Reducing Cost, Improving Service
Editor's note: A special AFFI meeting session featured an interview between Refrigerated & Frozen Foods Editor Bob Garrison and Ron Pillsbury, vice president of planning, distribution and customer service for McCain Foods USA. Following are excerpts from that conversation.
Refrigerated & Frozen Foods: Please tell us about McCain Foods' logistics group. Also what's been happening behind the scenes?
Ron Pillsbury: We have five directors -- responsible for Warehousing, Transportation, Demand & Supply Planning, Customer Service and Network Optimization. Following Keith Orchard's promotion, logistics was realigned under a senior vice president [Dave Cowperthwait] who now is responsible for our entire supply chain, including procurement, manufacturing and logistics. This organizational change already is driving improved synchronization and optimization throughout the entire value chain.
R&FF: What are you most proud of involving your group?
Pillsbury: We've achieved an overall "Customer Fill Rate" at 99.5 percent and continued moving toward a perfect order metric. Meanwhile, we continue to improve in other areas. We are establishing an optimum run strategy, which is statistically based to calculate safety stock and demonstrated run rates to deliver consistent and reliable service levels. This will reduce our finished product inventory and improve warehousing costs.
R&FF: Please describe McCain's approach to transportation and work with trucking and rail firms.
Pillsbury: The goal is to utilize a preferred [rail and truck] carrier base where we work together to understand operational processes and eliminate or minimize inefficiencies, such as detention or demurrage.
We're executing a root-cause analysis program to better understand these issues. Meanwhile, we want to establish paperless environment for freight invoicing where payments are made quickly and accurately, in 14 days or less.
R&FF: What are a few of your goals in the transportation area?
Pillsbury: Our 2007 goals are to implement a new transportation management system. We will better optimize rail and truck use and reduce our costs by $1 million this year. Meanwhile, we want to reduce inter-company transfers and shrink our overall carrier base by 10 percent.
As far as new initiatives are concerned, I'd note that we're embracing a business process-driven approach in all transportation areas. We're instituting a companywide, 360-degree "Transportation Quality Review" to identify carrier and shipper (meaning McCain) strengths and weaknesses.
We are implementing metrics throughout all of our transportation and warehousing functions. In this process, scorecards are highly visible.
That's in keeping with the saying, "Measure what you manage and manage what you measure."
R&FF: How would you describe McCain's approach to warehousing and work with third-party storage providers?
Pillsbury: Our warehouse management approach is truly a collaborative, team-oriented and participative style where we secure and build strategic alliances. I'll note that we manage two private distribution centers in Othello, Wash., and Easton, Maine, and those operations help us benchmark with our 3PL partners. This helps us better understand and appreciate demands placed on our warehouse operators. We recognize that they're dealing with higher utility costs, labor management issues, safety and security requirements, etc.
Overall, we're working to improve our operational flexibility, improve our technology platform, better manage variable costs and increase our capability. Last year saw us reward or "feed" our top-performing partners with additional business opportunities. Meanwhile, we reduced our exposure to less strategic warehouse operators.
R&FF: What are a few of your goals in warehousing?
Pillsbury: We have a program called "Project Biggie," which is designed to rationalize the number of warehouses we use by 25 percent. We're already ahead of plan in this area and are working with other key stakeholders within McCain -- including sales, marketing, operations and customer service -- to create a best-in-class distribution network that will meet customer demands as well as our internal financial objectives.
R&FF: Are there any new initiatives for your PRW partners?
Pillsbury: We are actively talking with our preferred 3PL partners about issues involving supply chain security, technology enablers, reduced dock turn times, environmental responsibility, cost rationalization and improved customer service levels.
R&FF: What issues concern you? What are a few goals going forward?
Pillsbury: I thinking about offsetting the large price increases we're seeing, relative to commodity costs (cheese, fuel, etc.). What can be done to offset these increases so as not to increase our price to the market place or reduce the profit margin?
As mentioned earlier, our goals are to link, synch and optimize demand and supply throughout the value chain. That means integrating our supplier base with our manufacturing facilities and optimizing inventories to reduce costs and improve customer service.
Ultimately, the goal is to understand and consistently meet and exceed customer expectations in regards to product quality, consistency, and delivery.