Outsourcing provides faster ramp-up for SunnyD

Time is best spent analyzing data, not collecting it

David Hannon, Managing Editor -- Purchasing, 11/3/2005

In today's supply chain, what used to be considered a curveball may well be considered a mundane change. But picture this scenario: after working for more than 30 years for one of the largest supply chains going, you retire thinking you've met every challenge the corporate world can throw you. Then one day your phone rings and it's your old boss telling you the division you used to work for has been spun off from the parent company and desperately needs you to guide its supply chain and logistics organization through what looks to be a hectic transition.

Well, that's more or less the position Jim Glendon finds himself in today as supply chain director at juice maker Sunny Delight. Glendon worked more than 30 years for Cincinnati-based consumer goods giant Procter & Gamble and had taken up retirement when he got the call—P&G was spinning off the Sunny Delight brand and would need someone to get its supply chain and logistics operation up and running from scratch. Sunny Delight was basically a $550 million company with no systems in place.

"It's funny because I had found myself looking for something to do during my retirement when this came up," Glendon recalls. "The person who re-placed me at P&G did not want to go with the spinoff, so it seemed like a good fit for me."

While it may sound like a pretty laid back outlook, Glendon was in fact under the gun to get the new company's logistics and supply chain under control. He was given from May 2004 to February 2005 to get the company's entire logistics network in place because P&G was putting its logistics contracts out to bid in February and would not be including Sunny Delight on that project, so it needed to be flying solo by that time.

One of the first decisions Glendon made was the majority of the transportation work would have to be focused on the outbound distribution of finished product. When Glendon came back on board, Sunny Delight was shipping about 3,000 refrigerated trucks of product per week from four production facilities across the U.S. The company's inbound logistics network, the majority of which is bottling and packaging, is still handled by its suppliers for the most part—an issue Glendon plans on tackling in 2006, but not one he felt he could realistically address right away.

To set up a transportation network to handle such a widespread distribution would either take a large internal organization with a variety of skills or a skilled third-party logistics provider with deep carrier relationships. With such a short ramp-up time, the outsourcing route looked most promising. With that in mind, Glendon tapped some contacts from his P&G days as well as outside resources to get a few 3PLs in the loop and request initial presentations.

"The first thing we did was have [the potential 3PLs] come to one of our plants to make sure they knew what they would be bidding on," says Glendon. After a couple more rounds of more focused presentations and discussions, Sunny Delight signed on with Transplace to handle the company's widespread outbound distribution network including day-to-day management, shipment tracking, freight payment, and carrier claims.

"It was really a question of where could the 3PL bring most value to the equation," Glendon says of the decision to focus on outbound first. "In this case we needed scale, technology, expertise and quick ramp-up. So it would be much more difficult for us to negotiate with a host of carriers on our own because the 3PL simply carries more clout than we do alone. Transplace manages more freight than our former parent P&G does. That was the value of going with them."

The transition to a third party was smoother for Sunny Delight than it might be for some other companies, because of the way operations worked under its former parent. In short, Glendon says the 3PL basically took the place of the internal shared logistics organization at P&G that handled much of the same kind of work.

In a mostly refrigerated consumer-driven supply chain, lean is not only a strategy—it's a necessity. Sunny Delight maintains only three to four days' worth of inventory on hand at its plants and relies on its precisely timed shipments to keep the product flowing smoothly. And visibility is key to running that lean. The information systems that Transplace brought to the equation were another major factor in helping Glendon get a functioning network in place quickly and allowing more immediate improvements to be made.

"That level of visibility has allowed us to spend more time analyzing the data instead of collecting it early on in our post-spinoff days," says Glendon. "[Transplace's] level of systems sophistication is much further than ours. Right now, either weekly or monthly, I can see every shipment from a plant, what we paid vs. contract, what the fuel surcharge was, and more. I can see as fine a detail as I want, and I can easily pull performance by plant, by carrier, by lane, etc."

While Sunny Delight is not a very seasonal business, as a retail supplier it is subject to demand fluctuations based on promotions and marketing campaigns. Those fluctuations make it more difficult to line up transportation capacity in a tight market. Glendon feels handing off outbound to the 3PL can help secure capacity to cover those increases much easier than an internal organization could.

"Our company can focus on promotions, customer service, marketing issues—which are very important in our industry—instead of worrying about how to support those ideas from the transportation side."

As a recent example, over the summer Sunny Delight expanded its product line to include a shelf-stable product, which meant contracting with dry-van carriers. Again, Glendon relied on Transplace to recruit and negotiate with carriers to set up a network.