customer's manufacturing production goals.

And a large truckload carrier demonstrates how fleets can put logistics to work internally -- and externally -- to offer an array of customers new service options.

What the question boils down to is not whether trucking gets logistics.

But, more to the point, do customers ultimately reap the benefits of getting the most efficiency possible from transportation-based solutions?

Recipe for success: Pillsbury-Progresso-Old El Paso Taking a cookie-cutter approach to logistics doesn't always pan out. Fleet manager Tony Jolly says Pillsbury, including its Progresso and Old El Paso divisions, whips up logistic solutions by mixing third-party providers in with its private-truck operation.

The over-the-road private fleet, which is adorned with the Old El Paso brand, is based in St. Louis. It moves inbound, outbound, and interplant shipments, mainly on routes to and from the East Coast. However, it now handles only about 4% of Pillsbury's dry freight, with the bulk hauled by contract carriers.

For Pillsbury, increasing asset utilization and maintaining operational control are key to wringing the most from its distribution chain. According to Jolly, the company developed its current logistics framework by continually examining the movement of freight "piece by piece." He says this exercise uncovers potential synergies and other ways to enhance distribution efficiency.

Studying the transportation elements needed for its Progresso manufacturing operation in New Jersey led Pillsbury to outsource one piece of the pie to Rollins Logistics Inc. starting in November of '94.

Pillsbury's analysis had suggested that greater synergies could be attained from its shuttle operation between the Progresso plant in Vineland, N.J., its distribution center in Hamilton, and a can supplier in Edison. Because it was difficult to regularly coordinate backhauls of cans, various carriers had moved outbound product from Vineland but little else.

"We saw integration of the Progresso spotting and drayage piece as an opportunity to realize measurable efficiency gains," Jolly relates. "And we've achieved considerable savings vs. the group of smaller carriers we were using previously."

The dedicated fleet Rollins Logistics fields for Progresso consists of six power units, 25 trailers (48- and 53-ft.), 9 drivers, and an on-site manager. At Vineland in South Jersey, Progresso produces its own brand of soups and Italian specialty foods as well as some Old El Paso salsas.

These products are transported up to the Hamilton center by Rollins before final distribution to supermarkets via its own fleet or outside carriers. After dropping off finished goods at Hamilton, Rollins reloads at nearby Edison -- boosting utilization by using the same equipment -- to pick up new cans for the Vineland plant. Additional backhauls now include glass jars from a supplier in Carteret, not far from Edison, and a breadcrumb baker in the vicinity.

"The Rollins agreement has generated synergy by making use of the same equipment for inbound and outbound shipments," Jolly advises, "while eliminating the cost of some equipment and giving us greater control of the operation."

He cautions, however, that Pillsbury didn't go blindly into this deal. "We looked at having existing carriers take on dedicated work for us and considered acquiring our own equipment for this task. The decision to go with Rollins," Jolly adds, "was partially based on our experience leasing our over-the-road truck fleet from them.

"Asset utilization is quite high at Progresso," he continues. "Along with the backhaul contribution, Rollins is now making deliveries on two shifts." While making the most of the trucking it pays for was a big factor, Jolly points out other benefits derived from the switch.

"Having the Rollins logistics manager on site gives us an extra pair of eyes evaluating our operation," he says. "We receive detailed reports weekly, and can request them more frequently. On-site management also lets our warehouse personnel concentrate on their primary jobs. There's no longer a need for us to micro-manage the system."

Jolly reports that securing skilled, reliable drivers is no longer a headache, either. "Rollins has that responsibility now," he says. "They recruit and train the drivers, which represents a clear benefit for us.

"Tying this transportation piece all together with a dedicated logistics provider," Jolly states, "gave us an excellent distribution tool for matching our resources with our needs.

"We're analyzing opportunities for improvements at other facilities, too," he continues. "Even if we make a change, we leave the door open. We feel any agreement with a logistics provider should be set up in such a way that we can do it ourselves, if we so choose at a later date."

Though literally the opposite of those "Poppin' Fresh" rolls it sells all rolled together, Pillsbury's piece-by-piece logistics recipe might be filling its Doughboy with glee, too.

Ahead of the buzz: Crete Carrier Corp. We feel we've been doing logistics since long before it became a buzzword," says Tonn Ostergard, president & CEO of Crete Carrier Corp. "For years, we operated in an environment where we replaced private fleets for many suppliers by streamlining the distribution system using our approaches. That remains a major focus of our business strategy."

The Lincoln, Neb.-based truckload carrier runs some 2,350 power units in predominantly dry-van service. Crete is also the parent firm for two reefer fleets, Pennsylvania-based Schaffer Trucking and Nebraska's Sunflower Carriers, as well as HTL Truck Line of Iowa.

The subsidiaries together field another 1,960 power units. About 75% of all the trucks are company-owned with the balance run by "long-term" owner-operators. Every tractor is equipped with Qualcomm mobile communications.

"Each of our carrier's systems are integrated for nationwide coverage," says Ostergard, "allowing us to match up capacity with equipment availability on a daily basis. The four carriers are autonomous in many respects, but close coordination achieves economies of scale, which we in turn can deliver to our customers."

While computerization lets the fleets interact with each other's routing systems, Ostergard points out that it often comes down to "close communication between personnel to balance out which operation is running short or long."

The Crete chief views drivers in a similar light. The carrier continues to employ owner-operators for a quarter of its driving force. "In recent years," he remarks, "trucking became convinced that company drivers were superior to owner-operators. But that cycle's gone around, and now we're seeing other major fleets using owner-operators again."

Ostergard also has a specific take on being utilized by third-party logistics providers. "The jury is still out on `brokering freight,'" he states. "We don't want to lose control of the service we provide to the customer."

He says Crete's goal is to maintain the service relationships it has developed with customers. "We don't want to be viewed as a commodity representing a third-party provider," he continues. "When we take over a big piece of business, we want to handle it all."

As an example, he points to a customer that this month is turning over all inbound and outbound shipments for a single manufacturing and distribution location to Crete. "We won't broker any of this work out," Ostergard asserts. "Instead, we'll service it with our own assets-- and manage it with our own people."

Buzzword or not, logistics is more than a fad for Crete. "Logistics should be about finding the optimum solution for moving the freight," Ostergard contends. "The key remains with the vehicle and the driver. Without those assets, everything else is for naught."

Worth their weight: Alcoa Rigid Packaging Div. Seeking to better support a customer's internal logistics, the Rigid Packaging Div. of Alcoa (Aluminum Company of America) went beyond its own manufacturing and distribution expertise for an application-specific solution.

The Alcoa, Tenn.-based operation produces aluminum coils, generally used for manufacturing beverage cans. It supplies one specific customer with huge coils 56-in. wide and 80 in. in diameter. Some 450,000 cans can be made from just one of these coils. This allows the customer to operate for longer periods with fewer scrap materials -- which translates into greater manufacturing productivity.

But with the coils weighing in at 30,000 lb. a pop, the existing trucks in the Alcoa fleet could deliver only one at a time. At 340 miles per load, Alcoa could only make about 48 deliveries a week to this customer.

Determined to beat the weight, Alcoa asked Ruan Transportation Management Systems to come up with a better idea. Accepting the challenge, Des Moines-based Ruan set out to design a tractor-trailer combination light enough to haul two of the coils, yet remain within the 80,000-lb.-GCW limit. That meant cutting a standard combination spec by 20,700 lb.

Bill Giles, Ruan's vp-research & engineering, formed a team, including representatives from Freightliner, Cummins, and Reinke Manufacturing, that developed specs for a pair of tractor-trailers both light and strong enough for the task.

Comprised largely of aluminum -- no doubt a plus in Alcoa's eyes -- the units actually claim the title of being the lightest in their U.S. weight class. Ruan's Giles reports every aspect of the truck was designed with weight conservation in mind.

For example, the specs call for a 6x2 instead of a 6x4 tractor. Besides not being equipped with sleepers, the tractors have only a driver's seat, a 70-gal. fuel tank, and a single tag axle instead of a power divider. While the trucks have steel frames, their crossmembers are all aluminum.

Each of the 44-ft., 8-in. aluminum flatbeds boasts a calculated empty weight of 7,320 lb. and features a 9-ft. spread axle for "axis-horizontal" hauling. The trailers are fitted with larger 85/8 x 16-in. brakes.

A special braking-system valve works with the air-bag system to increase vehicle safety. "When the truck is empty, the tires are more likely to skid when the brakes are applied," explains Ruan service manager Ralph Stapleton. "The valve will indicate that pressure needs to be taken off the air bag to prevent the brakes from acting aggressively -- which could result in either skidding or coming to an abrupt halt."

Powering the trucks is a Cummins C8.3 diesel driven through an Eaton Fuller transmission. The trucks average 2,400 miles a week but because of the high weight the small-bore engines must pull, oil is drained every 8,000 miles.

Since entering service three years ago, the heavy-duty lightweight twins have made two runs a day, six days a week. Stapleton reports the "trucks have proven to be very strong and reliable" in over 421,000 miles for one and 362,000 for the other.

"We have definitely seen better utilization of time and drivers since these units have come on board," Stapleton adds, "which is saving money for all the parties involved."

Snack Attack: Drake Bakeries Inc. Our charter calls for determining what will be needed to move our trucking operations into the 21st century," says Jack Mulvaney, executive vp-operations for Drake Bakeries Inc.

Founded over 100 years ago, the Wayne, N.J.-based baker annually leavens $150 million in sales, primarily from markets in New England and the Middle Atlantic states. Building on this formidable Northeast base, Drake recently began distributing its baked goods to Arizona and California. The company has also made an agreement with Schmitt Baking to market their products on Schmitt trucks in the Washington-Baltimore area.

In the Northeast, Drake's store deliveries are handled by a fleet of stepvans that work out of 22 depots to cover over 335 routes. Another 30 or so vans are run by distributors over their own routes. Out West, Drake directly ships product via common carriers to warehouses operated by its local distributors.

"We also have our own transport fleet of 20 tractors and 40 trailers," Mulvaney points out. "This fleet moves baked goods from our Wayne plant to a central staging facility in Totowa, N.J., from which it shuttles shipments to our local depots. Our trucks make the most of backhaul miles by picking up materials from our suppliers."

According to Mulvaney, "route optimization" is sweet stuff at Drake's. "Sales is constantly looking to get the most out of the routes we run," he says. "In recent years, we've made savings by consolidating routes and depots."

Drake stays on top of this form of asset utilization by tracking performance against a "minimum route average," which Mulvaney says is a proprietary number developed from gross sales and overall cost figures by the sales organization.

"The average is a key driver in analyzing whether or not a route is viable for Drake's," Mulvaney advises. "Decisions on routes also involve looking at the minimum cost per stop -- that is, are enough sales being made to justify each stop? In addition, sales considers the impact a route has on the operating costs of the depot, as well as the time it takes the driver to get to and from work."

Stepvan drivers are designated "route salespersons" at Drake. Their productivity and selling potential is aided by a communications link to the company's computerized order-intake system. "Store orders are generated by the route salesperson," Mulvaney explains, "who inputs the data into a handheld device to report the requirements of each stop.

"A software system crunches the order-intake information to provide the plant with weekly allocation requirements," he continues. "This helps schedule production workers."

Although computerization is an important ingredient in Drake's logistics, Mulvaney hastens to add that the software system can be overridden by depot managers if they experience rapid increases or decreases in product demand.

To further boost efficiency and utilization, the 300-plus stepvan fleet is undergoing a major upgrade. "By forming a unique partnership with USL Capital, which is providing financing, and NationaLease, which is taking over our stepvan maintenance, Drake is phasing in 130 new vans at a minimum cash outlay," Mulvaney reports.

He says the new vehicles will slash the average age of the stepvan fleet from 17 to 7 years while adding cargo capacity. "We've also reduced the number of spare vans we keep on hand."

The 16-ft. vans, which weigh in at just under 10,000 lb., have a Grumman aluminum body mounted on a Freightliner chassis. Power is supplied by Cummins diesels driven through automatic transmission, a "new spec" for Drake.

"Going to NationaLease let us eliminate the cost of garage facilities, shop mechanics, and environmental compliance," Mulvaney points out. "And we've agreed to a PM program that can be budgeted out at a fixed cost for 12 years."

According to Mulvaney, changing with the times is not difficult if you know where you're starting from and where you'd like to be headed. "Logistics," he contends, "is really a matter of minimizing the cost of distribution, starting with a thorough analysis of all the factors involved."

Securing the lifeline: Whirlpool Co. Parts are a manufacturer's lifeline," says Tom Wright, general manager of logistics for Whirlpool Co. "For plant managers to trust that a centrally run logistics operation will keep them in production is a big leap of faith."

He says that's why the Benton Harbor, Mich.-based appliance maker thoroughly studied the inbound-logistics system for its U.S. plants before electing to turn it over lock, stock, and barrel to an integrated service provider.

Whirlpool eventually signed a five-year contract to have Ryder Dedicated Logistics Inc. manage all inbound shipments to 11 plants. The switchover was achieved completely and simultaneously -- with no shutdowns -- on Jan. 1, 1996. "Before going to an outside firm," Wright says, "we had a `lead' logistics provider, but each manufacturing division independently chose its inbound carriers. Removing this autonomy and consolidating inbound logistics under one provider gave us the ability to examine our routing in total.

"After we initially designed the network with Ryder," he continues, "we went to our plants and explained the new approach. The system has been well accepted and Ryder has met the cost efficiencies we expected to gain." He says these targets included reductions in order-processing and manufacturing-cycle times.

Under the contract, Ryder has been directing the movement of some $2 billion in appliance components and raw materials inbound to the plants.

Although the multimillion-dollar deal represented Ryder's biggest non-automotive logistics account, Whirlpool remains integral to the management loop. For example, Wright points out that Ryder's on-site managers work closely with Whirlpool's and the material coordinators at each plant.

"Having all the data centralized is the first step in addressing inefficiencies," Wright contends. "The integrated system enables `milk runs' to be designed for the trucks based on total shipment volume. That also cuts the high cost of expediting freight to keep plants up and running."

While Whirlpool tackled inbound logistics first, Wright reports that the manufacturer has begun leveraging its outbound movements, too. "Quality Express, our 600-truck private fleet, makes LTL deliveries to eight regional distribution centers. Our fleet is currently augmented by two third-party providers, KLS and ERX Logistics.

"Over the last two and one-half years we nailed down inbound," he continues. "Now we're in the second phase of our relationship with Ryder and are looking at other opportunities."

These include an expected alliance between Ryder and one of Whirlpool's other third-party providers "to better leverage" inbound and outbound traffic lanes.

"Using economic-value analysis as a tool," Wright notes, "we're also taking a strong look at whether we should convert our private fleet entirely to a dedicated outbound operation using an asset-based provider."

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