American Railcar uses TMS to shine light on inbound supply chain
By David Hannon -- Purchasing, 3/11/2010 12:00:00 AM
A black hole in their supply chain.
That's how the purchasing team at American Railcar Inc. (ARI) described the issue that led them to select and implement a transportation management system last year. And that decision is reaping benefits both expected and unexpected.
Like a lot of manufacturing companies, ARI, was having particular difficulty tracking its inbound shipments from suppliers. "We had visibility when the product was ready at suppliers, but then it went into a black hole once it left our vendors' docks until it arrived at our location," says Brent Roever, purchasing agent at St. Charles, Mo.-based ARI, which manufactures and services railcars and parts.
In some respects, ARI was better off than some other manufacturers because it has a smaller supply base than a typical manufacturer, so there were fewer inbound shipments disappearing into the black hole. As a railcar manufacturer with two primary manufacturing locations in Arkansas, its supply base is limited to companies that can meet the rigorous specifications and certifications required by the American Association of Railroads. As a result its relatively short supplier list is based primarily in the U.S.
According to Richard Armbruster, ARI's vice president of purchasing, about 80% of its inbound shipments come via flatbed truckload. Only about 5% come in by truckload van and the rest come from suppliers via less-than-truckload. And, of course, the majority of its outbound shipments go out on rail—literally.
But as a Lean organization, ARI was always looking for ways to streamline its just-in-time manufacturing model and reduce its inventories. In its previous logistics model, ARI provided its suppliers with lists of preferred carriers and routing guides, but "it was on the honor system" according to Roever. "We had visibility when the product was ready at suppliers, but then it went into a black hole once it left our suppliers' docks until it arrived at our location."
So under Ambruster's direction, ARI's Senior Director of Purchasing Scott Smith worked with Roever to investigate what the solution to the black hole problem was. And while they knew it would require some outside help, the first question they needed to answer was TMS vs. 3PL?
"We reviewed both 3PLs and TMS providers we decided a mix of both would suit us best," says Roever. When it came to the TMS, ARI was sure it wanted to go with a web-based TMS that would integrate easily with its in-house ERP system.
With those priorities set, ARI decided that St. Louis-based Logistics Management Solutions (LMS) of was the right choice for its TMS provider. In early 2009, the team began working with LMS to incorporate its TMS system into ARI's purchasing and logistics processes.
The key to effectively streamlining the inbound freight flows was getting ARI's suppliers on board with the program. And it had to be a simple, straightforward process for the suppliers if it were going to be embraced.
In the new process all of ARI's orders flow from the ERP system into LMS' TMS system where suppliers can view those orders. Suppliers respond to those orders and indicate that their shipment is ready either by providing a form or by logging into the LMS system depending on their frequency of shipments and can include notes on how that product needs to be shipped. Some shipments may require a tarp or a flatbed truck, for example, all of which can be indicated on the notification.
With those details in place, LMS can then tender the load to one of ARI's carriers in that given lane. Carriers are only dispatched when the shipment is ready, which avoids costly carrier delays.
But most importantly, the system indicates to Roever and the ARI team when the shipment was picked up at the supplier and when it can be expected at ARI's facility based on established delivery times. Black hole averted.
"This allows us to control early and late shipments and ultimately this helps us reduce our on-hand inventory," says Roever. "It's our goal to have just enough inventory to build our railcars while taking into account transit times. We measure inventory month over month and it is improving from a host of activities, including our work with LMS."
The TMS system also lets the purchasing team at ARI track which suppliers ship on-time and which are late. That data is then included in the supplier's scorecard and also lets ARI perform root-cause analysis on those that are consistently late.
"We're using Lean to become world-class so being able to use reporting tools to identify and fix problems is very valuable," says Roever. "These tools give us more data to analyze in these areas."
While there was some pushback from suppliers early in the process, currently ARI has 99% of its suppliers on the system now. Roever says one thing that made the transition smoother was LMS assigned dedicated reps to the ARI contract, so all of ARI's suppliers are interfacing with the same people at LMS each time.
"Communication at every stage is crucial," says Roever. "Bring suppliers in early when you're looking at the change and ask them how it would impact their business."
No comments:
Post a Comment