optimize your distribution network to improve service
TRANSCRIPT
2013 MHI™ Copyright claimed as to audiovisual works of seminar sessions and sound
recordings of seminar sessions. All rights reserved.
Sponsored by: Presented by:
Mark Kaiser, Manager,
Distribution Operations
Myers Tire Supply
Jeff Cook, President,
TransTech Consulting
Optimize Your Distribution Network to Improve Service
Levels while Reducing Costs
2
Agenda
Session Description
Presenter Introductions/Bios
Myers Tire Supply Overview
Project Background
Strategy / Design / Implementation
Results
Session Description
Title: Optimize your distribution network to improve
service levels while reducing costs
Description: Determining the optimal distribution network
that reduces operating costs, improves overall service
levels, simplifies the supply chain and addresses the
concerns of various stakeholders at the most economical
costs
Key Takeaway: Understand how Myers Tire Supply
turned their distribution network right side up and the
process to get there
3
Presenter Introductions/Bios
Mark Kaiser Manager, Distribution Operations for Myers Tire Supply
39 year career at Myers Tire Supply and Myers International
Project Lead for Business Model Change
Jeff Cook
President of the Strategy Group for Blue Horseshoe Solutions
25 year career at TransTech/Blue Horseshoe, Jeff has led many Supply Chain transformation projects throughout the US, Canada, Europe and Australia
Focus on Business Strategies, process improvements, functional designs and Warehouse Management System specification and implementations
4
Myers Tire Supply Overview
Myers Tire Supply, a subsidiary of Myers Industries headquartered in
Akron, Ohio Largest wholesale distributor of tools, supplies and equipment for the tire service
and undervehicle repair industry in the United States.
Products range from tire balancers and alignment systems to service tools,
TPMS valves, wheel weights and other supplies.
Myers Industries (NYSE: MYE) is a diversified, international
manufacturer of plastic and rubber products for industrial, agricultural,
automotive, commercial and consumer markets. Leading manufacturer of plastic material handling containers and pallets, plastic
flowerpots and planters, rubber tire repair products and custom products.
Visit www.myersindustries.com to learn more
5
Project Background
In 2010, Myers Tire Supply was operating as follows: 33 Branch locations containing Sales Offices & Warehouses
Each location run independently.
Branch Managers responsible for Sales, Inventory and Operations.
Majority of products received into Central warehouse in Akron then
replenished to branches
Various Product Mix
throughout the network.
Branch managers
defined and planned
own inventory.
77% fill rates, multiple
shipments per order
from different locations.
6
Order to Delivery Cycle
30% of shipments from Akron
Delivery requirement is highly dependent on a salesperson’s visit
A varying percentage of orders are required same day or next day
FedEx Delivery Days (Shipments)Fed Ex
Delivery
Time
Available
Service (33
Sites)
Actual
Service *
1 Day 99.2% 81.2%
2 Days 0.8% 13.5%
> 2 Days 0.0% 5.4%
* Actual 1 Day from Branches is 90.8%
Day 1 Day 3+Day 2
$
$ $
Orders
Taken
Shipments
Delivered
Orders Entered
& Shipped
# Days from Order Entry to Shipment
OE to Shipment
Time
Branch to
Customer
Akron to
Customer
Same Day 38.4% 29.7%
1 Day 30.2% 53.2%
2 Days 9.1% 3.8%
> 2 Days 22.3% 13.3%
Few orders are received and entered on the same day
7
Project Statement
Distribution model enhancements required to support growth
and profit level strategies Different Branch distribution strategies create challenges on supply chain
management
Economic slowdown has created opportunities within the market
Sales Organization to focus on sales opportunities, not distribution
Need to provide exceptional service to meet or exceed
customers’ expectations Customer service varies for each order given a lack of product availability
Order turnaround and delivery timing to be consistent
Distribution must maintain flexibility to meet changing market
demands New products, regionalized expansion value added services
8
Realization
Completed Strategy Study / Set Direction Assembled team to include all functional areas
Evaluated and understand current state
Interviewed internal and external stakeholders to understand needs
Identified and analyzed potential network alternatives
Selected Strategy that best fit Myers’ current & future goals
Designed Network Facilities, Organization, Transportation Network, Inventory Systems…
Implemented / Transitioned Internal and External Stakeholders communication
Established detailed schedule and consolidation plan
Coordination / project management of all activities
Results
9
Strategy Design Implementation Results
Strategy - Project Objective
Determine the optimal distribution network that reduces
operating costs, improves overall service levels, simplifies
the supply chain and addresses the concerns of various
stakeholders at the most economical costs
Specific components quantified as part of the study include:
High-level supply chain design
Geography, space, staff and inventory
Technical infrastructure requirements
Costs and benefits including operating expense, balance sheet
and P&L impact
Implementation timeline
10
Strategy - Network Design Alternatives
Improved Current
Centralized inventory management
Separation of Distribution and Sales
18 Branch Network – 1 Day Delivery Model
Branch locations - Equipment: A& B Items Only (> 7 of 26 wks with sales), Avg. 9 items per branch
- Supplies: Full stocking (> 0 of 26 wks with sales), Avg. 2,900 items per branch
Akron as Replenishment Hub
Bada, Patch, Perfect, and Specialty continue direct to branches
4 DC Network – 2 Day Delivery Model
Akron, Memphis, Denver, LA
Each location is full stocking, Avg. 5,200 items per DC
All products received directly from vendors into each location
11
Strategy – Recommendations
Corporate
CURRENT BUSINESS ORGANIZATION
Akron
(Dist. Hub)
Sales & C.S. Distribution
Branch
Manager
Customer
Branch
Profit
Center
Product
Product
Product
Pro
du
ct
Ch
arg
e
Corporate
PROPOSED BUSINESS ORGANIZATION
Akron
(Dist. Hub)
Sales & C.S. Distribution
Sales
Manager
Customer
Sales
Profit
Center
Product
Product
Pro
du
ct
Ch
arg
e
** Distribution expenses allocated based
on activity **
Separate Distribution from Branch Profit Centers
12
Strategy – Recommendations
3 Facility Distribution Network Highest annual operating savings of all alternatives
Maintain 2-day delivery to all customers
Consolidated inventories improving in-stock position
Maintain LA Branch with Myers’ Truck delivery to support
unique market
Centralize inventory management functions in Akron
ERP system enhanced to provide centralized inventory
management and distribution expense allocation to branch
profit centers
Sales tools provided to each salesperson
Complete sales reorganization by realigning sales managers
13
3 Facility Distribution Network LA Branch maintained to support specific market requirements
14
3 Facility Network – Delivery Days Shipments - 40% in 1 day and 97% in 2 days
15
16
Strategy – Recommendations
Maintain / improve order to delivery cycle while improving fill
rates Order to Delivery Cycle
3 Facility
Network Shipments
Delivered
Orders Taken
Entered &
Shipped
Day 1 Day 3Day 2
Baseline (33
Facility)
$
$ $
Orders
Taken
Shipments
Delivered
Orders Entered
& Shipped
17
Design and Implementation
6 months to complete detailed design & facility/systems prep
15 months to roll in all branches
Activity J J S O N D J F M A M J J A S O N D J F MNetwork Process Design
Communications PlanOverall Network Design & TransitionDRP/Inventory Mgmt & Financial Struct.Sales Reorg & Sales Tool DesignMTS Organization Design
Systems and Facility ImplementationFunctional DesignEnhancements / PurchasesEquipment and Process Installation & TestingTraining & Start-up
Communications Meetings with Branch ManagersGroup Meetings with Sales PersonnelInitial Communications to CustomersReview of Impact with Sales PersonnelOn-Going Internal & External Communication
3 DC Facility Roll-out ScheduleRegional Facility Start-up 1 1 1
Branches Consolidated into Akron 1 1 2 2 1 1 1 1 1Branches Consolidated into Memphis 1 1 1 1 1 1 1 1 1 1Branches Consolidated into SLC 1 1 1 2 1 1 2 2
2010 2011 2012
A
18
Design of Network Components
Design 2 new DCs, Redesign
Akron DC to handle direct
shipments
Detailed design document
Define new Inventory
management functionality
Revamp Sales & Distribution
organizations
Define implementation /
transition plan
Finalize financials / set budgets
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Implementation / Transition
Customer/Market and Internal communication
Facility lease arrangements / sell owned facilities
HR Staff realignment
Develop ERP enhancements, Match system to business
requirements
Configure ERP systems rules and data, Setup warehouse
Install Material Handling Equipment (MHE)
Test & Train
Validate Systems, Equipment & Process functionality, train key
resources
Begin the inventory moves
20
Implementation – Risk Mitigation
Phased roll-out; proven systems and processes before next
go-live, all but eliminate Customer shipment risk
Physically remain in existing Akron facility location, eliminating
significant product moves.
In the beginning, selectively choose branches having least
change to customers
Retain product and company knowledge of existing
Management and Hourly workforce for initial start-up
No moves scheduled for end of month periods
Strong design and implementation team
Collect and monitor KPI, adjust immediately
Project Organization - Implementation
T. Smith, R.
Nunez, M.
Pallotta, E.
Williams
Steering Committee M. Kaiser – Project Lead
J. Cook – Project Management
T. Derusso, G. Jones, D.
Nauert, R. Pallotta, D.
Swaisgood, B. Vellucci,
M. Vinay
Project Management
Committee:o Scope
o Schedule / Transition
o Budget (Entries, Tracking &
Summaries)
o Risk Management
Co
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Implementation Sub Teams
TransportationR. Pallotta
oMyers truck delivery transition
o Lift gate services contracts
o FedEx and Commercial carrier
arrangements
oSecure trucks for transition /
material moves
Facilities/MHER. Pallotta
oSite selection and lease
arrangements
o Facility closing schedule
oAcquire MHE and other hardware
o Install MHE and facility
infrastructure components
o Test components
o Inventory load / transfers
oIn
tern
al o
pe
ratio
ns
oC
usto
me
rs / M
ark
et
/Su
pp
liers
oC
on
tin
ge
ncy P
lan
s
Da
ta C
ap
ture
& R
ep
ortin
g –
T. D
eru
sso
oId
en
tify d
ata
co
llectio
n n
ee
ds
oD
ete
rmin
e h
ow
to c
ap
ture
da
ta
oC
ap
ture
ba
se
line
an
d fu
ture
sta
te
oT
ruck d
eliv
ery
info
rma
tion
oW
ill-ca
ll an
d c
ash
sa
les
oO
rde
r to d
eliv
ery
cycle
Salesperson Tool T. Derusso
Staff/OrganizationG. Jones
oStaffing plan details
oHiring / attrition plan details
o Training / education plans and
materials
oDaily operating schedule
oPlan execution
Financial SystemM. Vinay
o Implementation schedule
o Functional requirements
documentation
oSystems enhancements completion
oSystem configuration
oUnit testing
DRP / Inv. MgmtB. Vellucci
o Implementation schedule
o Functional requirements
documentation
oSystems enhancements completion
oSystem configuration
oUnit testing
o Inventory depletion and transfer
plan
o Implementation schedule
o Functional requirements
documentation
oSystems enhancements completion
oSystem configuration
oUnit testing
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Business Model Change - Results
Akron DC + 33 branches
420,000SF
Avg. 1,000 SKUs/branch
77% Fill Rates
38% same-day shipping
38% 1 day, 69% 2 days
Operating expenses SG&A
Network Inventory
Company owned facilities
3 DCs + LA branch
190,000SF
Avg. 5,000 SKUs/DC
99% Fill Rates
98% same-day shipping
40% 1 day, 97% 2 days
$3mm reduction
$4mm reduction
$1 million
Invest inventory and operating expense reductions in new
sales strategies and product introductions
More distribution flexibility – more quickly and efficiently
react to business / market changes
Simplified supply chain allowing for increased
management control
Shorter overall distribution cycle improving billing cycle
Better position the business for a competitive market &
growth
Better leverage our resources to support a sales
organization positioned for growth
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Business Model Change - Results
Awareness / Risks
Implementation and ongoing management systems /
processes to control centralized inventory management
Impact of local inventory / facility presence
Controlling impact of competitor propaganda and market
perception while closing facilities
Change to Will Call/Customer Pick-up business
Impact of the business change on Myers personnel
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Questions and Answers
25
2013 MHI™ Copyright claimed as to audiovisual works of seminar sessions and sound
recordings of seminar sessions. All rights reserved.
Speaker: [email protected]
Home Page: www.myerstiresupply.com
Speaker: [email protected]
Home Page: www.transtechconsulting.com
Visit ProMat 2013 Booth# 3482
For More Information:
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