Supporting business growth and change with 4PL solutions: Insights from IPC Subway

Thanks for letting me speak to you guys. So good to see everybody and happy to tell you a little bit about. our story. So Subway is the largest QSR restaurant in the world by store count, right? So we've got 40,000 stores. It's the largest in the United States, the second largest in Canada. We are also the largest franchise organization in the QSR restaurant industry. We're all of our stores are exclusively franchise owned. So that makes us an interesting challenge. We set up a Cooperative about 25 years ago that buys all the Subway product. So we buy about three billion dollars worth of product in the US and there's about five or six billion globally that we do on behalf of our franchisees. We get them scale. We get them quality standards and we allow do all the end to end Supply Chain management. So these are our mission statement our goals, right? So franchisee profitability is the biggest thing that we do and then the rest is about people and and the culture that we bring to get to become the best supply chain organization for the Quick Serve restaurant industry that in our partners. So the other thing is we strive to be the best collaborative partner to our brand which is Subway and help them to achieve their their goal, which is to become the the most profitable quick to restaurant chain in the world. So for us on the supply chain side, we have a pretty complicated puzzle to solve every day. We've got a hundred manufacturing sites that produce 250 products across the system. We have 72 distribution centers in the United States and Canada. We have no ERP. That means we're solely reliant on third party data. As a Cooperative, we don't make we don't sell anything. We contract it out with third-party providers. We're really good at sourcing. We're really good at purchasing. We lean on our third parties to help us with data to make decisions on a daily basis. That's where we use managed service providers. We use data hubs and it makes a little bit more complicated because we have 72 distribution centers, in 19 different distribution Partners, 80 manufacturing companies and that how we do 25 National promotions in the US and another 15 in Canada every year. So all at the same price, so we've got a lot of challenges. Just a little bit of an overview. Our Logistics network is complicated as well. There's a lot of money flowing through the system about 100 million dollars. What we do with that is we find Value by, you know in Freight Network savings at about 8% every year we're doing in cost savings cost avoidance initiatives with internally and with our service providers. We also use digital twin processes to help us find sourcing savings. And we also I mentioned before we don't we don't do any have any ERP. So we're sole reliant on third-party data. So our managed service provider TMC actually does 60 EDI connections with our with our manufacturing companies and they also use provide portals to provide fill all the gaps of our business for inbound purchase orders inventory on hand and sales. There's a lot of you know, there's about 1500 lanes that we manage about 150 trucks a day are flowing through the system. We have complete visibility to that managing on-time performance about 92% and OTIF about 94 and a half percent. So all throughout the pandemic we can't we kept our metrics at about the same level. So as a 4pl, TMC does a lot for us as they manage. They do all the supplier performance. They manage all of our supplier EDI connections, and they look at how they're doing against plan. They also manage almost like a banking service for us for their collecting money and paying our third parties on our behalf. We have a pretty broad portfolio of carriers that allow us to execute every day. Everything from refrigerated to LTL and also ocean Freight which they allow us a control tower to really truly manage that on an end-to-end basis. We have a process that we set up collaboratively with TMC to help us manage our exceptions. So when inventories are getting it at risk or if we have suppliers that are struggling we have ways to pivot on that relatively quickly. Using inbound reporting and also some risk matrixes that we set up. The final thing is is something that is kind of interesting. We built a digital twin process with the network modeling tool that we maintain and update monthly. And that allows us to look at the best use of our current Network every month. And we can make changes with our sourcing and our distribution partners to flow product more efficiently. So it's a fairly complete solution that we have in place. What I wanted to talk to you about was how we used our existing solution to adapt to Subway's big refresh that happened over the past year. So you may if you watch any sporting events over the past year and a half you may have seen Subway particularly like Tom Brady and a lot of other sports figures involved in this new campaign that was done and what was behind that was not just the kind of glamor behind the athletes, but we actually transformed our whole menu last year. We had new bread across the system. We had all new proteins and a lot of our sauces were changed. So it was kind of a quiet thing on the And the commercial side, but on the supply chain side it was the biggest transformation the brand has ever done. And we had to do it in a very challenging period of time as you can imagine so last year was with a lot of challenges. So our goal with the big refresh was to transition all of our food in a window of about six weeks. Across 21,000 restaurants the United States and you know there should there's no just there's no disruption right. We're in a world of disruption that we have today. And so that was the goal in our challenges were we had all new suppliers? A lot of new freight lanes set up. We had a lot of industry disruptions as all of you know, and we had a lot of challenges headwinds with transportation costs. So that was not a good starting point for us, right? What we didn't expect was we'd also have some additional challenges with our suppliers. So we're really good at managing freight as a system or really good at managing network efficiencies and pivoting against that. What we weren't that good on at was was managing supplier performance and managing supplier disruptions. So throughout our our big refresh, which is basically May and July. We had dozens of core product challenges with our other manufacturing entities. This is a lot of you in the manufacturing arena have probably seen something similar, but we had everything from steak and ham in the system that was out to portions of the system had bread issues packaging across the board. And it was a very challenging time to do the largest transformation in the brand history. So how do we adapt to that? Well, we had a good foundation to start from to begin. We had a fairly elaborate networking, a network optimization process I mentioned the digital twin. We have a great on-site presence in a control tower with our maintenance service provider TMC. We also had a single TMS to look at all the orders in the system. So what that what that did is we had a really good foundation and from there it was more how do you adapt? How do you become agile? It was the biggest test that anybody could probably have between a cooperative and a managed service provider. So it was a good test for us to figure out what to do, but what we ended up doing, this is a graph that we'll talk about in a minute. So this is kind of how we look at our our whole planning process. From you know a daily day to a year year on year kind of process all the way from, you know tactical operational to strategic. So we actually built a process with TMC and C.H. Robinson to do network design a digital twin process. They also we use them on a very tactical level to manage our day-to-day business: truckload fulfillment, order management, EDI this kind of stuff. And what IPC did is they focused on the supply plan. They focused on annual operating plans and RFPs contracts stuff were really good at right. That's what we're good at. What we had to do throughout the life of of the big refresh with all the disruptions. We had to merge our strategic interoperational capabilities very quickly. And the good thing is we set up this digital twin process to be adapted every month beforehand. Not not by design. It was it was probably more fortunate than than fabrication, I guess so. It so what we did was we looked at all of our network pairs. We looked at all of our supply sourcing and we looked at what's the best way to adapt to the current supply situation? We had manufacturers producing at half capacity for core items where we needed to pivot and add two or three more manufacturing sites on within a number of days. So we had to adjust the supply plan in a way that we could action it. So we built we leveraged the digital twin. We also built some some complementary exception management processes with things like smartsheet and and email processes and we even had a standing daily call that would would align our planning organizations freight and and supply management all in one. But we did was sort of shifted that war room to sustainable processes that could last the whole the whole project right? And what we learned was a lot of this is actually good good business practice. We're still using this digital twin in a process that is directly aligning to our 4pl operations today. Things are a lot more stable. We're not out of the woods with supply issues, but we've got a process now that we can actually adapt to another severe supply disruption we could add in suppliers as needed. We could pivot as needed. So that's the that's the big thing. I think this is how we've this is this is kind of the big piece for us how we manage through the worst the pandemic. With the biggest transformation of a food, you know a menu probably in history probably for a restaurant's history definitely for ours, but there's probably not another QSR who did anything quite like us so so this is a good good story. So now we're on to Big refresh 2.0. And like I said, we've got a pretty good playbook to manage that. We are on a process today. The big refresh 2.0 is more about building custom sandwiches and and and chef inspired food then about transform the actual menu. So this is a lot funner to deal with than having to figure out how to you know, swap out the old stuff bringing the new stuff in a very calculated way. But the thing is that we've got a path there's actually five more three more refreshes that we're working towards that will continue to transform the food. So the fact that we've built the process that can adapt to whatever the brand throws at us is really going to help us to bring the brand the level that there that they want to go. They want to be a sub sandwich shop of destination. Not just a convenience, right? So one of the great things I mentioned about Subway is the most stores as of any chain out there. They're in every small town in the US or in every small town in Canada, which is wonderful, but it's kind of been a brand of convenience over the last years. They're working to make it more of a cravable brand of destination. So talk about a roadmap and where we're going. We're in a good spot to be able to adapt to whatever whatever we need. So, you know some things that to kind of tie this together our roadmap from a 4pl perspective, we're looking to build on the new the processes that we've That we've already established throughout the big refresh. We're looking at how we manage freight differently a little bit differently. We're doing more frequent procurement events. Cost savings is a lot more dynamic than ever before right. It's more about how we flow product to the network. How we align our business to our suppliers and our distributors then then cost per mile. Freight is always, you know, it's always about the dollars, but I think for now it's more about how we flow product and how we can have a sustainable system on an end-to-end basis. So that's that's an important thing service levels are most important thing for us now, right? Those are things that we're looking at not only on the carrier side and distributor side, but also on our suppliers, we're a lot more closely honed in on their performance on production plans production attainment these kind of things. So what we've learned is we can build a very good process with the 4pl. It's highly dependent on on visibility in the technology around that. TMC has a has a basis of Navisphere for TMS which is a wonderful platform. We're looking at how we can extend that. How can we bring in inventory management and inventory exceptions to that too. So it's it's really taking what we have which is really solid and broadening that. You know inventory in most inventory rest inventory in motion these are things that that are now part of our day-to-day all the way from strategic to to operational tasks. Data science is another big thing that we're looking to leverage our 4pl in the coming months and years. So this is kind of just a just a case study. Hopefully it's it's something that you know is is similar to some of your experiences. I think that, you know working with a 4pl I had a lot of experience working with the fort peel prior to working with with Subway IPC, but how we're utilizing and leveraging them is is much as much more extensive right to bring in the engineering which is a very strategic very intimate part of an organization's business and to align that to the operational components I think is really unique and we found a lot of value in marrying those two and to the point where I think we're looking to figure out how we extend that relationship.

4PL solutions for complex change: Positive outcomes for IPC Subway

When Subway was ready to implement their biggest ever menu change amid a global pandemic and volatile transportation market, IPC looked to C.H. Robinson & TMC to increase agility and visibility across their logistics network. Watch how TMC’s powerful combination of supply chain technology and talent helped make Subway’s “Eat Fresh Refresh” possible:

  • Supply chain engineering and network optimization
  • Carrier and exception management
  • Single TMS platform
  • Digital twin

Gain insights on how a 4PL solution can help your own business navigate complex change and achieve positive outcomes.

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