In this article, we explore the innovative world of the outsourced logistics solution.
West Corporation, a provider of outsourced communication solutions to many of the world’s largest companies and government agencies, ships hundreds of thousands of dollars of hi-tech and call center equipment around the world to its clients such as AT&T and T-Mobile. David Hybner, director of corporate purchasing at West, says the servers and other IT equipment arrive at its Omaha, Nebraska, facility, sometimes in as many as 20 boxes. West’s IT department then needs to break down the equipment and configure it to a client’s specifications.
That poses a challenge: how to package and ship the equipment safely to the client, since it can’t go in the same boxes in which it arrived.
West has been using Colorado-headquartered Craters & Freighters to package and handle its international shipments and large shipments for about five years. Prior to that, West employees packaged the equipment themselves. But as Hybner explains, “We don’t have the expertise and capacity to build a specialized crate here for a $100,000 piece of equipment.”
“We did the best we could before Craters & Freighters,” he continues. But he says some equipment arrived at client locations damaged from not being packaged properly or from the carriers not handling it carefully enough. Multiply the possibility for that significant financial hit by multiple shipments every week. West has several facilities throughout the United States and continually moves equipment around. Shipped equipment varies from such items as a large quantity of monitors, large servers or server cabinets, a large UPS generator, or even a data center — all too costly to risk damage.
Omaha Neon Sign Co., which manufacturers, installs, and ships custom neon signs, has a similar challenge. John Peterson, plant manager, says even if they had the expertise, he can’t justify the cost to pull people off the manufacturing line to create custom crates for the signs.
“The cost of labor in Omaha, Nebraska, is extremely high,” says Peterson. “And we work on a fast timeline. Every day is a Monday in the sign business. It’s very hectic. All the signs are custom products, no two the same. And customers tend to get to us for their signs as the last thing they do before their grand opening.”
Ninety percent of Omaha Neon Sign’s business is local. Signs for those customers don’t need to be crated and shipped. They just strap down the signs, and its installation crews deliver them on a truck — a 53-foot semi. The company crates and ship signs too small to justify the cost of a semi or not going to local customers.
Composed of neon tubing, glass, and custom paint, the signs are fragile and require special packaging. Peterson says that in the last four years while they’ve been relying on Craters & Freighters, they’ve had no problems with signs arriving scratched or dented when shipped. But that was not the case earlier, when they used a variety of shipping companies.
“We insured the signs, of course,” he says. “But a lot of freight companies rough handle packages, and the packages have to go through so many terminals.” Some freight companies did not package the signs well enough to survive that treatment. Then there would be problems with delays to the client while someone repaired the sign.
The best deal
Both companies wanted to find the “best deal” for packing and shipping their items. The best deal turned out to be Craters & Freighters, in large part because the provider has the capacity and capability to be a one-stop source for all aspects of a logistics solution. It picks up and packages items in custom-built crates, then ships them anywhere in the world.
Brad Barenberg, vice president of National Account Sales for Craters & Freighters, headquartered in Denver, Colorado, explains how unique the services are. “Some big freight companies have minor packaging capabilities, such as packing in bubble wrap, but don’t handle packaging that is much more complex than that. Even more relevant to our customers, Fed Ex, UPS, and many other companies won’t pick up unpacked items.”
He cites another example (on a contracted, not outsourced basis). A major telecommunications provider sold its phone equipment to 1,200 retail outlets in Canada and the United States. The size of the shipment and the 1,200 delivery locations were not the challenge. The company stored all the equipment in a back room, which had to be emptied in 24 hours. They called a leading global logistics company — only to learn its services did not include picking up loose equipment. Craters & Freighters successfully handled the project on time with its global logistics solution.
In addition to the complexities of creating custom crates for very costly items, many of the things Craters & Freighters crates and ships — such as data centers, wireless telephone equipment, an MRI machine, airline flight simulators, or assets being moved around a company’s 27 different offices around the world — also have tight time constraints.
The company picks up shipments, engineers, and builds customized shipping containers and crates to ensure all items are delivered safe and on time. Diane Gibson, president and CEO, Craters & Freighters, explains her company is not a virtual business operating over the Internet and using subcontractors to do each task (all adding their separate mark-ups to the price).
“We provide an end-to-end solution and brick-and-mortar business. We have 67 locations equipped with warehouses in the United States and have a packaging engineer on staff,” says Gibson. The 67 business units are franchises independent of each other but use their combined economies of scale to get good pricing for shipping. Services are 24×7 globally.
The end-to-end solution was especially attractive to another client, a software development firm. Gibson says the client’s request was: “Can you store our assets for us? We sell software; we’re not a warehouse. We’ll ask you to crate and ship our products as needed.”
Customers can use local Craters & Freighters’ services on an as-needed contractual basis or on an ongoing outsourced basis. For clients with ongoing services, the company coordinates all services (including multiple or global pick-up and delivery requirements as well as centralized billing) through a central team in Denver. The contract is usually a master services agreement. SLAs, where used, normally focus on timing of pick-ups.
Barenberg explains the specialty expertise and process involved in crating items to be shipped. “Our engineering department conducts a product analysis. They can look at an 8,000-pound piece of equipment and know exactly the type of crating it needs for conforming to government regulations and safety in transporting it damage-free. They do a CAD drawing and create a design for a crate. They compile the raw data and send it to Denver, where we design it and then e-mail it to the warehousemen to build the crate at the franchise location for the customer.”
Prior to founding Craters & Freighters, Gibson worked with Pak Mail in the 1980s. “People brought things to us that were too big for us to handle. I saw what others were not doing, such as crating.” Those things are now key offerings in Craters & Freighters’ services.
Gibson says her company’s logistics services are cost-prohibitive for most companies to have in house. “Besides the expertise and the cost of employees, they would need to maintain an inventory of crating materials and to continually invest in streamlining the process.”
Peterson at Omaha Neon Signs says his company has “always found Craters & Freighters to be very pleasant, courteous, and on time.”
Hybner at West Corp. says, “They will do a better job than we would do in house, and the packages will arrive securely. With Craters & Freighters, I have a comfort level, no matter what we ship. And their handling this process for us enables us to focus on our core business. All of this makes it “the best deal.”
Lessons from the Outsourcing Journal:
- Full logistics services are cost-prohibitive for most companies to have in house. Besides the expertise and the cost of employees, they would need crating materials. Plus they would have to continually invest in streamlining the process.
- Look for a service provider that has the capacity and capability to be a one-stop source for all aspects of logistics services: pick up and package items, then ship them anywhere in the world.
- Many freight and shipping companies do not have the capability for complex packaging and will not pick up unpackaged items. Choose a provider with an end-to-end solution to eliminate these challenges.
- An end-to-end solution from one service provider is more cost-effective than a virtual business operating over the Internet and using subcontractors to do each task (all adding their separate mark-ups to the price).
