Since 1991, auto parts retailer AutoZone has achieved astounding growth, from $800m with 598 retail stores to $5.6bn in 2004 with 3,400 stores. In 1995, AutoZone recognized that this kind of growth was not sustainable with its current supply chain infrastructure, which focused on each supplier shipping directly to each AutoZone distribution center. This resulted in the predominance of LTL shipments as inbound, which drove longer lead times, higher transportation costs, higher claims, and ultimately unnecessary inventory. It also resulted in disjointed communication between various participants in the supply chain process, including AutoZone merchandising, distribution, traffic, retail store operations, and suppliers.
To meet these challenges, AutoZone's Richard McDuffie, vice president of transportation set up a relationship with Transplace for strategic supply chain management.
According to McDuffie, AutoZone chose Transplace to help it with four primary needs:
• Convert supplier shipments from prepaid to collect for control and visibility
• Integrate inbound and outbound shipments
• Increase existing private fleet efficiency, and
• Achieve supply chain efficiency through systems, processes, and people
At the strategic level, Transplace used a total system approach in defining how AutoZone should optimize their transportation logistics flows and processes from suppliers, to cross-docks, to distribution centers, and to stores. Transplace analyzed, designed, optimized, and simulated a new AutoZone logistics network infrastructure with regard to site location, product flows from suppliers to distribution centers and stores, optimal transportation modes, and the tradeoff between required services and transportation costs.
At the tactical level, Transplace selected and contracted with a core group of quality carriers for dedicated lanes, supplier inbound, and cross-docking transfer shipments. Also, supplier-sourcing analysis was done to provide logistics-oriented information to the sourcing decision.
At the operational level, Transplace executes activities that involve the optimization of the freight flow and mode, LTL consolidation, optimal carrier assignment and coordination, continuous moves, cross-docking, transfers from one distribution center to another, and optimal integration with distribution center outbound store delivery routes. All purchase order information is transmitted directly from the AutoZone system via satellite to the Transplace system. Shipment status and visibility are provided through the internet to all registered users with a secured web browser. The bottom line at the operational level is managing the day-to-day transactional activities with a focus on improving service, reducing costs, and providing assured capacity.
"This partnership has enabled AutoZone to grow aggressively and use capital more efficiently," says McDuffie. "We have been able to achieve a competitive advantage, and gain market share without internal logistics constraints."
The results speak for themselves. Before working with Transplace, each of AutoZone's vendors controlled its freight, so more than 85 percent moved as high-cost individual LTL shipments with transit times as long as one week and poor on-time performance. There was little pipeline visibility and significant freight damage. AutoZone's private fleet handled practically none of the inbound traffic.
When Transplace took over the inbound shipment routing for AutoZone, it was able to convert 77 percent of the vendors to collect. Less than 2 percent of these shipments moved as LTL. Transit times dropped to 1.5 days with better than 98 percent on-time performance and practically no freight damage. Total transportation costs have improved by 20 percent. AutoZone has complete pipeline visibility, and has been able to significantly reduce its inventory levels. AutoZone's private fleet now carries a significant amount of the inbound traffic, so its utilization has increased 25 percent.
"Transplace has become an extension of the AutoZone enterprise," says McDuffie. "It is the single point of contact for transportation logistics for AutoZone, providing the people, processes and systems to accelerate AutoZone's growth."
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