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Outsourced Logistics

What's Between the Clicks and Mortar

by Mark Morrison

Virtual business, virtual alliances, virtual supply chains, virtual collaboration, you’ve heard it all, and you will undoubtedly hear more. Hold on a moment…is that buzz in my ear someone trying to contact me? As the newest generation of dot-coms, dot-consultants, dot-software vendors continue to accelerate in dog years, let’s pause for a moment to see what really happens between the clicks and mortar, and the implications on supply chain fulfillment. Today, all the digitization of logistics commerce is pointed at one thing - value mining, or as one expert has coined—LVA, Logistics Value Added. Without LVA, third party providers (3PLs) would simply not exist. It’s fine to have links and front-ends and 7 x 24 access to the world, but if the network cannot deliver LVA, what then?

It is in this attempt to create value that many companies turn to 3PLs for support. 3PLs understand the landscape between the click and the mortar, and know it is not a domain to be navigated by techno webmasters. Rather, it is space where the practical use of technology intersects with operating excellence to achieve LVA. Let me share an example.

Honda builds cars, motorcycles and engines at its Marysville, Ohio, assembly complex of four plants - good products that are in great demand. To build these products according to schedule and meet the demands of the market, the supply environment needs to execute flawlessly. Over the past several years, as production volumes increased, the pressure on the supply environment has become immense, requiring Honda to review each step between clicks and mortar. They called for support and CTI was selected to study the environment and make recommendations.

What was happening was that every supplier was potentially shipping to every plant within the complex each day. Envision 100 or so loads originating from 350 individual suppliers from as far north as Canada and as far west as Nebraska delivering daily to 14 possible sites. Some trucks actually delivered to seven or more locations. Something had to be done as chaos reigned, shipment accuracy suffered and claims abounded. While all the providers did their best to support the demands of manufacturing, it was not without an intense amount of logistics pain and costs.

Interestingly, before Honda officials could completely understand the need for synchronized logistics, they had to comprehend the great distance among its suppliers. The cultural perspective of its decision makers prevented them from realizing suppliers were not as near to its assembly plants as is the case in Japan where suppliers are literally within blocks of assembly plants. To help reshape that perspective, it is said that a Honda representative actually made the trips between suppliers and assembly plants recording in real time with a camcorder the large distances suppliers had to travel. After documenting the costs, the video was presented to Honda officials in Japan who realized the geographic hurdles of the American supply chain.

CTI and Honda settled on a network design that considered the use of a Delivery Support Center (DSC) – a multi-purpose, assembly complex centric, sortation facility to rationalize the flow of material into all of their assembly operations. Honda and CTI created an IT network (Vector 21—speed and direction) to achieve the electronic collaboration required by suppliers, outside transportation partners, CTI’s own dedicated truck fleet and DSC personnel. The proprietary network employed the use of scannable labels to support dock sortation, demand planning to right size the fleet each day, route planning technology to setup the daily transportation plan, interactive voice response and satellite tracking for dispatch control and intransit route tracking, and standard business-to-business EDI to further move information regarding material and conveyances in transit. Collectively, all of these applications addressed the network’s complexity.

Now, instead of almost 1,900 daily deliveries to Honda’s assembly plants, only 456 are necessary. Each provider and supplier adheres to a daily plan and schedule, which is continuously monitored for exceptions, thus conforming to the absolute requirement of assured delivery and eliminating uncertainty over capacity, supply and delivery.

Honda and CTI have not stopped there in responding to the needs of its customers and suppliers. They are planning near-term improvements to the channel in order to accelerate product through the network, as well as web advancements to increase supplier connectivity and to promote advanced returnable container programs.

Where is the LVA? Look between the clicks and the mortar at the intersection of technology and operating excellence. There were millions within this program. There could be equally as much mined in yours.

Mark Morrison is Vice President, Business Development, for Customized Transportation, Inc. (CTI), one of the nation’s leading providers of contract logistics serving many Fortune 500 companies in the Automotive, Electronics, Rail and Heavy Equipment industries. A wholly-owned subsidiary of CSX Corporation, CTI manages over 140 separate contracts throughout the United States, Canada, Mexico, Latin America and Europe.