In a logistics world full of new strategies, tight capacity and heavy competition, Owens Corning says its approach to transportation starts with its own customers.
The sprawling supplier of construction materials said this month that it is putting the finishing touches on a logistics project four years in the making, one that restructures the company's approach to its supply and delivery chain and along the way upends the traditional relationships between carriers and shippers. Becoming something of a carrier of its own in the way it manages transportation, Owens Corning is seeking to build a supply chain as sturdy and reliable as the building supplies it is shipping around the United States.
"We are positioning ourselves as being the shipper of preference," said John Gentle, global leader for transportation affairs and processes at Owens Corning.
The effort that started in 2001 culminated in this month's rollout of a three-pronged "transportation solutions team" to anchor what the Toledo, Ohio-based company calls its "Carrier 'Pink Power' Program" that includes new investment in transportation and an effort to reach out to carriers.
Although the program has taken on a new urgency as freight transport capacity in the United States has tightened in the past year under a surging economy and tightened regulations, the company says the effort started long before and goes beyond the search for day-to-day trucking capacity.
"Our role is to make sure our customer receives a premiere experience with us," said Gentle. "They need to believe they that can't do any better than doing business with Owens Corning, that they cannot replace the value of Owens Corning."
To logistics industry experts, the effort reflects a clear fault line in the way shippers view their transport and logistics operations. Whether the operations are focused on direct-to-consumer delivery or just-in-time management of inventory, the delivery of the goods is considered thoroughly entwined with the value of the product that is being delivered.
"They are showing a sophisticated understanding of the importance that transportation has in the value equation of their products," said Scott Elliff, president of Capital Consulting and Management, a consultant to shippers on supply chain matters.
"They are showing a very broad perspective of what their value is to their customers," said Elliff. "It's particularly smart because it serves as a continual reminder to them that 'we are not simply a widget company.'"
The flip side, he says, is the manufacturer or retailer considers its relationship with the customer over when the purchase is made.
"You've got those who say, 'You pick it up or we'll deliver it, but whatever happens, that is not our core business.'"
For Owens Corning, the restructuring its part of an effort that began in 2001. It was highlighted by the rollout last year of a Web portal that not only put Owens Corning's shipping information on the Internet but handed the company's trucking providers important technology tools that many smaller operators simply cannot afford to develop or purchase on their own.
This month, the company said it had restructured its logistics division into three management teams: sourcing, process and logistics.
Essentially, the sourcing operation is the primary "owner" of carrier relationships, managing the traditional daily functions of moving for goods and paying for that movement. It will be run by Jerry Ulm, a 30-year industry veteran and former president of Fostoria, Ohio-based RHC Logistics, who will have the title North American transportation sourcing leader.
The logistics teams will be led by three executives - Shradda Gupta, Kirk Ulrich and Rick Ruzzin - divided by Owens Corning's product lines and responsible for deeper relationship matters, including forecasting.
"It will give carriers short term and long term visibility and hopefully take bumps out of the road," said Gentle. "It will provide better management possibilities for the carrier and his driver."
The process team, headed by Gentle, will oversee overall process efficiency, including management of the Web portal.
Because of its direct-to-customer shipping model, Owens Corning depends on its base of more than 400 carriers to reach points that can be remote and variable. So rather that winnow its carrier base, it provides the truckers the ability to step up their operations in serving Owens Corning.
The company spent some $400,000 on a portal that allows carriers to view planned payment details, balance due charges, contract and tariff information, freight claims, service levels, load status and other critical operating information.
In return, Owens Corning gets carriers providing similar information in similar formats rather than aligning its systems with myriad carrier sites, that simplifies its own management of data.
Owens Corning values its transport and logistics network at about $350 million a year, which would rank the company close to the top 40 trucking companies in the country if Owens Corning were, in fact, a trucker.
The $5 billion company entered bankruptcy in 2000 as it faced claims over allegations involving asbestos but the financial results have remained strong, including a $94 million net profit in the third quarter last year that left Owens Corning with $822 million of cash on its balance sheet.
The supplier of construction materials manages its transportation network largely on its own. Owens Corning does use third-party logistics providers but, as the company puts it, to manage transportation in an ongoing way but to provide direct services in "capacity challenged areas."
The logistics effort will not change Owens Cornings' relatively lean distribution strategy. The company has only two sites, a standalone facility in Portland, Ore., and a warehouse outside Columbus, Ohio, that supplies the company's plant in nearby Newark, Ohio.
Turning the preferred carrier concept on its head is "very reasonable," said supply chain industry analyst Evan Armstrong of Armstrong & Associates, "especially as truckload capacity remains constrained. Last year, the average truckload carrier took a 6 to 8 percent increase in rates. We expect that to follow a similar pattern this year.
"Capacity is tight and we expect it to remain tight, so anything you can do to attract carrier capacity is going to keep your operation running more efficiently," he said.
But shippers also shouldn't expect to simply ride out tight capacity and hope for a shift in the pendulum in the next quarter or next year. "Things have been tight, really, since the late 90s. So this trend is pretty long now. And even in a slow economy, service levels have to be covered," said Armstrong.
The broader lesson, he said, is in thinking about transport and logistics needs beyond the day-to-day needs and picturing a company's management of inventory and delivery as an operating network in the same way carriers of all kinds manage their assets and schedules. It's shift, he says, from thinking of logistics needs on a transactional basis to something more like transportation management.
"Now, you're getting into thinking about your transportation piece as a network. You're thinking, 'How do capacity constraints and imbalances fit into my overall network and how do I structure things to minimize that impact?' You're not thinking about what happens on a given lane," said Armstrong. "You're thinking, 'What is the impact of what is happening on my whole network?'"
But Gentle said the overall effort is built on the idea that Owens Corning believes that its delivery operations are critical to its success and that to maintain high standards it must treat its customers and transport providers with similar consideration.
"It really provides every person who touches our team the tools they need, not just helping the corporation get from point A to point B. ? You can't expect people to do a good job if you're not setting the table for them," he said. "As the shipper, we're the enablers and we need to put people in a position to be successful and then nourish those relationships.
"We are making our investment in our carriers, in helping them."
Like virtually every industrial shipper, Owens Corning has been pressed by both tight capacity and the regulatory changes such as hours of service driving rules that put a greater premium on driver duty time. Gentle says that bolsters the company's approach, but is not the sole underpinning of the transport strategy.
"Shippers must recognize that they too are responsible for driver recruitment and retention by creating a place of business that is safe and efficient," he said. "Carriers have and will continue to seek out shippers that will help them grow their company, and will move away from those that do not share that view."
That will be true, he says, even as capacity ramps back up as predicted in 2006.
"There may be more capacity down the road, but that is only a number," said Gentle. "What you want is consistency. I'm not interested in simply identifying more different service providers. Our goal here is not to rotate carriers through Owens Corning. Eighty percent of our carriers are with us year after year after year.
"They are making an investment in us."