TruServ Nails

New Outsourcing Approach

By Leslie Hansen Harps    

Chicago-based hardware cooperative TruServ Corporation has been working hard to streamline its supply chain and improve operations. The company provides marketing, procurement, and logistics services nationwide to a network of 6,000 independent retail outlets and rental service companies. TruServ operates 12 distribution centers and a private fleet of more than 400 power units.

 As part of its improvement process, TruServ three years ago started looking at a new model for handling transportation. "We were using a legacy system that worked well, but was very reactionary," says John Strauss, director of inbound logistics for the company.

 "We were looking for an opportunity to move ahead to a more proactive and systematic approach, and to integrate all our locations using the same procedures," Strauss explains.

At the same time, TruServ wanted to convert from an operation where vendors routed more than 80 percent of freight prepaid to taking a more active role in  inbound transportation management. This move was seen as a strategic initiative that was of great importance to TruServ.

 "We were undergoing some drastic changes and realized that, if we wanted to get to the next level of performance, we couldn't continue to do what we were currently doing,"  Strauss says.

 To make the change, TruServ decided to partner with a 3PL with demonstrated success. A cross-functional team was named, headed by John Strauss. It included senior representatives from merchandising, logistics, transportation, and buying, with input from finance.

 The company's previous experience with logistics outsourcing had been limited to drivers and transportation equipment, so the team invested roughly a year in planning and preparing for the change.

 "We had great support from the top; this has been a strategic initiative," Strauss says. Top management, including senior vice presidents of logistics and merchandising, have been fully engaged and supportive of the change.

Not A Guinea Pig  

 "We had several different vendors in mind," Strauss recalls, most notably companies with proven retail experience. "We didn't want to be a guinea pig. We were looking for someone that had already blazed the trail."

 The team sent a Request for Proposal to about one dozen vendors. While a few declined to participate, eight potential third-party providers made presentations to TruServ. After narrowing the list down to three semi-finalists, the team conducted on-site visits and talked with current customers.

 After completing a thorough due diligence process, in October 2001 the team selected Transplace Inc., a provider of logistics and transportation management services headquartered in Plano, Texas, in part because of Transplace's proven model and methodology.

 Just a few months later, TruServ began its transition from a reactive, freight-prepaid environment to one that is preplanned, with Transplace providing collaborative transportation planning and execution services in support. TruServ looked to Transplace to spearhead the implementation. The 3PL used a methodology called LADDERS, an acronym for Launch, Analyze, Design, Develop, Evaluate, Rollout, and Support. Tammy Rice served as Transplace's dedicated implementation manager.

 At a kickoff meeting between TruServ and Transplace, the partners clarified roles, responsibilities, and expectations.

 In addition, notes Chad Palmer, vice president of integration for Transplace, the companies discussed a scope change process, agreeing that anything that came up during the implementation that would change the relationship between TruServ and Transplace would be documented, outlining the impact on cost, personnel, and timing. This process laid the groundwork for dealing with the types of changes that inevitably occur during a new relationship of this magnitude.

From As-Is to To-Be  

 The next step was for Tammy Rice to document the existing, or as-is, process and plan for the transition to the to-be process. In addition, TruServ interviewed Transplace's candidate for its account manager, Andy Trout, who would be situated in TruServ's headquarters in Chicago. Trout came onboard in January of last year, working next to John Strauss.

 "That was by design," Strauss says. "Given the size and complexity of the change, we wanted that ongoing dialogue."

 Now in the second year of the relationship with Transplace, TruServ has nearly 600 vendors using the new collaborative process, and is seeing a definite improvement in cycle time and carrier performance. "We're seeing improved vendor performance metrics, and a big improvement in our private fleet's productivity," Strauss says.

 TruServ's experience with logistics outsourcing has been very successful. The relationship is so seamless that Strauss thinks of Transplace as TruServ's logistics team.

 "We don't like to refer to the operation as Transplace, because that connotes a 'we and them' environment," he says.

 It's all part of his commitment to treating the third-party provider as an integral part of TruServ's operation.

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