Getting transportation right

When Jerry Johnson joined Archway nearly seven years ago, the company was growing fast. Its distribution centers, located in 13 metro areas throughout North America, were serving some of the nation's largest firms—Fortune 1000 and Fortune 500 corporations. And its transportation program was in trouble.

The problem lay in the back end of the transportation operation—in the billing process, to be precise. As a provider of marketing fulfillment services, Archway spends on the order of $25 million a year to ship everything from gift cards to store signage to locations throughout the continent on its corporate customers' behalf. While Archway had no trouble getting shipments out on schedule, customer billing was another story. It was taking Archway as long as nine months to get invoices out to clients. That created complications with cash flow, receivables, and working capital. And customers were none too happy.

What brought matters to a head was Johnson's discovery that not only was billing slow, but sometimes it wasn't happening at all. Clearly, something had to change.

Systems failure
Since its founding in 1952, the Rogers, Minn.-based Archway has made a name for itself in the marketing fulfillment services business. It has developed systems for delivering such diverse items as gift cards, point-of-sale materials, promotional goods, and marketing materials to company locations, retailers, auto dealers, and the like. Last year alone, Archway sent out nearly half a billion gift cards to 150,000 retail stores.

Some of the services Archway provides are extremely complex. For example, it has an arrangement with a leading fast-food restaurant chain that not only calls for it to procure print material for the client's 10-times-a-year promotions but also to distribute the material to restaurants based on a profiling system that fine-tunes shipments for each individual register, window, and drive-through location in the chain's system.

Archway's client list includes some of the best-known names in American business: Ford, Chrysler, General Motors, Lowes, Staples, American Eagle Outfitters, Colgate, Owens Corning, McGraw Hill, and others. It serves those clients from 21 distribution centers that collectively occupy more than 4 million square feet of space—and that is growing, says Johnson, who is the company's vice president of continuous improvement.

But while Archway shines in the services it provides its customers, until a few years ago, its transportation management did not measure up. The source of the problem was the system Archway was using for transportation rating and customer billing. The company had built the system internally, spending hundreds of thousands of dollars in the process. But by nearly every measure, it did not work.

"It was a complete failure," says Johnson. "And it was proving very costly."

Just how costly was revealed by an audit Johnson conducted shortly after he arrived in 2004. The audit uncovered unbilled charges going back five or six years. With limited supporting material, Archway was forced to take a significant write-off. "We could not charge for those shipments. We had no idea what they were," Johnson says. Obviously, it was time for a new system, and Johnson decided the company's best bet was to call in a transportation specialist.

Quick turnaround
Archway selected Echo Global Logistics Inc., a Chicago-based third-party transportation management specialist, to take over management of its transportation. What Echo brought to the partnership, Johnson says, was a combination of "relationships, competence, and knowledge." On top of that, he says, Echo brought top-notch negotiating capabilities. "That was a big piece," he says. "And they gave us a textbook implementation plan."

Johnson set an aggressive timeline for the project, giving Echo just 45 days to turn matters around. But he says he had full confidence in the new contractor. "We felt we could partner with them, roll up our sleeves and get things done," he says.

Johnson reports that he was particularly impressed by the way Echo employees jumped right in, meeting with Archway's staff to develop a full understanding of the operation—Archway's reporting requirements, manifesting and operating systems, and so forth. "They worked with our teams to see what we were doing," he says. To ensure a smooth handoff, Echo kept a full-time team at Archway throughout the transition, and continues to maintain an on-site team at Archway today.

Among other improvements, Echo developed a rating plan for its client's small packages. Of Archway's approximately annual $25 million transportation spend, 60 to 65 percent goes for small package shipments. The rating system, built off files from Federal Express, provides rating and routing for all small package shipments and established billing rules for clients.

The result was an immediate reduction in billing times. Where it once took as long as nine months to complete a billing process, it now happens in days. Each Sunday, FedEx uploads information on shipments through the previous Wednesday to the Echo system. "[The Echo system then] goes through rating and routing, kicks out exceptions, gives the team a day to fix those, and on Wednesday loads into the Archway system," Johnson explains. "We can track by job number and client, and show billing rules. We get two files from Echo: One goes to a financial application, the other to a billing application. They have really helped us manage our day-to-day business."

Big payoff
Johnson sees Echo as a true business partner for Archway. "We have open books," he says. "We know what each other is doing."

Furthermore, he says, Echo has steered Archway toward new business. "They have helped us come to the table with existing business clients and new clients," Johnson says. "And I am comfortable putting them in front of a client."

He cites as an example Echo's analysis of one client's spending. "Based on their knowledge and leverage in the transportation industry, they showed that they could save 30 percent on small package shipping and 35 percent on LTL based on current rates. That's on a million dollar spend. That's savings the client gets."

Johnson says the partnership has paid off in multiple ways for Archway. "The relationship has meant millions and millions of dollars, and it has helped us secure business," he says. But it's also been a two-way street, he adds. "It has helped us, and it has helped them."