The best presentation I saw at the event was given by two executives from Sears. Sears is a North American department store and general merchandise retailer with over $30 billion in revenues. Joe Macro, Network Planning and Analysis, and Steve Rutkowski, Director of Logistics Services, spoke on the “Next Generation Home Delivery” Route Planner solution from Descartes they implemented.
The solution was implemented at their Innovel Solutions division, a third party logistics company owned by the Sears Holdings Corporation. This 3PL is the supply chain arm for Sears Holding Company which includes Sears and Kmart. Innovel also does work for outside entities like the Air Force and Navy Exchanges and Lands’ End (which was spun off from Sears in April of 2014).
In this case, the new routing solution was implemented on behalf of Sear’s home delivery services. Customers can buy appliances, consumer electronics, fitness equipment, indoor and outdoor furniture, heating/cooling equipment at Sears. They may then elect to have these goods delivered to their home, installed, and have their old appliance hauled away.
To support these deliveries, Sears has a network of 11 Distribution Centers with 7.5 million square feet; 106 market delivery centers (MDOs) – midsized warehouses that support this business line; and in some areas they deliver directly from stores, there are 86 retail outlets they deliver from.
As Joe pointed out, many traditional retailers are involved in omni-channel initiatives. This often involves the use of parcel shipments from warehouses or stores. What Sear’s is doing is more complex. Their home deliveries involve big box items. It requires insuring that the technicians with the right skills are assigned to a particular job, and the use of third party carriers.
Routing is made even more difficult by: changing delivery slots, 10 percent of Sear’s customers change their delivery time when they get the reminder call about the next day’s delivery; By their cut off times, they take orders until 3 pm for goods that may be delivered the next day; And, by the volume of deliveries the company does, 4 million home annually. This is clearly a hugely complex routing problem.
Finding the right routing supplier was clearly going to be critical. Sears had three finalists. Each finalist took a week’s worth of delivery data and showed the kind of savings their solution could provide. Descartes won.
Once Descartes had the contract, they were faced with an aggressive timeline for implementation. The project kicked off in September 2013, had several stages, and was completed in July of 2014. To meet that deadline, Sears elected to have Descartes prescriptively tell them how they should configure the system to get the best results based on their network and requirements. And because of the time crunch, Sears decided to postpone until later detailed truck capacity planning.
To transform their delivery operations Sears needed more than a robust routing solution. Sears also needed efficient warehouses with accurate inventory information – warehouse management systems (WMSs) from HighJump Software are being rolled out across the network. That inventory availability is being made available to their carrier partners.
Sears also needed better integration to in-store point of sale systems so that store associates fully understood all the services associated with different types of products, and so the associates could accurately enter the dates and delivery windows.
Sears decided to integrate the routing solution with a mobility solution so that the company understood exactly where delivery trucks were. This visibility allows the retailer to improve the routing optimization; it provides customers with updated notifications by phone, text, or call, that the truck is on the way; and finally the GPS data gives them information that can improve their processes. For example, this GPS data can be mined to show how much time should be allocated to the delivery team to put in a certain type of refrigerator. Sears also chose Descartes for the mobility solution, in part because it was preintegrated to the routing solution.
So what were the results? Sears increased truck productivity by 2.8 percent, decreased their miles per shipment by 5.4 percent, and cut the number of full time equivalents in the planning department by one third. This resulted in annual savings of $3 million in the first year with ongoing anticipated savings of another $400,000. Further, Sear’s carrier partners report being very happy with the ability to take pictures of the goods delivered using the mobility solution and prove that the goods were delivered on time and undamaged.
In conclusion, Joe said that the savings Descartes said they would deliver, based on one week’s worth of data and simulations, was “almost exactly” what they did deliver. Because the IT team was a little conservative on the ROI they committed to for management, the team ended up exceeding their ROI projections.