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The Strategic Benefits Of Logistics Alliances

Aug 17, 2007
In early 1990, American President Companies started double-stack container rail service from Woodhaven, Michigan to Ford Motor Company's auto assembly plant in Hermosillo, Mexico. APC coordinates all the information, transportation, and inventory handling necessary to pick up parts and components from vendors and sequence-load them into containers for delivery on a just-in-time basis to Hermosillo.

The movement includes coordination over four railroads and with Mexican customs officials for delay-free clearance. At the plant, Ford has built a state-of-the-art stack train terminal to smooth the flow of sequenced parts into assembly operations. APC provides cranes and management to break down the containers. The partners collaborate to return containers to the United States carrying components produced in the Maquiladora region and specialized part racks.

A warehouse service venture of Lever Brothers and Distribution Centers, Inc. is bearing fruit. DCI has built, staffed, and operates a high-tech dedicated distribution warehouse for the toiletries maker in Columbus, Ohio. The companies share the benefits and risks: if warehouse utilization falls below a certain point, Lever helps cover the overhead; in return, DCI shares the productivity benefits when utilization approaches full-capacity economies of scale. A similar arrangement exists between Lever Brothers and Dry Storage Corporation in Atlanta.

Schneider National furnished initial computerized scheduling and electronic data interchange for 90 Minnesota Mining & Manufacturing Company shipping locations that were revamping their transportation operations in the late 1980s. The service included coordination of freight transit and associated documentation for all motor carriers 3M was using. 3M got the benefits of the latest information technology, and Schneider gained and still enjoys the position of nationwide core carrier for 3M.

These examples illustrate logistics alliances that are becoming commonplace business arrangements. Virtually unheard of a decade ago, such agreements are now spreading as a way of lowering distribution and storage operating costs. For many manufacturers and vendors, these ventures offer opportunities to dramatically improve the quality of customer service.

The principals in a typical agreement are a provider of customized logistics services and a producer of goods that jointly engineer and launch a system to speed goods to customers. But there are other forms too, like arrangements between two service providers and between two product marketers.

Outsourcing of transportation or warehousing requirements to a specialist is, of course, an everyday matter. What is unusual about the relationships described here is the innovative manner in which the parties commingle their operations to obtain mutual benefits. A prime example is Drug Transport, Inc., which has carved out a niche in less-than-truckload distribution in the pharmaceutical and office supply fields.

To permit wholesalers to offer daily delivery to retail customers at specified times, the Atlanta-based carrier has established an array of services and pricing. The rates are based on guaranteed delivery, at a fixed charge, to the retailer of whatever product quantity is required. The charge is based on average shipment weight at a rate negotiated in advance of each 30-day planning period.
About the Author
Melih ("may-lee") Oztalay, CEO
SmartFinds Internet Marketing
Web: www.cjps-enterprises.com
EMail: melih@hsfideas.com
"The Strategic Benefits of Logistics Alliances", Donald J. Bowersox, Harvard Business Review, July-August 1990.
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