Having spent millions of advertising and marketing dollars to position themselves as one-stop shops for the management of motor freight, trucking companies now face a steady stream of one-off challenges from customers that once took these projects to specialists or freight forwarders.
Trucking managers now see the ability to step into this space as a means of differentiating their companies in an increasingly commoditized market for freight transportation. Several key companies even have project teams focused solely on designing and/or executing supply-chain strategies for these custom projects, which often stem from new product introductions, special promotions or holiday sales.
For example, when Yellow Transportation launched its Exact Express service in July 1998 as an expedited service emphasizing time-definite delivery, the intention was to provide an easy-to-use transaction-based means of accommodating special delivery needs. Customers could call into the system, plug in their shipment information, get a quote and book a shipment, explains Rick Mathews, vice president of Exact Express. "The last 24 to 30 months have really seen the service evolve to where a very big part of our business now consists of freight that doesn't have to get to destination necessarily fast, but it does have to be there 10 days from now, delivered directly to the store at 2 p.m.," he explains. Exact Express responded to market conditions with a "no later than" service and maintains dedicated Exact Express personnel at Yellow's national customer service centers in Des Moines, Iowa, and Sioux Falls, S.D., to work out solutions and manage Exact Express shipper needs.
"Since it was a one-day sale, there was no margin for error."
And within Yellow's Meridian IQ operation are another 60 professionals who labor exclusively for Exact Express. "Their whole knowledge is airfreight forwarding and the expedited world, so together we have well over 100 people dedicated to the Exact Express customer base," says Mathews. That base is on track to generate approximately $100m in revenue this year, he adds.
The Sioux Falls and Des Moines facilities back each other up, ensuring 24/7 coverage for Exact Express shippers 365 days a year. Moreover, the operation that began essentially as an escape valve service for unusually pressing needs has morphed in part into a solution source for complicated, time-sensitive distribution challenges. For example, Exact Express handles the acquisition and shipment to designated training locations of all employee training materials for one of the nation's leading retailers, ensuring that the materials arrive within specific delivery windows on identified training dates. The delivery accuracy eliminates the need as well as the security risk involved in storing training materials at training locations.
Coordinating Special Events
For another customer, Exact Express maintains the timely flow of new shoe models to retail locations and ensures just-in-time delivery coordinated with advertised sales specials. In both instances, theft risk as well as re-handling costs are reduced or eliminated by tightly controlled delivery windows at individual stores. A national distributor of greeting cards also incorporates Exact Express into its new store project plans, with card deliveries timed to coincide with the arrival of installers at new store sites.
With an annual transportation spend in the neighborhood of $2bn, Ryder System is a logical source for challenging logistics solutions. Bill F. Jones, vice president of transportation management for Ryder, points to two specific projects that underscore Ryder's ability to ride herd on special events for its customers. For three straight years, Arby's Restaurants came to Ryder to organize and execute a distribution game plan to ensure that the restaurants' special Christmas glass promotion during the December holidays had plenty of the holiday glasses on hand at individual store locations when the national advertising of the special hit the media. And similarly, when Taco Bell launched its "hero" sandwich promotion last summer, Taco Bell looked to Ryder to plan, coordinate and execute a distribution program for the pita bread used by all store locations as part of the three-month sandwich campaign.
In both the Taco Bell and Arby's examples, hundreds of loads had to be picked up at specific plant locations, stored, then simultaneously broadcast out to individual stores on the launch day for the promotion, says Jones.
When these special-event requests flow in, Jones assigns them to people who are familiar with the customer account. "Since these people already know the customer and its products, it gives them a head start towards more effectively working out the solutions. All they have to do is realign their time so they are focused 100 percent on this promotion."
Jones understandably touts the service Ryder can provide as superior to special-event distribution performed by a more conventional motor carrier, pointing to the bias of asset-based companies toward their own equipment. "There's a different mind-set and approach to these promos, depending on whether the people doing the planning are part of an asset-based carrier," he explains. "Our job, which is different from a pure motor carrier, is that we will source that service from a wide variety of transportation sources to make sure it's delivered on time and at the lowest cost. In contrast, the carrier often will try to put 100 percent of the volume on their fleet."
According to Jones, Ryder's leverage in the transportation purchasing market yield dividends to those customers seeking solutions to special-event shipping needs, particularly when those special events occur during holiday shipping seasons, such as the Arby's promo does. "We buy $2bn worth of transportation a year, and these carriers want to do business with us all year-round," he explains. "Accordingly, once a carrier agrees to a specific program and these prices, their track record of standing behind the service commitment is very good, because if they don't support and give us the equipment during this promotion, it's gonna have an adverse effect on whether we use them again for more routine linehaul work."
And while it's true that companies like Yellow and Schneider National of Green Bay, Wis., prefer to keep special-project freight rolling on Schneider or Yellow wheels, both companies look to the external market for secondary carriers when company-owned fleets cannot match the required delivery times or are otherwise overburdened with scheduled loads. Mathews reports that although a high percentage of Exact Express business stays within the Yellow network, they probably shift 25 percent of their business to outside carriers. "We do this simply because the customer requirement is faster than the Yellow network, or the specific time-definite delivery window is outside of the normal operating procedures for Yellow Transportation," he explains.
Some of the promotions are huge and would be virtually impossible to service exclusively with company-owned equipment.
Woody Richardson, vice president of marketing for Schneider National, recalls one special event last year for which Schneider needed to organize the steady accumulation of product from manufacturing sites over a period of time and then broadcast those materials to individual store locations at a specific time on a specific day. "Since it was a one-day sale, there was no margin for error," he explains. "The advertisements were in the newspapers, and the fliers were in the mailboxes. The challenge for us was to somehow take all these loads in as they rolled off the manufacturing lines, figure out where we were going to store them, and then all at once deliver them all on the same day to individual store outlets. And we're talking about more than 2,000 truckload shipments."
These projects often require multiple modes of service, usually a variety of Schneider's One-way Van, Intermodal, Brokerage, Expedited and Dedicated services, says Richardson. "Based on the customer need, our Schneider Logistics division also may be involved. Securing additional trailers, drivers, tractors, trailer parking space, cross-docking and warehosuing space might also be involved."
In addition, special monitoring is established to track the project. "Our customers usually require this apart from the normal monitoring or reporting because in most cases the customer has established a project leader or team who requires the unique reporting," says Richardson.
Special projects of this scope demand a great deal of set-up and some very intricate pricing, Richardson adds. "First, how do you cover all your costs for doing all of this, and second, how do you make sure we end up being profitable after all of this activity? It gets very complicated on the pricing side of the equation, as we have to deal with a lot of different types of capacity, such as lining up intermodal and over-the-road service and locating enough company-owned and rental trailers. But as it so happened, fortunately, it was a huge success for the customer. And keeping the customer happy is a critical concern in today's business environment."
Full Slate of Services
FedEx Freight of Memphis, Tenn., the entity formed by the acquisitions of LTL carriers Viking Freight System of Santa Clara, Calif., and American Freightways of Memphis, joined forces last year with sister company FedEx Trade Networks (FTN) to engineer and execute a solution for 7-Eleven Inc., Dallas. The world's largest convenience store retailer wanted to reduce distribution costs and improve direct-to-store freight service for special holiday promotions. 7-Eleven sought greater efficiencies in moving holiday goods inbound from overseas vendors and then outbound to approximately 4,000 individual store locations, with deliveries timed to coincide with holiday promotions.
Specifically, the FedEx solution involved a new ocean-to-ground distribution service that integrated ocean transport services arranged by FTN, LTL freight delivery by FedEx Freight and small-package distribution provided by FedEx Ground. FTN, which offers trade services that include full-service customs brokerage, freight forwarding and trade consulting, initially came to the attention of 7-Eleven through Dick Garrison, then a consultant to FTN. Garrison now serves as director of non-foods merchandising for 7-Eleven.
The ocean-to-ground service was in beta testing when Garrison raised the concept with 7-Eleven executives. An RFQ followed, and FTN assembled the package, working with Mountain View Inc., a Colorado-based supplier to 7-Eleven. The FTN solution produced more sales of Halloween products in the first week of October 2001 than were sold in the entire month of October 2000.
"This is another example of 7-Eleven's efforts to move to a lower cost model and a more store-friendly delivery system," explains Garrison. "We first used this approach last fall and achieved higher sales with lower costs on our Halloween and holiday seasonal merchandise, and we continue to look for ways to improve our structure and simplify procedures for our stores. Accordingly, we used the same process to deliver our Valentine's Day product assortment this year."
"Our business now consists of freight that doesn't have to get to destination necessarily fast, but does have to be there 10 days from now, delivered directly to the store at 2 p.m."
Margaret Chabris, a spokeswoman for 7-Eleven, adds that the FTN program eliminates two layers of handling and all but one broker, who now works directly with the 24 manufacturers involved. "FTN's integrated approach reduced from 10 weeks to four weeks the amount of time from when the product was produced until it arrived at 7-Eleven stores," she says.
"We're seeing more of those proposals - some domestic and some international - as the U.S. economy continues to become more global," says Dennie Carey, vice president of FedEx Freight. Accordingly, Carey now has an operating entity called FedEx Freight Solutions that specializes in working with the various operating companies and formulating solutions to these special project challenges.
Mathews of Exact Express reports a steady stream of special project inquiries arriving from customers and the company's new, dedicated sales force. "Over the course of the last six to eight months, we have really seen the Exact Express service evolve to more of a multi-bill shipper or a corporate-type account, where the customer has multiple locations and they have come to us in the form of an RFQ and asked us to put together a solution, a strategy and a price for handling their business."
That type of business now constitutes approximately 30 percent of revenue at Exact Express. Lead times tend to be notoriously short, he adds.
"On these projects, we get maybe three or four weeks to respond. But once we respond and are awarded business, the launch date can come fairly quickly," he explains. "For example, we expect to hear today (editor's note: the interview was in mid-May) whether we are being awarded a very large amount of business from a Fortune 500 company. We responded to their RFQ last week, and if they choose us, they are going to want to roll it out June 1. They like the numbers, and they're not going to waste much time once they make a decision."
To keep up with the requests, Mathews earlier this year put into place a dedicated RFQ response team, which includes a project manager as well as a pricing analyst and a marketing analyst. "Now when we receive an RFQ and the accompanying historical shipment information, this is the team that analyzes the customer's needs, puts together the right solution, crunches the numbers and assembles the formal response," he says. As of mid-May, Exact Express had approximately four dozen RFQs in queue awaiting action.
Sometimes it's a complicated and costly effort to respond. In the case of the recent presentation to a Fortune 500 company, the project team put together cost-savings opportunities and consulting recommendations as well as a video presentation specifically designed and customized for this company. "There's a lot of business at stake here," he adds. "The savings we could provide them compared to their traditional approach of handing the project to a freight forwarder and is in the neighborhood of $3m."
Timely, incisive articles delivered directly to your inbox.