W ith the robust economy driving its business in an exciting new direction, Lowe’s Companies was poised for dynamic growth in the late 1990s.

Included in the plans was a push to “go global” by concen-trating on expanding markets in the U.S. and later Canada and Mexico. But at the time, the retailer says it was using several carriers that it felt were providing unreliable levels of service, thus, presenting a wrinkle in the plans.

To help the company meet this challenge, Steve Palmer,

the company’s vice president of transportation, commu-nicated a simple yet effective vision for its transportation operations: Minimize the number of carriers bumping store docks and make sure Lowe’s vendors use those car-riers based on a routing process that awards lanes based on performance.

Palmer pulled together a team to help drive improve-ment into Lowe’s transportation processes; however, they quickly realized that to get to where they needed to be, the

LOWE’S FINDS SAVINGS AT

THE CORE BY PATRICK BURNSON, eXeCUTIVe eDITOR

By raising the bar on performance metrics with its core carriers, the home-improvement retailer captured significant supply chain savings as it grew over the past decade. But stripping out the cost took time and a dedicated team that encouraged its key transportation partners to target the same goals.

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2008 nAsstrAc shiPPer oF the YeAr

company had to encourage improvement from its partner carriers and get to the right handful of carriers that were on the same page with the retailer’s growth plans.

A new LTL/parcel transportation program was set into motion. Led by Robert Long, Lowe’s director of transpor-tation development and LTL/parcel transportation, the company developed a core carrier program to reduce the number of service providers down to a tight-knit group that could execute what corporate spokesmen defi ne as a

“superior customer approach.” For Long, this was more than a marketing pitch. It really meant getting the carriers to sing the same tune when it came to serving the end-user.

According to Long, communication of this value was vital to the company’s expansion, and it was crucial that carriers either buy into the concept or opt out. And, over

LOWE’S FINDS SAVINGS AT

THE CORE

Robert Long, Lowe’s director of transportation development and LTL/parcel transportation

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time, the process paid off in even more ways than the company origi-nally planned.

It was the team’s work in executing its core carrier concept that earned Lowe’s the 2008 NASSTRAC Ship-per of the Year award. The award is given in recognition for outstanding achievement in transportation and distribution and is presented annually to a member of the National Ship-pers Strategic Transportation Council (NASSTRAC), an organization that provides education, advocacy, and networking for professionals in all areas of transportation, and Logistics Management magazine.

“Lowe’s is very aware of the fact that we can not do it alone,” says Long. “We recognize that strong busi-ness relationships with our employee owners, product suppliers, and ser-vice providers are required. It’s this intense team effort that brings it together—and everyone wins.”

Driving to the coreHaving mapped out the core carrier

program for their service providers, execution then became key; and it was up to the carriers to help Lowe’s achieve its objectives. According to Long, Lowe’s had strong business relationships with many of the carri-ers, and their support of the standard

transportation contract already in place demonstrated their willingness to work with the retailer in a seamless manner. The ultimate (shared) goal was to build good faith with consumers.

“The core carrier program is really an extension of our business philoso-phy,” says Long. “The ideal carrier is one that has the optimal mix of geo-graphic coverage, effective service

and cost, the right amount of capacity to grow with Lowe’s, and the willing-ness to work with us and our product suppliers to constantly improve busi-ness processes and service levels.”

Through Lowe’s analysis pro-cesses, Long and the team began selecting the best-in-class carrier for each lane. He admits that this selection took time, but he also knew

Shipper of the Year, continued

From left to right: Robert Long, director of transportation development, LTL/parcel transportation; Dean Tracy, director of import transportation; Kevin Perry, director of inbound truckload, intermodal, and rail; Doug Chellman, director of outbound truckload

It’s been a dynamic decade for the entire Lowe’s transportation team, and its core carrier program is only part of the story.

According to Dean Tracy, the company’s director of import transportation, Lowe’s has grown from a large regional home improvement chain to a multi-national with stores in all 50 states, Canada, and planned growth into Mexico in 2009. Lowe’s sources its goods and services domestically and globally.

“For our international operation, the most significant improve-ment has been Lowe’s ability to match containers with key sail-ing schedules,” says Tracy. “A more predictable international transportation service has resulted thanks to core carrier performance.”

There is a common theme to how Lowe’s now manages its supply chain and transportation programs, Tracy adds, noting that the company has an intense focus to drive out variance, reduce service time, and improve the quality of delivery. The programs have resulted in dramatically eliminating claims and

decreasing the freight invoice payment cycle. “Longer-term improvements will continue to come from improved reporting and drill-down capabilities and continued emphasis to focus the efforts of our core carrier program,” he says.

Doug Chellman, Lowe’s director of DC outbound transporta-tion, agrees, observing that without effective carrier capacity and reliable service, Lowe’s abilities to leverage its supply chain would be compromised.

“You can’t connect the nodes of a network without the right carriers,” says Chellman. “Those carriers must be depend-able, committed to a common strategy, and must execute daily to established performance requirements. In many instances, the distribution processes we have created improved the carriers’ abilities to deliver freight. The carrier’s service has become faster and more predictable for Lowe’s and, as a re-sult, the carriers’ revenue streams have become equally more predictable.”

new focus on transportation

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that creating the right metrics and communicating them regularly to the core carriers would be crucial to the overall success of the program. Lowe’s began by developing key mea-sures that are the basis of their entire value proposition.

Each month, Lowe’s published the carriers’ results to the group, which drove competition in providing the very best service. With EDI, this had been converted to a daily process, and carriers were rewarded quarterly for performance by volume adjustments.

Lowe’s also worked with the carriers individually to understand the key driv-ers of cost. Along the way, the team also installed a TMS system that allowed it to identify various opportunities to con-solidate movements and redirect more of their LTL freight to an expanding regional distribution center environ-ment—thereby saving time and money.

“We have been successful in work-ing with our service partners to lever-age Lowe’s DC infrastructure and then place the right volume on the right carriers to connect the supply points with Lowe’s DC’s and stores,” observes Long. “It is all about building the network that will support the cus-tomer, and our carriers are essential in that regard. They help us understand where there are head haul/back haul opportunities, where their service is most effective, and where they can drive improvement in cost.”

Long adds that the data they share is the most important element of its core carrier program information. “This provides the foundation to mea-sure and improve,” he says. “With dedicated support from each car-rier and aid from the transportation teams, business improvement oppor-tunities are identified, the best solu-

tion options are co-developed, and follow-up plans are carried out.”

Combining the cooperation of their core carrier base, establishing teams to work on specific key metrics, and rewarding the performers, Lowe’s has made some significant improvements in each of their key measures over the last four years. Domestic U.S. transporta-tion service time has improved, reduc-ing Lowe’s inventory investment while better utilizing the carrier’s equipment. Furthermore, having the right number of service providers resulted in fewer dock bumps at the stores, reducing wait-time for the carriers.

UnintenDeD conseqUences Kevin Perry, Lowe’s director of

inbound truckload, intermodal and rail transportation, notes that working more closely with its core carriers over the past decade has revealed some positive, unintended consequences.

As transportation challenges sur-faced, the lines between transporta-tion modes began to blur. “A perfect example of this was when hours-of-service restrictions hit the industry,” he recalls. “We began working with the core carriers to build operating relationships between our truckload and LTL carriers. Rather than running independent, complex, multi-stop

TL deliveries directly to the stores, a hybrid TL/LTL in-transit service was developed. Many of the shipments that traveled as TL transit, multi-stop deliveries were now distributed through a merged network.”

This option, he says, has allowed many shipments to be dropped off into the LTL network as one stop on a multi-stop TL run. These shipments are combined with LTL deliveries already going to the store that day. In the end, deliveries to the stores have been streamlined and simplified, allowing better service and a more cost effective solution.

Another “unintended consequence” was a joint project with the carriers to reduce the wait time at the loading dock of the stores.

“Through standardized reporting and consistent follow-up, improve-ment opportunities were identified by both the participating carriers and Lowe’s. Steps were taken to speed up the time required for a live delivery,” says Perry. “By making these changes, Lowe’s throughput at the stores improved, carrier wait time has been reduced, and ultimately the product is placed effectively on the shelf for the customer. We view this project as an ongoing process now.”

And for Lowe’s, the numbers speak for themselves. Days for delivered service have been reduced faster than the rate of change in length of haul. Merchandise velocity has improved, and distribution freight has increased from 50 percent to 75 percent since its inception. And the delivery quality has improved so that it can be man-aged on a project basis. L

Patrick Burnson is Executive Editor of Logistics Management

Shipper of the Year, continued

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“the core carrier program is really an extension of that business philosophy. the ideal carrier is one that has the optimal mix of geographic span of coverage, effec-tive service and cost, and the right amount of capacity to grow with us.”

—Robert Long, Lowe’s

“For our international operation, the most significant improvement has been Lowe’s ability to match containers with key sailing schedules. A more predictable international transportation service has re-sulted thanks to core carrier performance.”

—Dean Tracy, Lowe’s