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Soaring product demand and rapid advancements in manufacturing technology constantly create competition for corporate investment funds at Ericsson, Sweden's mammoth telecommunications firm. Ericsson's consumer products division, however, has managed to increase investment in its core business by freeing capital previously immured in the supply chain. The means to this end is a global vendor-managed inventory program in which Ryder Integrated Logistics monitors supply levels and feeds materials to production lines on a just-in-time basis.
|"Nor did it make good sense to dedicate that much space and capital to storing materials when we could use that same space and capital for manufacturing phones. - Lars Lindberg of Ericsson|
|The entire process, from the decision to evaluate changes to final recommendation, took nine months.|
|"We communicate with one another on the net, and there's web visibility for Ericsson's buyer/planners and for its suppliers to monitor inventory levels in the Ryder hubs." - Derek Fain of Ryder|
|Ryder Launches e-Channels Solutions|
|The implosions of certain high-profile e-business fulfillment processes during the 1999 holiday season - the most notable being that of Toys 'R' Us - created compelling opportunities for logistics management companies to step into the breach with new solutions.|
Among the third-party logistics providers responding to that challenge is Ryder Integrated Logistics, which this month announces the launch of its new e-business venture, e-Channels Solutions (ECS). The first phase of the program is scheduled to become operational July 1.
According to Mike Shelton, senior vice president of sales, marketing and e-commerce for Ryder, the fulfillment snarls that afflicted many e-businesses in 1999 served to accelerate the company's e-commerce strategy. "A lot of compelling opportunities arose due to fulfillment challenges during the holiday season," he explains.
Ryder already had been on the move, however. Nearly 18 months ago the company had assembled a team headed by Sandy Orr, group director of e-commerce, to perform due diligence with the assistance of Forrester Research and determine how Ryder's supply-chain expertise could be fine-tuned and positioned for the e-commerce market. "We saw the environment as a huge opportunity; we just wanted to ensure we could find the right solution," says Shelton.
Orr and her team identified it not only as a powerful opportunity today, but one that clearly fit with Ryder's long-term strategy of launching value-add solutions to meet changing market needs. "A lot of e-commerce companies are great at marketing - they just haven't focused on the logistics end of the transaction," says Orr.
"We realized there are a lot of market opportunities in the last mile of the delivery process as well as in handling product returns," she explains. "Forrester found that 80 percent of the U.S. population isn't home between 9 a.m. and 5 p.m., when the majority of deliveries occur, so our challenge was to find a way to leverage our competencies and bring flexibility to the final delivery. By giving the consumer delivery options, we can get that package to the end consumer when they want it."
Another critical finding by Forrester was that nearly 40 percent of products ordered from e-tailers are returned.
The ECS game plan calls for Ryder to manage dedicated e-commerce DCs. Ryder will launch the service with three such facilities, which will allow ECS to reach 80 percent of the U.S. population within 72 hours using over-the-road transport. The facilities include a 176,000-square-foot DC in Alliance, Tex.; an 80,000-square-foot facility in Cucamonga, Calif.; and a 104,000-square-foot center in Odenton, Md., near Baltimore. The Odenton DC is adjacent to an existing 142,000-square-foot facility that Ryder already uses for multi-client services, and the company could take advantage of that capacity as it grows. "Part of our strategy from a DC perspective is to create campus environments so we can flex up as we need to and leverage our supervision within one major campus environment," says Shelton.
ECS will focus solutions on both the business-to-business and business-to-consumer markets. "We think that's a critical component both from a seasonality issue as well as from being able to leverage our resources," says Shelton. "Our clients will always be business customers, not end customers, but we have clients who deliver both to businesses and to consumers."
ECS also intends to focus on the brick-and-mortar companies that are starting an internet presence. "Within the four walls of a distribution center, an e-commerce venture constitutes a markedly different operation - it's a piece-pick environment that involves different material handling equipment and systems and requires different sortation procedures compared to many traditional DC environments," he explains. "There are clear advantages to performing this function in a more specialized DC."
ECS's solution for providing delivery flexibility centers on establishing a network of "neighborhood depots" where parcels could be held temporarily for customer pickup or until the customer returns home, at which point couriers could deliver the package to the customer's door.
"Our plan is to set up a static network of partners that have retail storefronts, and align with those partners to provide neighborhood locations where we can send the shipments," explains Ray Greer, executive vice president and general manager of global markets and solutions for Ryder. "Customers then have the choice of coming over to the neighborhood location at their convenience and picking up their shipments, or we can arrange attended deliveries from that neighborhood depot with our network of couriers."
Ryder already has integrated its transportation management system with select couriers as well as the U.S. Postal Service. By tying together the warehouse management and transportation management systems and linking the couriers and neighborhood depots to the network, ECS customer service managers will have complete visibility throughout the pipeline and will be able to re-route shipments in transit to accommodate changes in customer schedules and preferences, says Greer.
Initially, the three DCs will use the Delfour program for transportation visibility, but as volumes increase the intent is to shift to the TMS system of i2 Technologies, which already serves as the IT backbone for much of Ryder's transportation operations. Ryder purchased Viewlocity's Amtrix messaging software specifically for the ECS venture.
"The Viewlocity program provides us with a messaging system that has been proven globally and already was live at several enterprises so we could see exactly how it worked," says Shelton. "It gives us the flexibility to use multiple WMS programs and integrate with the legacy systems of our clients."
What really set Viewlocity apart was their recent merger with NextStep, which specializes in e-fulfillment functions, says Shelton. "The company now has a tighter focus on synchronizing inventory as well as multi-leg visibility. For us, it was an attractive fringe benefit to get some of those capabilities very quickly."
Operationally, freight shipments will be routed either to one of the neighborhood depots or to one of the courier's hubs for direct home delivery. The Viewlocity system enables real-time messages to flow between the i2 TMS, the couriers' systems and the computers ECS installs at each depot.
ECS intends initially to test this concept in pilot programs targeted for Dallas, Baltimore, Los Angeles and Atlanta and is evaluating potential partners in those markets. Ideally, they are looking for partners that have multiple spread across the metro area. "We will have the processes in place and will help train their people to do the receipt of shipments and perform the customer service as the consumer comes in to pick up their parcels," says Greer.
Eventually, the company plans to expand this strategy globally. "Our global network is not yet complete, either physically or informationally," says Greer. "You'll hear a lot more from Ryder on both of those fronts within the next 60 days, as we have acquisitions underway and are looking at other options throughout the world to enlarge and strengthen our network."
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