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The Alliance: Domestic Multimodal

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World Trade 100/SMC3 Alliance Awards

December 10, 2012
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One of the challenges of being a retailer in a world dominated by giants is driving your supply chain to perform at or above the level of your big-box competitors. At 840 retail stores in 43 states, Tuesday Morning has a substantial footprint. As an upscale, deep-discount, off-price retailer specializing in domestic and international designer and name-brand closeout merchandise, it also faces stiff competition.

As its name implies, Tuesday Morning receives new merchandise shipments weekly so that customers can return often to find the shelves replenished with new items. That business has changed since Tuesday Morning opened its doors in 1974, but its philosophy and promise to customers has not. By its own description, that brings in over 9 million loyal customers on a unique “treasure hunt” for high-end, brand name products.

The combination of stiffer competition and a volatile economy can test a company like Tuesday Morning. Through the last four fiscal years (ending June 30), the company has held firm on revenues, ranging from $801 million in 2009 to $828 million in 2010, and most recently $812 million in 2012. Gross operating profit in the same period ranged from $313 to $330 million, and settling at $324 million in the recently ended fiscal year.

When Brian Turner joined Tuesday Morning as director of transportation two years ago, he says it was business as usual — the transportation spend was what it was. But he looked at the budgets he had to meet and, he says, “We had no choice but to change.” He reached out to Averitt and showed them what Tuesday Morning was doing and asked how Averitt could help.

“They jumped right in,” says Turner. Tony Allison, regional vice president for Averitt, says that Averitt has always been entrepreneurial as a company and it had the advantage of having anticipated what customers would need as it built a menu of service options.

The relationship with Averitt started with Averitt providing truckload services in the Southeast, recalls Turner. Now, Turner looks at Averitt like it is part of Tuesday Morning. The relationship has evolved — and continues to evolve — into a partnership of mutual benefit. “They want to do things that help Tuesday Morning and I want to do things that help Averitt. I think that’s one of the reasons the relationship has been so strong; we’re not in it for ourselves. We’re in it to support each other and to make each other the best that we can be” says Turner.

 

Step by Step

The simple beginnings were that Tuesday Morning was looking for outbound capacity from the Southeast and Averitt was trying to reposition equipment from that region. Tuesday Morning’s issues were much bigger than balancing loads in a single region. With the number and size of its stores increasing and inbound volumes on the rise, Tuesday Morning had to find a way to provide service to its locations more frequently while reducing supply chain costs in an environmentally friendly manner.

Tuesday Morning’s suppliers varied from large manufacturers to small vendors, and it was adding more imports. “My transportation spend isn’t the same as what Target or Walmart has,” says Turner. Instead of simply hammering price, he sat down with Averitt and basically asked, “What can we do?”

Turner recalls, “They were the ones saying, what if we deliver loads on the rail?” Turner says it was a win-win because Averitt said it could give Tuesday Morning the same service and help control costs better. At the same time, it freed some of Averitt’s over-the-road capacity for other customers.

Tuesday Morning continued to expand its use of rail, moving from an average of 40 to 50 intermodal loads per month in 2010 to 70 loads in 2011 and 171 loads per month in 2012.

The two partners took a look at multi-stop truckload and, in an effort to become more environmentally friendly, it moved from three-stop routes to four stops. When you start talking to carriers about multi-stop, says Turner, they start shaking their heads. They don’t want to do it because it ties up their equipment longer. The other carriers’ reluctance and Averitt’s willingness to look at eliminating inefficient routes and expanding multi-stop truckload to four stops paid off, eliminating 86,000 miles and reducing truckloads by 1,114 annually.

 

More Imports

Tuesday Morning was increasing its use of overseas vendors, driving increased import traffic. Those inbound containers were typically routed to Tuesday Morning’s Dallas distribution center (DC) where they were broken down and put into inventory or used to build outbound loads. That was becoming cost prohibitive, says Turner.

One problem he was seeing was that quite a lot of product was arriving through West Coast ports and moving back to the West Coast to the 337 stores Tuesday Morning has along the coast. Discussing the problem with Averitt, the carrier offered a solution in the form of its Portside Services which were launched a number of years ago to transload import containers into domestic truckloads and intermodal containers. In combination with a DC bypass solution, which routes shipments directly to stores without an interim stop at a Tuesday Morning DC, Tuesday Morning was able to cut approximately 19 percent from its supply chain costs.

 

Gaining Intelligence

“All the issues that I face, we faced together,” says Turner. “The Averitt group comes down quarterly and we go through each of these things as we sit around a table and, together, we ask, ‘How can we make each others’ businesses better?’ It’s a very collaborative partnership. One of those outcomes was that Tuesday Morning is working with Averitt to implement a Transportation Management System (TMS). According to Turner, the TMS will contribute to Tuesday Morning’s ongoing efforts to create a more environmentally friendly supply chain.

“With the advent of the TMS service offering, we’re able to take this to a new level because we’re able to look deeper into Tuesday Morning’s supply chain,” says Allison. “We’re able to identify more efficiency and then we can capitalize on those efficiencies by designing a deeper solution to drive more cost out of their supply chain. The TMS implementation was critical to taking us to the next level.”

Turner agrees, adding, “When we went out shopping for transportation management systems, we had one company come out to the facility. They met with us for a week and reviewed our processes. At the end of the week they came to me and said, ‘You’re just too complicated. We don’t have the time or the resources to provide you with a service that’s going to meet your needs.’ That speaks to the complexity of our business.”

But it is also further testimony on Tuesday Morning’s alliance with Averitt. “We’re not like most shippers. We do a lot of things here that have needed updating and changing over the years,” Turner explains. “Most companies will gladly sell you a system and install it and then go away. This has been an evolution with Averitt where they have had folks on site designing a system that makes sense for us and finalizing and tweaking that system so it is exactly what we need and it’s going to help us save costs in the supply chain.”

The TMS is not up and fully operational, says Turner, but Tuesday Morning anticipates marked improvement in inbound optimizations. “We’ll be able to fill those loads coming in,” says Turner. “We’re not typically able to pick up full truckloads inbound. That will give us the ability to marry up vendor moves. Instead of running a 53 footer out there to get 16 pallets, this may enable me to stop at multiple vendors and fill that full 53 footer up on the way,” he explains.

Turner sees the TMS giving Tuesday Morning a business intelligence platform that will allow it to drill down into specific areas of its business by asking: “How many runs are we making? How full are they? How many LTL loads are we running? Where are we picking up at most origins?”

 

Building on Success

DC bypass has been a huge success, Turner reiterates. “We’ll be able to grow that business as we start to build more import loads the way we want them to be built.”

In addition, Turner notes Averitt has an East Coast and a Houston option which will allow Tuesday Morning to direct import boxes to the right port, break off partial loads or full containers, and have that delivered directly to the stores vs. bringing it all to Dallas.

“We know that works and we’ve done it and it saved us 19 percent. We want to maximize that, but we need to make sure we’re building it at origin the way we want it, get the product pre-allocated and then break it out at the port,” says Turner.

He adds, “Rail has been a huge success for us both inbound and outbound. That’s saving us money. It’s a lower rate and consumes less fuel.”

 

Expanding Alliance

Tuesday Morning has more areas it wants to address, Turner notes. As importers, “We don’t have the pull of a Target or a Walmart, which means our boxes sometimes get offloaded in some of the ports to make room for the big boys. We need to have folks on the ground fighting for us. If we’re only moving 3,000 containers vs. a 10,000 or 12,000 Target or Walmart, that’s still product that means big dollars to us. We need some folks out there saying, ‘Hey, all these boxes need to get on there.’ They need to have the commitment with the steamship lines. They need to have the commitment with the ports. They need to have the commitment with the manufacturers to make sure that stuff makes it to the port in time.”

As Turner explained some of his next big issues, his team and a team from Averitt were preparing for a trip to China to “put boots on the ground” and begin to solve some of these issues.

Allison acknowledges, “The partnership that Averitt and Tuesday Morning share is the future of transportation. I think going forward partners will look at these types of relationships that exist and will want to duplicate them because there is just too much to gain. These collaborative networks will be very instrumental in the way shippers and carriers look at each other and it’s going to be critical, if not a necessity, to have these relationships.”

Turner concludes, “My advice would be talk to folks like Averitt first. Explore how these relationships are built.” He admits, “You don’t ever want to put all of your eggs in one basket, but you want to develop a relationship with suppliers who can give you options and provide you with resources that are really going to help.”

He sees continued growth and success with this alliance. “I think when you find a relationship like that and you can develop a relationship like that, there are just too many pros not to do it. I really consider Averitt a part of us. They want us to be successful. They look at it as a long-term relationship, not trying to make an extra couple of cents on a specific lane. They’re here to help us; to support us.” wt

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