Ryder’s TLC Acquisition Significantly Increases its Consumer and Food & Grocery Business
Indianapolis, Indiana USA Site Visits
September 29, 2011
John Williford – President, Global Supply Chain Solutions
Tom Jones – Senior Vice President and General Manager, Supply Chain Solutions
Stephen Dean – Senior Vice President, Sales and Marketing, Supply Chain Solutions
Darin Cooprider – Vice President Operations – Consumer Packaged Goods
Robert Arndt – Vice President – LEAN Supply Chain Solutions
Duane Sizemore – Vice President – Business Development, Consumer Packaged Goods
Ron Denisienko – Vice President – Client Operations, Consumer Packaged Goods
Carole French – DC/Site Manager
Kyle Eubanks – DC/Site Manager
Paul Vollmer – DC/Site Manager
Ryder System, Inc. (Ryder) Acquires Total Logistic Control (TLC)
Ryder System, Inc. completed the $200 million acquisition of third-party logistics provider (3PL) Total Logistic Control in January 2011. TLC had 2010 revenues of $253 million and was a value-added warehousing and distribution centric 3PL serving major customers in the Consumer and Food & Grocery vertical industries. When added to Ryder’s Supply Chain Solutions (SCS) division, the combined entities generated $2 billion in 2010 revenue, and manage a warehouse network of 311 facilities with over 30 million square feet of space. In addition, the TLC acquisition added 168 SCS customer accounts, which included 131 public warehousing customers. The TLC business now operates as Ryder Supply Chain Solutions’ Consumer Packaged Goods industry group which includes Kroger, Kellogg’s, Sara Lee, PepsiCo, General Mills, and ConAgra Foods as major customers.
Ryder SCS has a large network of multi-client campus operations in major geographic areas across the U.S. including Chicago, Southern California, Dallas, and Indianapolis. We recently were invited to visit three of the six Ryder SCS facilities in and around the Indianapolis, Indiana area. Our visits are highlighted below.
Site 1: Dedicated Mixing Center Operation
Our first tour was of a 479,000 square foot dedicated Mixing Center warehousing operation for a food manufacturer. The operation builds orders of single and multiple product brands. In total, over 62 million outbound cases per year are shipped to food service and retail customer distribution centers (DCs) within a 600 mile radius of the operation. Retail customers served include Kroger, Target, SuperValu, and Wal-Mart. The facility is FDA (Food and Drug Administration) licensed and has been inspected by the AIB (American Institute of Baking).
The operation has a staff of 145 working in three shifts seven days a week. Average on-hand inventory is 4.4 million cases. Ryder performs a comprehensive warehousing solution, which includes value-added services such as packaging, assembly of end aisle displays, promotional display builds, and pallet modifications. Ryder operates RedPrairie’s LMS (labor management system) and WMS (warehouse management system) linked to RF (radio frequency) scanners. The WMS is integrated with the client’s SAP ERP (enterprise resource planning) system. The operation manages 120-135 inbound and outbound truckload shipments per day and the warehouse runs at 80-90% cube utilization throughout the year.
Through its process improvement and Lean management efforts, Ryder SCS has been able to continually meet and exceed multiple KPIs (key performance indicators) for this operation, in areas such as safety, productivity, service quality, and cost containment.
Rack and bulk storage locations
“Heavy” product layer pick line
Site 2: Packaging and Value-Added Warehousing & Distribution Operation
The second tour included a secondary packaging and distribution center operation for a leading beverage manufacturer. This 1.2 million square foot operation started in 2008 after the client consolidated three separate warehouses into this single DC. Of the DC’s 1.2 million square feet, 40,000 is conditioned storage space and 60,000 is secondary packaging space. Over 225 truckloads of product are received and shipped per day. The average inventory of 4.2 million cases includes approximately 905 SKUs (stock keeping units) of product.
Ryder has made significant capital investments in high-speed, automated packaging equipment to support this operation. It systematically mixes and packages sorted cases and pallets of various product SKUs. The building deploys a traditional cycle count methodology and counts physical inventory each month.
Ryder’s inventory accuracy level for the operation is high at 99.98%. Current warehouse utilization is 92%, which is above the Ryder SCS target of 85%. Ryder SCS is tracking and meeting or exceeding multiple KPIs for this operation, including throughput, uptime, inventory accuracy, and product freshness.
Totes of picked parts destined to pack stations
One of two high-velocity parts pick towers
Site 3: Service Parts Logistics Operation
While Sites 1 and 2 were brought into the Ryder SCS portfolio as a result of the TLC acquisition, the third site we visited has been operated by Ryder SCS since July 2001. It is a service parts packaging and value-added warehousing and distribution operation split between two warehouses:
- Warehouse 1: 804,000 square foot facility for finished goods parts
- Warehouse 2: 436,000 square foot facility for raw materials parts
Combined, both warehouses have over 150,000 SKUs of service parts in inventory held in approximately 400,000 storage locations. Total Ryder SCS staffing is approximately 400 hourly, 100 temporary packaging and warehouse workers, and 49 salaried personnel.
Ryder SCS receives daily demand forecasts from its client to identify which parts inventories need to be replenished and which may become potential backorders. From the forecast, Ryder SCS prioritizes what items need to be packaged and identifies single piece versus parts kits fulfillment requirements. Ryder SCS packages approximately 100,000 parts pieces per day.
Warehouse 1 processes approximately 28,000 parts orders per day. Parts orders are wave picked based upon outbound carrier pickup
cutoff times. Most picking is piece pick out of racks, shelves and bins to totes which circulate on automated conveyors to one of 12 packing stations. Ryder SCS continuously monitors individual parts profiles/demand and re-slots faster movers as needed. If a rush order is dropped to Ryder by 5:30 P.M., it will ship the same day.
Most of Ryder SCS’s packaging work is performed in Warehouse 2. Ryder SCS uses a Kanban parts inventory process to “pull” parts orders into its packaging area. The packaging area has poly-bagging stations with bowl feeder capability, automated packaging stations, and flashing stations for programming control boards.
Ryder SCS has made significant improvements in reducing its customer’s parts backorders through Lean process improvements and is typically running at an order fill accuracy rate above 99.7%.
Ryder SCS Operations Review Summary
Ryder’s acquisition of TLC has greatly extended its domestic Consumer and Food & Grocery industry customer base and warehouse network footprint. When combined with its long-standing automotive, high-tech, and industrial manufacturing customers, Ryder SCS now has a substantial presence in most major vertical industries. From our visits, we have reviewed its skills in managing complex value-added warehousing and packaging operations.
Ryder SCS’s significant network transportation management capabilities can be paired with the newly added TLC operations which focus on warehousing, packaging, and value-added services to sell integrated supply chain management services to customers. Through its acquisition, Ryder SCS is well positioned to provide intricate 3PL solutions to customers in multiple vertical industries and expand to its overall domestic business.
Sources: A&A Primary Research, http://www.ryder.com/