THAT'S AN ORDER

Did you ever notice that the declaration “It's not your father's Oldsmobile any more” turned out to be false? It was your father's Oldsmobile. No one believed it, and now the time is near when it won't be anyone's Oldsmobile at all. Meaningful change is often subtle; not flashy, but very important.

I was reminded of that ad and its slogan recently when I spent a very pleasant morning with Gary von Plewe, director of distribution and materials for Culligan — the company made famous by the TV ad with the all-American housewife calling “Hey, Culligan man!”

By contrast with GM, I was pleasantly surprised to discover that when you say “Hey, Culligan man!” today, you're talking about the twenty-first century version. It's actually a different Culligan: a leaner, more sophisticated, and more effective organization, even with the product lines and market much as they were when that slogan first registered on our psyches. Culligan has a lot to teach us about the ways to benefit from “culling” the best of what's available to work with, be it old or new.

Small is beautiful

The occasion for my meeting with von Plewe was a discussion of Culligan's ongoing continuous improvement initiatives and, specifically, the application of Internet technology to the age-old problem of keeping suppliers up to speed on compliance requirements. But first, let me paint in the background of this picture.

Culligan is a subsidiary of the global French firm Vivendi Environmental. The company is part of the Consumer and Commercial Group and one of 166 companies under the same water-related umbrella that comprises US Filter. The headquarters facility in Northbrook, IL, houses corporate offices, manufacturing operations, and the major U.S. distribution facility. A second, smaller distribution center in Rancho Cucamonga, CA, services western states.

A number of years ago Culligan embarked on a program to refine its operations in many ways. It has adopted a methodology of planning well and carefully, and then implementing change in sensible increments at a reasonable pace.

Culligan's secret — as with many Japanese companies — is the knowledge that numerous small, effective, permanent improvements can have much greater impact and more value than a few large improvements can. By looking everywhere and often, and instilling a sense of the value and expectation of continuous improvement, surprising progress can be made. The process doesn't have to be glitzy. The result is seldom a home run, to risk a sports analogy, but a much higher “on base” percentage. The following are three examples of Culligan's prowess:

Culligan became ISO 9001-certified in 1997. The certification is by no means unique, but the point to be noted is that this standard forces the organization to define, adhere to, and document the use of its defined processes. It requires attention to detail and a focus on quality that is conducive to ongoing improvement in performance no matter what specific measurement a company may choose to apply. This approach has yielded many benefits for Culligan.

A second example flows from that certification program. Also in 1997, Culligan sought to simplify its transportation process by reducing the number of carriers in favor of those who were most reliable, consistent, error-free, and cost-effective. In roughly three years it has achieved a remarkable level of improvement and currently has fewer than ten carriers providing all inbound and outbound services.

The same scenario has been played out with suppliers. Beginning with 1,200 domestic suppliers in 1997, the company now works with about 700 vendors and expects to reduce that number by another 200 over time.

Something old, something new

While none of that's new, or even unique to Culligan, what is atypical is the accomplishment of each task, as evidenced by the results. Process improvements have been significant and lasting. There's real change and real improvement afoot, not just talk.

That brings me to the foreground of our picture and something quite new. The latest Culligan undertaking in this continuous process is an application of Internet technology to vendor or supplier compliance. In early 2000, while discussing the potential value of Internet and Web technology with one of its carriers, von Plewe was introduced to a newly created service organization dedicated to Web-based compliance services.

Among the myriad options for Web use in the supply chain and logistics and distribution, here was a narrowly focused solution designed to tackle one of the toughest problems in our industry — vendor compliance. And what seemed initially to be a specific tool for a problem of limited scope has proven to be much more.

“We thought the opportunity was mainly to easily get the compliance information and updates to the right people at the supplier,” says von Plewe. “We learned a lot more, especially about what had not been communicated. Perhaps we initially raised more questions than we answered.” Did the information get to the vendor at all? Was it disseminated to the right people? How well are purchasing personnel communicating with the vendor's staff? Does anyone connect with the supplier's transportation or inventory management team?

FrontLine Logistics, the organization Culligan found, has embarked on an ambitious but very effective task — to connect suppliers and customers over the Web for compliance purposes. In doing so, the fledgling company is tackling one of the most opportune areas in which to apply technology and a problem whose resolution will benefit greatly from the power of the Internet. All one has to do is consider the range of departments involved in logistics-related work and the associated information within any one organization to appreciate the potential of this kind of communications tool.

The objective is to create a compliance database that is Web-accessible. Once a company elects to participate, it can be up and running in about six weeks. The application developer handles much of the configuration and set-up work, including notification of suppliers about the program. As Bill Standish, FrontLine president, puts it, “We do most of the heavy lifting so the customer doesn't have to. The customers provide the set-up information and we go to work.”

Typically, suppliers are prioritized and invited to participate via letter. Both parties pay a small fee for the service that is readily offset by the benefits on both sides. Special arrangements can be made for the infrequent user.

Updates and changes to the database are forwarded to the Web service provider, who in turn updates the database and notifies any number of individuals on the supplier side at no additional cost. FrontLine Logistics guarantees up-to-date and accurate information, plus timely notification for the supplier, the customer, and any carriers involved. For suppliers who are not Web-enabled, the communication can be accomplished through an automated fax function, with much the same result.

It's easy for suppliers to access information at their convenience. “We can change our requirements very quickly and be assured that all participants are notified of any change quickly,” says von Plewe. “We also get confirmation when the supplier accepts the changes.”

Rich data bank

Within the scope of the current compliance database are online functions to support most of the requirements companies expect from their suppliers. In Culligan's case, the requirements reflect an early stage in the process and are not especially complex, given the capabilities of the application. Pages are both clear and readily accessible to anyone with a password and Internet access.

Label requirements

As is the case with each function (and most changeable fields within the function), the database contains a “date last changed” field readily visible to all users. The label description identifies the requisite symbology and the nine categories of information that must be present on the label, defines the text field content, and specifies the preferred label size, among other things. This is followed by an illustration of a typical, correct bar coded label.

The function can also accommodate other requirements beyond those needed by Culligan.

Packaging requirements

In addition to defining the general nature of inbound containers, carton dimensions are defined (each field here also contains a “date last changed” field for each dimension). Although weight limitations are not defined, the field is standard on this page.

Packing list requirements

If the product requires certification documents, their placement in the order is called out. The number of copies is also specified.

Bill of lading requirements

Culligan requires purchase order numbers on both bills of lading and on all carrier invoices. If more detail is required, the page has ample room to display it.

Carrier selection

This function, which accounts for many expensive supplier errors, is as nearly bulletproof as possible. The page has fields for weight, origin, and destination (states), with pull-down menus. When those fields are filled, the system either identifies the correct carrier or prompts the shipper to call Culligan's routing desk for specific instructions. And it's fast. I ran ten or fifteen options varying from a few hundred pounds to truckload shipments in just a few minutes.

ASN form

At present, for Culligan, this is optional. The page provides fields for the PO, ship date, estimated time of arrival, carrier, number of pallets and cases, and comments. Multiple fields are also available for item number, description, and quantity. As these become a requirement, the ability to populate the fields automatically from the shipper's warehouse management system or host system will become much more important. This information affords many other functions within the organization the ability to plan and react earlier, thanks to improved accessibility to up-to-date data.

Non-compliance requirements

For Culligan's purposes, penalties are represented as another requirement, triggered by a shipper failure. Consistent with other criteria, this function has been kept simple. Only a single level of penalty approximates Culligan's cost to correct the mistake, and it is invoked at the purchase order level only.

The non-compliance feature has no provision for multiple problems or multiple instances of label problems per purchase order, and no penalty for violations of other inbound shipments contained in the database, although the application could easily accommodate them. The degree to which this page could accommodate some of the more complex chargeback or penalty schedules developed by large retailers was not evident.

At press time, the first 80 targeted Culligan suppliers were using the service; 200 will be participating very soon. In the near term, the company expects to apply the 80-20 rule: The proportion of its suppliers who provide 80% of the inbound product will be essential participants. Everyone else will have an opportunity to get involved in the future, but not on such a high-priority basis.

Culligan expects to recoup all of its costs and more by the time it completes phase two of the implementation (250 vendors). Von Plewe expects to continue to realize new and unanticipated benefits for some time to come.

Because information dissemination is rapid, accurate, and low-cost, and because the recipients can be as numerous as the supplier wants, usually using existing technology, the method appeals to the supplier.

As a general rule, both suppliers and customers share a goal of consistency, compliant performance, and a hassle-free path to sales growth. The easier and more reliable the process, the more likely it is that these goals will be met and the better the relationships among all parties. And the better the communications (the right information, presented to the right people — not just those the sales force talks to — in a timely, complete, and accurate form), the better the outlook for a high level of compliance.

Set-up is largely handled by the developer, with minimal participation from the client staff and without any IT effort. The program has a low participation cost and the prospect of a robust return (typically a few months) through cost avoidance on both sides. By engaging an outside resource to facilitate the process, compliance becomes independent of staff turnover. The value of integrating all suppliers into this program quickly makes it one of the criteria in vendor selection.

Culligan thinks highly enough of the program, even at this early stage, that this spring the firm plans to promote use of the compliance database by Culligan's more than 800, mostly independently owned dealers.

Object lessons

As with all compliance processes, problems during start-up can stem from problems in getting to the right people. Because parts of the supplier compliance process may reside in purchasing, information systems, transportation, customer service, operations, and shipping, among others, it's often necessary to engage upper management in the process to get the right people involved to launch the program with a particular supplier.

FrontLine's experience suggests that an automated third-party approach to compliance is new and requires some adjustment. (But then many people were unsure, if not downright skeptical, about the potential of the Internet itself just a few short years ago.) Costs may be disproportionately higher for vendors whose sales are comparatively low. Special arrangements for those low-end exceptions will pay high dividends when most, if not all, suppliers join the program. As FrontLine becomes more experienced in the process, the rollout will doubtless be streamlined further.

FrontLine's operations manager, Amy Buddelmeyer, cites a number of issues that affect the start-up process (with an estimated completion time of six weeks):

• contacting the right person at the supplier's company;
• managing the customer's expectations;
• managing the customer's information-gathering process;
• defining and maintaining a formal schedule for adding suppliers to optimize benefits;
• communicating with suppliers about the program; and
• the procedure for communicating with FrontLine about changes in the database content.

Back to the future

Although the product is not there yet, plans for its enhancement and elaboration proliferate. Just think about what this tool could offer your logistics program:

• information for resource planning;
• the host site becoming a clearinghouse for purchase order and shipment status;
• near real-time information updates;
• linkage to the client's inbound planning staff for allocating dock space and time and labor resources;
• ASN processing and inbound delivery appointment scheduling (automated or manual); and
• messaging to purchasing, receiving, and customer service, based on inbound detail and updates.

It should be clear that the long-term scope and range of support this type of program can provide is very wide. Its impact and value are hard to estimate, but should be noticeable.

Intelligent life

Online compliance management is a good example of the powerful benefits of an intelligent application of currently available technology. FrontLine Logistics has a staff of seasoned logistics professionals behind it — obvious from the way in which the software functions. It is especially suited to the compliance approach Culligan has taken: The online database is straightforward, user-friendly, and comprehensive enough to be useful to a wide variety of suppliers. From the supplier side, it is easy to implement and low enough in cost to be practicable, with the capability to significantly reduce chargeback costs in a short time.

What we've seen here is an example of the maturing of both the technology and its users. Intelligent tools like online vendor compliance and prudent strategies like Culligan's provide some early indications of the true potential of Internet technology for our industry. “Hey Culligan man!” may very well be as much a marker of the future as it is of where we've come from.

Ron Hounsell is vice president of software solutions at Tom Zosel Associates, a distribution and logistics consulting firm based in Long Grove, IL. He can be reached by e-mail at rhounsell@tzaconsulting.com, by phone at (847) 540-6543, and by fax at (847) 540-9988 .