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A company that sells "green" products ought to move them to market in a similar fashion. That, at least, is the philosophy of Kranz Inc., a distributor of industrial packaging and cleaning supply systems.
Founded in 1850, Racine, Wis.-based Kranz predates the era of environmental awareness. In fact, the company claims to be the nation's oldest continuously operating distributor of supplies and materials. Today, it directly serves a market that covers much of Wisconsin, Illinois and Indiana, with wider exposure by way of an industry cooperative known as Network Services Co. Customers include companies in the healthcare, education, manufacturing, hospitality and contract cleaning sectors.
Even with 159 years of experience, Kranz hasn't grown complacent. It regularly benchmarks its logistics operations against others in the industry, with a goal of staying in the top 10 percent in terms of performance.
One recent benchmarking exercise gave Kranz cause for dissatisfaction. It found itself lagging competitors in the efficiency of its warehouse and delivery operations. "We noted that we were spending a lot more money on that function than other companies," recalls Jeff Neubauer, Kranz's chief executive officer. "So we knew we had an issue."
Some of the symptoms were obvious. A number of pallet loads were being handled twice within the warehouse. Certain orders were arriving too late in the day for Kranz to route them optimally. Company trucks were returning to the warehouse with unloaded product, because they didn't make it to the customer's location in time. Then they would deliver a second time. Not only was the system wasting money, it was burning extra fuel and generating additional pollution - hardly a favorable situation for a self-professed "green" company.
"We wanted to reduce our carbon footprint," Neubauer says. "A huge part of sustainability is all about eliminating waste."
Seeking an outsider's perspective, Neubauer turned for help to Network Services, the 40-year-old, Chicago-based coop whose 70 members account for more than $7bn in sales. Collectively, Network Services is the largest supplier of paper and janitorial products in the U.S. So it was a good resource for advising Kranz on how to retool its logistics operations.
One member of the coop recommended that Neubauer look up Tom Zosel Associates. Based in Long Grove, Ill., TZA is a logistics consulting firm with experience in transportation design, productivity enhancement and strategic planning. Neubauer's call to TZA vice president John Platz proved fortuitous: Platz lived in Wisconsin, not far from Kranz.
Platz's strategy for addressing the situation gave new meaning to the term "hands-on." Beginning in October 2007, he actually became Kranz's head of logistics for three months. During that period, he scrutinized each aspect of the operation. He spent time with both the day and night shifts at the warehouse. He accompanied drivers on their routes, to understand how deliveries were made and what kind of equipment was needed. From that experience came a set of conclusions on how Kranz could whip its logistics program into shape.
One obvious problem was the 5 p.m. cutoff time for customer orders. The warehouse night shift began work at 5:30 p.m., as mandated by the company's union contract. But the first shipments of the night had to be on the floor by then, Platz says, resulting in a schedule that didn't allow for proper routing. Kranz would simply print out orders and instruct workers to route and load those shipments on the fly.
"We started dropping pallets, labeling by hand," Platz says. "What happened is, the whole dock would fill up with unrouted pallets of products." Finding the right pallet for any given truck could back up the whole system.
Further down the line, the effects of such inefficiencies would compound. Trucks weren't being fully utilized, and Kranz had to supplement its private fleet with units from an outside local-delivery carrier.
The Only Solution
Not wanting to challenge union work rules, the company had only one other alternative: push back the cutoff time for orders. For obvious reasons, notes Platz, such an idea tends to make sales staff nervous. But he didn't see the change as a problem. "It's not really a big issue," he says. "It's just a perceived issue."
In fact, Kranz moved the cutoff time from 5:00 p.m. to 4:00 p.m. without alienating any customers. Most orders were already in by 3:00 anyway, Platz says. The rest were given a brief transition period, where the deadline went to 4:30. After that, the system ran smoothly. Platz says the change, which was made in close cooperation with sales, led to a 20-percent reduction in the time required to sort and load pallets.
"We used to spend two hours a night just loading trucks," he says. "Now, as we get the orders, we fill the truck. We started making all of our departure times."
Moreover, Kranz had time to route the shipments in the most optimal manner. In the process, it was able to take two trucks off the road and still support customer requirements, almost exclusively through the use of its own fleet. Operating costs went down because the Chicago-based third-party carrier that Kranz had been using for some shipments had higher labor costs. Ultimately, says Platz, Kranz cut fleet operating costs by about $40,000 a month.
Private fleets have lost favor among many companies in recent decades, victims of cost-cutting and a desire to shed unnecessary resources. Not so with Kranz. "At the end of the day, with John's help, we actually found that we could run the fleet more effectively from our location in Wisconsin ourselves," Neubauer says. "Secondly, it's nice to have control over your own trucks, so that you can be more flexible in terms of how they're utilized." Today, Kranz runs seven vehicles in daily operations, from 28-foot straight trucks to tractor-semitrailer combinations.
With the help of TZA, Kranz focused on labor productivity as well. It implemented performance standards for warehouse workers and drivers, based on the amount of time needed to complete various tasks. Also under scrutiny were inventory quality and customer service.
Kranz avoided union opposition to the new standards by launching a worker incentive program. On Fridays, the night shift is allowed to go home early if it maintains a certain level of productivity during the week. "We raised the expectations," says Platz. "And it didn't cost the customer any more money."
TZA helped Kranz to sharpen its use of performance metrics. Platz began receiving weekly reports on key aspects of the operation, including inventory, personnel, customer-service levels and equipment utilization. Kranz had tracked some of those elements before, but had never measured the utilization of outbound trucks or the productivity of drivers.
Other changes that arose from the TZA engagement included the reconfiguration of warehouse racking, the teaming of order selector and driver for better communications, and designation of the order selector as the individual responsible for picking accuracy, eliminating the need for follow-up quality checks.
Turning to Technology
Kranz sought changes on the technology side as well. It hadn't been making use of existing routing software, which wasn't fully integrated into the company's enterprise resource planning system, according to Neubauer. A new routing package from Oklahoma City-based Appian Logistics Software, recommended by Kranz's ERP vendor, proved to be the answer. (TZA also had prior experience with Appian, Neubauer says.) The tool helped in the implementation of performance metrics and the reduction of driver overtime.
Implementation of the whole project was wrapped up by the end of March 2008, and the results were quickly evident. Kranz saw an improvement in order-filling accuracy from 89.85 percent to 99.94 percent, a 99-percent record of on-time deliveries, a 16-percent improvement in trailer utilization, 21-percent reduction in logistics operating costs and 18-percent drop in fuel consumption. At the same time, Kranz cut down on the use of pallets and stretch film, bolstering the company's green initiative.
TZA's initial engagement with Kranz, including follow-up process monitoring, concluded at the end of 2008. The companies are now exploring how they might further work together. Platz says his firm is currently in the test phase of a possible project to install onboard communications systems on Kranz's trucks, including global positioning system technology.
Neubauer says Kranz is committed to seeking further improvements in processes and customer service. "Instead of getting up to an average level of performance within our industry, let's try and get within the top 10 percent, and start looking outside our industry to best-in-class firms." The company plans to hire outside experts to advise on the launching of a formal "lean" program for boosting efficiency and eliminating waste. "It's the kind of thing where one never stops," Neubauer says.
Even in a down economy, he sees the potential for further growth. Kranz hopes to capitalize on the public's desire for environmentally sustainable products. There's plenty of room to increase market share within the company's existing sales territory, Neubauer believes. "We haven't begun to hit the upper bounds of what our market share could be."
An important part of reaching that goal is maintaining credibility as a company committed to protecting the environment. And that means finding new and more creative ways to green the Kranz supply chain. "It's not just about what we sell," says Neubauer. "It's about working sustainability into every fiber of our company."
Tom Zosel Associates, www.tzaconsulting.com
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