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Weyerhauser Finds Basic Blocking and Tackling Helps Link Supply andDemand

How much will customers buy? Try asking them

The News: As reported in the Wall Street Journal, Weyerhauser earlier this year announced a series ofsupply chain related strategies and improvements that included plans to present a single face tocustomers across formerly different business units, and a leaner, more responsive manufacturingstrategy. (See Weyerhaeuser Restructures to Lower Inventories, Build a More Responsive Supply Chain.)

An outgrowth of these plans, the company is hoping to get a better handle on supply and demand andsmooth out the vicious cycles that have plagued the building products industry. As the Wall StreetJournal reports, Weyerhauser has begun attempting to sell wood products much as retailers such asWal-Mart Stores sells consumer goods: Stock inventory based on precise customers forecasts, notestimates that have often proven wrong.

Now, three supply chain managers roll up data from the company s 43 North American sales regionsbased on what customers say they plan to order in the next 6 to 24 months. In the past, Weyerhauserrelied almost exclusively on internal forecasts which surprise! often proved highly inaccurate.

The company then drives the data back up its supply chain. Factory managers meet weekly to compareinventories and production plans with the forecasts and adjust as needed.

Using this approach, for example, Weyerhauser has been able to keep inventories of soft wood lumberat about one week s demand, whereas in the past, with the housing slowdown, they likely would havegrown to 2-3 weeks of inventory.

Wholesale Supply Chain: VWR Finds Getting More Demand-Driven andChanging Its Approach to the Business Can Pay Big RewardsCompany a prime example of the dynamics in the wholesale segment

The News: VWR, a multi-billion dollar wholesaler of scientific products, lab supplies and other products,is finding promising initial results in its strategy to make the company more demand-driven andchange many of the ways it has operated for decades.

The Impact: There are powerful dynamics occurring right now in the wholesale distribution, with rapidchanges in relationships on both the manufacturing/buy side as well as the customer/sell side. Mostobservers believe wholesalers that fail to adapt will struggle to succeed.

The Story: VWR is a $3 billion dollar, global wholesale distributor of scientific and lab equipment,supplies, chemical and furniture, serving more than 150,000 customers and distributing products fromover 5000 manufacturers.

Despite many years of business success, the company was beginning to feel pinched by many of thecompetitive and environmental forces facing much of the wholesale distribution industry, according toDave Shellenbarger, Director, Inventory Management for VWR International. That required a majorstrategic re-assessment, which includes a major look at how the company ran its supply chain.


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Like many companies in the wholesale distribution industry, VWR is facing pressure and opportunity ona number of business fronts. In general, many wholesale distributors are seeing some of their traditionalrole and value for the customer being changed by the Internet and other forces. For example, the role ofthe wholesale distributor in terms of being the primary source of product information and availability isvery different in a google economy, whether the company is a business-to-consumer (B2C) orbusiness-to-business (B2B) distributor.

In addition, many wholesalers have been historically successful having a purchasing centric view of theworld, with the company oriented towards buying opportunities and terms, rather than a being more pull oriented and letting customer demand drive the rest of the company s supply chain andpurchasing patterns.

Pressure from both the buy and sell sides is negatively impacting margins percentages for manydistributors as well.

VWR was strategizing on how to make the transition to being more demand-driven when it waspurchased two years ago by a private equity firm. That added an additional focus on improving cash flowand working capital both of which are heavily driven by how well a distributor manages its inventory.

Overall, the company has embarked on a broad strategic overhaul, with a significant supply chain and demand-driven focus. In addition to taking a number of actions to impact cash flow and marginsthrough better forecasting and inventory management programs, it is also looking to increase itsvisibility to its supply chain internally and to use that information to better collaborate on both the buyand sell sides.

New technology in the area of demand planning, inventory management, and performancemeasurement is a key part of that, says Shellenbarger, but must be deployed in the context of significantprocess re-engineering.

The company was using a traditional re-order point purchasing and replenishment paradigm thatlooked at policies but didn t really consider expected demand. In piloting new technology from supplychain planning and execution software provider Logility, the company is finding substantialimprovements in inventory levels through more accurately forecasting demand and letting that forecastcombined with trade-off analysis and SKU-based inventory policies determine optimal stocking levelsand purchasing requirements.

A test in one SKU category, for example, demonstrated a 35% reduction in total on-and inventory as aresult of the new processes and software tools. Key to that is using the Logility system s ability to time-phase demand forecasts and SKU replenishment requirements, a significant improvement over re-orderpoint systems.

Like many wholesalers, VWR is also more heavily moving into private labeling and global sourcing, andthese longer supply chains put even more pressure on inventory management. Shorter productlifecycles and the need to better manage new product introductions and end-of-life s is also critical to adistributors. Shellenbarger believes the new planning tools will also help improve results in both thoseareas as well.


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ADP Brokerage Services Drives Out Cost, Improves Efficiency Though Web-based PortalADP runs a 400,000 square foot DC on Long Island that does literature and related fulfillment for many

of the country

s leading brokers and other financial organizations. With rapid growth, the company firstimplemented a new WMS (HighJump Software) to help it improve distribution performance, and laterturned to inbound and supplier integration processes to look for additional gains.

Like many companies, ADP was using fairly manual processes for its purchased materials: phone calls,faxes, email. It generates substantial purchase order and inbound activity (peak volumes of 2500+pallets received per day) with eight key commodity suppliers.

Beyond overall process inefficiencies stemming from the manual methods, ADP also saw opportunitiesto improve logistics processes and costs through improved supplier integration as a result of bettervisibility and inbound ASNs.

To achieve these opportunities, the company implemented a web-based supplier integration tool (alsofrom HighJump). The portal enables the entire purchase order process to be managed over the web,provides visibility to ADP buyers into vendor inventory positions (ensuring they can buy in truckloadquantities and avoid material stockouts in the DC), and enables suppliers to easily generate inboundASNs.

The results: Substantial reduction in receiving times as much as 75%. Receiving processes that used totake as long as an hour have been reduced to 10-15 minutes through use of the vendor ASNs andassociates receiving processes based on simple scans.

Reduced transportation expense: Visibility into vendor inventories enables ADP buyers to consistentlyorder in full truckload quantities, without worry that the order will not be full due to supplier out-of-stocks. The system has also reduced the need for expedited freight.

Reduced overhead costs: Significantly reduced time associated with purchase order creation andtracking automated communication processes. Significant reduction in phone calls/emails, leading toreduction in total procurement cycle times.

Avon s Supply Chain Transformation Pays Off

Avon is of course the $6.8 billion dollar manufacturer and distributor of beauty and cosmetic items. Afew years ago, it had plans for a major expansion throughout Europe but found its supply chain wassimply not ready to support the strategy.


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How many of these problems sound familiar?

Highly decentralized, country-specific supply chains that led to overlap and a lack of coordination acrosscountries/regions.

Rapid new product introduction cycles from a market perspective, with a supply chain that took multiple

times that frequency to execute. The inevitable result: inflexibility that produced not enough of the hotsellers, and way too much inventory for the market dogs.

Related to the above, poor forecasting processes, which added not only to inventory mismatches buthigh costs for schedule changes and expedited transportation.

Little or no supplier collaboration, and a focus on per unit not total supply chain costs forpurchased items.

The fix: a major, multi-year supply chain transformation in Europe. Key elements of the change:

Unified supply chain structure: one supply chain executive with four direct reports one eachfor the supply chain processes of plan, source, make and deliver.

Optimization of the physical supply chain: moving some production to lower cost easternEuropean countries, use of a new central distribution center that can rapidly ship goods tosmaller, country specific warehouses.

Major infusion of new technology and other IT contributions: normalization of all key supplychain metadata (customers, items, suppliers, etc.) across regions and development of aunified data warehouse; new demand planning, production scheduling, and other supply chainplanning tools (Manugistics)

Aggressive use of postponement strategies, making generic bottles of an item in the plant, lateradding customer specific labels and other touches as part of distribution processes.

Much greater collaboration with suppliers, especially around new product design. Change in some suppliers/sources to increase flexibility and lower inventory, even if per unit

costs were slightly higher.

It wasn t easy. No specific costs were noted, but in addition to the technology and other capital costs,Avon had a dedicated team of 45 working on the project for 18 months. The result: annual savingsestimated at $50 million, adding two full points of gross margin to the bottom line.

Closed-loop RFID systems Drives Value for Seagate

The Executive Forum also had an interesting presentation from Boda Rao, Sr. Director of IT at Seagate.For those that don t know Seagate, it is a $6 billion company that is the world s largest manufacturer ofdisk drives for PC and an increasingly wide array of other electronic devices.

The manufacturing of the core media (the basic disk, if you will) is a complex process, involving 10-15steps fraught with the chance for a quality defect. In the early to mid 1990s, Seagate tracked WIPinventory through this production process using a paper-based bar code traveler, which was scanned


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at each step, and required hand-written entries on the traveler that were then key entered intoSeagate s MES.

The media is moved throughout this process in a plastic cassette, which holds 25 disks. It isdifficult/impossible to discern visually whether a given cassette has been through a particular processstep or not, problematic because there are many different routings depending on the specific product.The bar code-based system had many issues, including difficulty quickly quarantining bad parts, missedor duplicated steps, and a general lack of true process control.

In the late 1990 s, Seagate adopted a closed-loop RFID system to manage the WIP track and supportprocess control. Read-write tags are embedded in the cassettes, and are read before each step in themanufacturing process. The reader and an associated PLC at each tool are wireless connected to anRFID controller/server, which in turn is integrated with Seagate s MES system and manufacturingdatabase.

The human element of WIP tracking and process control has therefore been largely eliminated. Tags areread automatically, and the system ensures that the cassette is at its correct next routing, that a step isnot being duplicated, etc. For some steps, there are also required dwell times, which the system will alsoenforce. Bad parts are more easily quarantined, and Seagate managers both in-plant and across theglobe have complete visibility to WIP inventory and the production process in virtual real time.

Seagate is actually writing the production data at each stage to the tag as well. I wondered why this wasnecessary, instead of just using an RFID license plate on the cassette and relying on the database totrack the steps, but Mr. Rao said this approach allows Seagate to continue production for up to severalhours in the case the MES system goes down.

Seagate has realized significant benefits from the system: 1-10% yield improvements, reduction indefects, and complete traceability of product increased from 50% to 0ver 99.5%. What s next? They arelooking at perhaps using RFID in distribution, but the cost of tags is still too high to justify. They are alsolooking at using tags with more memory to capture additional process variables at each step.

Adtran Does Sales & Operations Planning Right

Excellent presentation at CSCMP 2005 by Thomas Dadmun, Vice President of Supply Chain Operationsfor Adtran (Left), $500 million designer and manufacturer of componentry for the telecom industry,

headquartered in Huntsville, AL.

Adtran s case was typical in that it often takes a crisis or wake up moment to lead fundamentalchange; in Adtrans case, that was rising inventories and decreasing customer satisfaction that reachedlevels that required a change. That situation was driven in large part by the complex environment thecompany faces: short product lifecycles, difficult to forecast products, many engineering changes, shortorder delivery cycles with long supplier lead times, little or no ability to shape demand. Combined with


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forecast accuracy of less than 50%, and we had a perfect storm that was leading to hits on the bottomline, Dadmun said.

Particularly vexing were the various walls of silence that restricted the flow of information; for

example, little or no information about why the forecast was missed. We d ask, Why did we miss theforecast? Dadmun said. Because customers didn t order would be the response. But why didn t theyorder? That we didn t know.

There were also walls of silence between the supply side and marketing, and the supply and sales sideand engineering. Only engineering really knew what dates they were going to hit in terms of newproduct introductions, Dadmun noted. Often, we were building supply capabilities and revenue plansthat didn t reflect the true schedule.

Faced with this situation, Dadmun helped drive a number of initiatives to improve results. This included

forming a multi-functional team across supply, sales, marketing and engineering to look at the problem,investing in new supply chain technology, and ultimately starting an effective S&OP process.

There were some key moves. First, to get buy-in, Adtran worked with the vendor (i2) to back-testforecasting results with its demand planning tool for 20 of the company s top SKUs over the past 2-3years. The surprising insight: the tool s base line forecast simply based on history, etc. was better for 18of the 20 SKUs than the forecast team s results an observation that quickly generated interest andsupport from execs and others.

Adtran also brought in some outside consultants to help them benchmark against best practice in thearea. This also worked to show Adtran execs that they were not operating at close to an industry-leadinglevel. It delivered a wake-up call, Dadmun noted.

Dadmun also helped convince the organization that while an improved baseline forecast coming out of anew demand planning tool would help, it wasn t enough. That s still a rear view mirror view, hecommented. You need additional input from sales, marketing and engineering to see the upcomingcurves and exit ramps.

The S&OP evolution at Adtran is designed in three phases.

Phase 1 (complete):

Implement supply-side technology to better understand supply capacity and constraints Implement demand planning technology Launch an integrated S&OP process, with goal of developing a true consensus forecast and

integrated financial plan Assignment of process captains, now out of sales/marketing, for each division Use of a pre-meeting before the actual S&OP meeting to review the data, work out issues,

identify other needed information, etc. so that the main meeting can focus on building the plan


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Focus on exception management

Phase 2 (in process):

Use of an on-line S&OP dashboard that provides a detailed view of forecasts and actualresults, and allows rapid drill down into supporting information

Focus on identifying when and how the forecast and plan went wrong Further reduce the walls of silence through both process and technology

Phase 3 (planned):

Facilitate more true root cause analysis, especially in trying to learn at a detailed customer levelwhy a forecast was inaccurate.

Among the real keys to achieving S&OP success is to really start with the end in mind, Dadmunnoted. You really have to define what you want to come out at the end. This is essential, andnot as easy as you might think.

Other lessons learned include:

There is no change without some suffering be prepared to have poor processes and resultsexposed to execs and peers

Develop early proof points, perhaps in a pilot mode, to create buy-in Benchmark to be able to say Ive seen it done. Use some outside experts/consultants if this is new territory for your company, partner with

others that have been down the path Work hard to develop other internal champions besides yourself Celebrate success when one planner hit 72% accuracy, the highest level, they took the whole

team out to dinner

We have to be able to get to the point where we can drill into the demand side of the equation withthe same level of detail and insight that we can on the supply side, Dadmun added.

7-Eleven Gets Demand-Driven - With Bar Codes and POS Data

Interview in CIO magazine with the CEO of 7-Eleven stores, James Keyes. We re including it because itillustrates that a lot can be done to improve visibility and real-time information flow with thetechnologies we have, such as bar codes and RFID, without the need in some cases for RFID.

Just a few years ago, 7-Eleven had virtually no in store systems or strong linkages to corporate systems.According to Keyes, We didn't know what we sold by store. It was total guesswork. It would take usalmost 20 days to collect sales data from the stores because it was all manual. The chain relied on manyof its vendors to stock stores because they had a much better grasp on what was moving.


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Now, 7-Eleven uses bar code scanning, in-store inventory systems, and frequent communication of thatsales data to drive merchandising and replenishment processes. As Keyes notes: We can track everyitem literally every hour and use that point-of-sale data to drive revenue. In effect, we have come fullcircle in our ability to respond to the needs of the customer. Because now, we can use technology as asurrogate for being able to talk to every customer who walks in the door. We don't just have to rely onitems we know will sell quickly, like 12-packs of beer; we can actually stock something that we're takinga chance on. And in short order, we'll understand how the customer responds.

Granted, small C-stores may be easier to manage than large box retailers, but we still believe thatpotential improvements using existing technologies such as POS and bar codes to solve many of theproblems being targeted by RFID.

JC Penney Makes Dynamic Inbound Transportation WorkAt the i2 user conference, JC Penney transportation manager Kevin Persons delivered a compelling storyof how the retailer was able to move from static routing guides for suppliers to dynamic inboundtransportation management, and how this has delivered real savings.

Like many retailers, Penney s had traditionally relied on traditional printed routing guides for its nearly2000 suppliers. As a result, there were few opportunities for cross-vendor shipment consolidation, andPenney had to maintain a decent staff just to check whether supplies were actually following routingguide rules.

Over a couple of years, Penney s has moved to a dynamic inbound process.

When vendors are ready to ship, they send a

request for routing

(EDI 753 transaction) into Penney

s.Some smaller suppliers are allowed to do this via a web form.

A Penney s preprocessing tool does a variety of validation checks (is it within the shipping window? arethe required data elements present?), after which all the approved requests are sent to i2transportation planning software. An optimization run is performed at 1:00 a.m., after which an EDI 754response is sent back to suppliers with routing and pick-up confirmations. Currently, the pick-ups arescheduled for 48-72 hours from the time of the EDI, to allow Penney s to secure capacity. Shipments areconsolidated among vendors, reducing LTL freight in favor of less expensive truckload shipments, andoften allowing Penney s to bypass its own pool centers entirely and deliver direct to its DCs, whichfurther reduces transportation costs and takes 1-2 days out of the inbound delivery cycle.

Key to the program s success is that Penney has been able to get support for the program from Penneyexecs and merchandisers, especially around the 48-72 hour windows from request to shipment. Whilethe transportation group accommodates true emergencies when product is absolutely required in lesstime, Penney s has been able to maintain this discipline successfully, without which it would be hard toachieve the results, Persons said.

One challenge was certainly getting suppliers both technology-enabled and to modify their processes towork with the new model. For example, many lacked cartonization logic, because in the past they could


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manually build cartons, then determine routing after the orders had been packed. Under the newprocess, most need to use cartonization programs to accurately estimate cartons, weigh and cube priorto actual order picking processes. Many suppliers also responded by reducing the number of carton sizesthey used, Persons said.

Persons also said that while many suppliers were skeptical of his claims, that the program would actuallyenable them to improve processes and get a better understanding of their JC Penney business. Manyhave later confirmed these benefits did result from participating in the program, which now controlsabout 90% of Penney s inbound freight.

Distribution Management: Ingram Books Smooths the WavesDistributor finds wave planning simulation reduces cost, improves cycle times, validates strategies inincreasingly complex DC's

Ingram Books is the world s largest wholesale distributor of books, managing over 1 million titles andservicing tens of thousands of customers retail customers.

At the recent CSCMP conference in San Antonio, Don Clayton, VP of Logistics Analysis for Ingram,described for attendees how an innovative approach to order wave simulation had uncovered keyinsights and enabled it to significantly improve fulfillment processes.

Ingram s DC operations have some inherent challenges, given that almost all of the volume is piecepick based, with same day order-ship policies, and some significant peaks and valleys of order flow. Italso had to manage significantly increased levels of value-added services, and huge increases in

consumer direct shipments. The consumer direct shipments not only drove up the total volume of worksubstantially, but significantly drove down the average number of lines per order, which in turn led togreater use of batch picking and downstream sortation.

As the scope and needs of these customers advanced, however, Ingram found the work in its four U.S.distribution centers was growing increasingly complex. To manage all the unique fulfillment scenarios,Ingram had developed a slew of different pick wave types to meet ever more precise customer orderprofiles and DC processing needs.

Sound familiar?

According to Clayton, the company decided that exploring simulation of this environment was likely toresult in a number of benefits:

Provide insight into dynamics of a complex operation, and what the real bottlenecks andconstraints were?

Improve staff utilization and scheduling


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Better manage flow of work through the DC Optimize use of sortation equipment (e.g., a Crisplant sorter), and improve batching rules and

sizes Create a test-bed for evaluating order processing strategies without adversely impacting

operations

Ingram hired consulting company TranSystems to develop a simulation tool, which would basically rideon top of the company s existing, tier 1 WMS.

Ultimately, the tool enabled Ingram to do several things:

Get a better handle on what was really happening with order volumes by type, customer,seasonality, etc.

Understand what the cost and processing times were for different waves types and scenariosunder current practices

Improve those practices based on understanding the data Simulate what the effect of changes in wave practices and policies would be before actual

implementation Give wave planners better real-time tools to understand how the wave would flow through the

DC and to better balance the work load for optimal results.

Like many companies, for example, Ingram sometimes found that completing the last few percent of awave could take a very long time, leading to operational complexity. The simulation tool could helpthem better understand what was causing the end of wave issues, and present new approaches tomitigate the problem.

The graphic below offers just one example of the kind of insight the tool provided, here showing analysisof how long a order available for picking during a wave sat between initial release and picker activity,and how well utilized for the wave pickers would be by pick zone.

Source: Ingram Book Group and TranSystems


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Through use of the tool, Ingram was able to make a number of operational improvements to reducepicking costs and streamline order and material flow.

In some cases, Ingram reduced complexity in the number of wave types it would try manage. Theinformation highlighted some areas where it DC standards needed improvement, and even identifiedsome problems in its actual configuration of the WMS (e.g., pick zone definition). The DC had beenprimarily optimized around picking efficiency, and according to Clayton the data is showing there maybe benefits in making some trade-offs between picking efficiency and downstream packing and shippingoperations.

Ingram also used the tool to confirm prior to deployment the positive impact of some new pickingstrategies in one DC, and significantly improve the actual order wave building and release process by

giving planners better data about how the wave will impact various processing areas.

For the initial implementation of the tool in the company s La Vergne, TN distribution center, data wascollected for about 5 months. For the second DC to go live with the simulator, only 2 months of data wasused before deployment.

Clayton noted that in most cases, wave planners have no real incentive to dig into the issues and try todrive continuous improvement. While the tool has had a number of benefits, according to Clayton, Themain benefits were to force us to review our DC processes, and to better understand how specificdecisions we made impacted operating results.

Key Insights: It's easy for creeping growth in DC complexity to really start to impact effectivenesswithout real insight into how or why. Simply blaming complexity itself doesn't lead to improved results.However, you do it, get your arms around what the data is telling you.

QVC Gets Transportation RightQVC is a big company, with projected sales of $7.2 billion in 2006, selling everything from jewelry toapparel to household items, even Dell computers and Saturn cars. On the outbound side, it ships 105million packages per year to its customers, and on a peak day last Christmas season it shipped as manyas 675,000 in a single day. On the inbound side, it receives tens of thousands of shipments across it fiveeast coast distribution centers, totaling over a 100 million inbound units.

As part of a larger Supply Chain Management initiative termed Product Flow, a couple of years ago thecompany saw opportunities for significant improvement in its transportation processes and technology.


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The as is case was similar to many we hear from companies that have not put a focus ontransportation excellence. As McDermott said, QVC s transportation and inbound processes werecharacterized by the following poor practices.

Paper-based, decentralized carrier selection No optimization Manual checks and processes for approving vendor shipments Little or no use of EDI Very little control of actual receipt quantities versus Purchase Orders Tremendous amounts of manual data entry Lots of effort to bring on new vendors Poor inbound visibility both internationally and domestically

In 2003, we had 12 transportation specialists whose only job was to manually build shipments based onvendor faxes or emails into our legacy systems, McDermott said.

To be successful, McDermott said, QVC processes have to be built for velocity, built for speed. There

was an obvious disconnect between this principle and its approach to transportation.As a result, QVC launched an ambitious program that achieved significant results in a relatively shortperiod of time. The key drivers:

Moving to a centralized process characterized by use of best practice Nearly 100% automation of a number of vendor interactions New TMS software to optimize planning and execution (from i2), optimizing its collect

inbound freight business, its substantial return to vendor shipments, and some of its outboundmoves (there is less opportunity for optimizing outbound the way QVC works, with huge line-haul volumes to local UPS zones for local package delivery.)

Use of a Service Oriented Architecture (SOA) approach to IT to facilitate integration and enable

robust cross functional workflows Comprehensive use of EDI and web integration with domestic and international carriers andforwarders

Detailed ASNs to streamline receiving processes

QVC developed a vendor portal that has a robust set of tools for both QVC and its vendors to managethe PO to delivery process. 100% of our inbound shipments are now built by vendors or forwarders, McDermott said. There is zero data entry done by QVC.

This includes a series of automated checks to ensure that the shipment meets QVC quality and processcriteria before approval to ship and a routing instruction are delivered electronically to the carrier.

The transformation has had enormous benefits. Transportation headcount has been reduced, mostlythrough attrition, and the team now focuses on optimization/planning and working as supply chainspecialists to improve vendor collaboration and integration. Both these tasks add real value to QVC, asopposed to the low value data entry and administrative work they were doing before.


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Work is hugely automated. Transportation specialists get automatic alerts when vendors or carriershave not completed certain steps when they should have, allowing QVC to move to a more manage byexception environment.

Visibility has improved dramatically. McDermott said QVC s goal is to get ASNs 96 hours beforeshipment. While he acknowledged some vendors believe this is too long a window, but we re tellingthe vendors we need this, he said. Since QVC plans its television sales programs 5-6 weeks out, it iscritical that supply chain disruptions not force the sales side to have to revamp plans because productwon t be available. We now have high levels of visibility and control, he noted.

The vendors also benefit from the event management technology. For example, a vendor may get analert saying it is less than 96 hours until the ship date, and not all of the PO/shipment qualifiers havebeen met.

As a result of the transportation and TMS initiative, QVC has also been able to significantly increase thepercent of its inbound shipments that it controls thru collect freight, versus vendor prepaid. It is alsoachieving savings on the order of 12% on that collect freight thru optimization and core carrier programadherence.

There was clearly a lot of change management required both internally and - critically - at the vendors.QVC also invested in a big educational effort with its vendors to get them up to speed. They reliedheavily on a webinar type format with groups of 20 or so vendors at a time, McDermott said.

Ultimately, McDermott said, QVC is trying to get further inside the vendor s door, in terms of themanufacturing process. We think if we do this right, we can have 3000 supply chain specialists, not justour internal ones he said, referring to the number of vendors QVC has.

Given the size of its operation, QVC s transportation transformation turnaround over a relatively shortperiod of time is an impressive story.

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