Can Competitors Unite On Your Behalf?
In 1997, DSC Communications Corporation, a $1.6-billion telecom equipment maker based in Plano, Texas, decided to get radical. In an attempt to streamline the number of freight forwarders not only swarming its docks, but swamping the progressive company with paperwork, DSC turned to outsourcing.
Putting its domestic, international, and van line segments out for bid, DSC was looking for a program that would allow it to use third-party logistics, while keeping the nucleus of its transportation department intact.
"We wanted to expand our concept even further," says Rob Lewin, transportation manager operations. "We wanted to select carriers that could become part of our logistics team."
As part of its strategic selection process, DSC posed a number of questions to carrier candidates, attaching a point value in relation to how important the answer was to its operations. One question in particular packed a serious punch in the point column. "We asked carriers, 'pretend I'm a new shipper without any experience. Tell me how to run my business,'" says Lewin.
DSC had previously worked with a large number of carriers. Based on the bid, it selected one primary carrier for each segment: Pegasus TransAir Inc. for domestic, Circle International Inc. for international, and McCollister's/United Inc. for van line operations.
"We wanted three carriers to go into the heart of our building and monitor every step of the shipping process, from on-dock staffing to scheduling to follow-up reports," says Dennis Stanley, DSC's director of logistics.
To successfully achieve what Lewin calls "true kinsmanship," DSC asked each of its three selected carriers to bring personnel in-house. In addition to working side-by-side daily, Pegasus, Circle and McCollister's/United participated in monthly brainstorming sessions with the DSC transportation team.
DSC's vision is unheard of in what is typically a competitive, if not cut-throat industry. The strategy, however, has allowed DSC to have access to more resources, to focus on growth, and to tap into the wealth of industry information its carriers bring to the table.
"We weren't looking to come in and change everything," says Ken Beam, president of Pegasus. "Our commitment from day one was to reduce DSC's transportation costs and to base our employee incentive plans via the on-time performance of every DSC shipment, regardless of whether the shipment was handled by Pegasus or routed through another domestic carrier."
Getting DSC's buyers, suppliers, and various plants to buy into the program was easy. Suppliers call one dedicated Pegasus line to schedule a pickup, and from that moment on the system churns out status reports providing DSC with vital tracking information. This catchall of information lets DSC buyers focus on procurement rather than tracking down what has already been purchased. "It also enables the three carriers to take ownership of DSC's shipments," says Stanley, "and gives them the capability to fully manage the transportation pipeline."
Behind the scenes however, how do the three carriers really get along? Well, they travel together to various DSC sites, but most importantly, they work as a team to get a shipment where it needs to go, when it needs to be there.
"Since becoming an extension of my department, the three carriers have in a way lost the identity of who they were," says Lewin. "But the relationship they developed opens new opportunities for everyone involved."
Having your suppliers in-house reduces the need to re-bid services annually because suppliers can be benchmarked daily. It allows them to be motivated not only by their access to sales leads, but by their ability to make things happen without worrying about saving a penny. To have a successful program, though, time must be invested to train and build the relationship.
"Guiding carriers to adopt DSC's concept and vision is not something that was achieved overnight," says Lewin. "But having our three carriers thinking together as one has been a phenomenal achievement."