Outsourcing helps cut forms purchasing costs
Outsourcing forms management saves 17% annually, says Barbara Sheppard, purchasing manager, Southeastern Freight Lines (left), shown here with Margaret Jordan, account executive, Reynolds & Reynolds.
By SUSAN AVERY -- Purchasing, 5/20/1999
For Southeastern Freight Lines, an interstate carrier based in Columbia, S.C., outsourcing forms management to a single supplier has resulted in more accurate reporting, warehouse efficiencies, and process improvements--saving about 17.5% annually in buying costs for two years.Previously, Southeastern had stored its business documents in a parked truck at its Columbia terminal, recalls Barbara Sheppard, purchasing manager. From the terminal, Southeastern trucks would pick up and deliver the forms to other company freight yards. Since inventory was taken monthly, any daily accounting was impossible. Southeastern has 53 locations throughout the U.S., from Virginia to Texas.
"The process was quite costly," says Sheppard. "We maintained inventory at each freight terminal, which meant we had to assign employees on site to distribute the forms. We had little control over inventory. Users reordered indiscriminately, eliminating any savings we could have gained with volume orders. Also, the system was difficult to manage. Because distribution wasn't integrated into a comprehensive document management system, sometimes we would temporarily 'lose' a truck filled with forms. Actually, the truck would be on its way to another location, but our records did not indicate that information," Sheppard adds.
So it's little wonder that Southeastern wanted to get out of the forms distribution business and drive costs out of its document program. When the carrier's forms supplier, Jordan Graphics, was purchased by Reynolds & Reynolds three years ago, the document management company suggested a program that includes document analysis, consultation, printing, warehousing, and distribution from a central location. Southeastern spends approximately $1.7 million annually on business forms and supplies with Reynolds.
Since that time, Reynolds has achieved nearly perfect scores on Southeastern's supplier report card called Supplier Certification Analysis, which monitors such measures as inventory control, billing accuracy, and customer service. Last year the supplier received the carrier's "excellent quality" award. For 1999, it's maintaining a 99.8 average score for three months running. Southeastern, for its part, has been a finalist in the Malcolm Baldridge National Quality Award competition.
To maintain its quality standards, Southeastern's strategy is to form close, long-term relationships with suppliers. "Because excellence is a way of life here, our suppliers are not only the 'best of the best,' they hold to the same principles of quality as we do," says John Cross, vice president of corporate services, and Sheppard's boss.
To introduce control, streamline processes, improve quality, and reduce costs, Reynolds recommended an integrated document management program which includes such services as on-demand reports, distribution from Reynolds' Charlotte, N.C., business service center (BSC) warehouse, and consulting services of an account executive, Margaret Jordan. From the Reynolds BSC in Charlotte, Southeastern Freight trucks ship inventory to 50 terminals and 29 corporate locations.
As a result, Reynolds has eliminated storage at the freight terminal, saving the cost of maintaining personnel on site to distribute forms. A reporting system now provides Southeastern managers with access to information when they need it. Detailed reports help to minimize back orders and inaccuracies.
With up-to-date information, Sheppard and Reynolds' account rep can closely monitor costs so they stay within monthly budget guidelines. The reports are particularly valuable for monitoring requisitions and usage and providing more control over local users. "We monitor requisitions very closely; we know the usage of every location," says Sheppard.
Inventory status can be pulled whenever needed. For example, through the ship-to-location report, Sheppard can see which Southeastern locations have received orders and the day of delivery. The inventory report gives exact order status, and any item can be tracked to see if it's in stock or on back order.
"Reynolds monitors where we stand with an item--quantity in storage, what we've used, and the levels of investment to ensure we are staying within budget guidelines," says Sheppard. "Knowing exactly what we've spent is very critical to us."
The supplier tracks its own performance, producing an annual Reynolds Performance Report that highlights account activity for the year, documents cost savings, and suggests improvements for future cost savings. RPR tracks billing accuracy, timeliness, order status, number of orders, order value, inventory value, the number of products in inventory, inventory turns, usage, value of items used, value of line count, and items withdrawn.
"The RPR helps us maintain a high level of accountability," says Jordan. "It's both a report of where we are within the program and a road map for continuous improvement."
With tight control and an efficient distribution process, cash flow has improved. Southeastern is billed by Reynolds for what's shipped, a real benefit for the carrier, versus having to pay up front for all items in storage. State-of-the-art technology installed at Reynolds' Charlotte warehouse helped Southeastern save $60,000 in 1998. Greater efficiencies make it possible to increase inventory turns to 6.15 per year, up from 2.1, thereby cutting storage costs.
To increase inventory turns, computerized picking sets up the quickest pull sequence for products. Moreover, a very narrow aisle (VNA) operation enables the worker to pick both sides of the aisle at the same time. "VNA enables us to better utilize our human resources," says Mike Proctor, Reynolds BSC operation manager. "With the Reynolds system, half the manpower is needed to pull the same number of products in half the time."
Proctor and his team work closely with Sheppard and Jordan. "They are very responsive," says Sheppard. "There have been times when we've had an emergency order and the warehouse team has rushed the material out of the warehouse to our truck terminal the same day--even on weekends."
Before the transition to Reynolds, the process from faxed order to shipment was two full days. With the Reynolds "advantage network"--a client-server-based fully integrated network that facilitates document purchasing, requisitioning, reporting, and billing--orders are keyed in, picked, and shipped in a single day. "We ensure Southeastern's orders are out the same day we receive the order," says Proctor. Using computerized reports, he can determine exactly what was shipped out of inventory on any given day.
Reynolds continually looks for process improvement opportunities. For instance, clubbing--running several printing jobs at once on the press--has significantly reduced Southeastern's production costs.
A Reynolds-created bar-coded "pro label" has streamlined Southeastern's work processes. Shipment data imprinted in the bar code is scanned into a computer system that tracks freight delivery. When Southeastern customers need shipment updates, the information is immediately available.
Outsourcing forms management
At Southeastern Freight Lines, outsourcing forms management has resulted in:
* Cost savings of 17.5% per year for the past two years.
* Increased cash flow.
* Reduced value of sitting inventory by increasing turns from 2.1 to 6.15.
* Despite 11.2% growth in number of freight bills, document costs per shipment rose only 8%.
* Streamlined workflow processes.
* Back orders and incorrect shipments virtually eliminated.
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