Executive Briefings

Delphi: A Piecemeal Approach to Marriage

The most comprehensive partnerships don't always start out that way. Ryder Systems Inc. took over the cross-border warehousing and transportation business of Delphi Packard Electric Systems in pieces.

Delphi had been using another provider to manage dedicated distribution centers in El Paso and Laredo, Tex., its two gateways for parts flowing between the U.S. and Mexico. Ryder had been hired to handle inbound and outbound transportation.

Either way, it was a big contract. Based in Warren, Ohio, Delphi Packard makes power and signal distribution systems for the world's 20 largest automakers. While its core business remains trucks and automobiles, it recently has expanded into non-automotive products such as smoke alarms and computers.

"Once you get to the Customs inspector,
it's quick. It's getting there that's the
problem."
-Jorge Salas of Ryder Systems

Delphi Packard is one of six divisions of Delphi Automotive Systems, the Troy, Mich.-based parts supplier with 1999 revenues of $29.3bn. Ryder serves numerous units of the parent company, which was spun off by General Motors in an initial public offering in May of 1999.

In the case of Delphi Packard, a previous warehouse operator "was not meeting our expectations," says Jim Borzi, director of Mexico west operations for production, control and logistics. Six months ago, that task was added to the duties of Ryder, which was already routing shipments, managing communications and monitoring the compliance of Mexican carriers on selected routes.

Ryder moves raw materials and components from the U.S., Europe and Asia into the border DCs, where items are cross-docked and shipped over the road to 32 Delphi plants in Mexico. The finished goods are then run back through the DCs to auto manufacturers throughout the U.S.

The job entails approximately 45,000 raw-materials part numbers and 15,000 finished items, all moving under extremely narrow delivery windows, according to Jorge Salas, Ryder's director of customer logistics. In Mexico, the vendor has long-term relationships with a handful of domestic carriers that are strong in their respective regions. Notwithstanding the freedoms of NAFTA, Mexican law requires that all domestic over-the-road shipments be handled by Mexican carriers.

Prior to the Ryder partnership, Delphi Packard relied on a personnel-management firm that left it with no sense of performance levels, says Borzi. By handing the complete package over to Ryder, the company could track activities throughout the supply chain in both directions. Yet Delphi Packard keeps just one of its own employees on hand, with Ryder supplying all warehouse staffing and managing day-to-day operations.

Borzi doesn't worry about being out of touch. "We didn't just hand over the keys," he says. Delphi Packard already was familiar with Ryder as a transportation provider. And it continues to reevaluate the partnership based on mutually developed performance standards.

Despite Ryder's success as a multi-service provider, Delphi Packard prefers to work with more than one third party. For northbound traffic out of Mexico, it uses an independent customs broker for border clearances. Southbound, it does the job in-house, drawing on 20 years' experience in Mexico. But Ryder is still accountable for any disruptions in cross-border flows, says Salas.

Ryder and Delphi Packard have worked to eliminate non-value-adding steps in the supply chain. One way is to maximize use of truckload transportation on long-haul routes southbound to the border DCs. Meanwhile, says Borzi, worker productivity has improved significantly. If actual head count hasn't gone down, it's because Delphi Packard has taken on more contracts over the past 10 months.

Some problems are out of Ryder's control. Veterans of U.S.-Mexico trade have long complained of the punishing delays that trucks experience in crossing the border, especially at Laredo. Competing with armies of passenger cars, and depending on the attitude of customs officials toward a particular shipment, they may take hours or even several days to reach the broker on the other side. A busy day finds trucks backed up for five miles or more.

Delphi Packard's southbound shipments tend to have an easier time at El Paso because that is the crossing point for goods destined for maquiladora plants close to the border. Many items move duty-free because they are destined for reexport after undergoing processing and assembly in the Mexican plants. Laredo, on the other hand, is where shipments cross the border on their way to plants deeper in Mexico's interior. From the viewpoint of customs officials, that is a more complicated transaction, says Salas.

A brand new bridge in Laredo dedicated to commercial truck traffic could speed up the process, but only if customs increases the number of inspectors instead of merely shifting them from one place to the other, says Salas. At the moment, there simply aren't enough bodies to cope with the steady rise in border traffic, which has partially offset efficiencies caused by a reduction of paperwork and other forms of red tape, he says.

Southbound moves occur with relatively few delays at Mexican customs, Salas says. Northbound can be a major problem, as U.S. Customs battles drug traffickers, illegal immigrants and a chronic shortfall of staffing. In El Paso, he says, there are only two inspectors on duty at a time.

Pre-clearance of cargoes, an increasingly popular method driven by the revolution in electronic communications, can only do so much to help. "Once you get [to the inspector], it's quick," Salas says. "It's getting there that's the problem."

Delphi Packard and Ryder are looking at ways to make the whole process more efficient-for example, through the use of returnable containers. Their review will run the gamut from raw materials to finished goods. Not all of those tasks will involve Ryder, says Borzi, "but they are a key contender in all of that."

The most comprehensive partnerships don't always start out that way. Ryder Systems Inc. took over the cross-border warehousing and transportation business of Delphi Packard Electric Systems in pieces.

Delphi had been using another provider to manage dedicated distribution centers in El Paso and Laredo, Tex., its two gateways for parts flowing between the U.S. and Mexico. Ryder had been hired to handle inbound and outbound transportation.

Either way, it was a big contract. Based in Warren, Ohio, Delphi Packard makes power and signal distribution systems for the world's 20 largest automakers. While its core business remains trucks and automobiles, it recently has expanded into non-automotive products such as smoke alarms and computers.

"Once you get to the Customs inspector,
it's quick. It's getting there that's the
problem."
-Jorge Salas of Ryder Systems

Delphi Packard is one of six divisions of Delphi Automotive Systems, the Troy, Mich.-based parts supplier with 1999 revenues of $29.3bn. Ryder serves numerous units of the parent company, which was spun off by General Motors in an initial public offering in May of 1999.

In the case of Delphi Packard, a previous warehouse operator "was not meeting our expectations," says Jim Borzi, director of Mexico west operations for production, control and logistics. Six months ago, that task was added to the duties of Ryder, which was already routing shipments, managing communications and monitoring the compliance of Mexican carriers on selected routes.

Ryder moves raw materials and components from the U.S., Europe and Asia into the border DCs, where items are cross-docked and shipped over the road to 32 Delphi plants in Mexico. The finished goods are then run back through the DCs to auto manufacturers throughout the U.S.

The job entails approximately 45,000 raw-materials part numbers and 15,000 finished items, all moving under extremely narrow delivery windows, according to Jorge Salas, Ryder's director of customer logistics. In Mexico, the vendor has long-term relationships with a handful of domestic carriers that are strong in their respective regions. Notwithstanding the freedoms of NAFTA, Mexican law requires that all domestic over-the-road shipments be handled by Mexican carriers.

Prior to the Ryder partnership, Delphi Packard relied on a personnel-management firm that left it with no sense of performance levels, says Borzi. By handing the complete package over to Ryder, the company could track activities throughout the supply chain in both directions. Yet Delphi Packard keeps just one of its own employees on hand, with Ryder supplying all warehouse staffing and managing day-to-day operations.

Borzi doesn't worry about being out of touch. "We didn't just hand over the keys," he says. Delphi Packard already was familiar with Ryder as a transportation provider. And it continues to reevaluate the partnership based on mutually developed performance standards.

Despite Ryder's success as a multi-service provider, Delphi Packard prefers to work with more than one third party. For northbound traffic out of Mexico, it uses an independent customs broker for border clearances. Southbound, it does the job in-house, drawing on 20 years' experience in Mexico. But Ryder is still accountable for any disruptions in cross-border flows, says Salas.

Ryder and Delphi Packard have worked to eliminate non-value-adding steps in the supply chain. One way is to maximize use of truckload transportation on long-haul routes southbound to the border DCs. Meanwhile, says Borzi, worker productivity has improved significantly. If actual head count hasn't gone down, it's because Delphi Packard has taken on more contracts over the past 10 months.

Some problems are out of Ryder's control. Veterans of U.S.-Mexico trade have long complained of the punishing delays that trucks experience in crossing the border, especially at Laredo. Competing with armies of passenger cars, and depending on the attitude of customs officials toward a particular shipment, they may take hours or even several days to reach the broker on the other side. A busy day finds trucks backed up for five miles or more.

Delphi Packard's southbound shipments tend to have an easier time at El Paso because that is the crossing point for goods destined for maquiladora plants close to the border. Many items move duty-free because they are destined for reexport after undergoing processing and assembly in the Mexican plants. Laredo, on the other hand, is where shipments cross the border on their way to plants deeper in Mexico's interior. From the viewpoint of customs officials, that is a more complicated transaction, says Salas.

A brand new bridge in Laredo dedicated to commercial truck traffic could speed up the process, but only if customs increases the number of inspectors instead of merely shifting them from one place to the other, says Salas. At the moment, there simply aren't enough bodies to cope with the steady rise in border traffic, which has partially offset efficiencies caused by a reduction of paperwork and other forms of red tape, he says.

Southbound moves occur with relatively few delays at Mexican customs, Salas says. Northbound can be a major problem, as U.S. Customs battles drug traffickers, illegal immigrants and a chronic shortfall of staffing. In El Paso, he says, there are only two inspectors on duty at a time.

Pre-clearance of cargoes, an increasingly popular method driven by the revolution in electronic communications, can only do so much to help. "Once you get [to the inspector], it's quick," Salas says. "It's getting there that's the problem."

Delphi Packard and Ryder are looking at ways to make the whole process more efficient-for example, through the use of returnable containers. Their review will run the gamut from raw materials to finished goods. Not all of those tasks will involve Ryder, says Borzi, "but they are a key contender in all of that."