1. Problem Statement
Today Company controls 18% of the total inbound freight, with vendors controlling 82%.
Today distribution and procurement do not fully coordinate to optimize inbound freight opportunities.
Every 1% increase in the freight Company controls represents approximately $470,000 net to the company.
Today we control 18% of our inbound freight. Supervalu handles 26% and we believe the industry standard to be 35-36%.
We’re not sure if we’re comparing apples to apples however since our business model is very different than the rest of the industry.
We know that there is an opportunity for us to handle more and this gives us something to shoot for.
Every 1% increase in SAL controlled freight equates to approximately $470,000 in Net Revenue.
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2. Backhaul growth
This graph represents Gross Backhaul dollars before expenses. As you can see they steadily increased from 2005 through 2008 only to flatten out in 2009.
If we were to do nothing the forecast for 2010 would be similar to 2008 & 2009.
We’re confident that if we implement the changes we are about to share with you it will create a process to handle more inbound freight and capture more backhaul dollars.
We’re not sure how much or how fast but by getting everyone pulling in the same direction we’re sure to see the increases return.
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3. Process Flow Map Fresh dept in alignment with all depts
Backhaul opportunities identified prior to vendor selection
We started out by mapping the process as it exists today and identified the changes we need to make to accomplish our objective.
1. Move away from blended delivered pricing to division specific FOB plus freight pricing.
2. We will add the Fresh Department Special Buys to the backhaul review process.
3. The Fresh Department will align itself with the processes followed by the other departments.
4. We will move some of the process steps to examine the possible backhaul opportunities prior to the final vendor selection.
5. Doing this will eliminate the need for the warehouses to review Bills of Lading looking for opportunities.
6. The New Item Form will be updated to include a CPU form insuring that we have all the necessary information at the beginning of the process.
Updated New Item Form
Added Fresh Special Buys to backhaul review
Eliminate manual review of BOL at DC’s 3

4. Control Measures Distribution Procurement
Part of a balanced performance scorecard that is reviewed each period
Procurement
Backhaul load reporting done each period by DC’s
Backhaul reliability reporting
Distribution
Transportation and Distribution - will be providing a measurement scorecard for procurement to view our growth in backhauls and brokering
One measure for a well-balanced scorecard will be:
Reliability Reporting This will measure our service level in backhaul and brokering. We are under the assumption that the service level for our private fleet and the brokerage is higher than the inbound “delivered” vendors. This report will help us to better service our customer by showing our weaknesses, which will make us a better provider, once the problems are corrected.
As Save-A-Lot takes on additional inbound freight, we will continue to evolve our practices to ensure timely pick up and receipt of product.
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