You'd think it would be a simple matter, finding the lowest-cost carrier on any particular lane, and giving your business to that vendor. But transportation patterns today are so complex, and the players so numerous, that nothing about booking freight is simple.
Now add in a shipper that operates in a business with historically tight margins, and the situation becomes even more challenging. The company in question is The Newark Group, a producer of recycled paperboard and related products. With headquarters in Cranford, N.J., it produces tube board, chipboard, clay-coating and uncoated folding board and specialty paperboard grades in North America and Europe. Major customers include the construction industry, book binderies and school-supply houses.
One of the world's largest procurers of wastepaper, The Newark Group has four divisions: the mills, recovery and recycling, tubes and cores and a converting operation. The U.S. network includes six mills, nine locations for recovery and recycling, three for converted products and 15 for paperboard (tube and core) production. It's a tightly integrated organization, drawing on some 300 core carriers to link facilities throughout the country. Approximately 100 carriers provide most of the company's freight needs.
Although a successful operation, The Newark Group needed to improve its bottom line, in part by cutting down on transportation expense. It wanted a system that could tender freight sequentially to the lowest-cost carriers. At the same time, it was looking for ways to capitalize on the unique way in which its manufacturing and distribution network is set up. The company insists on maintaining direct control of the transportation program, says corporate logistics manager Frank Provost, so that it can better take advantage of changes in the market.
The Search Begins
The search for new transportation-management system (TMS) software began in 2001. At the time, there weren't that many products on the market that could meet the company's needs, according to Provost. In 2002, after months of searching, The Newark Group selected Nistevo, provider of an on-demand application. "It had all the bells and whistles," says Provost. "Contract management, the ability to do continuous moves, and round trips."
In 2007, Nistevo was acquired by Sterling Commerce, which at the time was a subsidiary of AT&T and was itself bought out by IBM in August 2010. The TMS remained essentially the same, however, able to manage all carriers, lanes, rates and accessorial charges for The Newark Group. Krysta Person, product marketing manager with IBM, says the shipper places a high value on its ability to manage transportation throughout "the whole commerce lifecycle - all the pay to freight payment." That last process was a being handled manually, prior to acquisition of the Nistevo TMS.
Nearly all of The Newark Group's freight moves in full truckload quantities, although the company relies both on over-the-road and intermodal providers. Contracts are essential; Provost will typically ask carriers to hold their rates for at least a year. (His shipments are still subject to rate changes based on fuel-price variations, pegged to weekly data issued by the Department of Energy.) The Sterling TMS is designed to monitor and manage those fluctuations.
For carriers, The Newark Group's freight presents no special challenges. But the shipper does insist on tight monitoring of freight in transit, with visibility extended to all shipping locations. It requires carriers to update the status of a shipment at each "event" - arrival and departure at pickup, final delivery and any intermediate stops. In addition, some intermodal carriers update train movements in real time, Provost says.
About a quarter of the company's shipments move by rail, although not every division makes equal use of the option. "I'm a huge believer in intermodal," says Provost. "Our product is 100-percent recycled. In terms of our carbon footprint, the more we can take off the road, the better."
Implementation of the software, which is provided in the cloud, was fairly straightforward. The system was rolled out in stages, taking about five months to complete. Sterling TMS supplies a team that reviews the entire project plan with the client and helps to get the software up and running, Person says, adding that the entire implementation team has been with the vendor since the Nistevo days.
Ensuring Local Autonomy
While Provost insists on centralized oversight of the company's freight activities, he leaves actual booking to the various manufacturing locations. The Sterling TMS "allows the facilities to take care of their own shipments," he says. (Provost will query the shipping location if a booking seems out of the ordinary.) Orders are created within the company's order-management system (OMS), then transmitted via electronic data interchange to the TMS. The system then automatically tenders freight to the lowest-price carrier on any given lane. Billing is completely paperless, and payment is automatic, once the information is uploaded to the OMS. Prior to automation, it might have taken two days to process a bill. Now it takes 15 minutes, Provost says.
One of the most valuable aspects of the Sterling TMS, in The Newark Group's view, is its ability to manage continuous moves. The shipper relies heavily on dedicated fleets that link its various manufacturing facilities. Whenever possible, it looks to provide the carrier with another move beyond the initial delivery point. In return, it becomes eligible for a discount on the freight rate. The concession might elevate a higher-priced carrier to first place on The Newark Group's list of cheapest providers.
Carriers looking to avoiding deadheading might stretch a continuous move on behalf of one shipper into half a dozen or more legs. The ability to find such opportunities within the customer's distribution network "is built into the Sterling TMS," says Provost.
He is pleased with the system's ability to handle sequential tendering across all lanes and rates. For the future, he would like to see a TMS that could automatically determine whether a given shipment was better suited for intermodal or over the road. As it stands, the system appears to be meeting The Newark Group's goal of keeping transportation costs down. As Provost puts it, "Everybody is looking to save money every step of the way."
The Newark Group
IBM Sterling TMS
Keywords: supply chain, supply chain management, global logistics, transportation management systems, TMS, logistics services, transportation services, supply chain systems, supply chain planning, sourcing solutions
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