Executive Briefings

SPECIAL ISSUE: GLOBAL SUPPLY CHAIN PARTNERSHIPS - DaimlerChrysler: Extreme Logistics? Putting an "X" in Third-Party Services

You've heard of 3PLs and 4PLs - third- and fourth-party logistics providers. Now get ready for the XPL.

That's the term DaimlerChrysler has applied to a select number of its logistics vendors who perform extended services, usually involving management of multiple providers in the supply chain. One of them is Exel, which oversees the giant automaker's assembly and aftermarket parts operation in the U.S. and Mexico.

It began, for Exel at least, in the late 1980s. Boston-based Minuteman Transportation, a privately held company, had been handling some aftermarket parts distribution for then- independent Chrysler Motors. Exel, a U.K.-based company with U.S. operations headquartered in Westerville, Ohio, got the Chrysler account with the acquisition of Minuteman, according to David Vieira, vice president of operations.

Over a decade, Exel took on progressively more of Chrysler's aftermarket business, spreading into such locations as Detroit, Denver, Portland and Atlanta. Then, in 1993, Exel began operating a regional parts logistics center in support of Chrysler's manufacturing and assembly plan in Greenville, S.C. Since that time, it has expanded its service to include five integrated logistics centers (ILCs) in North America, three in the U.S., and two in Mexico. In addition, Exel oversees nine Dedicated Delivery Service (DDS) centers, eight in the U.S. and one in Mexico. The DDS operation covers the movement of parts from Mopar, DaimlerChrysler's parts-making division, to dealers.

The range of services performed by Exel is extensive, says Tim Flucht, Exel's director of solutions development. They include route planning and operation, sequencing of parts being fed into the assembly line, shipment consolidation, delivery, management of both inbound and outbound shipments, overall transportation management, and information management for reverse logistics.

DaimlerChrysler considers Exel part of its extended enterprise, overseeing relationships with suppliers, 3PLs and 4PLs, says Ed Sprock, the automaker's director of logistics in Auburn Hills, Mich. When it comes to parts, he says, "they do virtually all the execution of our strategy," extending to complete operation of the logistics network.

DaimlerChrysler conveys its service expectations via a balanced scorecard, which is also used to rate all of the providers under Exel's authority. Says Sprock: "I consider these guys very much a part of my staff."

Exel has more than 800 people working the DaimlerChrysler account in North America. Communication, inside Exel as well as with the customer and its multiple logistics vendors, is through a variety of media. Assembly operations are highly dependent on electronic data interchange (EDI), says Flucht. A number of procedures, such as freight billing and parts tracking, are paperless. Performance reports, both weekly and monthly, are usually circulated via e-mail. And, despite the arrival of the electronic age, many key meetings still occur over the phone or face-to-face.

The ILCs act as centralized links between parts suppliers and DaimlerChrysler's manufacturing activities. Exel handles 80 percent of the parts numbers, although just 20 percent of the volume. (The majority in terms of weight moves on rail or truckload services.) The vendor executes the automaker's carefully crafted plan for the movement of less-than-truckload parts to the plants. "We're the shock absorber in that work, all the time," says Vieira.

A sophisticated network of cross-docks minimizes the level of inventory at rest. At the Toledo regional center, for example, some 20,000 part numbers ship across the dock on a near-daily basis, Vieira says. Each is part of a plan for just-in-time delivery to the line.

When things do wrong, Exel kicks off a problem resolution procedure that could include alternative routing or modes. But such incidences are rare. According to Sprock, DaimlerChrysler has reduced the number of certified line shortages (CLS) by 60 percent in the last year and a half. Greenville, says Vieira, has had just two in 10 years; Toledo two in two and half. Mexico has had no incidents at all. That record is the result of a rigorous Six Sigma quality program within DaimlerChrysler.

The automaker wasn't unaffected by transport disruptions following the terrorist attacks of Sept. 11. It created a "situation room" from which it communicated with all suppliers, Sprock says. Because of beefed-up security, the biggest potential for problems was at the U.S./Mexico border, where DaimlerChrysler and Exel temporarily added eight hours to expected crossing times.

The entire program has saved the company nearly $11m over the last 12 months. DaimlerChrysler, says Sprock, asked Exel to identify areas where it wasn't operating at maximum efficiency. Now, Exel is starting to take on similar parts-management duties for the Freightliner truck division. And it could become an "XPL" for the Mercedes-Benz line in Europe and elsewhere. That division, says Vieira, represents "significant contributor potential to our business base."

You've heard of 3PLs and 4PLs - third- and fourth-party logistics providers. Now get ready for the XPL.

That's the term DaimlerChrysler has applied to a select number of its logistics vendors who perform extended services, usually involving management of multiple providers in the supply chain. One of them is Exel, which oversees the giant automaker's assembly and aftermarket parts operation in the U.S. and Mexico.

It began, for Exel at least, in the late 1980s. Boston-based Minuteman Transportation, a privately held company, had been handling some aftermarket parts distribution for then- independent Chrysler Motors. Exel, a U.K.-based company with U.S. operations headquartered in Westerville, Ohio, got the Chrysler account with the acquisition of Minuteman, according to David Vieira, vice president of operations.

Over a decade, Exel took on progressively more of Chrysler's aftermarket business, spreading into such locations as Detroit, Denver, Portland and Atlanta. Then, in 1993, Exel began operating a regional parts logistics center in support of Chrysler's manufacturing and assembly plan in Greenville, S.C. Since that time, it has expanded its service to include five integrated logistics centers (ILCs) in North America, three in the U.S., and two in Mexico. In addition, Exel oversees nine Dedicated Delivery Service (DDS) centers, eight in the U.S. and one in Mexico. The DDS operation covers the movement of parts from Mopar, DaimlerChrysler's parts-making division, to dealers.

The range of services performed by Exel is extensive, says Tim Flucht, Exel's director of solutions development. They include route planning and operation, sequencing of parts being fed into the assembly line, shipment consolidation, delivery, management of both inbound and outbound shipments, overall transportation management, and information management for reverse logistics.

DaimlerChrysler considers Exel part of its extended enterprise, overseeing relationships with suppliers, 3PLs and 4PLs, says Ed Sprock, the automaker's director of logistics in Auburn Hills, Mich. When it comes to parts, he says, "they do virtually all the execution of our strategy," extending to complete operation of the logistics network.

DaimlerChrysler conveys its service expectations via a balanced scorecard, which is also used to rate all of the providers under Exel's authority. Says Sprock: "I consider these guys very much a part of my staff."

Exel has more than 800 people working the DaimlerChrysler account in North America. Communication, inside Exel as well as with the customer and its multiple logistics vendors, is through a variety of media. Assembly operations are highly dependent on electronic data interchange (EDI), says Flucht. A number of procedures, such as freight billing and parts tracking, are paperless. Performance reports, both weekly and monthly, are usually circulated via e-mail. And, despite the arrival of the electronic age, many key meetings still occur over the phone or face-to-face.

The ILCs act as centralized links between parts suppliers and DaimlerChrysler's manufacturing activities. Exel handles 80 percent of the parts numbers, although just 20 percent of the volume. (The majority in terms of weight moves on rail or truckload services.) The vendor executes the automaker's carefully crafted plan for the movement of less-than-truckload parts to the plants. "We're the shock absorber in that work, all the time," says Vieira.

A sophisticated network of cross-docks minimizes the level of inventory at rest. At the Toledo regional center, for example, some 20,000 part numbers ship across the dock on a near-daily basis, Vieira says. Each is part of a plan for just-in-time delivery to the line.

When things do wrong, Exel kicks off a problem resolution procedure that could include alternative routing or modes. But such incidences are rare. According to Sprock, DaimlerChrysler has reduced the number of certified line shortages (CLS) by 60 percent in the last year and a half. Greenville, says Vieira, has had just two in 10 years; Toledo two in two and half. Mexico has had no incidents at all. That record is the result of a rigorous Six Sigma quality program within DaimlerChrysler.

The automaker wasn't unaffected by transport disruptions following the terrorist attacks of Sept. 11. It created a "situation room" from which it communicated with all suppliers, Sprock says. Because of beefed-up security, the biggest potential for problems was at the U.S./Mexico border, where DaimlerChrysler and Exel temporarily added eight hours to expected crossing times.

The entire program has saved the company nearly $11m over the last 12 months. DaimlerChrysler, says Sprock, asked Exel to identify areas where it wasn't operating at maximum efficiency. Now, Exel is starting to take on similar parts-management duties for the Freightliner truck division. And it could become an "XPL" for the Mercedes-Benz line in Europe and elsewhere. That division, says Vieira, represents "significant contributor potential to our business base."