Executive Briefings

Dana: Distance No Barrier To Serving the U.S.

One of the unwritten laws of third-party logistics might be: Never say no to new business. Even if you have only two days in which to take over a big account.

C.H. Robinson Worldwide Inc., the freight forwarder and logistics provider based in Eden Prairie, Minn., had been courting the business of Danaven C.A., the Venezuelan arm of auto-parts giant Dana Corp. Joe Mulvehill, vice president of C.H. Robinson, was working in the Miami office back in 1990, when he got word that Danaven was ready to switch from another third party.

By convincing truckers to eliminate
overland charges to Jacksonville,
Robinson saved Danaven $1.5m a year..

Although it represents only a slice of Toledo, Ohio-based Dana Corp., which had sales of more than $13bn last year, Danaven controls a substantial amount of business between Venezuela and the U.S. Robinson oversees the door-to-door movement of auto parts from 13 Venezuelan manufacturers to Dana's U.S. plants, as well as to vehicle makers.

Products moving on a regular basis include filters, hoses, belts, pistons and tubing, according to Danaven Operations Director Gustavo Flores. The division's annual sales are around $200m a year, 65 percent of which is exported.

Robinson's responsibilities include moving shipments from Venezuelan plants to the port, usually Caracas; customs clearance into the U.S.; and domestic trucking to final destination. In the course of a move, Robinson will spot trailers at the plant or port, secure bookings and track shipments by ocean. Danaven subsequently entrusted the provider with its supply chain in the reverse direction, for the movement of spares from the U.S. to assembly points in Venezuela.

Robinson also negotiates with ocean carriers. It moves Danaven's parts in cost-efficient containerloads, consolidating product from the Venezuelan plants for shipment overseas.

Mulvehill says Danaven initially was reluctant to turn over the responsibility for carrier negotiations. It was persuaded by the promise of savings resulting from the combined purchasing power of Robinson's client base. The provider's first contract netted a reduction of between $100 and $150 per container-not an insubstantial amount, considering that Danaven was shipping 3,000 containers a year by ocean.

Robinson has crafted a number of creative solutions over the life of the partnership. Three years ago, it shifted its U.S. receiving warehouse from Miami to Jacksonville. At the same time, it convinced truckers to erase the $300-per-shipment rate differential between the two cities, eliminating overland charges to Jacksonville, where distribution and warehousing were cheaper. The concession saved Danaven $1.5m a year, Mulvehill says.

Many obstacles stand in the way of forging an efficient supply chain between Venezuela and the rest of the world. Flores cites high inflation and overvaluation of Venezuela's currency, the bolivar. The Venezuelan economy has long been dominated by petroleum production, causing its fortunes to rise and fall in line with worldwide oil prices. The excessive value of the bolivar could serve as a disincentive to importers and hamper the nation's competitiveness in global markets, Flores says.

Access to petroleum income has its obvious upside. Compared with much of Latin America, Venezuela's transportation infrastructure is in reasonably good condition and could support additional trade. "Infrastructure is not optimal," adds Mulvehill, "but it's sufficient."

At least most of the time. Last December's heavy rains led to extensive flooding, with mudslides forcing temporary closure of the Port of Caracas. Freight had to be shipped through the smaller facilities of Puerto Cabello, 75 miles away.

As of May, shippers were still feeling the impact of the winter rains, although it had lessened from the height of the crisis in January and February. "It's a seven-day-a-week, 24-hour-a-day job just trying to get through it," Mulvehill says.

For the most part, Danaven doesn't experience the logistical problems of other Latin American importers and exporters. Monsanto, the big producer of chemicals and agricultural products, must cope with a seasonal surge in the movement of seeds from Argentina and Chile to the U.S. The vast majority moves within a six-week period, forcing the shipper to employ a combination of regular container services, chartered vessels and even air cargo to get its product to market.

The nature of the Latin American trades has changed drastically in the last year and a half, Mulvehill says. Before then, northbound movements were relatively inexpensive, and southbound was the heavy leg. Today, because of the sluggish state of regional economies, the problem is reversed. Northbound freight rates are on the rise, and southbound is the bargain.

Robinson's duties on behalf of Dana have recently broadened to include movements from the U.S. to Europe, and from Europe to South America. Flores says Danaven is building a new operation in Venezuela to sell product in other international markets, a program in which Robinson could play a role. According to Mulvehill, the provider is already beginning to handle shipments from Brazil to Venezuela.

One of the unwritten laws of third-party logistics might be: Never say no to new business. Even if you have only two days in which to take over a big account.

C.H. Robinson Worldwide Inc., the freight forwarder and logistics provider based in Eden Prairie, Minn., had been courting the business of Danaven C.A., the Venezuelan arm of auto-parts giant Dana Corp. Joe Mulvehill, vice president of C.H. Robinson, was working in the Miami office back in 1990, when he got word that Danaven was ready to switch from another third party.

By convincing truckers to eliminate
overland charges to Jacksonville,
Robinson saved Danaven $1.5m a year..

Although it represents only a slice of Toledo, Ohio-based Dana Corp., which had sales of more than $13bn last year, Danaven controls a substantial amount of business between Venezuela and the U.S. Robinson oversees the door-to-door movement of auto parts from 13 Venezuelan manufacturers to Dana's U.S. plants, as well as to vehicle makers.

Products moving on a regular basis include filters, hoses, belts, pistons and tubing, according to Danaven Operations Director Gustavo Flores. The division's annual sales are around $200m a year, 65 percent of which is exported.

Robinson's responsibilities include moving shipments from Venezuelan plants to the port, usually Caracas; customs clearance into the U.S.; and domestic trucking to final destination. In the course of a move, Robinson will spot trailers at the plant or port, secure bookings and track shipments by ocean. Danaven subsequently entrusted the provider with its supply chain in the reverse direction, for the movement of spares from the U.S. to assembly points in Venezuela.

Robinson also negotiates with ocean carriers. It moves Danaven's parts in cost-efficient containerloads, consolidating product from the Venezuelan plants for shipment overseas.

Mulvehill says Danaven initially was reluctant to turn over the responsibility for carrier negotiations. It was persuaded by the promise of savings resulting from the combined purchasing power of Robinson's client base. The provider's first contract netted a reduction of between $100 and $150 per container-not an insubstantial amount, considering that Danaven was shipping 3,000 containers a year by ocean.

Robinson has crafted a number of creative solutions over the life of the partnership. Three years ago, it shifted its U.S. receiving warehouse from Miami to Jacksonville. At the same time, it convinced truckers to erase the $300-per-shipment rate differential between the two cities, eliminating overland charges to Jacksonville, where distribution and warehousing were cheaper. The concession saved Danaven $1.5m a year, Mulvehill says.

Many obstacles stand in the way of forging an efficient supply chain between Venezuela and the rest of the world. Flores cites high inflation and overvaluation of Venezuela's currency, the bolivar. The Venezuelan economy has long been dominated by petroleum production, causing its fortunes to rise and fall in line with worldwide oil prices. The excessive value of the bolivar could serve as a disincentive to importers and hamper the nation's competitiveness in global markets, Flores says.

Access to petroleum income has its obvious upside. Compared with much of Latin America, Venezuela's transportation infrastructure is in reasonably good condition and could support additional trade. "Infrastructure is not optimal," adds Mulvehill, "but it's sufficient."

At least most of the time. Last December's heavy rains led to extensive flooding, with mudslides forcing temporary closure of the Port of Caracas. Freight had to be shipped through the smaller facilities of Puerto Cabello, 75 miles away.

As of May, shippers were still feeling the impact of the winter rains, although it had lessened from the height of the crisis in January and February. "It's a seven-day-a-week, 24-hour-a-day job just trying to get through it," Mulvehill says.

For the most part, Danaven doesn't experience the logistical problems of other Latin American importers and exporters. Monsanto, the big producer of chemicals and agricultural products, must cope with a seasonal surge in the movement of seeds from Argentina and Chile to the U.S. The vast majority moves within a six-week period, forcing the shipper to employ a combination of regular container services, chartered vessels and even air cargo to get its product to market.

The nature of the Latin American trades has changed drastically in the last year and a half, Mulvehill says. Before then, northbound movements were relatively inexpensive, and southbound was the heavy leg. Today, because of the sluggish state of regional economies, the problem is reversed. Northbound freight rates are on the rise, and southbound is the bargain.

Robinson's duties on behalf of Dana have recently broadened to include movements from the U.S. to Europe, and from Europe to South America. Flores says Danaven is building a new operation in Venezuela to sell product in other international markets, a program in which Robinson could play a role. According to Mulvehill, the provider is already beginning to handle shipments from Brazil to Venezuela.