Synchronizing tracking processes with customers' systems lets third-party logistics suppliers increase efficiency and lower costs

Laurie Sullivan, Contributor

April 9, 2004

3 Min Read

DuPont turned to Global Logistics Technologies Inc., which provides software, and to several hundred transportation carriers and freight-forwarding partners such as BDP, Exel Logistics, and Kuehne & Nagel. The company also is in the midst of a consolidation project, dubbed TransOval, to centralize 70 individual business units, subsidiaries, joint ventures, and affiliates on Global Logistics' GC3 Web-based transportation- and logistics- management platform, says Jerry Reynolds, DuPont's global logistics technology and process manager.

When it's completed next year, TransOval will centralize all the logistics data and will link 10 order-entry systems and a range of enterprise-resource-planning suites that include SAP and homegrown apps. TransOval also will sync up with logistics partners globally. "The biggest challenge has been to interface with dozens of systems to standardize processes," Reynolds says.

Since hiring Choice Logistics Inc. three years ago for service-parts inventory management and warehousing in the United States, Canada, and Mexico, Hitachi Data Systems has tripled its sales of spare parts. As volumes increase and Hitachi moves into new regions, Choice Logistics is helping Hitachi keep expenses down. "Many things needed to manage the business are now automated, so as the business continues to grow, there's no reason to add head count. There's a cost savings associated with that," says Sam Mikles, senior manager of logistics operations at Hitachi Data Systems.

Outsourcing does carry risk. The customer relies on the logistics provider to assist in monitoring inventory levels, and too much or too little inventory can break a company.

Tokyo Electron America Inc. believes the risk is paying off. Inventory levels are especially important to the company, which provides spare parts to semiconductor wafer foundries. Deliveries to customers must meet or beat sensitive time schedules, typically within hours. Delays can cause machine shutdowns and cost chip manufacturers as much as $250,000 per hour, and suppliers such as Tokyo Electron America are contractually bound to pay for any losses caused by delays. "It's absolutely critical I get these parts on site from UPS to the customer in less than four hours," says Jeff Jonas, Tokyo Electron's logistics manager.

After two years of attempting to deliver parts from local sales offices, Tokyo Electron America decided it needed to outsource deliveries to a company that stores parts near its customers. Since signing on with UPS Supply Chain Solutions in 1996, Tokyo Electron America has achieved 98.8% inventory accuracy rates.

Today, UPS Supply Chain Solutions operates for Tokyo Electron America a 15,000-square-foot facility in Dallas for high-volume, fast-turnover parts such as focus rings and electrodes that require same-day transportation, and a 10,000-square-foot center in Louisville, Ky., for lower-turnover parts. There also are 15 stocking warehouses near customer foundries that can respond to Tokyo Electron America's two- to four-hour delivery requirement.

The relationship with UPS Supply Chain Solutions has gone well enough that Jonas is spearheading efforts to expand it into Europe and Asia, where Tokyo Electron still manages the process itself. UPS Supply Chain Solutions is responding to this and other customers' growing global needs with acquisitions to fill in geographical gaps and capabilities. The company now has 650 stocking facilities worldwide.

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