OM in the News: A Radical Idea–Own Your Supply Chain
Most manufacturing companies long ago outsourced their truck deliveries in the belief that outside experts could do the job more efficiently, reports The Wall Street Journal (April 30, 2015). But Ashley Furniture, the largest U.S. maker and retailer of furniture, has resisted that trend. It owns and operates about 800 trucks and delivers the vast bulk of its own products from factories to stores. “We think it is a core competency,” says the CEO.
Ashley employs about 3,000 people in transport and warehouse functions in the U.S., 1/4 of its U.S. head count. Its distribution centers feature racks specially designed to speed loading, and its managers arrange for trucks returning after they deliver their furniture to carry loads for other companies for a fee. About 80% of Ashley’s trucks are filled with other firms’ goods on the way back but Ashley aims to increase that above 90%
It has become very unusual for manufacturers to own transport fleets. Typically, switching to a third-party transport service leads to greater reliability and savings of at least 10%.
Trucks in Ashley’s fleet, from Volvo and Kenworth, average about 2.5 years old. The industry average is about 6 years. Providing drivers with comfortable seats, beds inside the cab and other amenities helps keep them loyal. Ashley also tries to keep drivers happy with predictable schedules allowing them to sleep at home frequently. Its drivers, dubbed Ashley Ambassadors, are also charged with building customer relations. In terms of delivery times and reliability, “they’re unbeatable,” says one furniture store owner.
Classroom discussion questions:
1. Why does Ashley control its own delivery supply chain?
2. What are the advantages of outsourcing instead?