As third party logistics (3PL) distribution center professionals, we all have logistics key performance indicators (KPIs) that are either directed by our customer or are an internal measure of success. The goal: to keep our KPIs operating in the green. However, there are two KPIs that I have seen consumer packaged goods (CPG) customers attempt to manipulate, and I struggle to understand the logic.
Those KPIs are:
1. Load Ready Time Conformance (LRTC).
2. Customer Fill Rate.
No supplier wants to have the conversation with Walmart on why they are 90% to fill rate for product ordered. However, in order to increase the fulfillment rate with Walmart, KANE's customers sometimes tell us to hold an outbound shipment past the time it should leave the distribution center (DC) to meet arrive-by dates. The reason - they want to wait for an inbound that has the product that would make that outbound order 100% complete to fill rate. As a result of the DC holding the outbound order, the LRTC logistics KPI is compromised and thus results in a miss.
When the stock arrives and the order is completed 100% to fill rate, it leaves the DC late and the delivery appointment is now in jeopardy. If that load arrives late and misses the appointment time, our customer is graded at 0% to fill rate, even though all ordered SKUs were on the trailer. Had the DC shipped the load and made the LRTC, albeit at 90% fill rate, then the logistics KPI scorecard from Walmart would have read 90%, versus 0% after it arrived late.
When a customer tries to use an less than truckload (LTL) carrier, this can become an even bigger issue. Recently, when conducting a root cause analysis on why our customer was receiving a 0% fulfillment score from Walmart when the DC shipped complete, I found an interesting trend for LTL carriers.
Most LTL carriers with a facility near a large Walmart DC that requires appointments utilize a "TRAP" trailer. The LTL terminal will keep a trailer in a dock door dedicated to the Walmart DC and, as freight arrives at the terminal, they will load the pallet into the "TRAP" trailer, regardless of the delivery date on the pallet. When the "TRAP" trailer is full of multiple vendors' freight, the LTL carrier will then call Walmart to schedule an appointment. Your particular pallet may be days past the Must Arrive by Date (MABD) while sitting in the "TRAP" trailer waiting for an appointment.
The logistics metrics I've discussed are just a couple of examples of logistics and DC KPIs that can mean one thing to a CPG manufacturer and another to a retail customer. In order to create the most efficient line of supply to the retailer, we cannot be myopic. We must understand the suppliers' perspective and what they are being measured on by the retailer. Then, we must reconcile the two to promote speed and efficiency at both the distribution and receiving points.