Not long ago, suppliers to Dillard's Inc. had it made. When it came to merchandise deliveries, Dillard's, a fashion and home furnishings retailer with 330 stores in 29 states, was anything but a demanding customer. Not only did the retailer give its vendors a shipping window of 21 days, but the company's buyers were happy if they had merchandise on the retail floor on the first day of the month.
That much leeway is, of course, a thing of the past. Like most major retailers, Dillard's has become a much harsher taskmaster in recent years, demanding that its suppliers and carriers conform to ever-stricter delivery requirements. "We give our vendors a ship window that is getting narrower and narrower," says Director of Transportation Fred Anderson.
About 40 percent of the retailer's inbound DC shipments arrive by less-than-truckload (LTL) carrier. Dillard's has winnowed its list of LTL carriers down to FedEx National (the former Watkins Motor Freight) for long-haul freight and FedEx Freight for multiregional LTL service. The retailer also uses a third-party logistics service provider to consolidate shipments in the New York/New Jersey area and does additional consolidations at its DC near Charlotte, N.C., for full truckload shipments to its other DCs. In addition, private-fleet drivers often pick up shipments from vendors after they make store deliveries.
To keep all of those different types of deliveries on target, Dillard's has set up a transit-time matrix based on origin and destination ZIP codes for vendors that ship merchandise to the retailer's seven distribution centers. "All carriers are measured against that transit matrix," Anderson says. "You don't get extra points for being early. Early is as bad as late."
When it comes to time-critical services, shippers are demanding more from their carriers than ever. Here's what FedEx Freight says its customers expect it to do:
- Provide visibility from the time of pickup to delivery so they can plan replenishment orders, avoiding out-of-stocks and lost sales.
- Invoice accurately to avoid administrative and auditing costs.
- Count the pieces and read the labels. This is crucial when a retailer has multiple receiving destinations and a carrier picks up multiple shipments from the same vendor.
- Be a partner. What can the carrier and the retailer do together to drive costs out of the supply chain to keep rate increases to a minimum?
- Be consistent and do what you say you can do.
- Charge a competitive price.
The transit-time matrix is coupled with requirements for visibility of goods in transit. Dillard's gets that information in large part from advance shipment notices from its vendors. Says Anderson: "We know down to the SKU [stock-keeping unit] level what's expected."
Both of those tactics support the retailer's overall goal of streamlining operations. "Basically, the direction we are heading is to speed up the supply chain," Anderson says. The reason: "We are undergoing a dramatic change in merchandising," he explains. "We want to reduce the amount of inventory on the floor, reduce costs, and become more customer-friendly."
Less inventory, lower costs, and greater customer satisfaction, all at the same time? It can be done, but only if the motor carriers involved meet some pretty demanding performance standards. "We need accountability and reliability for quick replenishment into the stores," Anderson says. "We need to rely on our carriers and be specific about when we expect deliveries.We are putting the requirement on our carriers that transit times need to be accurate. They have to be on time, but not early."
Carriers say such requirements are becoming more and more common. Fortunately for both buyers and suppliers, carriers also say they're up to the challenge.
Designed for speed
Anderson's expectations will sound familiar to anyone who does business with large retailers, manufacturers employing just-in-time delivery strategies, and other companies that have very specific requirements regarding when goods must reach their facilities. Not only are those companies becoming more and more demanding, but they're also enforcing their programs by imposing hefty penalties on shippers that fail to meet their requirements.
The burden of figuring out how to meet tight delivery demands has largely fallen on carriers' shoulders. In response, they've developed an expansive menu of time-based services, ranging from traditional over-the-road shipments to emergency deliveries in exclusive-use vehicles.
What follows is a list of just a few of the many carriers that offer services that are specifically designed to meet their customers' requirements for faster shipments:
- Roadway Express offers two versions of its emergency and expedited products. Its Time- Advantage service is a next-day, non-guaranteed service that complements its guaranteed Time-Critical service.
- In September, USF Holland, part of YRC Regional Transportation, launched a next-day service that includes guaranteed delivery before 9 a.m., noon, or 3: 30 p.m. for shipments within 750 miles.
- Also in September, FedEx Express added Same Day Freight service for palletized or loose shipments weighing in excess of 150 pounds.
- Averitt Express, an LTL carrier operating primarily in the Southeast, offers customers both a day-definite and a time-definite service. In addition, it offers same-day, nextflight- out, and next-day ground and air services. Customers can upgrade shipments in transit from standard shipping to time-critical service.
- Old Dominion Freight Line, a multiregional LTL carrier with service coverage in 38 states, offers what it calls Speed Service on Demand, which provides guaranteed, time-specific delivery for critical shipments.
- Con-way Freight has offered guaranteed transit times on all of its direct services for several years.
Part of the plan
There's a lot more than speed involved when it comes to ensuring precise, on-time deliveries, however. Many carriers have focused on tightening up their own operations and networks to ensure that freight does not go astray, and they've built in recovery strategies for those times when it does.
For many shippers, moreover, reliability is every bit as important as timeliness. Some may not need an urgent mode of transportation, says Phillip Corwin, director of marketing and product management for UPS's critical shipment and service-parts logistics businesses. The most important thing for them, he explains, is not necessarily how long it takes for a shipment to arrive, but rather getting it when promised in order to meet production needs or replenish stores.
Customers' need for absolute reliability has led Roadway Express to hone its time-definite services, says President Terry Gilbert. The carrier was prompted to act in part by requests for help in avoiding chargebacks assessed by big box retailers for deliveries that failed to comply with delivery requirements. In response, Roadway developed its Time-Critical Multiday Window service. That service allows customers to tell the carrier what delivery window is required by the consignee, and Roadway guarantees delivery within that time frame. "That allows the vendor to shift the risk to us," says Gilbert. "We guarantee we will bring shipments into the DC within the parameters of the purchase order."
Similarly, USF Holland, a regional LTL carrier serving the Midwest and Southeast, takes on some of the risk for its customers. "We sell the guarantee," says Mark Pare, vice president of special services. "It holds us accountable and makes us utilize our system to ensure their shipments move according to the forecast. We have a group of people who monitor every shipment to guarantee compliance."
To comply with increasingly complex delivery requirements, shippers are beginning to mix and match time-specific services to fine-tune the way they move and receive goods. They're even incorporating carriers' diverse service menus into their operational plans. "We are seeing some things once considered value-added services that are getting embedded into the normal course of business during normal business hours," Corwin says.
Some shippers are making what have traditionally been viewed as emergency services part of their advance planning exercises. "What we are seeing is not so much sameday service as part and parcel of normal business, but as part and parcel of planning for contingencies," Corwin continues. "Rather than calling [carriers] in desperation, there is a plan in place."
Critical shipment services are even being incorporated into companies' standard operating procedures— think of high-tech manufacturers that include critical-parts delivery in their service contracts. Corwin offers another example: During sports playoffs, manufacturers of licensed apparel finish merchandise proclaiming the winner as the games wrap up, and then need to get it into stores the next day.
Premium price tag
Offering time-definite services demands new ways of thinking, a willingness to change, and a whole lot of time, effort, and cost. Roadway's Gilbert, for one, acknowledges that carriers that provide a variety of timebased services face operational challenges. "It has created an enormous set of complexities for a network our size," he says.
The complexities have grown along with the number of shippers using time-based services. "Two or three years ago, it was easier. With our first set of dispatches, we would make sure all time-sensitive shipments were on one or two trailers," Gilbert says. "Now, almost every trailer has shipments with time-sensitive requirements."
Likewise, USF Holland found it had to implement a number of operational changes before it could offer its time-definite, guaranteed service. The carrier also had to go through the laborious task of measuring the potential impact of restructuring on potentially millions of pairings among the LTL carrier's customers, consignees, and 78 terminals. That took an enormous number of calculations, Pare says. "We did yeoman's work getting it done."
Ironically, the time-definite services that are a challenge for carriers to implement make their customers' lives easier by offering them more ways to meet their own delivery commitments to their customers. Pare says, "When people used to ask how fast we could move from point A to B, there was one answer. Now we have up to six. We have heard from a lot of customers that it gives them flexibility and control."
Given that precision time-definite services require so much of carriers' resources, no one should be surprised that they come with a premium price tag. Even so, demand for such services is growing at double-digit rates—and the need for flexibility and control in today's hotly competitive environment is the reason. Says Gilbert: "Customers are willing to pay for that."
