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When a major producer of commercial vehicles, engines and parts goes to war, it must reacquire the supply chain expertise that it shed years ago.
Supply chain partners might prefer to chalk up a successful relationship to foresight, planning and careful execution. More often, it's the product of a willingness to grab hold of unforeseen opportunities.
In the case of International Truck and Engine Corp., a partnership with EGL Eagle Global Logistics evolved from a purely domestic contract into support for the company's recent push into the worldwide military market.
Houston-based EGL began working for International around 1997, says Cynthia Cochovity, the logistics provider's global account director. Services on behalf of the client were confined mostly to North American airfreight.
Soon after, EGL was helping International to grow in Brazil, where the maker of commercial trucks and engines had acquired a local company and wanted to start producing for the local market and for export throughout South America, South Africa, the Mideast and Australia/New Zealand, according to Charles Penrow III, International's manager of logistics planning within the parts logistics and operations support division.
Over time, EGL's responsibilities grew to embrace the forwarding of parts by ocean and air to International dealers around the world. It also took on the inbound movement of production materials and spares, as well as emergency parts for dealers in the U.S. domestic market. In 2002, EGL began handling vehicles destined for dealers globally, using roll-on/roll-off equipment.
But the biggest challenge that International took on, with the help of EGL, was its foray into the market for military vehicles and parts. Today, the provider aids the manufacturer with logistics in both Afghanistan and Iraq. And International plans a much broader role as a supplier of military equipment around the world.
International, the operating unit of Navistar International Corp. based in Warrenville, Ill., makes most of its engines in the U.S., as well as trucks at plants in the U.S., Canada and Mexico (in addition to production in Brazil). The lion's share of that product is for commercial and civilian use; the company also has a strong presence in emergency vehicles. But it's no stranger to the military sector. International supplied the U.S. and its allies with vehicles in both world wars. In World War II, it produced the M-series of trucks, which transported weapons and cargo for the Marines and Navy.
Selling to Afghanistan
In 2005, International was awarded a contract by the U.S. government to design and build vehicles that will aid in the stabilization of Afghanistan, Penrow says. Since then, the company has been shipping finished vehicles and parts to that country through the Port of Karachi, Pakistan.
The contract calls for International to supply up to 2,781 vehicles, including 2,400 general transport trucks and 381 specialty vehicles, for the handling of water, waste, hazardous materials and general items. The company is also providing all of the spare parts needed to support two years of scheduled maintenance.
The vehicles are being built in the U.S. at plants in Ohio and Texas, while diesel engines are produced at an assembly plant in Melrose, Ill. Spare and emergency parts, on the other hand, are being maintained by EGL at a foreign trade zone in Dubai, United Arab Emirates.
International's latest round of military business has evolved quickly, adding complexity to the supply chain. Initially, says Penrow, the company sought to apply its expertise in commercial power equipment to the military market. Many issues, including safety, durability and ease of maintenance, were common to the two sectors.
Then came the transition to military-specific vehicles. Basic truck chassis would be made at International's plants, then turned over to specialty manufacturers who would modify the vehicles for military use, adding features such as plate armor and gun turrets. (A similar setup exists for emergency vehicles such as firetrucks and ambulances.) Last summer, International announced production of the MXT-MVA, an all-terrain, armored vehicle with a 300-horsepower diesel engine for use on the battlefield.
The shift to military sales hasn't been a simple one, notes Penrow. International is supplying five distinct vehicle types, with accompanying service parts, to Afghanistan's military. It promises to repair any vehicle under warranty within 72 hours in five major cities within the country.
To do that, the company needed to maintain its regional parts stock at a safe location that could respond quickly to emergency orders. EGL happened to be consolidating its regional operations at the Dubai FTZ, which was a natural distribution point for serving Afghanistan. "It was a perfect fit for us," says Penrow, "based on their experience with the military and other government contractors fulfilling missions in that part of the world."
Despite a history of serving the military, International didn't have a wealth of applicable knowledge at hand. When International Harvester Co. sold off its farm and construction equipment business in the 1980s, and the truck and engine division became part of Navistar, the company was left without much global expertise. "We had to relearn important things that were necessary with regard to compliance and government contracting," says Penrow. "We were dealing in parts of the world that we were not altogether familiar with. EGL has helped us become as astute as we are."
Getting Up to Speed
EGL's capabilities in Dubai turned out to be a key factor in International's successful bid for the initial military contract. "We really had to pull it all together, and [combine] our knowledge with what we had set up there very quickly," says Cochovity. "Then we had to support that activity in a way that would keep them competitive."
The job involves more than running an efficient warehouse. EGL must cope with strict government regulations controlling the movement of military cargoes across borders. In addition, the shipper has to meet all requirements of the FTZ in order to avoid paying duties on parts shipments into Dubai.
Security, too, is a constant concern. Depending on the alert level in affect, shipments might require armed guards. And routes can change in an instant, based on the situation on the ground.
A non-asset-based provider, EGL relies on multiple carriers around the world to move its customers' goods. Such relationships allow the company to provide capacity on short notice. When it started shipping directly to a port in Iraq, instead of going through Kuwait, EGL had 130 trucks on the ground within weeks, Cochovity says.
International is now providing military vehicles and parts for Iraq as well, working through a local dealer. Again, it has turned to EGL for logistical support. The provider had only recently set up a presence in Iraq, handling items such as armored vehicles, food and bulletproof vests, when it began working with International in that country.
International is in constant communication with EGL, but it wants an even smoother link. Currently the partners must log onto each other's systems in order to access sales and shipment data. In the future, says Penrow, those systems will be so tightly integrated that information will be passed between them automatically. The change will cut hours out of the process of managing and monitoring shipments, he says.
International is now seeking opportunities for military sales elsewhere in the world. A standard bidding process will determine whether EGL gets a piece of that business. But in the case of Afghanistan and Iraq, "with EGL's experience in international, and the scope of the project, they turned out to be the provider of choice for us," Penrow says.
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