Food Distributor Cures Supply-chain Indigestion with Visibility Solution
Global Logistics & Supply Chain Strategies, August 2002 - By Kurt C. Hoffman

Atalanta, a major food importer and distributor, needed a new system to support its supply chain, but had been unable to find one that suited its complex operations. Then the company encountered, Blinco Systems Inc., a systems vendor whose roots are in the same type of food business.

Reliance on handwritten orders and an outdated software system was causing major headaches for food importer Atalanta and its complex network of divisions, warehouses and global suppliers. The company needed a supply-chain visibility system that would allow it to gain control of inventory and order profitability.

“Inventory under the old system was a mess,” says Joe DeNicholas, Atalanta’s director of logistics. “We didn’t even know how bad it was, but we knew it was way off.” To transform that mess into order, Atalanta chose Blinco Systems’ 3rdwave enterprise supply-chain solution. “Now our inventory accuracy is virtually 99.9 percent, each day of the week,” says DeNicholas.

In addition, billing is much more timely and far more accurate than it used to be. “There were times when we were two weeks behind on our billing, due to factors such as keystroke errors or inadequate shipping information or indecipherable handwriting, and that obviously can have a big impact on your cash flow,” he says. “That does not happen anymore. Now, the product is billed on the same day that it ships.”

Billing accuracy also has improved dramatically. “Our customer deductions for inventory-related glitches have been tremendously reduced,” says DeNicholas. “We still get deductions for the more creative reasons that some customers cite, but we don’t see the ‘you billed me for 10 and I only got eight’ claims anymore. And we have full visibility throughout our supply chain, both on products inbound to our warehouses as well as the outbound shipment of customer orders.”

Based in Elizabeth, N.J., Atalanta opened its doors in 1945 as a small import company. Today, the company posts annual revenue in the $500m neighborhood and services its U.S. customers through 12 regional offices in major metropolitan areas across the country. A subsidiary company services the Canadian market.

To understand the value to Atalanta of the 3rdwave solution, it’s critical to grasp the complexity of the importer’s global supply chain, says DeNicholas. Atalanta sells its products to a highly diverse customer base, ranging from food giants like U.S. Foodservice, Sysco and Costco, to grocery distributors, supermarket chains, specialty shops and mom-and-pop grocery stores. Products sold through Atalanta are channeled to customers via 16 departments within five distinct divisions:

• a cheese division imports products from Germany, France, Canada and Italy as well as the Benelux countries and Eastern Europe;
• the grocery division brings in items such as canned tuna and pineapple from the Far East, tomato products from Eastern Europe, and a mix of olives, mushrooms, artichokes, rice and pasta from dozens of countries;
• the ham division features items from Poland, Slovenia, Hungary, Denmark and Italy;
• frozen seafood includes lobster, crab and shrimp products; and
• the fresh/frozen pork and beef division ships in baby back ribs from Scandinavian countries, pork from Canada and beef from Argentina.

Given the complexity of the product mix, Atalanta needs climate-controlled transport containers and frozen, refrigerated and dry storage warehouse environments for each service region. It relies on a core network of steamship lines and motor carriers as well as a collection of more than 40 public warehouses/distribution centers to meet these needs. Nearly 90 percent of the company’s inbound products arrive in ocean containers, while about 4 percent moves via domestic service. Less than 1 percent moves by air freight — mostly high-end cheeses with a short shelf life.

Atalanta’s arrival port of choice is Port Elizabeth, N.J., and the company maintains a large multi-climate distribution center in Elizabeth that stores and ships approximately half of the product Atalanta sells. Twice a week, trucks line up at the Elizabeth center to make replenishment runs to various warehouse locations throughout the country. The company’s largest markets are Los Angeles, Houston, Miami and Elizabeth/New York City.

“Delivery windows were becoming smaller, and we saw penalties for incomplete deliveries.”
- Jim Marsh of Atalanta

The company maintains approximately 2,000 active SKUs, but the company’s inventory control challenge is multiplied by the fact that it must trace products by inbound lots. “Everything we did and continue to do today is done by individual lot,” explains Carl D’Angelo, Atalanta’s director of information technology. “If we bring in a container from Italy that has three different items in it, the contents of that container are entered into our system as three separate lots. And since we are talking about 35,000 orders per year, if you multiply that by the number of lots per order, you are talking about hundreds of thousands of line items.”

For years Atalanta had in place a homegrown legacy system that had most of the necessary pieces to handle this tracking, augmented by disparate pieces of off-the-shelf software, he says. “But in order to really get a picture of something, we had to manually collect all the pieces and put them together like a puzzle for the data to make any sense.” Manual processes also were prevalent at other locations where inventory was stored. Orders were hand-written and faxed to one of the main offices, D’Angelo explains. “We were dealing with paper-based orders written by hand, and between having to deal with individual handwriting and then repeatedly having to re-key that information into our various systems ... it was driving us nuts.”

In addition to the internal pressures, Atalanta also was feeling the heat from a customer base that was becoming increasingly sophisticated on the IT front. “In the past few years, many of our customers were getting more technically demanding and requiring more efficiency from us,” says Jim Marsh, director of sales for Atalanta. “Delivery windows were becoming smaller, and we started to see penalties associated with incomplete deliveries. The whole marketplace was tightening and putting demands on us, and our old system simply could not meet those demands. Needless to say, this encouraged us to move along and quicken our pace to get a better tool in place.”

This did not come as news to the Atalanta managers. “We all knew as far back as five years ago that we needed to upgrade our systems, but we simply could not find an alternative appropriately suited for the complexity of our operation,” says D’Angelo.

For example, adds DeNicholas, one Atalanta division brings in frozen shrimp and frozen lobster from South America, and the requirements for that business are dramatically different than those for importing cow-milk cheese under government licenses. And that is different from the import meat business, which involves a completely different set of inspections and requirements, he says. “There was no apparent software solution for the umbrella of businesses we have, so we kept struggling along with our existing systems.”

Multiple Records

However, the inventory control and order management problems were intensifying for Atalanta. Each of the company’s 12 regional offices kept track of their own inventory, and they would report their numbers to headquarters in Elizabeth, where operators would input into a different system the inventory numbers from the regional offices and then attempt to reconcile the local records with centralized records at headquarters. In addition, each individual warehouse location also maintained inventory numbers and would in turn report these to headquarters. “We would end up with three sets of records that were supposed to be parallel, but they were not connected in any way,” says DeNicholas. “And since we had no centralized order entry system, everybody was releasing their own product around the country, and then just telling us here in Elizabeth what to bill the customer. And billing was a completely separate process from the order entry system. There was no interconnectivity whatsoever.”

Given the highly entrepreneurial nature of the Atalanta business model, regional offices and division heads also enjoyed a considerable amount of latitude to conduct business independently. Consequently, the company’s finance department rarely had an accurate grasp on financial commitments made by the regions and divisions. “We had these divisions, or fiefdoms, which were P&L-responsible from beginning to end, including the interest on any money they might be expending on behalf of the company,” recalls Marsh, who also held purchasing responsibility in the ham division. “I could go out and buy ten containers of ham at a time — and that’s a sizeable piece of change, as a single container of prosciutto costs about a quarter-million dollars — and I didn’t have to tell anybody. The chief financial officer had no idea that I placed this purchase order until the paperwork hit his department, essentially telling him to come up with the money to pay for the ham. So from a financial and operating perspective, we were at the point where one of our key priorities was to get a handle on the liabilities being incurred by the various departments.”

Finally, in mid-1999, Atalanta assembled a five-man committee from different disciplines within the company to explore and scrutinize the various supply-chain management software offerings in the marketplace. The team put together a list of objectives and criteria and sought proposals and presentations from various software vendors. Initially, a match again proved elusive.

“Most of the products out there are geared for a domestic manufacturer, but we don’t really manufacture anything. We buy on the open market and sell, and 95 percent of our products are imported, so we have a whole other set of factors that domestic guys don’t have to deal with,” explains D’Angelo. “We’ve got to get products through Customs, through the Food and Drug Administration, and we have to deal with steamship companies and bill of lading numbers and container numbers and transit times and ports of origin and destination, veterinary inspections, ham inspections ... it’s much more complicated than a manufacturing operation, and there really are not that many companies out there that have a software that targets product sourced from overseas.”

Blinco Selected

Atalanta then focused on Toronto-based Blinco Systems and its 3rdwave supply-chain execution software system, and the software search ended abruptly. Blinco Systems was formed in 1988 as an offshoot of S. Blinick Company Ltd., formerly one of Canada’s largest independent food importers. The foundation of the software was conceptualized by David Blinick, then Vice-president of S. Blinick, who hired a software developer to write the program in the 1983-88 period as the internal operating system for S. Blinick Company. In 1988, David moved from the import business and was named to head the new software company. Keeping it in the family, Ned Blinick, C.E.O. of S. Blinick Company, closed the import business in 1994 and joined Blinco Systems as V.P. Sales and Marketing. Blinco’s 3rdwave brand has expanded to include enterprise-wide vertical-specific applications noted for a broad footprint that fully-integrates and synchronizes the global supply chain – end-to-end and in real time. In addition to food sourcing and distribution, 3rdwave has solutions for consumer goods distribution (soft and hard goods), automotive, metals trading, retail, fashion, 3PL’s, breakbulk and other global sourcing, private label and complex distribution environments.

“With Blinco, we were dealing with a company that came from the import grocery business in Canada, a company we had done business with at one time,” says DeNicholas. “From the start, we knew that they understood what we had to go through to run our business. They also knew that in light of the changes going on in the marketplace with a lot of the products we were bringing into the country, we needed to carve ourselves out as something special in the eyes of our customers. And we all agreed that the best way to do that was to provide superior service.”

Anyone can get into the import business these days, he adds; all it takes is an idea, a bank loan and some knowledge of the regulations, and a new company can start importing frozen shrimp next week. “The key is to get that product from origin to destination efficiently and in the best possible manner to fit each customer’s specific needs. Blinco understood that. They had the product that really fit our requirements. And the really big plus was that we didn’t have to teach them the business — there was no learning curve.”

For example, says Marsh, the Atalanta team would start to describe a problem or situation, and they wouldn’t get halfway through what they wanted to say, “before David would take over the discussion, because he knew exactly where we were headed and had already thought out a solution that consistently proved superior to the one we had in mind.”

D’Angelo also cites Blinco’s willingness to surge past Atalanta’s initial requirements for the software. “We would present a situation to them along with our proposed solution, and instead of simply saying ‘fine,’ they would tell us that they could give us better than that. Then they would go on to describe a solution that we hadn’t even thought of. It made the entire process a lot simpler, and it clearly worked out better for us.”

This was a refreshing change for DeNicholas, who had been through a similar software selection process at his previous company and ended up dealing with a software company that did not understand their particular business. “In that experience, the software company gave us what we asked for, but they gave us only what we asked for. They never had a better idea that went beyond our suggestion. And we had to explain the entire process to them, so there was a tremendous learning curve.” Not so with Blinco.

Atalanta made the decision to go, and implementation followed in 2000. With 3rdwave on board, life changed dramatically for many elements of the Atalanta operation. Now, Atalanta uses the 3rdwave order-entry program to purchase product from its overseas suppliers. The system takes the order information, computes the associated logistics costs of landing the product in the U.S. and moving it onwards to customer or warehouse, while also providing the means to track the shipment on its inbound journey. Once the product arrives at the appropriate warehouse or customer location, the system compares projected cost with actual cost. With full visibility of product moving inbound, the finance department — or any other element of the Atalanta operation with appropriate clearance — can see exactly what is moving inbound for the ham or cheese departments or from a specific country or on a specific steamship line or for a specific customer.

Customer orders now arrive via a number of channels: from one of the 35 Atalanta salespeople using telephone, fax or laptop computers and web-based systems; via EDI transmissions or web-based communications from larger customers; or from phone, FAX or web-based means from customers of a more modest size. 3rdwave provides customer order templates specific to each customer and formatted in accordance with the customer’s preference: alphabetically, by product type, by frequency of order, etc.

Once an order enters 3rdwave, the system checks to see if inventory is available and then reserves that inventory. The order data then moves through an approval process to ensure that the pricing is correct, credit is cleared, etc., before the order is ship-released to the appropriate warehouse facility. No re-keying of data is required, as the information flows smoothly from one function to the next in a fully-integrated fashion.

Atalanta and its salespeople have access to online information that reveals inventory throughout the pipeline, from inbound shipments through to the warehouses, enabling them to sell while they are on the road even against shipments not yet received.

3rdwave also keeps track of the product based on when it entered the country. In the past, the regional offices kept track of the product when it entered their region and from that point relied on a manual first-in/first-out procedure, so product didn’t get rotated as efficiently. Now, 3rdwave performs the inventory rotation, designating which lots ship first.

“Now, we can get an order entered and released to the warehouse in less than two minutes if everybody is on top of it,” says DeNicholas. “With the accuracy and visibility 3rdwave brings to us, we’re operating in a completely different environment.”

The software also gives Atalanta the ability to monitor real versus expected costs and to capitalize on margin opportunities, adds David Blinick of Blinco. “3rdwave gives Atalanta visibility to profitability by order and line item and by individual transaction across their warehouse network,” he explains. “They now have the ability to directly manage costs in real time to ensure that the estimated costs are really being achieved, which reduces their exposure.”

The software also enables 3rdwave users to discern trends in the business, he adds. For example, business department approval at Atalanta allows managers within a department to ensure that the transaction presented for approval meets business profitability targets and market coverage. “But what often happens in the food import business is that customers have more information than suppliers. As a result, when a market goes short, the customers will all of a sudden go out and try to pick up the limited quantities of an item before suppliers adjust their prices upwards, which is the natural response in a supply-and-demand economy.

“3rdwave gives our customers the systems ability to manage the outflow of product so that profit opportunities can be exploited. You want to be able to quickly identify those items that are coming under margin pressure as well as those items where velocity is starting to pick up and margin opportunities are being lost.”

For related information, please go to:
3rdwave Food
3rdwave CGD (for Consumer Goods Distributors)
3rdwave Global Logistics