As CNF Inc. and GM executives talked last year about improving the automaker's logistics, both sides knew they had to create closer ties than GM had with its existing specialists in warehousing and transportation. GM needed a company that could weave itself into the automaker's supply-chain management. CNF, a $5.57 billion-a-year transportation company in Palo Alto, Calif., agreed to set up a separate company in partnership with GM, called Vector SCM, that would serve as the automaker's day-to-day logistics operator. "The investment drives a commonality of purpose and ensures that we're on the same page and have the same goals and objectives," Vector CEO Gary Kowalski says.
Vector's oversight of GM's logistics is being phased in over three years, but it already has shaved by nearly one-third, to 10.5 days, the time it takes to ship finished vehicles in North America from factory to dealer. It did so with tools such as a system developed in-house to quickly identify misrouted railcars carrying dealer-bound autos. Previously, misrouted railcars could sit idle for days; now Vector and the railroads can reroute them in hours.
Meeting face to face with GM execs is important, Vector CEO Kowalski says.
Vector hasn't picked former GM staffers for its 250 employees. Instead, GM is shifting many of its employees who handled tactical logistic operations, now Vector's role, to other jobs within the company, including long-term logistical strategic planning, which remains in GM's domain.
It's a different approach than UPS Logistics took with Ford, where integrating staffs of client and provider was key. UPS last year created a unit called UPS Autogistics to serve to Ford. The automaker contributed 27 employees to a staff of 120, looking to hold on to automotive-industry knowledge, logistics expertise, and access to resources at both companies, says Lynette McIntire, UPS Logistics' marketing director. "Even in our distribution centers, you won't know if an employee works for Ford or for us," she says. The collaborative efforts are paying off: A year after the creation of Autogistics, Ford disclosed a 25% cut in delivery times, $125 million savings in annual carrying costs, and $1 billion a year in inventory reductions.
Differences exist between the approaches taken by Autogistics and Vector. Autogistics focuses on finished vehicles; Vector also handles the logistics involving parts shipped to assembly plants. Autogistics focuses on North America; Vector works globally. But both approaches prove that a new business model involving deeper collaboration between provider and partner pays dividends to all.