Imagine shipping millions of pounds of cheese daily from your warehouses across the country. What would you do if your logistics system resembled Swiss cheese – full of holes? This was precisely the challenge facing Sargento Foods, a Wisconsin-based family cheese business, five years ago when they realized their outdated Transportation Management System (TMS) could no longer keep pace with growing business demands.
The Costly Pitfalls of an Outdated TMS
In the early 2000s, many shippers faced similar problems to Sargento: obsolete TMS software struggling to adapt to rapidly changing operational needs. Sargento's legacy system failed to consider cost, service, and carrier contract terms holistically when planning shipments, completely overlooking accessorial charges. The consequences were severe:
- Suboptimal transportation modes: The system couldn't consolidate smaller orders into efficient point-to-point truckload shipments, forcing more expensive and less efficient less-than-truckload (LTL) methods that increased costs and transit times.
- Limited carrier selection: Without data support, Sargento struggled to identify the most efficient carriers for specific lanes, keeping transportation costs artificially high.
- Inaccurate cost accounting: The system couldn't precisely track actual transportation costs, making it impossible to evaluate logistics operations' true performance or provide customers with accurate shipping quotes.
"Simply put, we had serious operational problems," admitted Keith Hartlaub, General Manager of Sargento Transportation, LLC.
Strategic Transformation: Build or Buy?
Recognizing the severity of these issues, Sargento launched a TMS upgrade project in January 2006. "We knew we needed to invest to improve efficiency," Hartlaub noted, "but the question was how to invest."
The company faced two options:
- Custom-built TMS: This approach required significant capital and human resources but promised a fully customized solution.
- Cloud-based solution: This alternative offered lower upfront costs with vendors rapidly adding innovative features at minimal expense, adapting to evolving technology landscapes.
After careful consideration, Sargento chose the cloud solution. "We believed web-based software represented the future," Hartlaub recalled, "as it could quickly and cost-effectively enhance Sargento's network efficiency."
Selecting the Right Partner: IBM Sterling TMS
Hartlaub was particularly impressed with Nistrevo Corp (later acquired by IBM and rebranded as Sterling Transportation Management System). After evaluating five software vendors, Nistrevo emerged as the clear choice.
Cultural Transformation and Tangible Results
The TMS upgrade brought significant cultural changes to Sargento's transportation department, but the outcomes proved transformative. The new system enabled converting more LTL shipments to truckload, reducing LTL volume by nearly 30%.
Additionally, automated freight payment slashed indirect costs by 60% while improving cost allocation accuracy to customers. How did Hartlaub's team achieve these savings?
Goal Setting: Charting the Course
When initiating the TMS upgrade in early 2006, Sargento established three primary objectives:
- Select a cloud solution connected to a major logistics network
- Choose a system with robust TMS functionality, including comprehensive automated freight payment
- Enhance overall logistics efficiency through the upgrade
Implementation: Challenges and Solutions
The implementation spanned three months from April to June 2006. "The process was intense but relatively smooth," Hartlaub observed.
Key challenges included:
- Workflow adjustments: Transitioning from paper-based reports to digital inputs
- Staff training: Employees needed to adapt to the new system, replacing traditional phones and faxes with online data
- Partner communication: Sargento had to inform transportation partners about new business processes
The company also maintained a 36-truck private fleet serving eastern U.S. routes from its Wisconsin plants in Kiel, Hilbert, and Plymouth. Approximately 200 weekly truckloads originated from Plymouth alone.
Managing Change: Gaining Buy-In
Under the legacy system, freight invoices were processed manually. To improve efficiency, Sargento replaced this with electronic data interchange (EDI), reducing fax/phone use while increasing keyboard inputs. While necessary, Hartlaub remained mindful of potential employee resistance.
To secure staff support, Sargento clearly explained the rationale behind changes: business process improvements were essential for competing in the demanding food distribution industry. "Everyone resists change to some degree," Hartlaub noted. "We encountered some pushback but overcame it quickly. Our staff embraced the changes and moved forward."
Operational Improvements: A New Era
After overcoming integration and cultural hurdles, Sargento now plans, executes, and pays for shipments more efficiently. The company tracks performance across 30+ carriers, identifying cost-saving and efficiency opportunities. Hartlaub's team also leverages the system for visualization, planning, and precise customer cost allocation.
"The difference is night and day," Hartlaub emphasized. "We know shipping costs before goods leave. We see the same rates as carriers, with predetermined fuel surcharges. If accessorial charges occur, carriers can add them to invoices—but we know in real time. We can pre-approve or reject these charges, dramatically reducing billing errors."
Bottom-Line Impact: By the Numbers
Sargento ships approximately 24 million pounds of cheese products monthly. Automated freight payment through the new TMS significantly reduced administrative costs. The logistics department improved cost allocation efficiency while decreasing per-shipment costs (excluding fuel) by 15%—primarily by converting expensive LTL shipments to truckload. In fact, LTL shipments decreased by nearly 30%.
Gene Nusekabel, Sterling Commerce's Transportation and Logistics Industry Marketing Manager, noted: "For companies like Sargento, consolidating truckloads should be obvious, but sometimes the big picture isn't clear. A TMS's value depends on your planning."
Future Outlook: New Horizons
Sargento currently integrates inbound shipments into its TMS, with appointment and dock scheduling implementation planned for later this year.
"Initially, some carriers expressed concerns," Hartlaub acknowledged. "Many weren't computer-savvy but now must monitor emails and websites. For several carriers, this was new territory, but they've adapted and grown."
Throughout this process, Hartlaub takes pride that none of Sargento's 30 transportation partners dropped out. What changed was his carrier network's efficiency. "Things keep improving...everything runs smoothly now," he said regarding carrier relationships. "They appreciate how we interact with them."
From a vendor perspective, Nusekabel sees a bright future, noting that fully automated TMS systems are only implemented in 30-40% of logistics operations. "This shows tremendous opportunity remains," he observed. While large companies appear more willing to automate, smaller firms could reap equally significant benefits.
Hartlaub offers straightforward advice for shippers considering automated TMS: conduct thorough research, plan appropriately, secure executive support, and understand your desired outcomes. "Shippers must clearly understand their operations and potential systems' attributes," he added. "Some systems offer powerful options you might not need. We're not a $200 billion transportation company, but we got exactly what we required."