The eastward expansion of the European Union. The entry of China to the World Trade Organization. The likely spread of NAFTA to all of the Americas. The juggernaut of free trade and globalization of manufacturing and retail sourcing is unstoppable. But the speed with which this globalization is reshaping supply chains has been startling, especially for the third- party logistics providers whose job it is to support these supply chains.
"3PLs that expect to be competitive with major customers all have stepped up their strategic plans for global expansion," says Richard Armstrong, president of the Wisconsin-based 3PL research firm, Armstrong & Associates. "Their customers are telling them where they need to be to support rapid global business expansion."
This trend has lighted a fire under the world's 3PLs, including the U.S.-based companies that to a large extent have depended on the North American economy to fuel their growth. Until the end of the 1990s, 3PL annual revenue growth in the U.S. alone was climbing at around 10 to 15 percent year after year. International activity consisted mainly of cross-border NAFTA movements or management of export and import freight. In the last two years, however, setting up operations in Europe, Latin America and Asia has become a priority for those U.S.-based 3PLs that want to ride the globalization wave.
"Growth for 3PLs in emerging markets such as China and India should be between 20 to 30 percent over the next few years," says Ken Chay, corporate director of marketing for APL Logistics. "Average worldwide 3PL growth estimates for that same time horizon are only about 10 percent. Everybody knows where the action will be."
Global growth strategies for U.S.-based 3PLs is being driven by both their own plans, and by customer demand.
"Customers that we just served domestically are asking us to help them with their growing global activities," says Chay. "It is not just a matter of their being pleased with our domestic service, so they are willing to try our international services. Increasingly, they want to connect their global sourcing and inbound logistics operations with their domestic warehouse and distribution. As a global 3PL, we can bridge those two ends of the supply chain."
Mark Rhoney, vice president of marketing and strategy for UPS Supply Chain Solutions, says customers are coming to his company looking for their own global growth opportunities.
|"Growth for 3PLs in emerging markets such as China and India should be between 20 and 30 percent over the next few years."
- Ken Chay of APL Logistics
|"3PLs that expect to be competitive have stepped up plans for global expansion."
- Richard Armstrong of Armstrong & Associates
|Moving raw materials to Asia for manufacturers is 'becoming huge.'
|ASICS America Stays a Step Ahead with the Help of APL Logistics
|Staying ahead in the athletic footwear market is no walk in the park. Price competition is brutal. Style trends change overnight. The wrong inventory can shrink thin margins to nothing. That is why Ken Kato, vice president of operations for ASICS America, the U.S.-based subsidiary of Japanese athletic apparel and footwear company ASICS, spends so much of his time worrying about supply-chain efficiency.
All footwear production has been done in China for nearly 10 years, but until quite recently, Kato has had little idea of which orders had been filled, when they were shipped and what items were in any particular container. The company's previous consolidator had only minimal scanning capabilities that it could only perform at the Hong Kong pier where containers were stuffed. Shipment and inventory visibility information was erratic and highly inaccurate.
Kato decided that visibility had to be far more accurate and had to begin much farther back in the supply chain. Kato sought out a 3PL that could provide supply-chain information of his Chinese operations, as well as the actual logistics of handling U.S.-bound shipments.
He selected APL Logistics because of its IT capabilities and its long experience in the Chinese market.
Kato now sends his purchase orders to APL Logistics, which in turn provides them over the web to the Chinese factories making his footwear. The factory prints the barcode labels from the POs as the goods come through the production line. After quality assurance processes, the factory scans the goods, so ASICS knows exactly what has been produced and which POs have been completed. When the containers are stuffed, the cartons are scanned a second time.
"We get the final manifest as the container leaves the factory in the form of an advance shipping notice," says Kato, who adds that APL cleanses the data before sending it as an EDI message.
Besides providing much better supply-chain visibility, Kato says, the highly accurate ASN data has other benefits. He runs the detailed data through an internal accounting system that provides true cost down to the carton level.
"We compare this with our standard costs to check for variances," says Kato. "We are working on another application that will compare these actual costs with our projected costs to check for billing errors.
"The scan and pack operation and the ASN data lead to many good things for our supply chain," says Kato.
APL Logistics handles all of the container consolidation and freight forwarding. The factory calls APL Logistics when production on a particular PO is finished and ready to ship. APL Logistics books the container with carriers according to contracts that ASICS has in place, oversees the consolidations at the factory loading dock and manages the cartage to the pier. When the containers arrive on the West Coast, APL Logistics cross-docks direct shipments to certain customers and trans-loads everything else for trucking to the ASICS distribution center in Mississippi.
Kato is now working with APL to set up a more elaborate end-to-end visibility capability that is web-based. APL Logistics is setting up 30 check points along the supply chain from inside the factory all the way to the receipt at various points in the U.S. Any delays out of preset tolerances will produce exception alerts that APL Logistics and ASICS can respond to. All the ocean carriers that APL works with for its Asian customers are already tied into the system. Next to be added will be ASICS's customs broker. The last link to be added will be the truckers moving product to the ASICS distribution center in Mississippi.
The new visibility system is scheduled to be implemented this spring and will be fine-tuned over the next year.
The new system, as well as the existing scanning system, is being implemented at all of the footwear factories in China that ASICS uses, and will be expanded to Vietnam where additional factory capacity is being contracted for.
The web-based system will allow ASICS to add factories as needed and to move from country to country.
"We needed a partner who could move quickly for us and implement this system wherever we moved."
ASICS has chosen not to expand the scanning system to the apparel side of the business, which is mostly based in Indonesia. The scanning system requires special scanner guns and some degree of system integration, which can take a year to implement fully.
"In the apparel business we sometimes change vendors so often that we wouldn't be able to implement the systems properly," says Kato.
He says that he expects the partnership with APL Logistics to be a long one. Both parties have put several years of work into these programs, and further innovation will require even more time and collaboration.
"After making this commitment, it would be very costly and operationally difficult to change partners," says Kato. "We are confident that we selected the right partner."
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