3PLs Save the Day
Just when a shipper needs help most, in steps a partner with super powers…
The clock is ticking, the phones are ringing, the trucks are at a standstill, and customers are sounding the alarm. So who do you call? The guy in the spider suit? The muscleman in Spandex with X-ray eyes? The mutant girl with a fistful of lightning?
Whether you need a quick rescue or a large-scale solution to an ongoing business challenge, sometimes the hero you want is a third-party logistics service provider (3PL). Savvy, efficient, well-equipped, and bulked up with bargaining clout, a good 3PL will prove faster than a speeding cargo jet, more powerful than a double-stack container train, able to leap post-Panamax cranes at a single bound. At least, that’s the way it seems when you see your efficiency soar and your customers smile.
How does a 3PL fly to the rescue? Let’s take a look.
X-Ray Vision and Expertise
A government audit is never happy news. But a 2008 U.S. Customs and Border Protection (CBP) audit triggered a series of events that produced a very happy ending for Ames True Temper, after a 3PL came to its rescue.
Based in Camp Hill, Pa., Ames True Temper sells non-powered garden tools, snow tools, and other outdoor products under brand names such as Ames, True Temper, Dynamic Design, and Razor-Back. CBP audited the company to see if it was correctly classifying and valuing the products it imported into the country.
When CBP found items that needed correction, Ames True Temper asked its customs broker to plan a response.
“CBP wanted to ensure we had a system that would not only fix the issues it found, but also prevent future issues from arising,” says Craig Womeldorf, vice president of logistics at Ames True Temper.
Unfortunately, officials at Ames True Temper didn’t like the solution their broker proposed. The problem lay with the broker’s plan to assign a middleman to manage Ames True Temper’s customs data.
An importer needs to be fully conversant with its import information and completely responsible for CBP compliance. “We didn’t want a filter between us and our data,” Womeldorf says.
So Ames True Temper turned to third-party logistics provider TBB Global Logistics for a second opinion. “I suggested that we conduct a classification verification audit,” recalls Ann Bruno, director of global trade at TBB Global Logistics in New Freedom, Pa.
TBB sent Ames True Temper’s tariff number database to a partner company that checked each classification and made corrections as needed. TBB also held a customs compliance seminar for Ames True Temper’s staff, to make sure they fully understood their obligations.
In addition, TBB worked with Ames True Temper to enhance its customs compliance process.
“TBB helped verify and document our systems, then implemented, tested, and audited them to make sure we had the reports we needed,” Womeldorf says. This arrangement didn’t call for TBB to serve as a “filter” between Ames True Temper and its data.
Thanks to the help TBB provided, Ames True Temper met CBP’s post-audit requirements and laid a foundation for smooth compliance in the future.
Accurate customs compliance at the outset provides major benefits. “Shippers can prevent the fines and lost time that come with being audited,” Womeldorf says. “We now make sure we pay the right duties and understand all the elements of our product costs, so we can get accurate data to the people who set our product prices.”
Officials at Ames True Temper were so impressed with TBB’s work that they appointed the 3PL as their customs broker. TBB also submitted a proposal to manage some of Ames True Temper’s inbound logistics business.
“We conducted a rate analysis and outlined the services we could provide other than just managing freight,” Bruno says.
Ames True Temper awarded TBB part of its ocean business in 2009, gradually increasing the business. Today, TBB manages all the shipper’s inbound ocean freight, including land transportation from port.
Through its expertise and initiative, TBB has helped Ames True Temper streamline its business processes. The 3PL continually monitors carriers to learn about changes in lanes and locate better routing alternatives. “TBB is helping us keep fuel surcharges in line, and pushing back on other undue charges,” Womeldorf says.
TBB also provides accurate, automated inbound freight information. “TBB works with our receiving locations so we know ahead of time when containers will arrive,” he notes.
TBB now also manages imports for a company that Ames True Temper recently purchased in Australia. That job includes making sure the company complies with all Australian customs rules, and gets any applicable rebates under existing free trade agreements. “TBB is also quoting our Canada imports,” Womeldorf adds.
the Power of Creativity
In addition, the 3PL is working with Ames True Temper on several supply chain strategy projects, including packaging optimization and supply chain benchmarking. “TBB will participate in a program with one of our customers, to look at how we can add value through creative supply chain initiatives,” Womeldorf says.
According to both Bruno and Womeldorf, the super power that TBB applies to its relationship with Ames True Temper is a knack for understanding every facet of the business—a kind of X-ray vision.
“We take an in-depth approach to partnering with Ames True Temper—getting to know everything there is to know about its supply chain, and collaborating on a global supply chain strategy to further its corporate goals,” Bruno says.
“TBB’s leadership is fully engaged in this partnership,” Womeldorf adds. “I trust them to do the right thing.”
The Great, Green DC Network
It’s great to break into new markets and see your revenues soar. But like Bruce Banner buRsting his shirt seams as he transforms into the Incredible Hulk, an expanding business soon outgrows its supply chain infrastructure.
Growth is what first prompted Seventh Generation to call for help. A 3PL swooped in, first to provide a new distribution center (DC), then to design a whole new logistics network.
Based in Burlington, Vt., Seventh Generation sells household and personal care products with an emphasis on health and the environment. Before 2007, more than half its sales went through natural products channels. The retailers, distributors, and consumers it served were concentrated in the northeastern United States and between San Francisco and Los Angeles. “Those were the ‘green’ markets at the time,” says Chip Nolan, the company’s director of logistics.
Seventh Generation managed inbound transportation from contract manufacturers, mainly in North America, to DCs in Buffalo, N.Y., and Fresno, Calif. A different 3PL, working under its own warehousing and transportation contract, ran each facility. In the past, it made sense for Seventh Generation to distribute to its primary markets from those locations.
Then in 2007, Seventh Generation’s business exploded. “We started to serve the mass retail and grocery channels,” Nolan explains. Direct online sales were expanding as well. Much of the growth occurred in the Southeast, but service to that region wasn’t efficient.
“We were filling weekly less-than-truckload replenishment orders into the grocery channel from Buffalo, with a lot of transportation lead time,” Nolan says. “Customer orders are time-sensitive, and to consistently meet a delivery appointment from Buffalo to Florida, for example, was difficult.”
Trips of that length not only create too much opportunity for delay, product damage, and other mishaps, but also release a lot of carbon into the atmosphere.
Deciding they needed to add a third DC in the Southeast to reduce less-than-truckload delivery miles, officials at Seventh Generation conducted a vendor review, ultimately awarding the contract to OHL of Brentwood, Tenn. In fall 2007, Seventh Generation started to transfer some of its inventory and order fulfillment to the 3PL’s facility in Forest Park, Ga., near Atlanta.
That facility produced so much value that officials at Seventh Generation decided to ask the 3PL for further assistance. The company particularly wanted to improve its fill rate and on-time delivery to customers.
“As a smaller brand trying to get our foot in the door, we felt that delivering to customer expectations every time, and consistently filling their orders 100 percent, would give us a significant advantage,” Nolan explains.
Seventh Generation asked OHL to plan a regionally based distribution network, with the right number of DCs in the right locations to provide the best service at the lowest cost and with the least environmental impact.
OHL examined one year’s worth of outbound transportation data from the three existing DCs, then added all of Seventh Generation’s U.S. vendors, says Paul Cooper, OHL’s director of business development. Finally, it modeled scenarios that included four, five, and six DCs, each considering the optimal locations for sites and where OHL had existing campuses.
Based on OHL’s findings, Seventh Generation issued requests for proposals. In the end, it chose OHL to handle all of its distribution through five facilities—the one in Atlanta, plus DCs in Dayton, N.J.; Romeoville, Ill.; Carson, Calif.; and Kent, Wash.
In summer 2009, Seventh Generation started the transition to close the Buffalo and Fresno facilities and operate entirely out of OHL’s DCs. The transition was surprisingly smooth: OHL and Seventh Generation got each facility running on time and under budget.
The move paid off. The new network has reduced outbound miles traveled by 48 percent. Seventh Generation now delivers 97.7 percent of its orders within two days, up from 90 percent; and 86 percent in one day, up from 51 percent. “We cut our miles per delivery from 500 to 278,” Nolan says.
Carbon emissions per metric ton shipped are 35 percent lower. “And we were able to cut order-to-delivery time to customers from a standard of 10 business days to five. We did this while maintaining a 99.3-percent fill rate,” he says.
Seventh Generation followed up on that initial success last fall by making OHL also responsible for moving freight from manufacturers to the DCs.
As the 3PL took over inbound transportation, OHL’s engineers conducted an analysis to determine the most efficient locations for Seventh Generation’s co-packers and manufacturers. Under that arrangement, Seventh Generation has seen inbound transportation costs shrink by 10 percent.
Along with improving service, gaining efficiency, and reducing the company’s impact on the environment, the relationship with OHL has produced additional benefits for Seventh Generation. By integrating with the 3PL’s warehouse management system and transportation management system, Seventh Generation has gained visibility into its shipments.
“We’ve also been able to implement a monthly cycle count process with OHL to eliminate conducting a year-end physical inventory,” Nolan says.
In addition, OHL has implemented system lot tracking across all stockkeeping units. “For every liquid and every diaper, we know which customer it goes to, what is left in our warehouse, and what is on the road,” Nolan says.
Mutual respect and a desire to collaborate make the super-powered partnership between Seventh Generation and OHL especially strong.
Super and Seamless
Problems were brewing when Second Cup, the largest Canadian-owned specialty coffee retailer, put out a call for a 3PL.
Founded as a shopping mall kiosk in 1975, Second Cup now comprises more than 340 cafes in Canada and about 50 in other countries. Most of the international locations are in the Middle East. But the company also is expanding into Europe, with franchises already established in Turkey, Cyprus, and Romania.
To keep growing, Second Cup must make sure that franchisees overseas can easily receive all the products they need to run their cafes—everything from coffee, tea, and food products to cups, napkins, and restaurant equipment.
“Part of the selling point to franchisees is that we have a seamless supply and logistics system,” says Linda Bilanski, head of international marketing for Second Cup in Mississauga, Ont.
“We want to run a turnkey operation, where franchisees are able to place an order, then don’t have to worry about the shipments,” says Ella Khan, Second Cup’s supply chain and logistics manager.
But as the company added more international locations in recent years, officials discovered that the freight forwarder handling the overseas shipments couldn’t keep pace with the expanding responsibility. “The forwarder was a small company, and didn’t have the resources we required,” says Khan.
One problem was service quality. “We weren’t able to catch the products that were shipped incorrectly,” she says. Also, the forwarder relied on other companies for warehouse space, creating a disjointed process, “and we weren’t getting the shipping updates we needed,” Khan adds.
Second Cup needed a partner that could improve the end-to-end shipping process, with better visibility and quality control. “We wanted a service provider with the right global resources, but not one so big that we wouldn’t be important to their business,” Bilanski says.
Through a procurement process conducted in 2010, Second Cup chose global 3PL Agility to manage product transportation to its overseas franchisees. Although Agility maintains offices in more than 100 countries, Second Cup doesn’t get lost in the shuffle, says Mike Shum, vice president of business development, Agility Canada in Mississauga.
“Agility Canada recognizes Second Cup as a national key account,” Shum says.
Agility started handling Second Cup’s shipments in August 2010. Today, franchisees place orders for products with Second Cup’s vendors, and the vendors ship those orders to Agility’s Toronto-area warehouse. Agility consolidates orders into containerload, less-than-containerload, or airfreight shipments and manages transportation to overseas destinations.
Shortly after this relationship began, Agility added a quality control service to make sure vendors shipped the correct merchandise and quantities. The 3PL now also ensures that all international trade documents are in order, says Tiziana Sarracini, national key account manager at Agility Canada.
Eventually, Agility will add an origin cargo management (OCM) solution for Second Cup. Under this arrangement, Agility will keep some of Second Cup’s inventory—non-perishables such as paper goods—in its own warehouse, allowing the 3PL to fill orders for those products faster. Vendors will continue to fill orders for perishable goods, but franchisees won’t have to worry about who supplies which products.
“It will become a one-stop shop,” Sarracini says. “Franchisees will be able to place an order and see inventory online, then have those orders processed quickly and seamlessly.”
Currently, franchisees can monitor incoming order status once the product reaches Agility’s warehouse. The OCM solution will give franchisees visibility from the moment they place their orders.
The solution offers another benefit. “If multiple orders are being placed, and the franchise owner’s supply chain demands change, they can do different types of consolidations, working with the entire order instead of order fragments,” says Shum. “OCM provides scalability and the power to look for cost optimizations.”
Even before implementing the OCM solution, Second Cup has gained some clear improvements through its relationship with Agility. One benefit is the ability to monitor shipment status through Agility’s tracking and tracing tools.
“I have visibility of the actual container—when it gets loaded, and each milestone it hits,” Khan says. Second Cup also works with Agility to optimize how containers are loaded, creating savings that it can pass along to franchisees.
Communications with Agility are much better than they were with the previous freight forwarder. Agility’s quality control program has improved the supply chain significantly. Also, Agility has helped to streamline the job of filing import documents for multiple countries.
“Documentation is a tedious process, but Agility is helping us eliminate errors and make it more efficient,” Bilanski says.
As Second Cup continues to grow, Agility stands poised to carry out its next acts of derring-do.
It doesn’t take a fancy cape or mask to set things right for a shipper in a jam. A 3PL that pays careful attention to a customer’s requirements, tailors a creative solution, executes the strategy, tracks the results, and comes back with ideas for further improvement will stand out as a super hero in any shipper’s eyes.