Every company talks about being customer-driven. J.R. Simplot Co. does something about it.
When Simplot, one of the world's largest processors of frozen potatoes, went looking for a third-party logistics (3PL) provider to manage its new dry distribution network, it put customer needs ahead of cost.
Based in Boise, Idaho, Simplot produces 3 billion pounds of frozen french fries and related products annually. Its customers include the biggest names in fast food: McDonald's, Burger King, KFC. Yet when it comes to dry products, Simplot is relatively inexperienced. Having taken over a dry operation of nationwide scope, the company sought help from outside experts.
Steve L. Brown, senior director of logistics, had previously worked for a large food-service company that had a line of dehydrated potatoes. In addition, Lewisville, Idaho-based Idahoan Foods was piggybacking on that company's sales and distribution channel. When Simplot purchased the processed-potato division of the food-service giant, it took on Idahoan's distribution business as well. Simplot and Idahoan would enter into a co-packing arrangement, but it was Simplot that was expected to provide the new distribution network for dried potato products from both companies.
Brown, who moved over to Simplot with the acquisition, had just 60 days to create a new network, without any interruption in service. In addition, he had to replicate the transportation efficiencies that the acquired operation had previously enjoyed, as part of a much larger organization. While Simplot was a dominant shipper of frozen potatoes, it had no corresponding clout with carriers on the dry side.
For Simplot, coming up with its own chain of warehouses was out of the question. Nor could it afford the time to build new facilities. The only solution lay in the hiring of a 3PL that already had a network in place, and could combine Simplot's dried-potato business with the freight of other shippers, creating cost-efficient truckloads and consolidated lots.
Simplot canvassed the 3PL landscape, starting with 15 candidates and eventually narrowing them to two. It chose Des Plaines, Ill.-based DSC Logistics for four distribution sites, in Roanoke, Tex.; Allentown, Pa.; Joliet, Ill., and McDonough, Ga. States Logistics Services Inc., headquartered in Phoenix, got the nod to operate a fifth facility in Buena Park, Calif.
The main criterion, says Brown, was proximity to the distribution centers operated by the previous owner of the dried-potato network. The aim was to cause minimal disruption to customers. Only after that goal was satisfied did Simplot address the issue of cost.
Customer Pickups Prevalent
Simplot's priorities made sense, given that a significant number of customers picked up product at the distribution centers. Any change in location would have altered their arrangements with carriers, and possibly increased their own costs.
Buyers were used to getting consolidated truckloads with a variety of products from the big food-service provider. That volume would have to be replaced with items from other suppliers. Both DSC and States were already serving many of the end users' existing vendors, whose products could be used to fill out the trucks and maintain truckload economies.
Simplot made its choice of DSC and States in early May 2004, with the first shipment set for June 30. Within that time, all systems would have to be integrated and switched on, and all product moved into the 3PLs' warehouses.
|"The lot numbers had to be separated in our system, yet integrated as one customer."|
- John Kelly of DSC Logistics
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