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No doubt there are any number of reasons why a relationship ends between a customer and its logistics services provider, but how often is it because the outsource partner just pulls up stakes and leaves the area?
It's probably not often that a company is literally left behind, but it happened to Daimler Trucks North America when its provider of wheel-and-tire sub-assembly services simply left the region where DTNA was manufacturing trucks. DTNA is part of the Daimler family, whose premium brand is Mercedes-Benz automobiles. DTNA itself has several brands of heavy- and medium-duty commercial vehicles and other products, including Western Star and Freightliner trucks, Detroit Diesel engines and Thomas Built buses.
Daimler Trucks North America is headquartered in Portland, Oregon, but it has manufacturing facilities around the country. Two of its Freightliner plants are located in North Carolina; another is in South Carolina. And it was those three that experienced the break in the relationship.
A unit of Alcoa had provided wheel-and-tire sub-assembly services from a facility in Salisbury, N.C., only a half hour or so from the truck manufacturing plants. The work consisted of receiving tires from original equipment manufacturers, such as Michelin or Goodyear, mounting them on truck wheels and doing other preparatory work, then shipping them by road to the Freightliner plants.
Alcoa, however, was going through a national consolidation and relocation program for its sub-assembly sites. Corporate decided to shut the plant in North Carolina, but it was apparently willing to continue the work for DTNA from its new site. That was unacceptable to Daimler Trucks since it required sub-assembly operations to be maintained within close proximity of its facilities.
Continuing with Alcoa would have placed the tire-and-wheel mounting operation a day's drive away instead of 30 minutes, says Mike McCurry, plant manager for Freightliner's truck manufacturing facility in Cleveland, N.C. Anything beyond a 75-mile drive in the Carolinas was considered altogether too risky, he says.
Once mounted, the tires are shipped in plant line sequence that ideally matches a particular vehicle with a specific set of tires and wheels. There are any number of reasons why tire-and-wheel sets are not fungible and have to be sequenced very carefully. Differing tire brands and variations in colors of wheels are just two of them.
Freightliner is "pretty close" to a just-in-time operation, McCurry says, and schedules can change for various reasons. "Having Alcoa a day away posed flexibility problems. Just suppose the truck delivering the tires gets caught in a snow storm - we've got no tires and wheels to put on the trucks. We don't keep three or four days' worth of tires in inventory on site."
It was time to find a replacement, an entity that could do the work nearby and give the peace of mind that DTNA execs needed. Enter Kontane Logistics, a division of Kontane Inc., a designer and builder of packaging systems. Kontane Logistics, which offers warehousing, cross-docking, line sequencing, fulfillment activities, foreign trade zone services, and sub-assembly, began by taking over the Alcoa facility (and a number of its employees) in February 2010, says Van Chapman, director of North Carolina logistics for Kontane.
Within short order, the location was deemed inefficient and too costly to run. Kontane execs decided to move operations to a new facility in Statesville, N.C., but they knew they had to avoid disrupting service to Daimler. Transition to the Statesville site began in early May 2010. By moving only essential equipment and minimal inventory first, production down time was reportedly kept to a minimum. Kontane has another facility in Troutman as well.
Kontane Logistics' main service in Statesville involves unloading, stacking, inspecting, installing valve stems, mounting, branding, lead-free balancing, sequencing, and banding more than 200,000 tires a year. Powder-coated painting of select wheels is also available per DTNA specifications.
Kontane does more than tire-and-wheel services and delivery, Chapman says. "We build up sub-assemblies from doors, sequence engines, transmissions, clutches. There are about eight to 12 items that in some cases we just cross-dock, but in most cases it's line-sequenced per truck."
DTNA's own transportation department manages delivery of tires from OEMs to Kontane's facilities in Statesville and Troutman.
The bundling service that Kontane offers is one of the primary benefits of the relationship, McCurry says, and it's something DTNA did not enjoy with its previous provider. It means that when orders are fulfilled - when tires and wheels are stacked inside vehicles for delivery to the plants - they are loaded in a precise order that will guarantee they can be easily deployed to specific assembly lines.
"They bundle those tires by truck serial numbers and send them in based on our build schedule," McCurry says. Ideally, tires for the left-hand side of the truck being assembled are on one side of the trailer, tires for the right side of the truck are on the other side of the trailer.
The importance? "That way we can deliver to the line, on each side of the line," says McCurry. "That eliminates the waste of moving tires around and obviously there's a safety impact as well."
While Kontane Logistics retained a number of Alcoa employees, it hired some from Daimler Truck North America as well, including Chapman, who had worked for Freightliner for 29 years. Two of his top assistants are vets with similarly long tenures with the truck maker. Keeping that kind of experience on was in no small measure responsible for the seamless transition of operations from Alcoa to Kontane.
"There were no issues," says McCurry. "Starting pains are normal, but there were none here. They've decreased lead-time requirements, there's more flexibility with Kontane in terms of making changes, they've improved our productivity, and that's improved our costs. But the really great advantage for us is that they understand our operations and have a cystal-clear understanding of what our expectations are."
Daimler Trucks North America
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