The partnership with Chainalytics supported our goal of network balance as well as cost savings and service improvement. Their experience and expertise helped navigate a complex process while minimizing risk and adding value.Michael Burns, Vice President, Global Transportation Services at Big Lots
With over 1,400 stores in 47 states, Big Lots is one of America’s largest discount retailers of brand-name foods, home furnishings and accessories, furniture, seasonal merchandise, toys, electronics, gifts, and hundreds of everyday items. Maintaining their mission of “surprises in every aisle, every day” requires maximum effort, a complex transportation network, and a partnership with Chainalytics’ transportation experts to deliver the savings on brand name merchandise that millions of Americans depend upon.
Carrying such a wide variety of products comes with vast compliance standards and carrier options to ensure properly followed guidelines. As a result, Big Lots called upon Chainalytics’ expertise for its 2016 fiscal year truckload and intermodal transportation procurement event to assist with this massive undertaking. As a longtime customer of Chainalytics’, Big Lots knew the partnership would yield the desired results.
The project followed a 14-week timeline. It utilized Chainalytics’ proven procurement methodology that applies rigorous data analysis to develop the future-state network of to be bid, a multi-round bidding process with customized feedback between rounds, and an iterative scenario optimization process to move from a theoretically optimal solution to the adoption and implementation of business-optimal solutions.
Chainalytics’ staff members gained a comprehensive understanding of Big Lots’ business procedures, requirements, and expectations to kick-start the process. In addition, they conducted thorough staff interviews, lane evaluations, risk mitigation analyses, and a compliance overview for the various product offerings available across Big Lots’ retail sites and omnichannel operation.
After the operations assessment, Chainalytics applied a data cleaning process to all collected historical transaction-level data made available by Big Lots. This allowed consultants to assess, analyze, and aggregate the data while incorporating Big Lots’ forecasted future demand requirements. In addition, as previously discussed with Big Lots, Chainalytics created draft networks using various aggregation schemes upon data cleansing and validations. These included any provided transportation network changes.
Next, we conducted a carrier evaluation to determine the criteria for which carriers to consider, by both lane and product type, as per company requirements. Chainalytics’ experts leveraged their experience and proprietary resources to assess Big Lots’ current carrier network and Chainalytics’ carrier database to determine which ones to consider for the sourcing event. Chainalytics provided the resulting list of recommended carriers to Big Lots to consider for inclusion and invited these carriers to participate as requested.
Having established carrier specifications and requirements, Chainalytics assisted with the bid response parameters to ensure carrier understanding. Furthermore, Chainalytics created seasonality, lane definition, fuel and accessorial charges, and network statistics for inclusion in the RFP documents. Finally, Chainalytics completed bid packages and training materials and hosted a kick-off meeting to set expectations for the first round of carrier bidding.
Chainalytics posted bid packages to Big Lots’ instance of the bid optimization tool for the carriers to access, kicking off the bidding process. Chainalytics served as the first line of carrier support and answered any technical and process questions, and sent periodic FAQs to Big Lots for distribution. Upon completion of round one bidding, Chainalytics validated carrier responses and performed high-level scenario analyses.
Next, consultants worked with Big Lots staff to identify which carriers were eligible for round-two bidding. Chainalytics calculated rankings and target rates using round one data, carrier-market benchmarking data, and historical rates. Big Lots communicated this information to the carriers that were part of round two. As in round one, Chainalytics provided support to carriers during the second round of bidding and compiled completed round two responses for validation analysis.
After round two, Chainalytics again validated carrier responses for accuracy and worked with carriers to correct any errors. Next, Chainalytics, working with Big Lots, planned a series of scenarios to run through the bid optimization tool. These scenarios considered carrier capacity constraints, Big Lots’ business constraints, carrier incumbency, and the Big Lots network. Throughout the scenario process, Chainalytics provided Big Lots with a series of reports that evaluated the impact of changes between scenarios.
The project team first focused on nailing down the outbound carrier awards. With the outbound carriers determined, Big Lots sought to create a balanced transportation network concerning inbound and outbound operations. Additional scenarios were conducted to shift inbound volumes to carriers awarded outbound freight at each facility. This systemic awarding allowed Big Lots to reduce the total number of carriers required at each facility, achieve smoother operations at DCs, and reduce overall empty miles and driver hours for the carriers. By enabling carriers to make pick-ups immediately after deliveries, Big Lots gained additional value from their carrier relationships while reducing additional operational costs for all parties involved. Once an optimal solution was achieved, Chainalytics provided Big Lots with a “tweak” sheet to make final adjustments to the proposed awards based on face-to-face negotiations with carriers.
With the final awards established, Chainalytics then assisted in developing carrier-specific final award packages, including contract rate addendums and inbound volume specifications. Additionally, We created rate upload files for Big Lot’s execution systems. Finally, Chainalytics provided reports on the final award scenario, including rate and award changes that illustrated expected spend and savings by carrier, location, and business units.
Upon completion of the procurement event, Big Lots achieved a 44% reduction in the size of their carrier base while increasing the awarded freight amount to asset-based carriers, resulting in savings just above 7% for all Inbound and Outbound truckloads. Furthermore, the sourcing event allowed Big Lots to successfully achieve a balanced network by supporting inbound carrier volume that allows for better outbound execution.
Chainalytics accelerates fact-based transformation for supply chain leaders around the globe delivering market-leading consulting and managed services. We bring unparalleled passion to our core purpose: to help leaders realize maximum value from their supply chains. Our top supply chain talent enabled by our proven and innovative digital assets – methods, tools, and content – deliver actionable insight and measurable outcomes to some of the world’s largest and most complex enterprises. With locations across North America, Europe, and Asia-Pacific, Chainalytics serves companies globally in a borderless fashion. To learn more, contact us and follow us on LinkedIn.
