Manual processes can only get you so far. Eventually, they hinder your ability to grow and scale, which was the challenge CytoSport faced a few years ago.
CytoSport is a fast-growing, premier manufacturer of sports-oriented nutritional supplements. Its most-recognizable brands include Muscle Milk, CytoMax, and Monster Milk. The company’s powder and ready-to-drink beverages are manufactured and warehoused in a 150,000 square foot, state-of-the-art facility in Benicia, CA. From there, the products are distributed to co-packers and distribution centers (DCs) nationwide.
Historically, CytoSport managed its entire supply chain manually, including transportation management. The company relied on brokers and third parties as the primary source for obtaining lift capacity, and it spot-rated all shipments.
CytoSport’s overall logistics and distribution network was inefficient, as was its warehouse layout and business processes. Co-packer requirements added further complexity to an already-complex network. Since warehouse management was manual, inventory accuracy and replenishment planning for three DCs was a challenge and caused backorders.
Simply put, CytoSport was experiencing tremendous business growth, but its manual processes couldn’t scale, which prompted management to examine its entire supply chain to rationalize its structure and reduce transportation costs. The company’s objectives were to implement systems to control costs and to capture historical data for Business Intelligence (existing systems did not capture shipment details nor freight spend).
First, CytoSport modeled its network and determined it could save 15 percent of its freight costs by optimizing its network and implementing a transportation management system. Since implementation cost was a key decision factor, the company selected a software-as-a-service solution. Once it implemented the TMS, CytoSport’s first priority was to manage all outbound shipments to customers — from carrier selection through freight payment. Concurrent with its implementation, the company designed new business processes to capitalize on the capabilities of the TMS and staffed its organization appropriately.
CytoSport compiled an RFQ package and contracted with four carriers for each major lane, then used the TMS for rate shopping, carrier selection, and load tendering. The company also integrated the TMS with two existing ERP applications to facilitate more efficient communications. This integration provided a clear view of the status of all shipments from a single screen.
CytoSport replaced manual freight payment processes with automated invoice matching and payment with complete financial reporting. Now, the TMS captures detailed freight costs by customer and by channel, which the company uses in strategic network planning. Additionally, CyberSport uses the ability to compare carrier costs, combined with the cost- by-lane data, in carrier rate negotiations.
The control of operations and improved performance was achieved by implementing Management Reporting. CytoSport now uses carrier report cards to manage carriers’ allocations and ensure on-time delivery. Providing carriers with predictable freight volumes has had an additional benefit of reducing the amount of missed pickups.
What were the results? CytoSport saved $2.1 million in the first year — over 20 percent of its annual freight bill. Transitioning from brokers to asset carriers provided a huge cost reduction. Its new bid process secured the best available rates. The day-to-day management through the TMS ensured those rates were used appropriately and that all transportation processes remained consistent. Financial data from transportation was made available for planning and analysis through easy-to- understand management reports.
Using the TMS as a platform, CytoSport’s logistics team applied Six Sigma DMAIC methodology to their transportation program. In year one, they defined the transportation issues that needed to be resolved and used the system to measure and analyze the data. As they discovered new solutions, they began to make improvements at both a tactical and strategic level.
Additionally, they used the TMS to model changes in their distribution operation. The results of the study showed a transportation savings by moving west coast distribution less than 80 miles east, from Benicia, CA to Stockton, CA. In addition to realizing a net $300K annual savings, moving the shipping function to Stockton freed up valuable warehouse space and allowed CytoSport to expand its manufacturing operation in Benicia.
The bottom line: If you’re looking to take your company to the next level of growth and performance, but you’re still using spreadsheets and manual processes to manage your transportation operations, the time has come to invest in a transportation management system that can power your growth and scale with it.
Peter Yost is the Director of Business Development at MercuryGate International. He has 30 years of experience in technology sales & marketing, including 10 years in the logistics industry. He is responsible for MercuryGate’s domestic and international partner ecosystem that is expanding the company’s reach into Europe, Asia and South America. Peter has a BBA in Marketing and Information Technology from Georgia Southern University.
Note: This post is an excerpt of a case study originally published by MercuryGate.