Situation
A major multinational information technology manufacturer and distributor was struggling with an increasingly fragmented supply chain that was exacerbated by the inability to leverage economies of scale and standardize processes across three major international regions: the Americas, Asia- Pacific, and Europe-Middle East. Each geographic location operated independently, so that customer service standards, transportation/operational expense, and inventory compliance were all variable and volatile. Leadership did not have clear visibility into total cost-to-serve and did not have an adequate understanding of customer satisfaction levels. Something major needed to be done soon to correct this. The company decided to outsource all labor management, ERP, transportation management, order management, assembly, and reverse-logistics functions to an international third-party logistics (3PL) corporation with the scale and capability to consolidate, transform and operate all global supply chain functions.
Solution
The 3PL’s project owner and general manager, now a E78 Partner, quickly mobilized the company’s experts across financial analysis, industrial engineering, supply chain design, transportation management, human resources, and information management and tasked the team to design, build and operate three major logistics centers, one each for the three major regions. Utilizing 3PL subcontractors, the team was tasked to create 17 just-in-time fulfillment centers adjacent to their customers’ manufacturing locations, with the capability to fulfill all component orders within two hours of order placement.
The 3PL firm’s financial, HR and IT units provided these functions for the entire global supply chain including ERP integrations. The project’s transportation management team consolidated all multi-modal transportation activities into a single request for proposal and leveraged procurement scale to consolidate a highly fragmented transportation network, reduce the number of carriers and leverage scale to drive transportation cost downward and improve service levels. The operations leaders oversaw all component assembly, inventory management, order fulfillment and reverse-logistics functions, standardizing service, and quality globally.
Results
- All outsourced supply chain operations across the three regions were fully operational within 6 months.
- Within twelve months of the project start, transportation expense across all geographies had been cut by 18% and direct labor and occupancy expense reduced by 28%.
- Multinational customers enjoyed consistent service globally, reduced order management cycle times, shortened delivery windows, fewer stockouts, and better visibility into all facets of their vendors’ supply chains.
- Several years later when the IT company sold the three hardware divisions to a competitor, the new owner retained the incumbent 3PL company to continue providing the same levels of excellent service.
