LoadProof Video Testimonial – Paulo Lubag, Kohler

Um, so you know what is something that you guys like about this tool? Right, if you could say three things about the tool that you guys like a lot, know what is that? You know, three things that you would say.

Yeah, definitely! Obviously, just the actual solution itself, right? The fact that we are taking a more modern approach, I guess you’d call it, in this part of our operations. Uploading and instantly seeing it on your desktop is really seamless for our operations leaders out there to see where the gaps are in our process.

So, it’s an instant identifier. Of course, there’s that phrase, “a picture tells a thousand words,” so it’s easier for us to really understand where our efforts need to focus, whether that’s in that day or that week. So far, it’s been styled from that end.

Okay, and where do you guys see the most savings? Is it… we have customers that have seen all different kinds of savings. One is the overall reduction in the number of claims, right? That’s happened, and then also the time that they spend on researching things as a team. Where do you guys see the big benefit in terms of low growth?

Though we haven’t necessarily seen it from that specific perspective, where your customers may have, that has more to do with our process. Essentially, the solution is sort of isolated right now in logistics, but we do plan on expanding it to other parts of our business. We just wanted to increase our site adoption rate to multiple sites for a standardized process across our network.

We do have a wide network, so it’s essentially a ramp-up plan. Once we get enough sites on board, we can start to pull in customer service, marketing teams, sales teams, just to show them that these are the quality loads coming out of our sites. If there are any issues, we can address those. The most benefit we’ve seen, though, is just from a process visibility perspective.

Again, we’re really focused on identifying the gaps, and my team does that. The images really tell the story of where those gaps exist in our process. If you have 20 to 30 pictures for a shipment, you could monitor every single pallet that goes into your trailer if processes are executed correctly. It allows us to close those gaps faster.

Is it safe to say that because we now have pictures to go back to, the quality of the work, packaging, or shrink-wrapping done at the origin facility is much better? At the destination facility, they can log in and see this, trusting the process more. Is that what it is?

Yeah, that’s our ultimate goal: to have everyone looking through and policing each other on quality. Our operation is pretty friendly, and we have a good relationship with our operators. They understand that it’s not about monitoring every single move they make, but rather about having an audit process in place.

We can take different sample audits and use that as a training or process improvement tool to stabilize those processes, as mentioned earlier. That’s a great audit tool; if a problem happens, they can look back at these pictures and evaluate where we dropped the ball.

How did that improve your customer service? Are the recipients at the destination seeing any difference in terms of quality? Are the pallets standing nicely, or are the boxes loaded properly?

Yeah, overall, we have definitely improved. There are still some processes to hash out, but our customer service team really monitors the claims from their perspective. Overall, our numbers are doing better year-over-year, though we’ve had some challenges recently with the pandemic.

I won’t necessarily say it has improved just because of the tool, but it has definitely helped with the training part. With Load Proof, we can easily train an operator in their first or second week on the job and show them real-life examples of how a trailer should be loaded with our product.

You mentioned that the numbers have improved a bit. What are those numbers? Are those chargeback numbers, clean numbers, or freight claims?

Ultimately, they are clean numbers. We measure claims through accuracy and quality of loads, meeting damages. We’ve seen improvements in accuracy, but we do lose a lot of full pallets. Overall, there has been a downtick in claims.

So, when something happens and damage occurs, you’re able to accurately provide information for freight claims? Now you can process claims more effectively?

Yes, that would be our ultimate standard process. We haven’t fully integrated the transportation departments yet, as we’re still trying to increase our site adoption. For now, most of the process improvements are on the in-house side from a training perspective.

We’re always looking for feedback for improvement. If there’s anything you would recommend to make Load Proof even better—faster, easier to use, or automated—what are some things you would suggest?

For sure! We have a lot of in-transit items in the network. We’ve been playing around with the quality features of Load Proof. We’re trying to document issues whenever we receive a trailer from one of our sister sites.

Unfortunately, today, the outbound shipment process doesn’t necessarily match the inbound side. It would be nice to have an inbound screen or unique selections to cater to that process.

That’s a good point. We can set up another profile for inbound processes, capturing parameters specific to inbound shipments. After this call, we can help you set that up and show you how to do it.

Sure! I think we can set up some time to get into it and get some training. We’ve catered our outbound form to our operators’ needs, so it would be nice to get it all on one profile.

Yes, you could have another virtual site for inbound processing, defining parameters and metadata specific to that. Users can then enter that site and do all the receipt processes.

I understand we may need to purchase another site, and user names would need to increase. I’ll think about the process and get feedback from my team.

The goal is to simplify for the operators. I want to avoid adding complexity to their process, so they’re enticed to do the right thing.

Absolutely, we can explore that further. It’s essential to gather feedback, especially from users like you who see value in this. Your feedback helps us improve and incorporate necessary changes.

So, regarding chargebacks, is that one of the significant problems for you guys?

It’s hard again, right? We haven’t really built into that piece of it yet internally. Of course, chargebacks are a common issue in our industry, but again, like we discussed, your solution really needs to be viewed more internally from an operations perspective. That’s how we’re seeing our value in claims.

You know, I speak really just because if you can kind of picture a shipment trailer for Koehler, we’ve got bathtubs, which could be very large, ranging from AC classic FRP tubs to cast-iron bathtubs. Those take up a large amount of space in your truck. But then also in that same truck, you’ll see toilet seats, and of course, you’ll see our toilets. So, you’ve got a really wide mix of products in there.

Our loaders are essentially trying to play Tetris, ensuring everything fits appropriately. We’re using it more from just stabilizing those processes because we know there’s an art form involved. We’re trying to take our sort of art form of a pound and make it more into a science. Of course, there are other tools out there that you could use, but we’ve utilized Load Proof differently from what you might have intentionally designed it for.

We use it more for process ability and not necessarily straight to the chargeback claims piece. Of course, we want to get there; I agree it’s going to prove valuable and bring in our customer service team so they can start identifying when to reject or accept claims. We’re just not there yet because we have such a small number of sites operating with Load Proof.

Our intention is to increase it. I think you mentioned that the manufacturer says this is valid, but again, we’re currently operating at three sites. Our goal is to turn on North America first, and if we see a big hit there, then potentially turn it on in other parts of the globe. This will be a challenge for us, but if we see value in one of our biggest markets, we’ll definitely try to expand.

That makes perfect sense. You guys are really using this to optimize your cube in your truck carefully, ensuring no damage to the merchandise. Something to think about is involving someone from customer service or the chargeback team. When you invoice retailers like Walmart or Bed Bath & Beyond, they automatically deduct dollars for any chargeback issues.

Our customers have gained a lot from these chargebacks, with reports of savings ranging from $10,000 to $50,000 a month. That’s a significant number to discuss internally. I agree, it’s just more internal on our end. We had a slow adoption at first because we wanted to pilot one site to see how the software works. Then we turned on our second site, but the pandemic created challenges.

Now, as we start to adopt more sites, we’ll inch closer to reaching out to other departments. We don’t want our customer service team to be confused about which sites are on Load Proof and which ones aren’t. That can turn off those teams since they’d have to follow a complex decision tree.

Yes, starting somewhere and rolling it out to other locations in phases makes sense, as opposed to having one standardized process across the board. Moving on, the key data for revenue shows that Cola’s total annual revenue is approximately $7 billion.

We may have to get back to you on that since things can change, and we are a private company. If you found that number online, it may not be accurate without our latest data. Our focus has been more on North America, although we have other sites globally. We found research suggesting revenue is between $6 and $8 billion, but we can confirm the $7 billion figure.

Now, regarding the problems faced in distribution centers, we categorize them into four areas: losing dollars on chargebacks, damages or freight claims, suboptimal picture-taking practices, and multiple people working on the same invoice deductions management issue.

Chargebacks occur when retailers identify issues with shipments, like mislabeling or inadequate packaging. This leads to automatic deductions from invoices. Damages happen when products arrive broken, and freight claims involve legal liability for those damages.

The third issue relates to inefficient picture-taking practices, where operators run out of memory on their devices, causing bottlenecks. Lastly, multiple departments working on the same invoice deductions complicate matters, as accounts receivable teams have to research deductions and follow up with retailers. Sometimes, a simple PDF generated from Load Proof can resolve these issues efficiently.

This problem so all that is eliminated. Right, that’s how we came in with these big numbers of savings because now everything is now flowing through optimal. You know, I agree. And then moving on, losing dollars on chargebacks.

Number one, one of the major problems in the supply chain network is the dollars that have been lost due to chargebacks from retail customers. The loss due to annual chargebacks faced by Kohler is estimated to be approximately 35 million, based on industry practice. The chargebacks issued on suppliers from retailers can vary around two percent as per industry standards, which could result in chargebacks around 140 million per year. Even applying a conservative estimate of 0.5% of the value of shipments as chargebacks would result in the loss of 35 million, based on the total revenue of 7 billion.

So, then losing dollars on freight claims. This is a scenario where damages occurred during the transportation of shipments. Even though the damages were caused by the carrier, Kohler might be getting blamed for the mistakes, hence the loss of dollars. An estimated loss is calculated for one distribution center for one month.

Here, we calculated the average cost of one box in a shipment as $400. If we have six boxes in one tier, 400 times 6 is 2400. The cost of all boxes in one pallet for tiers in one pallet is 9600, and the value per load, ten pallets in a load, gives us 96 thousand. The value of all loads shipped in one month is calculated to be five million seven hundred sixty thousand, with the estimated dollars lost on freight claims at 0.5% of the total value, amounting to seventeen million two hundred eighty thousand.

So, any questions about that section on losing dollars on freight claims? Oh no, I think that makes sense as far as the numbers go. I’ll refer back to what I mentioned earlier, which is that we’re assuming all of our shipping sites actually have the solution. It’s going to be some challenge for us to try and really see the potential, as that’s essentially what these numbers mean to me right now.

Looking at these numbers, are the figures aggregated? The chargebacks of 35 million and then another half a percent for number two is an additional 17 million. Essentially, in the end, is that where the 57.3 million dollars on the first page comes from? That’s how these are all computed, with sections explaining the losses and adding in the losses from all four sections.

So, moving on, the dollars lost on freight claims is estimated to be twenty-eight thousand eight hundred dollars per month for one distribution center. The estimated annual loss of freight claims for Kohler throughout the entire supply chain network is seventeen million two hundred eighteen thousand, based on the two hundred fifty manufacturing facilities.

The industry practice of 0.5% of the value of shipments results in freight claims. Assuming that a Kohler distribution center of six hundred ninety-seven thousand square feet in San Bernardino, California, faces twenty-eight thousand eight hundred dollars per month loss in freight claims, the total loss for Kohler’s distribution centers is calculated as seventeen million two hundred eighty thousand.

Next, losing dollars due to sub-optimal picture-taking practices is a scenario where capturing pictures of all loads involves using digital cameras by shippers. The picture-taking process is suboptimal, with the following steps.

In step one, employees manage the pictures that are captured, including transferring them to a computer and storing all the pictures in a Google Drive or SharePoint. All the images are stored in a random format like IMG zero zero one dot jpg. In step two, at least one employee is dedicated to managing claims and submitting supporting evidence to avoid the claims.

When the images are needed for reference, the employees require a large amount of time just to get the pictures. We estimated the hours spent at forty hours per week for two full-time employees totaling eighty hours and one employee dedicated for managing claims at forty hours for that week.

So, the dollars lost due to suboptimal picture-taking practices will account for approximately seven thousand two hundred dollars per month for one distribution center. The industry practice calculates the dollars lost, considering one employee managing the pictures and one for managing claims at a rate of fifteen dollars per hour, resulting in an annual loss across Kohler’s supply chain network of four million three hundred twenty thousand.

Any further questions on that section?

Losing dollars from multiple people working on the same issue for invoice deductions management involves a sequence of operations requiring estimated labor time. The sequence of operations begins with accounts receivable personnel getting invoices with automatic deductions forwarded to the vendor compliance specialist, taking about three hours.

Next, the vendor compliance specialists under the AR manager review the automatic deduction, which is a chargeback estimated at four hours. Then, the vendor compliance specialist calls the distribution center asking about the compliance issue, which takes three hours. The DC manager then does his side of the research, assigning one or more people to identify the root cause of the issue, which takes four hours.

The vendor compliance specialist submits relevant information back and discusses the chargeback, which takes six hours. Sometimes, chargebacks are canceled, and sometimes they’re not, estimated at two hours for that review and decision. In total, approximately twenty-two hours is spent working on one chargeback issue, resulting in a loss of one thousand six hundred fifty dollars per month for one distribution center.

Approximately five chargebacks are issued per month in one distribution center, totaling a loss of nine hundred ninety thousand annually across Kohler’s entire supply chain network due to lack of clear ownership in multiple people managing invoice deductions.

We believe there’s an opportunity here to save, and the solution, Load Proof, is a picture documentation tool that enables DC managers and operators to take pictures of the condition of the loads, proving that they did their job right. Load Proof is the optimal solution that solves all the above-listed problems, resulting in savings of millions of dollars with minimal change management.

The benefits after implementing Load Proof and the dollar savings are presented as follows.

Saving dollars on chargebacks: Load Proof stores pictures taken at the time when loads are shipped. These pictures clearly show the condition of the product when they leave the distribution center, and sharing these pictures with the retailer gets the chargebacks canceled. The savings on chargebacks annually across Kohler’s supply chain network is 35 million.

For freight claims, Load Proof stores pictures taken at the time when the loads are shipped with third-party carriers, clearly showing the condition of the product when loaded into the trailer. Sharing these pictures with the transportation carrier, showing the condition of the product before leaving the facility, saves the dollars lost in freight claims, resulting in savings of seventeen million two hundred eighty thousand annually.

Next, we’re saving dollars with robust picture-taking practices. With Load Proof, the picture-taking process consumes close to no time at all. Site users capture pictures, enter load details in the Load Proof application, and upload the pictures to the portal with just one click.

The savings with robust picture-taking practices is estimated at seven thousand two hundred dollars per month for one distribution center. If we multiply that by all distribution centers, the annual savings with robust picture-taking practices across the entire Kohler supply chain network is four million three hundred twenty thousand.

Lastly, saving dollars on clear ownership for invoice deduction management: Load Proof defines clear ownership for managing invoice deductions, significantly reducing the time consumed. The sequence of operations begins with accounts receivable personnel getting invoices with automatic deductions forwarded to the vendor compliance specialist, taking about three hours.

Next, the vendor compliance specialist reviews the pictures of the load in Load Proof and submits relevant information to discuss the chargeback, taking about one hour. With solid evidence, the chargeback can be issued or canceled because of the date and timestamp submitted with the pictures stored in Load Proof.

The savings made with clear ownership and efficient management with chargebacks is estimated to be one thousand two hundred seventy-five dollars per month for one distribution center. Across the entire supply chain network, we’re looking at an estimated savings of seven hundred sixty-five thousand annually.

I appreciate the heads-up. The key is that fifty-seven point three million is a big number. We wanted to highlight that for you guys. It might be worth having some internal discussions to look at this.

I’m not claiming these numbers are going to be hundred percent accurate, but the fifty-seven point three million is a significant figure. Even if you guys say half of that, it’s still something worth spending time on to look at this analysis.

So, as far as the next step, should we plan to follow up? We were looking at setting up the third site.

That’s probably our next step, to turn that on, and we plan to turn on one more site after that. Once we reach out to other departments, we can really start to utilize the potential and get closer to where we want to be.

I’ll reach out to you, Paolo, and set up a time. We’ll work on turning it on, and we’re always here to help. Thank you very much. Great to meet you, and I appreciate you putting this together.