Supply Chain Collaboration: It Works Both Ways
Successful supply chain collaboration between shippers and their third-party logistics providers requires transparency, honest communication, and a commitment to forming a true partnership with shared goals and values. Come along for the ride.
A geographic divide was evident when Schofield, Wisconsin-based Greenheck Fan Corporation signed an outsourcing agreement with third-party logistics (3PL) provider Echo Global Logistics, which calls Chicago home. After the two organizations forged a deal for Echo to provide transportation management services for Greenheck’s supply chain, individuals from both teams had to contend with the issue.
"The Greenheck team is humorously skeptical of big-city Chicagoans like us," says Mike Mobley, senior vice president of operations at Echo Global Logistics. "There’s usually some good-natured ribbing when the Bears play the Packers."
Despite their differences on football team loyalty, the partnership between Greenheck, which manufactures and distributes air movement, conditioning and control equipment, and Echo Global continues to flourish as both strive to achieve the same goal: maximizing the effectiveness and efficiency of Greenheck’s supply chain. Both organizations say the two companies complement each other naturally, and they enjoy both a cultural and a business fit. The result has been steady, ongoing progress and concrete gains for Greenheck’s supply chain operations.
Greenheck extended the original three-year agreement between the organizations to five. "The extension shows that Echo was not only a good fit for our business, but we also were a good fit for their business," says Randy Huebner, senior director of supply chain management for Greenheck. "Together, we made each other’s companies stronger."
Supply chain partnerships can take on many forms and facets, and they also can experience widely varying levels of success. At the heart of a truly effective collaboration are two teams that are devoted to working together on a common cause, rather than operating on a foundation of self-interest. When the partnership goes right, the collaboration works seamlessly and supply chain efficiency gains can be profound and forever evolving. When the partnership falters, unlocking efficiencies becomes an unsolvable mystery.
Service providers often need to first prove themselves to shippers before they can begin to target ambitious changes. That comes through "the integrity that you bring to the relationship and the value that you’ve brought previously, so you have the right to sit at that table and have that conversation," says LeAnne Coulter, vice president of supply chain solutions and procurement for Schneider National, a transportation and logistics provider based in Green Bay, Wisconsin.
"When it comes to transformational cost savings, continuous improvement, supply chain and network changes in order to help shippers meet their objectives, a 3PL has to be able to get to that place of having an open dialogue with each other," Coulter says.
Part of the Team
Among the key components of identifying and achieving supply chain efficiencies is ensuring that the partnership between a shipper and a service provider is efficient. Two organizations operating at arm’s length rather than in alignment makes it more difficult for the teams to work in harmony to identify and pursue truly effective solutions. In effect, inefficiencies in the partnership lead to inefficiencies in the supply chain.
A collaborative approach requires commitment from each organization."Both parties must be willing to dedicate resources—financial, physical, technical and knowledge-based—with each party taking on risk to achieve mutual success," says Ashfaque Chowdhury, president of supply chain, North America and Asia for XPO Logistics. "It has to be a vested partnership where both sides have skin in the game."
In January 2016, Agfa Graphics, a Belgium-based supplier to the printing industry, enlisted Kane is Able, a third-party logistics provider based in Scranton, Pennsylvania, as its solutions partner for its Northeast regional hub. One strength of the partnership has been that Kane treats "the Agfa business as if it were their own," notes Jonathan Ashton, Agfa’s vice president of operations for North America.
"Kane constantly reinforces the desire to improve and appreciate their customers— treating them like family," Ashton says.
Similarly, the Greenheck/Echo Global partnership is based on shared goals and values. "There was positive chemistry from the start," Huebner says. "We knew that Echo’s culture and people and what they value as an organization was similar to ours.
"We shared the concept that they would be an extension of our company," he adds. "We look at Echo as part of our transportation department and not as a company we’re outsourcing transportation management to."
A Case of Evolution
When Greenheck partnered with Echo Global, it knew that it needed help evolving its operation. One key challenge was that Greenheck was struggling to nail down the freight costs of each business unit. In some cases, multiple sales orders with delivery groups from multiple business units could end up on the same truckload and "it would get messy," Huebner says.
Echo Global worked with Greenheck to improve its interface to better gather freight costs and allocate them to the individual business units.
"Greenheck now has much better visibility to understand profitability on products and on business units," Mobley says. "Any company running multiple business units and multiple products wants to know which ones are most profitable. Of course, freight costs can be a pretty good line item. Without good analytics and appropriate allocation of those freight costs to those business units and products, you’re just guessing."
Another major obstacle to efficiency was that Greenheck was unable to determine the exact location of a shipment when it was en route, making it difficult to communicate with its sales team and rep network the status of a shipment, such as whether it was running on time. Echo Global provided the digital interface and proper tool set to track that information and Greenheck now enjoys marked improvement in shipment visibility. The project was less about Echo Global applying a solution and more about Echo Global and Greenheck working in tandem to identify and implement a new solution, Mobley says.
The new data Greenheck can access has been critical. "Being able to provide good data for our business unit leaders to make fact-driven decisions is important for us and has led to better decisions," Huebner says.
Partnering in Distribution
Kane’s distribution center in Scranton, Pennsylvania, serves as Agfa’s national distribution center. The center receives inbound products from Europe and Agfa’s manufacturing site in Branchburg, New Jersey, as well as from third-party vendors and transfers from network distribution centers, according to Alex Stark, senior director of marketing for Kane is Able.
Agfa’s line includes products such as lithograph aluminum plates, inks and cleaning chemicals used in print media. In addition, the Agfa product portfolio features materials for printing, such as banner rolls, foam boards, aluminum boards and signage. At the Scranton distribution center, Kane stores and distributes large printers, racking, stackers and other equipment that Agfa employs for retail, demo rooms and trade shows.
The partnership between Kane and Agfa allows for streamlined, efficient distribution of products throughout the country. The distribution center receives and processes orders in real time and ships them—using full truckload, less-than-truckload, courier, and parcel—to other Agfa locations and direct to customers both regionally and nationally.
"The distribution center operations even include performing customer-specific board material cuts using a vertical Hendrix saw, as well as building and repairing crating material for the larger printers and equipment that ships internationally to Agfa customers," Stark says.
Well-honed coordination between Agfa and Kane has led to products passing through the distribution process with improved speed and lower costs, along with a customer-first focus and improved flexibility to meet business needs. "Because of this experience, Agfa is looking to expand our relationship with Kane to other regions of the country," Ashton says.
Communication Breeds Contentment
Transparency and strong communication channels are critical components of an effective supply chain partnership. It is important that the communication goes both ways.
"The best strategic partnerships are based on transparent collaboration," Chowdhury says. "For the customer, that starts with being open and honest about the realities of its supply chain, the needs and challenges, and the reasons for partnering with a 3PL.
"For the provider, it’s the same: being flexible and committed to deliver its plan for the customer to achieve its goals," he adds.
The best relationships feature "a healthy tension, where I can sit across from my customer and say here’s where I think you’re missing out on some cost savings or service improvements," Coulter says. In return, she adds, "we need to be open to receiving feedback, where we’re hitting the mark and where we’re a bit misguided. We want the customer to feel that it’s OK to have that conversation."
Clear communication not only can prevent misunderstandings but it also ensures that supply chain partners have a clear view of a shipper’s needs and desires and can tailor its services to meet them, while remaining aligned with the shipper’s objectives.
When the communication clicks and produces concrete results, it can lead to long-term collaborations. "You don’t want to look for another partner when things are going well," Huebner says. "You just want to keep that relationship going."
Finding the Right Partner for Your Ride
Searching for successful supply chain collaboration is not necessarily as simple as taking an overarching view of potential partners. Two organizations that appear to be a great fit may prove otherwise, while two others that seem ill suited may be an ideal match. Still, shippers should study some key considerations when searching for the partner that will add the most value to their supply chain operation.
“We looked at choosing a 3PL the same way we look at recruiting an employee,” says Randy Huebner, senior director of supply chain management for Greenheck Fan Corporation. “You look for a certain type of person—what skills and experience they have. You also look for a cultural fit. To me, and to our organization, that’s very important. A cultural fit needs to be front and center as part of the selection process. You can have all of the tools and services that most 3PLs have, but if the people don’t interact well, it’s not going to be an effective partnership.”
Shippers should speak with companies already working with a potential 3PL partner to get a clear feel for how their collaborations have worked in practice, recommends Mike Mobley, senior vice president of operations at Echo Global Logistics.
“Other customers will be able to attest to a third-party provider’s culture,” Mobley says. “They can also confirm that the 3PL has adequate resources to offer the kind of analytical work that can help an outsourcing company better understand how to improve its supply chain.”