Case Study - USG
How Committed partnership provides continued innovation and cost savings.TPAI has provided sole source Pallet Program Management to USG’s 42 plants in The Unites States and Canada since 2001; comprising five separate and distinct business units and products. Due to the long- term nature of the relationship, TPAI has become part of the USG company culture, which has led to the investment of time and energy in numerous cost-saving and product optimization projects.
Solution Needed: Immediately
One such project has been the innovation (and ongoing optimization) of the USG Durock pallet platform. The picture below was provided to TPAI within the first week of the Program’s inception.
It’s a story familiar to any of the sourcing professionals that are reading this page. An important customer has a pallet failure, sends e-mails and pictures … and needs it addressed immediately.
The next chapter of this story then becomes:
- What Happened?
- How Can it be Fixed?
- Who's to BLAME?
The pallet failed in two ways.
First, the obvious line-load failure high up in the cantilever arm storage racks of a warehouse-style retail store. That’s not good. The second failure takes a little more discerning eye … the nails failed.
A further look at the pallet with pallet-eyes gives more information … and more to think about. We notice the too-thick stringers and deck boards … remember … pallet cost is essentially a design factor of how much wood is needed to support the load.
An immediate visit to the plant then yields more information and insight.
Certain pallet footprints had large pine blocks wedged between the stringers. Plant personnel explained that when placed in rail-cars, the pallets would roll laterally unless the blocks were inserted to stabilize the stringers.
The additional information again demonstrated that the nails had failed to hold their adhesions, and had pulled out of the wood.
Now that the disparate elements of what happened had been (quickly) explored and insight gained, the immediate question becomes … how can it be fixed?
How Can it be Fixed?
- Address the Elements that Failed
- Ascertain How Much it is going to Cost
In the real-world, management wants it both fixed, and cost reduced while you’re at it. Good luck, right? In this case, TPAI accomplished both tasks, quickly.
As mentioned in these pages, pallet design optimization is the key component in the art of limiting cost.
The pallet failed because the design had become reactive to cost and availability of component materials. The wood content of the stringers and deck boards had been increased to gain stiffness because the locally available material chosen and used, aspen, was the least expensive (per board foot) material … but also the least stiff and least dense material.
The hand-nailed component meant using the least substantial nails.
TPAI’s solution (below) addressed the components of the platform that had failed. A block pallet was designed so no further bottom board failure was possible … because there were no bottom boards.
TPAI designers substantially reduced the thickness (and therefore cost) of the decking material by using regionally available dense hardwood, while replacing the massive stringers with blocks, substantially reducing board footage (did we mention … therefore reducing cost?).
Finally, TPAI innovated a process to machine-nail these odd-sized pallets (36 x 60, 48 x 96), so the best nails and most consistent nailing system was used. In effect, the best nails sunk into the best material, results in adhesions that hold … with no bottom deck boards to break.
Problem solved, crisis averted, approximately one million dollars saved annually.
Who's to Blame?
Yes, now that the crisis is averted, it’s finger-pointing time.
But first, let’s review the reasons TPAI chose this Case Study to illustrate:
- It makes TPAI look really really good (problem fixed … quickly … solution innovated that saved a boatload of money)
- It illustrates TPAI’s process: first assess factors that drive cost, then change the parameters of cost by optimizing design, and (if necessary) innovate a way to get it produced
- It cleverly reminds the purchasing professional that TPAI has big credentials with big companies
Now, back to the question … Who’s to Blame?
Here's the short and real answer... NOBODY in particular...
In the real-world environment that most people at most companies work in, new products and new equipment and new customers are continually introduced. Each new circumstance creates real-world challenges, which require real-world decisions.
As mentioned in these pages, today’s multi-site corporations are in reality the end-product of generations of disconnected facility, equipment, or product acquisition and expansion … without consistent oversight or planning.
Each individual that addressed the pallet design in question fixed the problem that they had to fix.
However, each time a new customer handling environment or a logistics change was added, a new component of load-bearing stress was added … and the pallet would fail again … which would again elicit a fix that addressed a specific circumstance of failure … with input from local vendors that offered solutions based on what they knew how to do, or could do, or wanted to do…
Then, as the component parts became more substantial, the sourcing focus predictably shifts from fix the problem to lower the cost … and lesser quality, less expensive materials are added to the equation.
Then as the new product and new customer cycle continues, the pallet gets placed into environments that the load-bearing platform was never imagined or equipped to handle, and the pallet fails yet again; except this time it involves an important customer … and it becomes a corporate matter.
The point to illustrate is this:
There was no single individual that did a poor job that resulted in the failure of this pallet … there was no one person or vendor to blame.
The pallet failure was a system failure. There was no system in place to assess the ongoing, changing business environment that is the reality in the real-world International Supply Chain environment that today’s national and international multi-site companies operate in.
Remember, it’s not just a pallet. Your company values are identified by the choices you make. Everything you do is riding on it.
As strategic sourcing professionals reading these pages well know, sooner-or-later your manager is going to ask, “What’s next?” What are you working on to increase productivity and profit, or to just plain survive as competition and the cost of doing business becomes more and more challenging?
Answers don’t become available, however, unless questions are first asked…
The kind of answers you will be required to supply will sometimes take years to develop … of course, only if the questions are first asked while there is time and motivation to pursue those answers.
In other words, you’ve got to start asking the next set of questions as soon as you’ve supplied the last set of answers … which requires both time and commitment … which is an essential component of why TPAI believes the National Program Management model represents the best platform for continued innovation and cost-management.
Durock: The Next Steps
Durock is an interesting and challenging product in that it is produced wet then becomes rock-solid as it cures over a period of a few days. The platform first must support the product as it is produced wet, then as it cures stacked five-high in a moist environment, then finally as it is shipped.
TPAI designers realized this presented a cost-reduction opportunity, as the product had very different physical properties immediately after manufacture than when it was shipped, and innovated the idea to construct an abbreviated shipping platform, seen below, which could substantially reduce wood volume; and therefore cost. However, in order for great ideas to become great process, true partnering is required.
This is an example how optimum pallet design requires knowledge of process.
In order to place Durock on the above product without damaging it, the USG manufacturing process would have to be amended. In concert with USG Durock personnel and management, tests were conducted to explore various avenues and materials. As TPAI became a part of the USG solutions culture, ideas began to flow back and forth more freely.
After extensive trialing, USG customized their palletizing mechanisms and handling systems to facilitate the new platform approach. This further innovation and cost-reduction opportunity, (another approximately million dollar annual cost reduction), could not have taken place without a true partnership and commitment to: first identify factors that drive cost (a single platform designed for two very different phases of the same product), then innovate both process and product solutions.
This further innovation reduced wood costs, refined incoming supply chain and inventory processes (due to its ability to be condensed during shipping), and added further value to the outgoing supply chain through its ease of disposal (product foot print is either 3’ x 5’ or 4’ x 8’).
You can read more about the entire USG Program process in the February, 2003 article, Getting it Right at US Gypsum: The Pallet Alliance Creates a Model for the Pallet Industry That Rewards ‘Great Work’ as the Goal, published by the pallet industry trade magazine Pallet Enterprise.