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Responding To Recessionary Challenges

NIAGARA-ON-THE-LAKE, Ont. - Today's recessionary challenges are requiring fleet and supply chain managers to look beyond their traditional spheres to identify opportunities to drive down costs in all ...


NIAGARA-ON-THE-LAKE, Ont. –Today’s recessionary challenges are requiring fleet and supply chain managers to look beyond their traditional spheres to identify opportunities to drive down costs in all aspects of the business.

For the TDL Group (more commonly known as Tim Horton’s), this has meant a multi-pronged approach to improving efficiencies on the road, in the warehouse and across the entire supply chain. Maple Leaf Consumer Foods, meanwhile, recently challenged all its distribution-related employees to look for opportunities to improve efficiencies -not only in their direct area of expertise, but also in other distribution-related departments. And the results for both companies are paying off in a big way.

Mark Mostacci, national fleet manager for TDL Group, shared some insight into measures taken by his company at the recent Private Motor Truck Council of Canada (PMTC) conference.

On the fleet side, Tim Horton’s has slowed its trucks down from 100 to 95 km/h while also training drivers on progressive shifting and eliminating unnecessary idling. As a result, the company’s fleet-wide fuel mileage has improved from 2.96 km/litre (6.96 mpg) to 3.09 km/litre (7.27 mpg). Slowing down just 5 km/h saved TDL $1,279 per truck each year, delivering a fleet-wide savings of $130,458 per year.

Mostacci said the fleet also re-geared its tractors, setting gear ratios at 3.73 to ensure optimum performance at the slower speed and keeping RPMs below 1,500 at cruise.

In the warehouse, TDL Group has converted from fluorescent lighting to T8 lighting and installed motion sensors so lights automatically shut off in areas where there’s no activity. The company has also installed ‘Big Ass’ fans (that’s their actual brand name), to improve ventilation. Meanwhile, TDL staff are required to use re-usable travel mugs when enjoying the product the company’s most famous for as part of its environmental mandate.

On the supply chain end of the business, TDL Group is testing clamp-style forklifts which could eliminate the need for pallets. It’s also looking at adding an extra two pounds of pouch coffee to each case, which could reduce inbound truck volumes by 250 truckloads per year, Mostacci said. Likewise, by increasing the number of cups per case, TDL hopes to eliminate a further 250 truck trips per year.

The group is also considering increasing the quantity of product it can stack on each pallet for high-volume items, eliminating pallet returns by 100 truckloads per year.

In Maple Leaf Consumer Foods’ case, the company has already found ways to drive more than a million dollars per year out of its supply chain costs through five simple steps, according to Kevin Riley, senior director of distribution optimization:

Pallets vs slip sheets: Maple Leaf has re-evaluated its use of slip sheets in place of CPC pallets and found that it can reduce costs by using traditional pallets. “This is due to the fact that we palletize all our product from our plants on CPCs and by not transferring this product onto slip sheets for inter-DC shipping, there was the cost avoidance of additional warehouse handling at both ends,” Riley explained. “As well, this change did not add any significant empty pallet transportation movements -in fact, it helped us balance our CPC transportation flows…We were able to shed considerable costs on both ends, ease up on dock congestion and have better flow through our DCs.” Total annualized savings: $542,635.

Direct plant shipping: “We’re always pursuing direct shipping opportunities,” said Riley. Maple Leaf has 12 secondary processing plants in the Greater Toronto Area, and “whenever we have the opportunity to ship direct to our customer or to one of our seven distribution centres that will ultimately ship to our final customer, we want to do that. Historically, that’s been a challenge. We have clients that don’t have the most robust shipping docks.” Despite some resistance from clients, Riley said the effort to ship more loads direct has been paying off. “There are some challenges with our manufacturing folks; it complicates their life a little bit. But when you explain to them the benefits and the impact it has on our cost structure and our customer service, it’s simple to win them over.” Total annualized savings: $255,886 (expected to nearly double with the recent buy-in of another key client).

Product pallet configuration: Typically, this has been the responsibility of the sales and marketing departments, but at Maple Leaf the distribution folks are now getting involved, Riley explained. He said a quick examination revealed as many as one-third of the company’s pallets could accommodate an extra layer of product. “It’s an easy thing to do, and the right thing,” he said. The company is now looking at ways it can increase package sizes. “These are non-traditional distribution initiatives, but we have a lot of visibility into it, so we can provide recommendations to the company,” said Riley. Total annualized savings: $65,210.

Reducing delivery frequencies: Maple Leaf explored all the regions it serves throughout the country and looked for areas it could work with customers to “still meet their needs, but where possible reduce delivery frequency, increasing load sizes and reducing costs,” explained Riley. This took some convincing with customers, but Riley said a strong business case was made to show customers how the changes could help control costs. Total annualized savings: $100,000.

Maximize re-supply order quantities: Maple Leaf is also looking at requiring full pallet re-supply orders on movements between distribution centres. In some cases, Riley said Maple Leaf was picking product from the same pallet as often as three times per week and shipping it to the same DC. “We can eliminate that,” he said. “Sending full pallet quantities once a week saves on labour, better maximizes our equipment and saves some money.” Total annualized savings: $100,000.

None of the cost-saving measures discussed at the PMTC convention involved slashing safety and compliance budgets, and that’s a good thing according to Angelique Magi, national director of transportation with Zurich Insurance. She urged fleet managers to keep their safety department intact -even during challenging times. Cutting costs on safety will ultimately drive up insurance costs, she warned.

She explained the insurance industry traditionally relies on two sources of revenue: underwriting and investment income. We all know what’s become of investment income in recent months, meaning insurance providers are more dependent on profit generated through underwriting. If an insurer sees a fleet reducing its safety programs, underwriters will get nervous and premiums may go up, she warned.

However, for fleets that absolutely must find ways to reduce costs, Magi offered four tips on how to reduce costs without sacrificing safety: reducing road evaluations from yearly to an 18-month cycle; reviewing driver abstracts on an 18-month cycle rather than twice yearly; conducting driver meetings by Webinar, rather than face-to-face; and outsourcing the safety officer position to a reputable firm (although she added insurers would prefer this be done on a temporary basis as an in-house safety manager is preferred).


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