Think it's a challenge to keep up with Polo Ralph Lauren's brands, some 14 or more by last count? Just try to get a grip on its supply chain activity. It has distribution centers in more than 10 countries, which supply 8,900 wholesale locations and over 630 retail stores. Worldwide employment exceeds 19,000. What began 40 years ago with a collection of ties has grown into a global enterprise that employs 19,000, generates almost $5bn in annual revenue and has a five-year annual growth rate of 8.5 percent. It also has highly complex logistics needs, which haven't always been met in the most stylish of ways.
Polo Ralph Lauren - Polo for short - has relied on third-party companies, who use a network of airfreight and ocean forwarders, to support its supply chain's ever expanding needs. Airfreight was of prime concern. Unfortunately for the retailer, there was no method to understand and route international airfreight according to best service and cost options. Creation of a dynamic airfreight routing platform/portal from Acuitive Solutions enabled Polo and its logistics service providers to meet business objectives and significantly improve supply chain performance in several key areas. They included costs, communication, delivery, timing, product planning, shipment staging, service options and customer service. The impact of the new platform/portal was realized across not only Polo but also with its global partners and is scalable in all key performance areas.
The air network is re-bid on a quarterly basis and ocean is bid annually. Air lanes are bid quarterly in order to align rates closer to market conditions as rates have fluctuated greatly over the past two years. Rates are re-published in a static routing guide on Polo's intranet.
Prior to implementation of the portal, the guide presented numerous challenges and risks. First, if a lane was split between service providers, one division might ship the majority of the airfreight leaving the actual allocation misaligned with the awarding of the freight. Because of the inability to provide an accurate volume projection, there would be difficulty for the LSP in securing capacity, jeopardizing Polo's budgeted freight spend. The guide would bury one freight forwarder while another was light on capacity. Polo was unable to hold freight forwarders accountable for service standards and capacity commitments. The airfreight volume became so variable that Polo included a "flex" requirement for providers to ensure they could support the volume above average weekly run rates. The flex commitment was imbedded into the quoted rates per lane.
There was a risk that vendors might not receive their updated Supply Chain Compliance Guide. Since all of the routing data was published in a larger guide and sent via email, Polo couldn't confirm receipt and understanding by all vendors. Often vendors didn't follow the new routing procedures and shipped under previous terms. The static routing guide also didn't confirm that the best service selection was being made for each shipment. The highest-volume lanes were split between two to three providers to ensure capacity commitments could be fulfilled in time of capacity constraints. Each freight forwarder on a particular lane had its own unique capacity requirements and costing. For example, larger carriers would have their own equipment versus others who would utilize commercial airlines and their existing contracts. Often, the size of the shipment could be a better cost and service fit with those who owned their own equipment versus others with space contracts in a tight market. The costing of these shipments could vary by 15 to 20 percent. Lastly, if Polo's nominated LSP was not performing to expectations, such as poor transit times or not providing agreed-upon capacity, Polo could not quickly and effectively change LSP allocations.
As an example, in third quarter 2009, a LSP couldn't secure capacity from Hong Kong at agreed-upon pricing. The rate was increased by over $1.00 per kilogram. Polo had to eat that increase for three weeks until its transport team could re-bid the lane and publish a new guide, incurring an additional $78,000 in freight expense.
In order to execute multiple service offerings appropriately, Polo needed LSPs to have EDI850 information. Without it, forwarders didn't know when Polo needed the product at destination. Further challenging the Transport Operations team was limited first-mile visibility. During the critical 8 to10 days prior to a shipment's departure from origin, there was no visibility into the work stream, and no opportunity to make important decisions affecting ship dates, costs and delivery times. All these factors were a driving force for Polo to review the market for an airfreight routing tool.
The company spent the next four months meeting with 11 transport technology providers, assessing their solutions. Acuitive Solutions had the closest product fit, says David Lande, director of international transportation at Polo. Gaps existed in critical areas of the service menu option and first mile-visibility, but Acuitive understood the value of the additional requirements and was willing to partner to co-develop these aspects as a shared expense. "By focusing on the problem, not the solution, we fashioned breakthrough results," says Phillip Marlowe, Acuitive Solutions president and founder.
The goal of the project was clear. The current static routing guide with manual alert milestones was not sustainable. The partnership's objective was to create an "International TMS" for airfreight management that would return control to the Polo Transport team.
Polo needed the ability to dynamically assign different service options for expedited international transport services based on defined business rules; automatically route the Polo PO to the assigned air forwarder to end manual keying; electronically capture vendor booking, confirmation and cargo handover at origin; give the airfreight forwarder ability to capture the Polo PO and booking data to route according to the defined service level; ensure the forwarder's chargeable weight is correct by having Acuitive compare the vendor versus forwarder chargeable weight in its system; and expand use of small-parcel services for shipments under 40 kilograms.
An aggressive implementation calendar was created with the goal of rapidly bringing the vendor base on board and going live by end of Polo's fiscal calendar - March 2011.
The resulting vendor routing portal has clearly made a large-scale commercial impact on the Polo organization. In only four weeks, Phase 1 standard service was expanded to a range of services with almost 22 percent of shipments converted to an alternative service, saving almost $50,000 by using only 16 vendors. Through Phase 2 implementation, over 36 percent of shipments were shifted to alternative service, including some returning to original ocean routings. By the end of March 2011, 111 vendors were on-boarded and are using the portal worldwide, which allows Polo to convert to alternative services.
In addition, the portal has not only reduced airfreight expenses but put the supply chain organization in highly transparent and productive partnerships with other key areas of the company, including: Production, U.S. Transportation, Customs Compliance, Supply Chain Finance, Corporate Finance and Distribution Center Operations. The new portal tool has also enabled savings reports by individual Polo divisions.
Polo's Transport Operations team views the portal as a "first of its kind" distribution strategy that has created live communications between the company and its logistics service providers on a 24/7 global basis. Other achievements of the system, they say, are: reduced cost variability, increased shipment visibility, improved data integrity, reduced turn time for invoices, improved shipment matching to vendors and optimum cost lanes, greater shipment date flexibility and cost saving opportunities, a reduced carbon footprint, timely identification of process gaps and quick resolutions without significant business interruption, more accurate volume projections that have improved capacity planning and allowed for greater control of the freight spend, improved LSP understanding of and compliance to Polo's supply chain business rules, greater vendor control and the ability to quickly and effectively change supplier allocations in cases where a LSP is not performing to service standards such as transit times or capacity.
All that, and quick, too. Says Lande: "It's like Expedia for airfreight."
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