Ask any logistics professional in the food manufacturing industry what their most significant pain point is, and you’ll often hear “managing their inbound freight.”
In this fast-paced industry, staying ahead of the competition means having your operations run smoothly and efficiently. Working with a massive inbound freight operation presents challenges: vendor compliance, lack of visibility, operational disruption, and resistance to change in procurement. Kingsgate Logistics provided tailored solutions for their customer, A National Prepared Foods Manufacturer, to address their pain points and streamline their inbound freight process. With 39+ years of experience, Kingsgate was able to use its expertise and leverage advanced technology to help its customer increase visibility, reduce downtime, and cut costs – transforming their supply chain from a headache to a competitive advantage.
Despite generating approximately $2B in annual revenue, the customer faced significant hurdles like early/late deliveries, production delays, and misspending. After several conversations with the company’s SVP of Logistics, Kingsgate recognized that the pain points would mandate a comprehensive approach to address freight costs and improve operational efficiency.
The team developed and began testing a three-month pilot program at a smaller plant with limited commodities and vendors. By choosing one of the customer’s smaller plants, Kingsgate demonstrated the program’s benefits with no operational disruption. The pilot tracked key metrics such as on-time deliveries, production downtime, and employee time spent managing orders.
Key Components of the Program
- Improved Visibility and Coordination: Kingsgate enhanced visibility and control, ensuring vendors scheduled deliveries with appointments – reducing wait times and enhancing dock utilization.
- Better Vendor Management: Kingsgate enforced stricter vendor terms, including penalties for non-compliance, driving better adherence to delivery schedules.
- Network Optimization: By aligning inbound and outbound freight, Kingsgate helped the customer negotiate better rates for both inbound and outbound shipments, lowering overall transportation costs.
The initial pilot was a success, with zero late deliveries, improved production schedules, and clear visibility from purchase order issuance to product delivery. Employees saved significant time, saving at least two hours each day previously spent chasing down orders and scheduling deliveries. The success of this pilot led to a phased rollout of the solution across the customer’s other plants.
6 Primary Results of the Program
- Zero Line Downtime: For nine months, the customer experienced no line downtimes, boosting production reliability and reducing costs from disruptions.
- Improved Vendor Compliance: Kingsgate raised vendor compliance from 60% to 95% in three months by implementing billbacks and penalties, ensuring more reliable deliveries.
- Increased Production Accuracy and Fill Rates: Production accuracy and fill rates rose by 8% across seven plants because of better supplier reliability and inventory management.
- Reduced Waste: A 7.5% reduction in waste resulted from better inventory control, increasing operational efficiency.
- Cost Savings: The customer saved 13% in landed costs in the first year, equating to nearly $1 million in savings, with potential for higher savings.
- Improved Vendor Relationships: Streamlined processes and stricter shipping terms improved vendor relationships, fostering collaboration and long-term partnerships.
The pilot program proved successful through clearly addressing the customer’s challenges and delivering measurable results that aligned with the company’s long-term goals. The solutions within the program helped the customer improve vendor relations, reduce waste, and streamline production processes.
Lessons Learned in Improving Freight Efficiency
The lessons learned from this project are helpful for any company wanting to improve its logistics efficiency.
First, inbound freight is often overlooked. Freight costs are a significant part of overall spending; ignoring this can lead to operational disruptions and increased waste.
Second, it’s imperative to leverage volume for savings. Consolidating inbound and outbound freight allows businesses to leverage their volume for better rates, resulting in substantial cost savings.
Third, vendor management is the key to success. Setting and enforcing standards for vendor management can drastically enhance delivery performance and minimize disruptions.
Last, the power behind proof of concept shouldn’t be overlooked. The value of the solution can be proven in a controlled environment, which makes the transition to full-scale implementation a smoother, more successful process.
With the incorporation of these lessons, it’s possible to improve the incoming freight handling of companies, cut down on costs, and develop a more effective and reliable supply chain. This case is a clear example of how effective freight management can be and the impact it can have on both the financials and operations of a business. Through the development of a logistics strategy, and with the help of Kingsgate, a national prepared foods manufacturer was able to redefine how it manages its inbound freight, realizing increased cost savings, enhanced operational effectiveness, and improved vendor relations.
