Executive Briefings

SPECIAL ISSUE: GLOBAL SUPPLY CHAIN PARTNERSHIPS

PerkinElmer: Vendor Reduction Program Cuts Cost, Boosts Service Quality

Many multinationals are streamlining their global supply chains by reducing the number of vendors that perform freight forwarding and customs brokerage between plants, distribution centers and end customers. How many they choose to keep depends on the company. In the case of PerkinElmer Instruments, the magic number was one.

The analytical instruments division of PerkinElmer Inc. (PEI), selling to pharmaceutical firms, researchers and scientists the world over, had six freight forwarders handling its shipments outbound, five inbound, and an equal number of customs brokers. Not surprisingly, "nothing really fit," says Michael Tarczali, manager of transportation and logistics. "There was no flow across channels and areas of the world. Everything was managed independently."

Based in Shelton, Conn., PEI has a plant at that location, along with others in Singapore and Bristol in the United Kingdom. Distribution centers are in Shelton and the Netherlands, supported by a worldwide network of sales offices. PEI accounts for about 35 percent of the parent company's revenues of $1.4bn.

That's plenty of business to spread around, but PEI was determined to consolidate vendors for a better deal on freight costs and a more coherent supply chain. In 1998, it went looking for a single provider that could take on the entire package. Price was a definite factor, says Tarczali, but so were consistent and reliable transit times in key lanes, full integration of data and information technology, and the ability to manage a stable of carriers in both normal and abnormal situations.

Seven bidders responded to a request for proposals. The winner, chosen by a cross-functional committee within PEI, was Danzas AEI Intercontinental. A division of the transport conglomerate Deutsche Post, Danzas had the best resources on a global basis, Tarczali says.

As is so often the case with large-scale logistics contracts, Danzas got the account in pieces, says Luigi Badetti, senior director of high-tech multinational customers. It started by handling PEI's inbound and outbound forwarding and customs clearance. Then it took on warehousing and distribution, primarily at its European distribution center and cross-dock in Venlo, the Netherlands.

A typical week in the PEI supply chain looks something this: The manufacturer turns out finished instruments in Shelton on Monday, loading a truck throughout the day. Concurrently, PEI transmits to Danzas all of the data needed to build airbills and file a shipper's export declaration (SED). By 2 a.m. on Tuesday, it closes out the truck, which ends up at Danzas's facility at New York's Kennedy International Airport within hours. Danzas books passage on one of several airlines, mostly passenger flights. The delicate instruments arrive at Amsterdam's Schiphol Airport on Wednesday morning.

Assuming the shipment gets a green light from Dutch customs, it moves from the airline's facility at Schiphol to Danzas's bonded warehouse on site, then on to the provider's Venlo distribution facility. By Thursday, it has been received into inventory and is available for sale to PEI's European customers.

A similar setup exists for instruments moving to Asia, entering through Singapore before being distributed throughout the region. Danzas also handles all of the arrangements, including customs clearance, for shipments entering the U.S. from Europe and Asia.
Judging from the results, PEI is a strong proponent of the "less is more" theory of hiring logistics providers. Working with Danzas, it has shortened delivery time to the end customer by three to four days. Half of that savings is in the form of faster inbound cycle times, from suppliers to PEI plants in the U.S., U.K. and Singapore, and half is on the outbound side, from the plants to distribution facilities in those same countries. At the same time, says Tarczali, PEI has cut inventory levels and transportation costs by 10 to 20 percent, while boosting the reliability of deliveries to the end user.

PEI is seeking further improvements. On April 15 of this year, it began shipping critical service parts directly from Shelton to European customers, via expedited carriers, cutting up to three days out of the cycle. A similar strategy could be applied to other parts of the world. The change stems from implementation of a rigorous Six Sigma quality program.

Danzas AEI doesn't intend to stop there. Having proven itself on the instruments side, "we're currently working on expanding our reach into other divisions of PerkinElmer," says Badetti.

Many multinationals are streamlining their global supply chains by reducing the number of vendors that perform freight forwarding and customs brokerage between plants, distribution centers and end customers. How many they choose to keep depends on the company. In the case of PerkinElmer Instruments, the magic number was one.

The analytical instruments division of PerkinElmer Inc. (PEI), selling to pharmaceutical firms, researchers and scientists the world over, had six freight forwarders handling its shipments outbound, five inbound, and an equal number of customs brokers. Not surprisingly, "nothing really fit," says Michael Tarczali, manager of transportation and logistics. "There was no flow across channels and areas of the world. Everything was managed independently."

Based in Shelton, Conn., PEI has a plant at that location, along with others in Singapore and Bristol in the United Kingdom. Distribution centers are in Shelton and the Netherlands, supported by a worldwide network of sales offices. PEI accounts for about 35 percent of the parent company's revenues of $1.4bn.

That's plenty of business to spread around, but PEI was determined to consolidate vendors for a better deal on freight costs and a more coherent supply chain. In 1998, it went looking for a single provider that could take on the entire package. Price was a definite factor, says Tarczali, but so were consistent and reliable transit times in key lanes, full integration of data and information technology, and the ability to manage a stable of carriers in both normal and abnormal situations.

Seven bidders responded to a request for proposals. The winner, chosen by a cross-functional committee within PEI, was Danzas AEI Intercontinental. A division of the transport conglomerate Deutsche Post, Danzas had the best resources on a global basis, Tarczali says.

As is so often the case with large-scale logistics contracts, Danzas got the account in pieces, says Luigi Badetti, senior director of high-tech multinational customers. It started by handling PEI's inbound and outbound forwarding and customs clearance. Then it took on warehousing and distribution, primarily at its European distribution center and cross-dock in Venlo, the Netherlands.

A typical week in the PEI supply chain looks something this: The manufacturer turns out finished instruments in Shelton on Monday, loading a truck throughout the day. Concurrently, PEI transmits to Danzas all of the data needed to build airbills and file a shipper's export declaration (SED). By 2 a.m. on Tuesday, it closes out the truck, which ends up at Danzas's facility at New York's Kennedy International Airport within hours. Danzas books passage on one of several airlines, mostly passenger flights. The delicate instruments arrive at Amsterdam's Schiphol Airport on Wednesday morning.

Assuming the shipment gets a green light from Dutch customs, it moves from the airline's facility at Schiphol to Danzas's bonded warehouse on site, then on to the provider's Venlo distribution facility. By Thursday, it has been received into inventory and is available for sale to PEI's European customers.

A similar setup exists for instruments moving to Asia, entering through Singapore before being distributed throughout the region. Danzas also handles all of the arrangements, including customs clearance, for shipments entering the U.S. from Europe and Asia.
Judging from the results, PEI is a strong proponent of the "less is more" theory of hiring logistics providers. Working with Danzas, it has shortened delivery time to the end customer by three to four days. Half of that savings is in the form of faster inbound cycle times, from suppliers to PEI plants in the U.S., U.K. and Singapore, and half is on the outbound side, from the plants to distribution facilities in those same countries. At the same time, says Tarczali, PEI has cut inventory levels and transportation costs by 10 to 20 percent, while boosting the reliability of deliveries to the end user.

PEI is seeking further improvements. On April 15 of this year, it began shipping critical service parts directly from Shelton to European customers, via expedited carriers, cutting up to three days out of the cycle. A similar strategy could be applied to other parts of the world. The change stems from implementation of a rigorous Six Sigma quality program.

Danzas AEI doesn't intend to stop there. Having proven itself on the instruments side, "we're currently working on expanding our reach into other divisions of PerkinElmer," says Badetti.