US Foods Utilizes Chainalytics Transportation Sourcing Methodology to Enhance Carrier Network and Lower Cost
When you’re one of the largest foodservice distributors in the country, maintaining your transportation budget and network proves no easy task. US Foods operates from 60 locations across America, with clients ranging from local restaurants to government institutions. As a company offering 350,000 deliverable products, successful transportation management remains a crucial business component that one cannot afford to get wrong.
So to ensure the affordable and quality service associated with the US Foods brands could be maintained, US Foods partnered with Chainalytics’ transportation experts for assistance in their sourcing and bidding process for truckload and intermodal transportation. The project revolved around an inbound transportation network consisting of 3000+ shipping lanes, which represented 75% of the annual budget for both refrigerated and dry goods. The collaboration sought to establish a balance between inbound cost and service as well as a predictable transportation forecast for the following 12 months.
Now a company as successful as US Foods is no stranger to transportation management, but a project this size required sourcing optimization technology to effectively analyze and leverage large amounts of data and knowledgeable resources who possessed years of experience implementing and utilizing such technology in transportation categories. As a member of Chainalytics’ Freight Market Intelligence Consortium (FMIC), US Foods was familiar with Chainalytics areas of expertise and understood how a partnership for this project would benefit their organization.
With a unique distribution network like US Foods possesses, there were a number of variables and requirements to take into account when planning a sourcing event of this scope. One has to consider compliance regulations and specialized handling requirements when transporting certain food products, less consistent lane volumes associated with an inbound network, and the additional challenges often created by the large number of stops that may exist on a given route. These challenges were key components to incorporate into the project’s overall plan and outcome.
Chainalytics’ team members presented US Foods with their proven sourcing methodology consisting of in-depth data analysis to create the future-state network to be bid, a multi-round bidding process with customized feedback between rounds, and an iterative scenario optimization process to move from a theoretically optimal solution to a business optimal solutions that could truly be implemented. The approach began with the leverage of FMIC data to determine current market rates in order to set reasonable expectations once carrier bids were acquired. Consultants also worked closely with the US Foods project team to gain an understanding of their transportation service requirements in order to determine and verify competitive drivers for the bidding stage and assist in building the event documents. Furthermore, Chainalytics compared US Foods base of carriers against the Chainalytics carrier database to identify additional sources of carrier capacity to consider in the sourcing event.
Given the timing and objectives that US Foods had for the engagement, Chainalytics and US Foods decided to conduct a two round bid process utilizing the transportation sourcing module of US Foods’ Transportation Management System (TMS). The teams worked to incorporate the bid response parameters, fuel and accessorial charges, seasonality, lane definition, and network information the carriers would need to submit a comprehensive response back to US Foods. After validating and evaluating carrier responses from round one, Chainalytics provided analyses to help determine which vendors best met the needs of US Foods and qualified for second round consideration. A unique feedback grade was then provided to each carrier on every bid they submitted to provide those carriers with some guidance in order to help them revise their proposals in the second round.
After the second round of bidding had taken place, Chainalytics lead the analytical process of validating bids and optimizing the carrier proposals in conjunction with US Foods’ business and operational objectives. Team members ran tests of alternative scenarios and brainstormed with US Foods any additional business objectives or conditions that may become a factor. These scenarios were built into the sourcing optimization tool to evaluate the financial impact to the network of various decisions and in some cases to ensure specific carriers received specific awards based on operational needs. During this process, the team adjusted scenario constraints, analyzed the results using various data visualization tools, and then made additional adjustments until they found that appropriate balance of cost and quality they were looking for.
Chainalytics consultants also supported US Foods during the final negotiation stage and awards process by developing and communicating the award packages and contract rate addenda the carriers would need to execute and return. The rate and award information was then formatted for upload to the TMS to ensure that US Foods could execute the plan that had been created during the sourcing event.
Upon completion of the sourcing event, US Foods was able to reduce their overall transport provider base by approximately 35%, increase the amount of freight awarded to asset-based providers, and identify over 6% in total savings. “Working with Chainalytics was incredibly beneficial for our inbound transportation operations,” states Carlos Nunez, Director of Carrier Development at US Foods. “Their expertise and methodology made this process run smoothly and effectively. We look forward to future collaborative opportunities.”
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