September 30, 2008, 12:00 AM

Driving Up Margins

(Page 2 of 2)

For example, he adds, retailers are collecting and analyzing information on the cost of shipping to stores compared to shipping the same products to customers who place orders online or through call centers, as well as considering the cost of returns of these products processed through each channel. “The thought leaders in retail are using the information to decide which channel to emphasize for particular products and customer segments,” says Hill, who is a former distribution manager for J.C. Penney Co. Inc.

More flexibility

At Papa John’s, the web-enabled integration designed into its transportation and supply chain management software suite is providing the chain with a level of flexibility it never had before, linking supply and demand with efficient and effective transportation of goods, Kinder says. As a result, the overall system is opening the retailer’s eyes to business improvements and costs savings it had not even thought of in the past, she adds. “We certainly have realized some pretty substantial cost savings, and we now have a systemic way to evaluate our operations.”

The company’s U.S. retail locations grew to nearly 2,800 by the end of the first half of this year, and with increases in both comp store sales and total revenue, the movement of freight to supply the chain’s operations is more important than ever, Kinder adds. To keep up with demand while better controlling costs, Papa John’s is using a suite of web-enabled software from Manhattan Associates Inc. that lets it control the movement of freight from the point of selecting carriers to directing truck consolidations, routing and scheduling.

Just two years ago, Papa John’s was largely shut off from the management of freight headed for its distribution centers. Suppliers of products like pizza dough ingredients, pepperoni and anchovies chose their own carriers, negotiated their own rates, then loaded and routed trucks bound for retailer clients to minimize the suppliers’ costs.

“In the past, our 10 distribution centers ordered their own products but weren’t looking to see how they could consolidate product deliveries with other centers,” she says.

Controlling inbound

Now, instead of relying on suppliers to handle transportation and tack the costs onto their invoices, Papa John’s can choose the most effective and reliable carriers and coordinate pick-ups and deliveries for the most efficient truckloads and routing, Kinder says.

Papa John’s now manages all inbound freight for its distribution centers from a central web-enabled transportation management system in Louisville, Ky.; the overall Manhattan Associates system includes software applications for product demand planning and replenishment; for procuring transportation carriers; for managing transportation planning and execution; and for warehouse management.

The software suite integrates with the retailer’s PeopleSoft enterprise resource planning system, which ties the demand planning and replenishment module to the Papa John’s store point-of-sale data as well as its online order records. This helps Papa John’s to not only better plan purchases based on demand at each distribution center as well as at individual stores, but to also better plan ahead for the proper number and type of truckloads connecting suppliers and distribution centers.

By having more specific information about demand at each distribution center-which Papa John’s refers to as quality control centers, because the distribution facilities also produce pizza dough for shipment to retail locations-the company can better manage inventory while also organizing the most efficient truckloads and routes.

In the past, for example, Papa John’s would at times bring a full truckload of particular goods from one supplier to a distribution center to realize lower per-pound shipping costs of full loads, but would then face the challenge of finding enough room to store all the goods at that location. Now, with direct control over the loading and routing of trucks, and visibility into the demand of each distribution center, it can more easily get a full truckload rate by splitting the load between two suppliers and bringing a more appropriate amount of goods to each distribution point.

But such improvements in freight operations are only the beginning, Kinder says. “We decided we would crawl, walk, then run with this,” she says.

Taco pizza to Iowa

Papa John’s started out with the software applications for transportation procurement, demand planning and replenishment, and transportation management. Together, they offered the easiest ways to improve efficiency and cut freight costs, Kinder says.

So far, Papa John’s has applied these systems only to its inbound freight, the movement of goods into its distribution centers once controlled by suppliers.

Going forward, however, Kinder says she’s looking forward to taking things up a notch next year, when Papa John’s will begin applying the Manhattan Associates software to outbound freight deliveries from its distribution centers to its retail locations and begin to further integrate the transportation planning and inventory management software. And in 2010, the company expects to begin realizing greater financial and operational benefits when it deploys the final leg of the software suite with the supply chain intelligence application, Kinder says.

The supply chain intelligence system will help it better match supply and demand throughout the country. “We know that in the Northeast our customers eat more chicken wings, and in Iowa they eat more taco pizza,” she says. The transportation management system helps to more efficiently direct goods from suppliers to these markets, and the supply chain intelligence software will help to uncover more ways to improve efficiency. “It will help us better look at supply and demand and everything in-between,” Kinder says.

“An interesting byproduct of the system and the whole implementation process is that we have a stronger and deeper understanding of how we do business across the country,” she adds. “We have a deeper understanding not of minutia but of all the cause and effect of our daily operations.”

paul@verticalwebmedia.com

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