Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Network Supply Chain Transformation at UScellular

Supply Chain Network Design | By •

ASCM UScellularThe Association for Supply Chain Management (ASCM) hosted its annual conference, ASCM CONNECT, on September 18 – 20 in Chicago. Fortunately for me, some of the sessions were available virtually. I found the presentation by UScellular especially interesting. I have always considered cellular and traditional communication companies to be service organizations. As such, I assumed that supply chain wasn’t a core competency. But I was wrong. I overlooked the sophistication required to support widespread and ongoing projects in support of constantly advancing cellular communication networks.

Rapid Change in an Asset Intensive Business

UScellular is the fourth largest wireless service provider in the US, distinguished by its dedication to rural communities of America. The company services customers with about 5 million retail connections in total.  The UScellular network that supports these customers has been built locally, with a focus on serving underserved areas.   The company’s cellular network includes approximately 7,000 cell sites. In 2020, UScellular took the major step of initiating the deployment of 5G technology across its network. Although the company has its roots in regional development, its growth opened up opportunities to gain efficiencies from centralized supply chain planning.

Network Supply Chain Restructure

UScellular historically operated with a regional structure. Being local allowed the company to understand the nuances of the community – such as knowing the dead spots with inadequate cell coverage. However, as supply chain practitioners know, operating regionally, or in a siloed fashion, tends to create inefficiencies that can be addressed by broader operating visibility and efforts to optimize holistically instead of locally. As UScellular matured, the supply chain function evolved, and a centralized supply chain function was initiated in the year 2000. This team in Chicago is responsible for logistics and coordinating efforts with vendors. Then earlier this year they added a supply chain planning function to the Chicago team. UScellular noted some of the major goals for its current supply chain transformation – much of which can be obtained from centralized supply chain planning.

  • A centralized structure could provide standardization benefits that could deliver efficiencies through bulk purchasing, broader understanding of materials requirements, and more effective shipping practices.
  • Visibility across the supply chain can enhance the ability to locate inventory and more intelligently prioritize its allocation to projects.
  • Centralized planning with insights from across the organization can result in holistic optimization and improvements from business goal alignment.

The Complexity of Deploying a Cell Site

The build out of cell tower sites is more complex than I had imagined. I typically think of supply chains with a mix of SKUs in a make-to-stock process. Although planning and timeliness are important, the impact of a critical path is much more substantial in build-to-order, project-based supply chains. As such, supplier reliability, supply chain resilience, and agility were among the primary considerations of the UScelluar supply chain transformation. The supply chain team conducted an in-depth analysis of 3 key projects and determined that 61% of components are internationally sourced, and most critical components are manufactured in Asia or Europe. Meanwhile, material lead times ranged from 9 days to 9 months. As a result, proper planning is required to source and receive critical components upfront to assure that these materials do not cause a project bottleneck.

UScellular utilizes 13 warehouses across the US, positioned so that every network cell site is within 500 miles of a warehouse. But the company was unsure if this was the most effective network for the company’s priorities. With all of these considerations in mind, the UScellular supply chain team took a step back, imaginging the criteria for an optimally effective and efficient path forward. They named this initiative Project Network Enterprise Optimization (Project NEO).

Project NEO

The team knew that they wanted to be able to scale and move quickly and realized that doing so would be enabled by reducing complexity to deliver economies of scale. They looked back at 2 years of data and determined that one out of every seven sites built was a unique configuration. So they took the 80/20 rule, worked with the engineering team to determine requirements, and reduced 47 unique builds down to 4 standard builds that would accomplish 80 percent of what they needed.

Next, the cell sites vary greatly. But often the sites are a very small work area between a sidewalk and the street. This lack of space adds difficulty to the field team’s installation work. In an effort to simplify the installation process, the supply chain team laid out four pallets on a warehouse floor and developed the most effective way to kit materials so that the engineers in the field will be able to access materials in order of use when in the field, enabling efficiencies at the point of installation.

Poles for cell towers are custom materials with a long lead time. Some small cell sites are attached to street poles. Very often existing street poles do not have the structural integrity to handle the cell equipment, requiring cell providers to install new poles. Local jurisdictions also require cell providers to use poles that match the environment. The supply chain team looked at how they can streamline this process. They worked with a pole supplier and created a “pole library” and simplified the process, with due diligence up front to assure that the materials will meet requirements before they place the order, reducing inventory mismatch risk down the line.

Finally, a traditional network, transportation, cubic utilization analysis was done. They determined that deliveries were going to the same area multiple times, without bulk shipments. They identified a multimillion-dollar opportunity to reduce costs through more efficient shipping. They also found that they can currently reach 95% of their sites in four hours or less drive time. But with half the number of warehouses, they could still reach 95% of sites in six hours. This presented a potentially large opportunity to simplify the warehouse network at some point in the future.

Path Forward

They are currently on their journey –  not finished. To get to where they want to be, they need transparency and visibility to mitigate risk. They believe future supply chain challenges, from plant shutdowns and supply chain disruptions, can be mitigated by upstream visibility. Also, workforce engagement is important given the expected increase in the need for supply chain talent and the tight workforce. Change management is an important and continuous process that needs to be managed They are trying to be open minded with their thought processes. Finally, they are working to prove their concepts out through presentation of data and facts.

Editor’s Choice: How IT Can Lead Supply Chain Transformation

Logistics Technologies | By •

Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. Today’s article is from Kinaxis.

supply chain transformationOutdated software isn’t just a headache to manage. It’s a business blocker. In a moment when unpredictable shifts in the flow of goods to consumers has dominated headlines, supply chains have become a driver of competitive differentiation for companies, with 65 percent believing their supply chain will be a source of differentiation in the next year. But the technological infrastructure that supports supply chains? It remains a weak spot. Many companies say they still rely on spreadsheets for all or part of planning.

This puts new pressure on companies to drive innovation — or be driven out of business. CIOs, VPs of IT infrastructure, system administrators and other IT professionals are tasked with one of the most difficult jobs in the midst of this: how to transition companies’ supply chains to new, enhanced systems without jeopardizing an existing competitive edge.

In many ways, IT teams have never been better positioned to launch their companies’ supply chain transformation. Their knowledge of existing systems and processes as well as their understanding of the technological foundations that support future capabilities, like artificial intelligence and machine learning (AI/ML), means they are uniquely capable of balancing existing supply chain needs with opportunities for the next round of innovation. To lead digital transformation, IT professionals should consider some key questions.

  1. Choose best-of-breed or single vendor?
  2. Manage in-house or adopt software-as-a-service?
  3. Invest in infrastructure to support innovation today or wait for future developments?

For the rest of the article, and to read the answers to the above questions, click HERE.

Ahold Delhaize’s Supply Chain Transformation

Retail | By •

Retail Business Services
An Ahold Delhaize Distribution Center Photo Credit: ADUSA Distribution LLC

In December of 2019, the global grocery retailer Ahold Delhaize announced it was investing $480 million to transform and expand its U.S. supply chain operations in support of a new three-year strategy to move to self-distribution.  In self distribution, the company insources many supply chain activities that were formerly outsourced.

Ahold Delhaize was formed in July 2016 from the merger of Ahold and Delhaize Group. The retailer’s grocery chain banners in the U.S. include Food Lion, Giant Food (of Landover), The GIANT Company (of Carlisle), Hannaford, and Stop & Shop.. The company has a very strong East Coast presence. The US operations generated over $47 billion of the global retailer’s revenues – over 60 percent of the total.

According to Chris Lewis, Executive Vice President of Supply Chain for Retail Business Services , prior to the Ahold Delhaize merger, Delhaize did their own logistics and most of their own procurement. Ahold, on the other hand, outsourced about 70 percent of their logistics and procurement to C&S Wholesale Grocers, the US’s largest wholesale grocery supply company. Retail Business Services  is the shared services group that has emerged subsequent to the merger. Among other responsibilities, Retail Business Services is responsible for supply chain services including logistics, procurement into the Distribution Centers, and supply chain strategy for Ahold Delhaize’s US operations.

In the U.S., 17 Distribution Centers provide fulfillment to over 2000 stores on the East Coast. The company is also acquiring another Distribution Center, building 2 frozen facilities, and just leased an ambient temperature DC in Connecticut.  1.1 billion cases flow through this network every year. The warehouse network will expand to 26 facilities by 2023. In the deal announced in December, Ahold Delhaize USA will take back all the outsourced Distribution Centers over next 30-36 months.

“Moving to a self-managed supply chain will enable Retail Business Services to reduce costs for the local brands it serves, improve speed to shelf, deepen relationships with vendors and better position our companies’ distribution centers in the communities they serve,” according to Mr. Lewis. “These changes will enable us to take advantage of financial and strategic value within procurement, logistics and warehousing to provide the freshest product through the most advanced, efficient delivery network in the grocery industry. Once the transformation is complete, Ahold Delhaize will save $100 million per year.”

Supply Chain Technology is Key to the Transformation

The two frozen warehouses the company plans to open will be highly automated facilities. The distribution centers, being constructed in partnership with Americold, will use automated storage and retrieval systems (AS/RS) from Dematic. This investment will reduce labor costs. But getting workers willing to work in frozen DCs can be a problem. In the future, Retail Business Services will also examine the use of autonomous mobile robots to support warehouse pickers.

Ahold Delhaize is committed to sustainability. Their annual report combines both financial and sustainability results. The annual report states that the global grocer was ranked among industry leaders in the Dow Jones Sustainability World Index. The global grocer reduced their year over year carbon-equivalent emissions by 4.6%.

Thus, as important as automation, was making sure the frozen distribution centers were optimally located. The retailer used a network design solution from LLamasoft to properly locate these warehouses. The LLamasoft software allows transportation, warehousing, and inventory carrying costs to be traded off in a manner that allows the company to hit service level targets while reducing costs. These two frozen facilities, when open, will reduce trips from these two warehouses to their stores by 2.5 million miles, lowering freight costs by $3 million while simultaneously reducing greenhouse gases.

While good placement of warehouses helps reduce the miles trucks drive to fulfill orders to the stores, transportation management systems (TMS) also play a key role. Currently 1,000 trucks are traveling more than 120 million miles annually across the East Coast network. A TMS reduces freight costs in a variety of ways. For contracted carriers, the TMS leads to better negotiations of long-term contracts. The freight audit functionality makes sure the carriers are not being overpaid. But much of the savings in a TMS comes from better routing and insuring trucks are more fully loaded – these capabilities save money and reduce emissions. Retail Business Services has selected Manhattan Associates’ transportation management system.

Retail Business Services is also in the process of selecting a common warehouse management system (WMS). A WMS increases picking efficiencies, which lowers labor costs. In making sure trucks are efficiently loaded and leave on schedule, having WMS and TMS solutions that are tightly integrated can improve synergies. While Retail Business Services has not made the final decision on who they will go with for WMS, Manhattan Associates’ WMS solution is in the mix.

Mr. Lewis said, “we are willing to add complexity in our warehouse operations, to reduce complexity at the stores.” When a mixed pallet arrives at a store, a pallet with different products on different layers of the pallet, the pallet should be designed in such a way that when the top layer is picked and goods are put on the shelves, the product on the next layer down will not require store workers to wheel the pallet from one end of the store to the other to reach the next stocking location.

Retail Business Services is also in the midst of rolling out a demand planning and inventory replenishment system. An end-to-end solution from RELEX will be live for all 1200 Food Lion and  Hannaford stores by Q1 2021. It will then be rolled out in phases to the other banners. The solution applies brand-specific machine learning to point of sale data, sales history, and promotional plans to more accurately forecast demand. Better demand forecasts lead to increased availability of goods on the shelf at lower inventory levels. The RELEX solution also has strong automation, automatically generating replenishment orders for a large percentage of orders. The RELEX system also lets planners know when the system believes their overrides, the replenishment order for a store or stores, is too low. This could result in lost sales. The system generates lost sales warnings that escalate to the planners’ managers. This is a powerful catalyst for culture change. This Inventory savings are another way that Retail Business Services aims to achieve their $100 million in annual savings.

Collaboration with Store Operations and Suppliers is Critical

Key to achieving these store level service level improvements and savings will be achieving better inventory accuracy at the store. Store level inventory accuracy is notoriously bad, although it has improved in recent years. Ahold Delhaize’s target service level at the shelf is 99 percent. Research by Chris Cunnane, of ARC Advisory Group, shows that only 17 percent of retailers achieve this service level.  Because grocers carry so many different products and the inventory turns so fast, the grocery industry’s store level inventory accuracy is probably far lower than other types of retail.

Mr. Lewis explained that store operations is ultimately responsible for improving the inventory accuracy at the store. But by using the RELEX solution the supply chain team can help predict when a store’s inventory count is wrong for a SKU. The RELEX solution includes business rules suggesting a shelf audit be done for that product. Lost sales alerts aimed at store managers provide incentives for stores to do the shelf audits and restocking. “With ecommerce, and pick from store fulfillment of customer orders, store level inventory accuracy is even more important” Mr. Lewis explained.

Retail Business Services has offered in-store mobile robots, which select Ahold Delhaize USA brands have elected to roll out, with a friendly face, named Marty, to identify hazards, such as food spilled in the aisles. The robots then provide reporting that enables corrective action. They help stores mitigate risk caused by such spills, as well as enable associates to spend more time serving and interfacing with customers. In the future, Mr. Lewis said, these robots can also be programed to improve shelf level inventory performance by identifying empty slots.

Retail Business Services is also looking to better collaborate with suppliers with new procurement programs. For example, the company might identify places in the end-to-end supplier-to-retailer supply chain where excessive dwell time or poor shipment sequencing is hindering fulfillment execution. Retail Business Services is appointing coaches to work with the supplier’s supply chain teams. The idea is that if Retail Business Services drives lower costs for suppliers, they will share in the savings.

Inventory visibility is key to this collaboration. When a consumer goods company agrees to a store promotion, they want to know that promotion was fully executed across all the participating stores. If an end cap promotion is agreed to, in store visibility is based on associates taking pictures of the end caps with iPads (in the future this could even be a task for the Marty robots). It may be that the pictures show that in 5 percent of the targeted stores, the end caps are not up. These would be turned into alerts and would trigger store operations to build those end caps. This provides assurance to the supplier they got what they paid for. Better execution can incentivize supplier to engage in larger win/win events. For example, instead of doing a promotion across just one banner, doing a promotion across all banners – and all 2,000 plus stores – will become possible. For this size promotion, Retail Business Services might ask for an extra five cents off per case.

Retail Business Services is also working to build improved control tower capabilities. These control towers will have improved visibility to both inventory at rest in stores and distribution centers, but also inventory in motion – inbound inventory heading to distribution centers. If a hurricane is charging up the East Coast, it would be natural to want to stock stores with more water and related products that customers want to ride out the storm. The control tower might be able to see that the warehouses have enough water on hand, but that getting enough labor to build expedited loads could be a problem. The control tower provides the visibility to explore different options.

In conclusion, this is quite a transformation. The transformation will save significant amounts of money, improve customer service, and aid Ahold Delhaize in reaching their sustainability goals. The transformation relies on technology, culture change, and new processes. Ahold Delhaize has not gotten the same plaudits for their supply chain efficiencies as Amazon and Walmart. This will begin to change these perceptions.

Hostess Brands Turnaround Driven by a Supply Chain Transformation

Food & Beverage Industry | By •

Hostess Brands – the snack food company that makes Twinkies and Ho Hos – announced on Tuesday that they had agreed to sell a majority stake in the company to a publicly traded affiliate of the Gores Group, an investment firm.

ho hos

This is quite a turnaround. In November of 2012, Hostess ceased doing business based on their bankruptcy. But fans of Hostess know that there was a second act to the story. This happened after the brands and certain factories were purchased out of bankruptcy in April of 2013. Now it is reported that the companies that purchased Hostess Brands stand to collect a return of about $1 billion on an initial equity investment of about $185 million.

This turnaround was, in large part, driven by a supply chain transformation that greatly lowered Hostess’s costs of doing business. In the fresh bakery segment the fulfillment model is based on direct store deliveries (DSD). The way this works is that merchandizers go into the stores, look at the inventory levels on store shelves, and refill the shelves. This is an expensive fulfillment model that requires the manufacturer to use more labor – in the form of merchandisers – and own a significant number of assets. In the case of the former owner of the brands, it meant 8,000 route trucks and 600 depots. But for fast moving, perishable items it was believed that this was the only practical way to keep fresh product on the shelf.

In contrast, in most grocery product segments a warehouse direct model is in place. The retailer orders goods, often in full truckload quantities, that are delivered to the retailer’s distribution centers (DCs). When Hostess Brands, LLC started up, the company decided the expensive DSD model would not work. They needed to get their costs down. They made a heretical choice, they would be the first in their segment to use a warehouse direct fulfillment model in order to drive a significantly less expensive supply chain while providing best-in-class service to its valuable customers.

Retailers that wanted to do business with Hostess would now have to forecast demand, order goods, receive goods at their DCs, ship goods from their DCs to their stores, and stock the shelves themselves.

One might think the retailers would balk at this. They did not. The coverage of the death of the Hostess brand, and the social media firestorm that erupted, had made it obvious that Hostess was a powerful brand. Once the company was ready to relaunch the Hostess brand, retailers were clamoring for their goods.

Quickly launching an asset light supply chain required the use of outsourcing partners. One key partner was LeanLogistics; LeanLogistics plans and executes Hostess’s transportation moves. An article we published in January has much greater detail on the Hostess supply chain transformation.  But the take away is that clearly that transformation was successful, Tuesday’s news proves it. And as a supply chain guy, I just love hearing about a business turn around that was largely driven by a more effective supply chain.

The Ottawa Hospital’s Supply Chain Transformation

Warehouse Management Systems | By •

I’ve been hearing about hospitals implementing warehouse management systems (WMS) in France and Canada. This is a new industry for WMS. So, when Oracle (an ARC client) mentioned that The Ottawa Hospital (TOH) was a WMS customer, I asked if I could interview them. Oracle put me in contact with Cameron Love, Vice President of Planning, Support Services and Clinical Programs at TOH, and with Joanne Read, Director of Logistics, who were both gracious enough to talk to me.

The Ottawa Hospital has three campuses and about 1,200 inpatient beds. The hospital began a supply chain transformation in 2004, which was aided by the province of Ontario’s willingness, starting in 2005, to fund operational excellence initiatives in back office and supply chain operations.

This transformation was based on a Supply Chain Strategic Plan the hospital developed to improve the efficiency of delivering Material Management services, as well as to achieve a benchmark cost profile within the industry. The strategic plan was organized around seven key initiatives aimed at reducing supply chain management costs and providing customer-focused service to support quality patient care.

Implementing Oracle’s e-commerce solution, for example, could improve procurement by enabling full electronic integration and increased collaboration with suppliers. The end-to-end supply chains of hospital supplies and operating room instruments could be improved through a collaborative demand management process; an extended supply chain monitoring and replenishment process; and centralized warehouse and distribution services based on Oracle’s WMS solution. In effect, the hospital wanted to get leaner by ordering and stocking only what it truly needed. 

This transformation could create larger opportunities for The Ottawa Hospital. There are 17 hospitals in the region and they are exploring the possibility of leveraging their total procurement spend to realize savings. Once TOH has transformed its internal processes, it will play a leading role in regional sourcing. 

TOH implemented the Oracle WMS solution this past year. Hospitals, unlike a traditional warehouse, have storage locations that are more distributed to support patient needs. Like a traditional warehouse, it barcodes and scans the 4,000 stock keeping units (SKUs) it receives and distributes out of the warehouses. 

Goods are picked and consolidated on carts that travel to respective storage unit locations. There are approximately 800 clinical unit locations at TOH containing inventory sourced from the warehouses. Each storage unit has between one and three carts with up to 30 SKUs. Nurses can pull items off a cart as needed without scanning them. 

To keep the total inventory count in the WMS correct, supply attendants use wireless handheld devices to scan goods onto the carts. There is also a cycle counting methodology at the cart level based on min/max levels set per item. Carts with high velocity inventory get counted more often. Real time monitoring of what is put onto the carts allows the hospital to cycle count only about three times per week instead of daily (other than for critical SKUs which are counted daily). Cart-level inventory counts can trigger TOH’s ordering system, which is integrated to the WMS, to place an order for needed SKUs.   

Because a key goal was to ensure that needed inventory was on the carts, it was critical that the min/max levels on the cart – what they call “par levels” in this industry – were set correctly. The WMS project took two years, much longer than a typical implementation, in large part because getting these par levels set correctly took time. Keeping them correct involves examining inventory and usage data on an ongoing basis, as well as collaborating with nurses to understand why a SKU is moving slow or fast, and whether it makes sense to change the setting.   

In hospitals, quality patient care is the ultimate goal. But quality care can often be achieved at a lower cost. TOH put in place a Product Evaluation Committee to ensure new products are reviewed by all interested stakeholders prior to being ordered and placed in inventory. No product can be ordered unless it is on the approved list managed through the Product Evaluation Committee. If a doctor wants a new product to be sourced, they must make their case to the committee. The committe looks at whether there are already similar SKUs available and then balances clinical need against costs.  

The hospital’s business case outlined a four year payback, longer than what most companies achieve when implementing supply chain programs. However, its goal was not only to reduce supply chain costs, but also to enhance patient care. This program delivers the right products, in the right quantities, to the right clinical locations. 

In conclusion, TOH’s supply chain was interesting, but its discussion about implementing best practices was even more interesting. In preparation for this project, the hospital examined supply chain best practices in both private industry as well as leading hospitals in Europe. I’d love to hear US hospitals start to talk and think this way too.

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