Alcoa plays match maker

Write short summary on this

Back in early 2005, carrier efficiency began to weigh heavily on Ed Hamorsky's mind. After visiting some of his core truckload carriers, Hamorskry, director of logistics and transportation for Alcoa, noticed that the trucks delivering into the company's locations had different dispatchers than the ones taking loads outand that lack of communication was resulting in an inefficient network loaded with deadhead miles.

Those meetings with his core carriers confirmed that most dispatch operations were decentralized and segregated by geographic region; and Hamorsky didn't see internal systems at those carrier operations that could effectively connect Alcoa's inbound and outbound freight between disparate dispatch groups. And since Alcoa offers a high volume of annual truckload shipments (236,000), the tender execution system they deployed at the time could not identify every internal and external freight-leg connection opportunity in time to re-allocate a load tender.

Hamorsky, who spends about $410 million a year on truck transportation, knew if he could find a way to marry a carrier's empty trailers with in-range Alcoa shipments, he'd find a solution to his company's inefficient freight transportationand be more environmentally friendly from an emissions standpoint.

With the help of a technology partner over the past year, that's just what he accomplished. It not only won him the respect of his core carriers, but it also earned him Silver in LM's 2007 Best Practices Awards.

Make Me a Match

At one time, Alcoa, the world's leading producer of aluminum, was using 1,200 truckload carriers to service its North American operations. The capacity crunch that took hold in 2005 pushed Alcoa to become more efficient in dealing with its contract carrier base; that meant trying to drive down the number of carriers it was using and do a better job tendering freight to the ones left standing.

"We saw the high volume of truckload equipment we were tendering out into our network, but had no method to connect to another Alcoa load where a carrier might be delivering within 120 miles of one of our locations," Hamorsky explains. "We wanted to capture that equipment, reload it, and send it back out so the trucks were more efficient."

Hamorsky realized that what he needed was a central dispatch group with direct management responsibilities over all the tenders coming out of Alcoa's plants. Finally, in August of 2005, Alcoa decided to work with Best Transport, the creators of a load tendering tool, to develop an online transportation hub that enables shippers to link their planning, tendering, and billing processes directly to all their carriers via a single connection. This online tool also gives carriers visibility and the opportunity to connect to all available loads in a shipper's network.

The creation of this online hub was a team effort. Alcoa created the connected capacity business model and execution strategy while Best Transport agreed to fund the programming costs because it recognized it could take this tool to market for other shippers to utilize. "This tool has leveled the playing field for all our carriers in terms of being able to connect inbound trucks to outbound shipments," Hamorsky says.

Once Alcoa and Best developed the Alcoa Connected Capacity Portal (ACCP), Alcoa became part of Best's online community of shippers and carriers. The ACCP allows carriers to reorganize their dispatch operations into a central resource unit focused on accepting Alcoa inbound/outbound shipments based on directional merit and meeting the hours of service (HOS) requirements of their driverswhile not having to factor if equipment is within an acceptable deadhead range. Now, the ACCP notifies carriers of available outbound Alcoa loads that are within a range that would otherwise result in deadheading.

To make this work, Alcoa's core carriers upload delivery information on all available equipment moving within their systems into the ACCP several times a day. The ACCP then applies the information to match and connect trucks landing near Alcoa shipping points to the company's planned outbound shipments.

As a result, the team has realized measurable gains in network efficiency, saving dollars, and improving safety risk for Alcoa and its core carriers. "Our relationships with our core carriers have improved due to better correlation of available equipment-to-shipment offers," says Brad Carraway, Alcoa's manager of transportation strategy and deployment. "In addition, Alcoa and our core carriers are enjoying better safety in our plants by reducing truck traffic via the consistent re-loading of inbound trucks after delivering supplies to Alcoa plants."

Not an Easy Sell

While the system's benefits are paying off in improved efficiency, it didn't come without a few bumps in the road. When Alcoa first approached its core carriers to sell them on the ACCP, they were anxious about several aspects. The primary concern was related to sharing advance shipment notification (ASN) information. Carriers didn't want Alcoa to know where other shipments were originating; so, Hamorsky assured them that all Alcoa wanted to know was where shipments would be landing.

Other concerns revolved around expense and complexity for Alcoa shipping locations, while core carriers were a bit leery about adopting a new way of doing business. For the core carriers, those concerns were allayed when they learned that the only process change was providing ASN transmissions to Best Transport. They would continue using the same low cost internet browser to access the system and accept loads as before.

However, the ACCP would automatically connect load offers for them based on a tiered decision-making hierarchy of available inbound equipment, deadhead miles, and a simple rate algorithm that elevates connected carriers to the front of a tender offer. This was especially comforting to Alcoa's strategic regional carriers, who have more limited IT resources than the bigger carriers, but who could also be participants in the connected capacity model. For Alcoa, there were no additional development costs or processing changes for their shipping locations.

"Once we made ASNs a condition for becoming an Alcoa Tier 1 core carrier, it was like opening a floodgate," Hamorsky says. "A few started doing it and the rest fell in line. Before, we might have tendered a load to 20 carriers in a lane and they may have all turned it down. Now our average network-wide tender is accepted by the third tender offer."

Spreading the Word

From the development and implementation of ACCP, Hamorsky says the list of benefits continues to grow. Alcoa has increased its ability to connect core carriers to remote shipping points and has repositioned their equipment back to less remote locations. From an environmental perspective, there's a significant reduction in carbon dioxide emissions since Alcoa is utilizing truckload assets more efficiently into and out of its locations.

With the information Alcoa gets out of the system, his team sends automated weekly scorecards to core carriers that detail the carrier's tender response performance. This data will help the team in its mission to continue its carrier base. Alcoa started with 800 carriers two years ago and that number is now down to 285. This year's goal is 250.

And while Hamorsky and his team crunch all their new data and cut costs, Best Transport continues to approach carriers, asking for capacity information so it can help them find potential customers. Dwight Bassett, CFO of Builders Transportation Co. in Memphis has been on the receiving end of this offerand he likes the way things are shaking out.

"Truckers like us have a big investment in technology, equipment, and training, so we need to do business with sophisticated customers like Alcoa," Bassett says. "This allows us to give better service...because it isn't all about price. It's level of service and the ability to provide a shipper with needed capacity."