Implementing a Rate-Cost Optimization System to Fuel E-commerce Growth with Boscov's Dallas Foard

by Vector | Jun 3, 2021 7:33:00 AM

“ The system allowed us to load the rates for all of our parcel carriers into one centralized location and to shop rates between different carriers and service offerings without having to rely on the human factor. It gave us a system which allows us to force the operator to use the best possible service at the best possible rate with the fastest delivery for the customer's purchase.”

 

Full Transcript: 

Francis Adanza: [00:00:00] Welcome to the down to freight podcast, where we sit down with transportation, logistics and supply chain subject matter experts to discuss digital transformation projects. I'm the host of the show, Francis Adanza and with me today is Dallas Foard, director of corporate transportation at Boscov's.

 Dallas, great to have you.

Dallas Foard: [00:00:20] Thank you. Good to be here.

Francis Adanza: [00:00:23] Could you please tell the listeners a little bit about yourself, your company, and what you're responsible for at Boscov?

Dallas Foard: [00:00:29] Absolutely. I have a little bit more than 30 years of experience in the logistics field supply chain.

My background covers everything from dedicated fleet, private fleet, common carrier also truckload, LTL import and export. I've, pretty much at one time or another done just about everything in the supply chain or logistics field. I am currently employed by Boscov's department stores as the director of corporate transportation, which gives me responsibility for a hundred percent of the transportation aspects of the company, including our private fleet, all of our inbound and outbound freight.

And that includes ocean and domestic as well. And it also covers all of the equipment that we use also, including company cars, all the leased vehicles, everything that we do. So, Boscov's is the single largest independently owned department store chain in the United States. We currently have 51 stores.

We are based out of Redding, Pennsylvania, and our store footprint covers basically the mid Atlantic and up into the Northeast States. The company itself is about a hundred years old and is privately held.

Francis Adanza: [00:01:43] Awesome. It sounds like you have a lot of responsibilities over there and have to oversee a complex network of transportation between all of the stores and the Cross States.

Dallas Foard: [00:01:54] it draws on a lot of my experience that I've gained over the years. The nice thing about being in this position now is a lot of my background was on the other side of the table where I was the carrier and now as the customer. You have the added advantage of having sat on the other side of the table and understanding both sides of all the different issues and the aspects of everything.

Francis Adanza: [00:02:21] Awesome. So we're here to talk about digital transformation and technology. Is there a recent project or current project that you'd like to share?

Dallas Foard: [00:02:31] Yeah, probably the most prominent project that we've done over the last few years was the implementation of a rate shopping system in our. Our e-commerce business.

E-commerce for our company, along with just about every other retailer in the company in the country over the last 12 months has become a much bigger portion of our business due to the whole COVID pandemic going on. Whereas in the past, Boscov's was probably more along a 65, 35 split or 60 40 split with the majority of our business being actually in our brick and mortar stores.

And e-commerce being an adjunct to that. It's flipped the other way. Obviously while our stores were closed, we were mandated closed for a better part of three or four months by law. And at that point in time, e-commerce was the be all and end all of our business. The brick and mortar sales have since accelerated from there.

We're back probably about a 50, 50 split at this point in time. And as things continue and we hopefully get through things with the pandemic and we get more people vaccinated, we'll get more foot traffic in and out of our stores. When we did open up, we saw a huge surge in business people dying to get back into the stores that kind of plateaued off after a while.

And like I said we're literally sitting at about half and half between e-commerce and brick and mortar sales at this point in time.

Francis Adanza: [00:03:58] So what was the problem you were trying to solve with the rate shopping solution?

Dallas Foard: [00:04:03] What the Pitney Bowes system that we implemented allowed us to do was to load the rates for all of our parcel carriers into one system and provided for us to rate shop between all of those different carriers and different service offerings and different rates without having to rely on the human factor, it gave us a system which allowed us to systemically force the operator to use the best possible service for the purchase at the best possible rate

with the necessary carrier. We implemented this back in 2019, which was very fortuitous. It's almost like we could see what was happening, what was coming, but we didn't, unfortunately we didn't have the crystal ball and everybody else did. We didn't see it until December of last year or December of 2019, like everyone else.

But like I said, the timing was very good. It took us somewhere in the 9 to 10 month range to do the implementation. Do all the coding with Pitney Bowes load all the rates and services into the system. But what the system has done is it allows the operator to take the product that has been sold.

Basically put it on a scale which automatically weighs it. They input a set of the package size, which is a set of fixed sizes. We use standardized either poly bags or boxes and they simply select which one they've used. And then based on that information and the order information, which is already loaded in the system, will then select the best service and the best carrier at the best rate and print the label for the operator.

So it takes all the human factor out of everything, and it has shown us a substantial savings. We did this primarily in order to give our customers better service and save us money. But like I said, it just happened to be very fortuitous and we did it at the exact right time for the fact that our e-commerce business was going to go through the roof.

And for the fact that it allowed us to take advantage of multiple carriers, so that unlike a lot of other companies, we were not hurt due to the huge spike in parcel business last year. We didn't have an issue with being shut down and not being able to ship parcels like a lot of our competitors did.

Francis Adanza: [00:06:25] Why was this important to the business?

Dallas Foard: [00:06:28] Like I said, it was just very good. The timing on our part. I'd like to say it was fantastic planning on my part. But unfortunate. Totally. I can't claim that it was just good time. And we did, we, like they said, we did it basically to improve our service and save money and it just happened to be the perfect time to do it.

The other advantage it's given us is that as we move forward, the system will allow us to load rates and services for additional carriers. One of the projects we're working on right now is looking at getting into a regional carriers as the major carriers. The FedEx and ups are U S P S is of a world become more and more, I guess I would say swamped with the volume we're looking at alternatives and that may be either going with a regional carrier or whatever. So we are currently working through a pool of regional carriers to see who we want to work with, how we can work with them best. And this system will allow us to load those into it as well, and give us even greater opportunities to move our merchandise.

Francis Adanza: [00:07:36] So what was the impact on the business?

Dallas Foard: [00:07:39] Unlike a lot of other companies, we do our fulfillment out of our stores. We do not have a fulfillment center. And our e-commerce system allows when the customer goes online and orders, it has an algorithm which will then assign the order picking to whichever store has those items. It's designed to select the store, that if it's a multiple product order, it's designed to select the store that has either all of the items or most of the items so that we can minimize the number of shipments.

And then once it's selected those, it'll look at which store is closest so that we can minimize the cost perspective as well, we then load the order into the Pitney Bowes system, which then selects the service that's appropriate and sets up the shipment from there. That's the other advantage to this system is that once that's done and it prints a label, it also automatically enters the shipment into whoever the carrier is, enters it into their system and sets up the pickup.

So we don't even have to have the operator call for pickup. It's all done automatically.

Francis Adanza: [00:08:44] That's amazing. So it sounds like it's really streamlined the backend operations while improving your customer's user experience.

Dallas Foard: [00:08:55] Absolutely. And like I said, it's taken the whole, the human factor out of all things.

So we're no longer reliant on a shipper to select who the best carrier and the best service is. We're now using a computerized system to do that.

We're no longer subject to I like the FedEx guy better than the UPS guy. Now it's based entirely on who gives us the best service at the best rate.

Francis Adanza: [00:09:19] So for those out there that are thinking about implementing a rate optimization system are there any words of advice or tips or gotchas, things that they should avoid as they consider embarking on a similar journey?

Dallas Foard: [00:09:34] Yeah, it took us a long time to go through the selection process. Pitney Bowes was not the only company we spoke with.

We did settle on them because we felt their system gave us the best opportunities and B was the most expandable for us to give us a place to move forward as well. I think the biggest advice I could give anybody is look at your physical operation, see what fits best and then go to the market and see who has the software. That fits what your needs are, but even more than that, look at what your needs are going to be not now, but 5, 10, even 15 years down the road. None of us want to replace software in a year or two. We want something that is obviously going to work for us somewhere into the hopefully far distant future. Unfortunately in the way advancements in software and systems go, it's not going to last us forever. There's going to be something that comes along better, but at least hopefully we'll get enough time out of this to get a good return on our investment and to show that we've proven the aspect or the project here that you wanted, and we can then take that information and move to the next step.

Francis Adanza: [00:10:50] Yeah, definitely. So you touched a little bit about expandability in next steps. What is next for you in Boscov over the next 18 to 36 months?

We have a lot of different projects that we were hoping to or planning to implement last year that obviously got pushed off because of what happened with COVID.

But some of the things that we're looking at is, especially on our e-commerce business, a portion of our e-commerce businesses is direct ship from our vendors. Now we're looking at expanding that as much as we can, when a customer goes online and order. Product, they can actually order products that we don't sell in our stores and they will get shipped directly from our vendor.

Anytime we can do that, there's obviously a cost savings to us because we're not handling it. We're not shipping it into our distribution center. We're not handling it and deconsolidated in the distribution center and then shipping it to a store and placing it on the shelf. So we get out of all that additional costs.

And we still get credit for the sale. So if we can push that aspect of the business, we'll continue to do that. A couple of the other things we're looking at, like I said, we're looking at implementing regional carriers as part of that. We're looking at how does zone skipping work for us?

Can we consolidate shipments that are going say to the West coast, into a truckload, ship them to a carrier that's in Arizona. And have them break bulk at that point in time and deliver from there. And how does that save us versus shipping everything as an individual shipment? The challenge to that is, like I said, since we do our fulfillment out of our stores, it's very difficult for us to look at consolidating the truck loads, going to one location.

So we're looking at a, what are our alternatives to that? Are we better off moving into a fulfillment center or do we stay with the model that we have now and find a way to make it work, where we used to use a different algorithm and our e-commerce system to aim specific regions at specific stores and allow us to consolidate that way?

The advantage to fulfilling out of our stores is we're not maintaining a separate inventory in a fulfillment center. We're not adding brick and mortar costs to what we already have, and we're not carrying a bigger inventory. Our entire inventory is on the sales floor. So the challenge to that is of course how do you deal with somebody buying a product online at the same time, some big buying it in the store.

We've had to work through that a few times and we've made it work surprisingly well and not run into too many issues with that. Like I said, that's where the challenge comes in between. Do we look at going to a fulfillment center eventually? Or do we stay with the store fulfillment model?

If we want to get into things like zone skipping, do we want to get into can I like I said, can a load, a truck load and ship it to the West coast and save my costs there? Can I do the same thing? Surprisingly enough, our two biggest markets for e-commerce are California and Florida.

For a store that's based in the Northeast, that's a challenge. So we put a lot of miles on our packages and we seriously are taking a good, hard look at our zone skipping opportunities to save some of that money. So I guess that's our two biggest opportunities on the e-commerce side is to look at zone skipping and how we handle fulfillment.

And then look at pushing our direct shipments from our vendors as well, to see if we can save more money there. There are other projects we're looking at. We're like everybody else, we're dealing with all the challenges in import business right now. We're dealing with capacity issues on the truckload side.

We're looking at potentially making some changes in our LTL. We have two consolidation operations that we run one on the West coast, one on the East coast now, for our LTL. We are very aggressively looking at, can we expand on those consolidation points, add more and say on our LTL, can we look at going with a single source LTL provider who gives us the chance to optimize our LTL and do more multi-stop truckload shipments versus individual LTL shipments.

So there are a lot of projects we have going on right now. That we will probably look to roll out. The fun part is we now have two years worth of projects crammed into one year because we have all of 2000 twenties projects and all the things that we had on the white board already for 2021. So it's going to be a challenging summer.

There's an old Chinese proverb that may you live in interesting times. It's not really a proverb, it's a curse. The more interesting it is, the more we work and the harder things are for us. But it's a challenge. And one that I and my staff look to rise and defeat here.

It definitely sounds like you and your team have a full plate and I'm glad you were able to carve out a little bit of time to share some of your lessons learned from that rate optimization project, as well as how you're thinking about things strategically over the next coming years.

So given all of those projects that you have underway and the amount of growth, it seems like you probably need some extra helping hands. Are you looking to fulfill positions across your organization?

Dallas Foard: [00:16:17] We are hiring not only on the retail side, in our stores, we're also hiring in the distribution operation as well.

There's a couple of things. We are definitely hiring. Like, a lot of people right now we're having a lot of difficulty hiring. Unfortunately there don't seem to be a lot of people that are out looking for a job right now. So that's a challenge for us. Both in the distribution operation, as well as in our private fleet, we're like everybody else, we're struggling to keep drivers or get enough drivers. The other thing is unlike a lot of our competitors or other retail companies, we're expanding. We already have a new store slated to open this year and another one on the books for next year.

Hopefully we'll continue to do a new store every year from there on, which has pretty much been our standard over the last eight to 10 years. We're putting a new store into Ohio this year. Rumor has it that next year, we may be looking at going further into New England or something along those lines.

So we're expanding our footprint and continuing to build our business. One of the aspects that I really like about this company versus some of the other companies I've worked with in the past is that this is slow, steady, controlled growth. Instead of going out and seeing how much I can do quickly and then running into trouble later.

Boscov's has a very good business model. We're very proud of it. And we think that we're here for the long haul and continue to be the largest independently owned retail chain in the country.

Francis Adanza: [00:17:49] So what's next on the horizon for this particular program or any other technology initiatives you have planned?

Dallas Foard: [00:17:55] We're hoping that 20, 20 or 2021 will be a better year for everybody than 2020 was, and moving into 2022 we'll continue to expand and be able to bring some more good people on board. 

Francis Adanza: [00:18:09] Awesome. I think you hit on a lot of key points. There was a lot of great advice and feedback that I think other SMEs will appreciate.

 



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