Eight years ago, Ace Hardware began working with LeanLogistics (a Logistics Viewpoints sponsor) to help with inbound freight moves. Scott McLean, Director of Transportation, and Carey Skoglund, National Logistics Manager, explained to me their journey to more fully leverage LeanLogistics to improve the transportation procurement program.
Ace Hardware is a cooperative that serves 4,000 independently owned and operated retail stores across the United States. The cooperative helps these local entrepreneurs purchase goods more cost effectively because of its ability to buy in bulk, and provide logistics services to streamline getting goods to the stores. On the inbound side, 60 to 65 percent of Ace Hardware’s business moves freight collect, meaning Ace Hardware pays for the moves.
LeanLogistics is a provider of a multi-tenant, software-as-a-service (SaaS) transportation management system (TMS), LeanTMS. LeanLogistics also provides supply chain services, including Managed Procurement Services.
Because LeanLogistics offers a multi-tenant, network-style TMS, it captures anonymous data on all the moves, made by all clients, on all lanes. LeanLogistics customer data is aggregated in a manner that protects the privacy of individual shippers, while allowing for the creation of lane benchmarking rates across the US and Canada. LeanLogistics’ customers are able to access current lane benchmarks, as well as historical trends.
When Ace Hardware started, the initial focus was to use the TMS for tendering, routing and optimization. After six months, Ace Hardware looked to harvest the information from its TMS to drive better transportation procurement. At this point, Ace Hardware collaborated closely with LeanLogistics, leveraging its Managed Procurement Services.
The combination of procurement services plus LeanSource, the procurement application, and LeanDex, the benchmarking application, helps Ace Hardware make better procurement decisions. As the hardware retailer goes through multiple rounds of lane bidding with carriers, it compares the rates being offered by the carriers to the industry benchmark offered by LeanDex.
Ace Hardware’s initial procurement services event was focused on intermodal and truckload (TL) carriers for its higher volume lanes. Since 2008, the retailer runs a strategic procurement event every year, and expanded these Managed Procurement Services engagements to also cover high volume less-than-truckload (LTL) lanes.
On certain lanes, Ace Hardware may discover that it is currently getting a very good rate. In that case, Ace Hardware doesn’t need to issue a request for a proposal (RFP), as long as the carrier agrees to move forward with the current rate while maintaining contractual service levels and tender acceptance rate.
Ace Hardware is still very much in charge of the overall procurement event. The RFPs go out with the Ace Hardware name on top and Ace Hardware decides which carriers can bid on lanes as well as which carriers win the business.
Ace Hardware has limited transportation resources and they can only dedicate so much time to support procurement events. LeanLogistics helps by ensuring that the core data is clean, aiding in RFP preparation, analyzing the responses, and finally building the analytics that illustrate the results from the multi-round bidding process.
LeanLogistics has also been instrumental in bringing new, qualified carriers into the bid process on particular lanes. Here LeanLogistics can leverage its network data. In the upper Midwest, for example, Ace Hardware might not have enough carrier participation. However, LeanLogistics knows that certain carriers with a strong presence in this region have not been invited to participate in the procurement events. In fact, some of the carriers initially suggested by LeanLogistics have subsequently become core carriers for Ace Hardware.
Ace Hardware also uses the combination of the sourcing application and the benchmarking data for tactical, spot market procurement events throughout the year. Finally, Ace Hardware uses lane benchmarking data for internal costing purposes surrounding the private fleet. Ace Hardware’s private fleet operates as a profit center and to make the most of these assets, the benchmarked lane rate is used to compare the cost of a common carrier to a flat rate formerly used.
Ace Hardware has had great success using the combination of LeanLogistics’ sourcing application, benchmarking data, and Managed Procurement Services. The retailer pointed out that over time, as the procurement process becomes highly polished, the savings from each new procurement event will begin to diminish. In 2007, LeanLogistics’ solutions and services allowed Ace Hardware to save over 8 percent on the lanes covered by the Managed Procurement Services event. More recently, Ace Hardware reduced freight spend by 2-3 percent based on these Managed Procurement Services events. In total, Ace Hardware saved $18 million across four separate strategic Managed Procurement Services events.
