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When you're selling product in 115 countries, and running plants and distribution centers around the world, it's easy to lose sight of your logistics spend.
The armies of carriers and third parties needed to support an operation of such scale virtually ensure that some freight payments and invoices will get lost in the void. Which was precisely the challenge confronting Blount International, Inc., a global maker of chainsaws and other equipment for farming, forestry and gardening.
Blount was unable to obtain a consolidated view of its logistics arrangements. As a result, it was plagued by inconsistent and inaccurate data. Making matters even tougher was a slew of mergers and acquisitions that frustrated efforts to achieve standardization of invoicing, says Alfredo Camacho, Blount’s director of global logistics. In simplest terms, the company lacked “visibility of where our dollars were being spent.”
Previously, Blount had relied on its carriers to supply the necessary data, but reconciling that information with the output from its own enterprise resource planning (ERP) system was a laborious process. “A lot of assumptions were being made,” Camacho says, adding that the resulting output was 60 percent to 70 percent reliable “at best.”
Blount chose Trax Technologies to help get its logistics house in order. The company’s first goal was to automate payment and carrier auditing. Camacho says the timing was ideal; Blount was engaged in a strategic planning process that looked out over the next five years. Key to that effort was the ability to use accurate information about its logistics spend to drive future business decisions.
Scott Nelson, vice chairman and founder of Trax, said the vendor was called in to investigate expense “leakage,” and verify the accuracy of Blount’s invoicing and settlement processes for logistics services.
Blount was looking for more than an off-the-shelf software solution. Camacho says the company involved Trax in extended dialogue with its key logistics providers, as part of its strategic management and planning design process.
Beyond Freight Payment
Not surprisingly, the conversation quickly moved beyond the basic functions of freight payment and audit. In addition to enabling global visibility of Blount’s freight spend, Trax was able to help the company allocate precise numbers to the activities that were actually driving it. Blount could then use the information to calculate landed cost and cost to serve at the SKU level.
Beyond that, says Nelson, Blount acquired reporting and analytics capability, enabling the company “to gain insights into its supply chain and use of logistics related to its supply-chain strategy.”
The key tool provided by Trax was its Logistics Performance Management (LPM) application, geared toward measuring the relevant activities on a global scale. It allowed Blount to get a handle on its governance, risk and compliance controls, while plugging revenue and expense leaks related to the use of carriers of logistics service providers.
Implementation of LPM wasn’t without its own set of challenges. Despite the clear advantages of adopting the system, Blount faced issues of organizational buy-in, Camacho says. Individuals from multiple business functions were pulled into extended conversations about what the company was trying to achieve.
The complaints were familiar to any company seeking to overhaul its internal operations: My process doesn’t support that; this is the way we’ve always done it; we don’t have the resources to support the project. Camacho had to lay out the payback for each business function within the organization. External logistics providers, too, were initially skeptical about the move from paper invoicing to electronic transmissions.
Nelson says Trax stepped up to demonstrate the value of the tool to each site, country operation and business unit. Eventually, all interested parties were won over, not least because of the benefits that quickly became evident. Observes Camacho: “The discussions are different now.”
Cutting Back on Carriers
Through LPM, Blount was able to rationalize its carrier and logistics services mix. Previously, it was relying on between 25 and 35 providers globally. With tighter requirements for becoming a Blount partner, the number is now between 10 and 15, Camacho says.
By developing standards across all providers, Blount could more easily add new ones, not to mention work more efficiently with current players. Contracts were more closely keyed to the specific services they covered. (The price of using just one major parcel service dropped by $1.6m.) In the process, says Camacho, the company secured a more trusted and loyal vendor base.
Additional benefits emerged on multiple fronts. Blount achieved single-source visibility for more than 90 percent of its logistics spend. Through deeper analysis and insights into that area, it cut overall logistics costs by $7m, or around 4 percent, over a three-year period. For shipments from India to the U.S. alone, the average cost per kilogram plunged from $1.20 to 50 cents per kilogram.
Camacho is aiming for continuous improvement of Blount’s global logistics program. “Right now we have full integration on the basic platform,” he says, “with data fed back and forth.” It hopes to take the data generated by the new process and develop a full, end-to-end cost model at the SKU level. “Our finance teams are ecstatic about what we’re able to do here,” he adds.
Information gleaned from predictive analytics can be shared with logistics service providers, who will be invited to suggest ways in which Blount’s supply chain can be further improved, says Nelson. They can advise on such matters as underutilized capacity or lanes. “Many times,” he says, “the people with the best ideas are your own suppliers.”
Camacho is always on the lookout for further opportunities to streamline Blount’s logistics program. “We want to get to the point where we’re using the information running through Trax to drive future business views,” he says. “Once we get there, the dollars will certainly come back to the organization two or three times fold.”
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