August 1, 2006
To deal with the rising cost of shipping product, processor Republic Plastics found logistics software affordable and convenient enough for a mid-sized firm.
Shipping can be a nightmare for processors. Robert Garner, director of transportation for Republic Plastics in San Antonio, TX, has dealt with logistics for 13 years, and he knows first-hand the challenges of getting product out the door to customers. Republic makes expanded polystyrene (EPS) foam plates and bowls. "The biggest change-and challenge-I''ve seen in my career is a regionalization of freight shipping," says Garner. "Traditionally, when I first got into the industry, we shipped long distances. Now, particularly with retailers such as Wal-Mart that opened more regionalized distribution centers in order to get things to their stores quicker, the average shipping distance has come down to 500 miles from 1500 miles."Another change, Garner points out, is that a lot of manufacturers have located new facilities close to the OEMs they service. Particularly with space-gobbling products like Republic''s, a processor''s proximity to a distribution point is a cost-saving must.The pendulum has shifted in the transportation industry, from being a shipper''s market in which "whatever the shipper wanted they got, rate-wise, service-wise, whatever," explains Garner, to being a carrier''s market. Why the change? A shortage of truck drivers is one reason, says Garner. "The other aspect, the carriers tell me, is insurance requirements that are getting so stringent that it impacts their ability to hire certain drivers if they''ve had even one ticket." Another more obvious factor is the cost of fuel. "We''re in uncharted territory with fuel being so expensive," notes Garner. "Most fuel surcharges went up about 10%. Some of the carriers are saying their biggest expense is fuel."So, what can transportation managers at plastics manufacturers do to reduce the time devoted to logistics planning and the costs associated with transporting product? One approach is software, such as that provided by LeanLogistics Inc. (Holland, MI), a provider of web-native, on-demand Transportation Management Systems (TMS). It offers full management of the transportation function. Pete Stiles, VP strategy and business development for LeanLogistics, notes that transportation logistics for smaller companies has typically been a costly, time-consuming challenge, and often treated as an afterthought. The software helps small-to-mid-sized firms such as Republic Plastics, with annual sales of $50-plus million and an annual freight bill exceeding $2.5 million. "The rule used to be that you had to have a $20 million-$30 million freight bill to make a logistics software program pay for itself," says Stiles. "We offer our software over the Internet as an on-demand TMS, or pay-as-you-go model, which allows smaller companies to take advantage of this capability without the expense of purchasing their own software. We even offer a trial program to allow companies to try the software for a period at no risk to prove the benefits to the organization."LeanLogistics'' software can handle simple functions like carrier selection, routing, tracking, tracing of shipments, and making payments, but is expandable to offer more tools and options. Republic started with LeanLogistics'' tendering service, which provides basic communications to the carrier; routing and scheduling; "tendering" or the booking process; rate comparisons; freight cost as a percentage of sales cost; settlement (carrier payment); and working with carriers to do volume shipping. That evolved into using network reporting for carrier capacity linked to Republic''s new plant in the Phoenix area to find carriers that serve Phoenix.Republic''s Garner says that the online software makes his life easier. "We''re a smaller company which means we have limited resources and everyone wears many hats," Garner says. "Utilizing an Internet-based software that gives us the ability to access it from anywhere, view shipments, check late shipments-with the bonus that you won''t be tied to your office-is a real benefit. I can work from any of our facilities. "I can also keep track of our rates through a rate matrix that has all the surcharges loaded in and lets me look at service, and I can rate the various carriers on how they perform, utilize that strategy to determine which carrier I need to use for a time-sensitive shipment. Or, if a shipment is price sensitive, I can look at fuel surcharges. I can view the proposed plan that the system generates, or I can automatically tender a shipment to a specific carrier, and set that up by service, or rate, or a combination of both," says Garner.Republic also wanted to understand its freight costs as a percentage of sales. Stiles says one of the biggest advantages of the software is this piece of the puzzle. "Many small businesses really don''t fully understand what their freight costs are or what percentage of sales that represents," Stiles says. "This gives them visibility on where they are spending their money."Clare Goldsberry [email protected]
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