Sophisticated services can remove hassles and safety vulnerability at the dock
The process of unloading trucks at the distribution center is a lot more than merely lifting pallets of product in one area and depositing them in another. Indeed, just as a chain is only as strong as its weakest link, if a retailer's unloading services are inefficient, they can have adverse effects on the entire supply chain.
What's more, when you're dealing with food, its safety could be compromised.
Supermarket companies that are members of Skokie, III.-based Top-co Associates, however, have tools available to optimize their unloading services via Topco's TopSource subsidiary, which connects them with providers that specialize in turning a traditionally weak link in the supply chain into a positive advantage that can help improve safety and efficiency, as well as reduce liability and costs.
What TopSource does is replace day laborers with sophisticated and efficient unloading services that have been screened and vetted by experts, and that perform more effectively, save money and bring additional technological advantages to the warehouse.
That has been the experience at both Price Chopper, a 128-store Northeast chain, and Brookshire Grocery Co. (BGC), which operates more than 150 supermarkets in Texas, Louisiana and Arkansas. Each grocer works with a service provider that's screened and recommended by TopSource, a relationship that officials of the two companies say has resulted in significant improvements on the dock and in the warehouse.
“Drivers want to haul freight, not handle it,” says Scott Reily, SVP of logistics at Tyler, Texas-based BGC. “So they used to hire guys to do that for them.”
The guys he refers to were temporary day laborers who showed up at the dock looking for a few hours' pay and are known in the industry as “lumpers.” They weren't employees of the shipper, the trucker or the warehouse. They weren't screened. They were paid in cash by the drivers, whose choice was either to use them or unload the trucks themselves.
“Back in the day,” observes Bob Doyle, VP of distribution at Schenectady, N.Y.-based Price Chopper, “when lumpers were used, there was not a lot of control.”
To say the least.
In fact, in December 2004, The Trucker's Report published an article warning that the practice of using lumpers made the distribution chain exceedingly vulnerable to a terrorist attack on the nation's food supply.
“Lumpers, who are accountable to no one, can come in right off the street and get a part-time job handling your food,” the author wrote. “These lumpers have usually had no background checks or any sort of employment screening whatsoever. Feel safe now?”
A Better Solution
But the TopSource system used by BGC and Price Chopper, as well as several otherTopco members, turns that point of vulnerability and aggravation into a positive experience.
“Rather than going to the street corner and hiring guys like they did in the past, when a lot of cash was exchanged on the dock, companies like LMS have turned the business around and made it much more sophisticated,” says Susan McNamara, senior sourcing manager for logistics and distribution at TopSource. “Those companies look at safety, systems, and provide benefits to their employees. Employees are well trained, and there are background checks.”
The service began in 2009, according to McNamara, when one of Topco's members requested a proposal for unloading services. Since then, she says, unloading services have become a fast-growing subcategory within logistics and distribution at TopSource. As 2010 came toa close, seven members were participating, and proposals were underway for two more to join up early in 2011. TopSource provides the service to members without charge, as one of the benefits available under theirTopco membership, McNamara explains.
“We have a group of key suppliers who we partner with,” she says. “We look at the company's safety record, technological expertise, business intelligence, past performance and how they stand up in the industry. We bring those we select to our members and recommend that they consider taking advantage of their services.”
Consistently, when TopSource analyzes a supermarket company's current situation, it can result in substantial projected increases in savings and revenue for those that choose to participate. She cites the example of one chain that was told by the incumbent unloading company that it would provide a 15 percent cut in unloading funds if the contract were extended.
“We went through the process and it resulted in a 35 percent savings forthat company,” she recalls. “We have the systems and the subject matter expertise to take the supplier through a formal process. We are aware of what's accepted in the marketplace.”
Price Chopper uses Norcross, Ga.-based LMS Intellibound Inc. to provide its unloading services, based on recommendations that resulted from an extensive screening process that allowed it to select from several vendors pre-qualified by TopSource.
“Our goal is to help our customers, to try to shorten shifts and reduce the amount of pallets taken into the distribution center,” explains Mike Bauers, VP at LMS. “There is a lot of value-added information that we get at the dock level that we provide to our customers.”
An important component is pricing integrity, Bauers says, making certain customers such as Price Chopper clearly understand unloading costs and making certain those costs are consistent for like loads on a day-to-day basis.
Rather than simply unloading trucks and pocketing the cash, LMS works with carriers and vendors, encouraging them to reconfigure loads so the operation is faster and more efficient. “Anybody can unload trucks,” he says. ”It's what we can do to improve their overall supply chain operation that is important. We bring everybody into the equation — carriers, vendors and the distribution center.”
According to McNamara, unloading costs for both backhauls and loads that come in from vendors are negotiated with suppliers like LMS through a formalized request-for-proposal (RFP) process implemented by TopSource.
Participating member companies save an average of 35 percent for backhauls, for which they typically pay the cost of unloading, McNamara says. For vendor loads, the process actually results in revenue for the DC.
“On the vendor side, we've been able to increase the rebates paid by about one and one-half to two times,” she says. “And this is with no impact on cost of goods sold, due to average load rates remaining constant, while the member's share of the rebate is increased to market levels.”
The rates are part of the contract negotiated with key suppliers and part of the selection process used by member companies when they choose their third-party suppliers. Suppliers are also asked to provide combination pricing for companies that have more than one DC, so they can receive a volume benefit and realize additional savings.
In addition, suppliers that offer additional warehouse services are asked to include those services in their RFP as discounted options, or as added benefits, whenever possible.
McNamara points out that suppliers are required to post their vendor rates “so everything is above board.” Dock-scheduling software is used to maximize efficiency and to track how long trucks are at the dock to prevent a DC from being charged unnecessary fees. Thus, a chain's decision regarding which service supplier to select is based on more than rates alone, explains McNamara.
“Scorecards are used to rate suppliers for multiple attributes, including reporting, partnership, staffing, technology, execution, and implementation approach, risks, experience, and financial impact,” she says.
The scorecards are invaluable tools for the supermarket members, according to both BGC's Reily and Price Chopper's Doyle.
“TopSource does a lot of the groundwork to determine who the top vendors are and to match them with our expectations,” says Reily. “They bring in the top three, and we interview them to decide which one we want to use.TopSource provides a spreadsheet that goes into the pros and cons. It is extremely valuable. We have to work closely with them to provide the information they need. They bring people to the table who can do the job.”
In the case of BGC, the third-party provider is Supply Chain Solutions of Grand Rapids, Mich. “We know them, but other Topeo members know other providers that we would not be aware of,” Reily says. “TopSource can bring all ofthat together.”
Adds Doyle, “TopSource took the bidding over and exposed us to other third-party companies that we would not have considered in the past.”
For Price Chopper, LMS provides a full-time site manager at the company's main distribution center, and supervisors at each of its two remote facilities.
“They have brought a whole new level of technology to us,” Doyle says, pointing out that the company shares data on the amount of loads that it handles, the number of pallets per load, and the number of pallets that move across the dock per hour. “Having that information enables us to get more efficient, and trucks are now turning quicker in front of our doors.”
In addition to technology, LMS has also brought an emphasis on safety to the unloading operation. “They have a very high level of safety awareness that mirrors our culture,” Doyle explains. “It is important to them that their employees behave exactly as we expect our people to behave. The site manager here is very focused on what we do.”
That approach has helped LMS to grow.
“We live up to what we propose,” says Bauers. “We do what we say we will do. It's a service business. It's very simple.”