Can outsourcing efficiently alleviate logistical challenges? Let’s take a look.
Wellington Technologies of Westlake, Ohio, was threatened by its own success. The authorized Hewlett-Packard 3000 and 9000 maintenance provider had signed a contract with one of the largest communications providers in the world. The scope of the win was beyond the capabilities of its existing parts delivery system.
“Our delivery system at the time was putting parts on every one of our sites. That would not work with this engagement,” says Duane Ahrens, Vice President of Service and Delivery for Wellington. “We did not have the resources to manage a large number of depots.” What’s more, Wellington had a parts delivery time line agreement with its customers that had penalties. After being hit with those penalties, Ahrens knew he needed the help of outsourcing to meet these delivery challenges and enhance its capabilities.
Rapid transition
Logistical challenges were abound. “Businesses rely on third-party logistics providers (3Pls) because they believe they have the levels of experience, expertise, and infrastructure required to assist them with all of their logistics needs,” explains William K. Pollock, Vice President — Principal Analyst, Strategic Service Management Practice for Aberdeen Group of Boston, Massachusetts. “A 3PL that already has a local presence with people ‘on the ground,’ distribution centers, and tried-and-true channel partners can assist its customers more readily with respect to finding, assessing, and ultimately opening new depots in new locations.”
Wellington began looking for an outsourcing logistics provider by reaching out for suggestions. Following recommendations from trusted colleagues and then evaluating real-time proprietary software, Wellington selected Flash Global Logistics of Pine Brook, New Jersey. Founded in 1983, Flash has over 700 depots worldwide including 300 in North America.
“Companies that engage in relationships to deploy parts for service contracts are now expanding to overseas and emerging markets,” explains John Miller, Senior Vice President of Global Business Development for Flash. “Our engagement gives them a dynamic approach to their markets because they can quickly react to client needs anywhere in the world.” Flash’s partners provide the physical locations and transportation following the supplier’s process mapping and systems that they installed in their facilities.
Wellington set up an aggressive time line for ramping up the transition, according to Ahrens. The company set up 11 depots initially through its on-site Flash representative. “She delivered everything we asked for, making the changes we needed for the delivery model to work for us. They were up in less than four weeks with parts available. They exceeded our expectations and went above and beyond everything we asked for,” says the Wellington executive.
“A 3PL representative on the client’s site represents a distinct advantage,” according to Pollock. “Time is the most valuable currency in the logistics business. Waiting for an off-site representative to answer a client’s emergency call can cost both real money and customer satisfaction.”
However, in many cases, he says the real value of a full-time, on-site representative comes from his or her ability “to contribute to the execution of the client strategy with a clear focus on facilitating shipments, satisfying clients, and managing costs.”
Ahrens says there were times where Wellington thought its depot could deliver the parts in the customer’s timeframe, but didn’t. “Flash took over the whole process and moved the parts and depot seamlessly. It didn’t affect our service level during the transition,” he says.
The depots increased to 48 including one each in Canada and Mexico. Expanding the number of depots is easy for Ahrens. “We can add a new depot and have it running in two weeks, typically in as little as one,” he reports.
Expanding outside of the United States
Outsourcing allowed Wellington to grow its business while skirting logistical challenges. “We had a challenge delivering parts to a critical customer in Mexico. We had no experience there,” Ahrens recalls. Once again Flash came to the rescue. Through the use of outsourcing, Wellington had ready access to the resources it needed to fulfill its contractual obligations with a major client.
Flash educated Wellington on the requirements, legalities, trading positions, and requirements for an importer of record in Mexico. “One of the key roles we play is providing the intelligence and design to actually do business in those countries. Sometimes it may be the first time they are engaged in international activity,” Miller explains. “This took longer than the deployment,” he adds.
Flash simplified the process for Ahrens. “All we had to do was get the part to Laredo, Texas, to a partner of Flash. They took the part into Mexico as the importer of record and delivered it to our depot without any complications,” he reports.
Ahrens appreciates the enhanced capabilities outsourcing provides. “We can grow internationally at will; they make us look like a much larger global organization. We can set up operations in another country in a short period of time with a successful delivery model where we don’t have to add staff because it’s their feet on the street. We are able to move wherever our customers are, knowing we have Flash behind us.
“They were a big part of our 300 percent growth […] because of their expediency in opening up depots,” Ahrens submits. “They have probably saved us $8 million annually in inventory procurement. We wouldn’t be where we are today without Flash.”
Lessons from the Outsourcing Journal:
- Outsourcing allows manufacturers to rapidly expand their depot facilities when opportunities require it.
- Outsourcing reduces the risk for companies doing business in a foreign country for the first time.
- Having a provider representative at the buyer’s site enhances strategic planning and more rapid implementation.
- Outsourcing provides worldwide resources to enable global expansion.
