When a company refers to transportation as a "core competency," it's usually justifying a decision not to outsource the function. Not so with Electrolux Major Appliances. Greg Bagwell, vice president of demand flow and purchasing, says transportation is critical to the company's ability to maintain high levels of customer service. But that hasn't stopped it from turning the task over to an independent provider.
The beneficiary was Menlo Worldwide Logistics, part of San Mateo, Calif.-based Con-way Inc. Menlo's role extends beyond that of a traditional third-party logistics provider. Not content with handing off responsibility to a 3PL, then looking over report cards after the fact, Electrolux keeps close tabs on its partner. It relies on Menlo to carry out a promise to customers of damage-free deliveries, timed to the minute.
Electrolux has seven manufacturing locations, all but one based in the U.S. for the moment. (A facility in Juarez, Mexico will soon be joined by another at the same location.) There are four regional distribution centers in the U.S. and two in Canada. The company delivers from those locations on a daily basis, with shipments moving either factory direct or to the regional DCs.
Owned by Swedish interests since 1987, Electrolux has its U.S. headquarters in Augusta, Ga. It markets two product lines in the country: the Frigidaire brand and, beginning this year, the Electrolux premium brand of appliances. Appliances include refrigerators, freezers, washers, dryers, dishwashers and cooking products. The company does business with most of the nation's major retailers, including Sears, Lowe's and Best Buy, as well as many regional sellers.
Menlo has been working for Electrolux since the late 1990s. The vendor initially was selected to provide, in addition to the usual menu of transportation services, planning at the site level. The partnership has since expanded to cover most aspects of outbound transportation management.
Procurement accounts for a major part of what Menlo does for Electrolux. It's responsible for identifying and managing a carrier base of about 200 providers, covering truckload, less-than-truckload, intermodal, dedicated services and rail. It also manages rate negotiations and freight contracts. On the execution side, Menlo assigns and tenders outbound loads, then tracks and traces shipments all the way to destination. Other jobs include freight audit and payment, including invoices for more than 200,000 truckload and LTL shipments per year; weekly and monthly reporting based on performance metrics, and the management of returns and claims.
Electrolux relocated its U.S. headquarters from Dublin, Ohio to Augusta about 10 years ago. It used the opportunity to ratchet up service levels. "We were challenged with being able to take an order and deliver it on time and complete," says Bagwell. So the company began daily monitoring of operations.
Each morning begins with an 8 a.m. "connectivity session," involving Menlo and key personnel at Electrolux's manufacturing and shipping locations. They walk through their service record for the prior 24 hours, then review opportunities for the coming day. At 6 p.m., the partners provide to each member of the selling organization a report card on that day's actual performance.
What Electrolux aims for is delivery to the minute-a practice that is common to the automotive industry, but not the world of consumer goods. In fact, none of Menlo's other customers in the consumer packaged goods sector have the ability to track on-time delivery to that level of tolerance, according to Morgan Anderson, director of account management.
Even for Electrolux, the goal isn't always an easy one to meet, given the two-hour-plus drive from Augusta to Atlanta's Hartsfield-Jackson International Airport. Over the years, however, customers have come to expect a consistently high level of service from the appliance seller, "and we measure ourselves against that expectation," Bagwell says.
Electrolux has saddled Menlo with even more responsibilities over the past year. The vendor now manages the facility in Juarez, and has been asked to oversee carriers in Canada as well. As the customer's premium brand takes hold in the U.S., shipment damage becomes an even greater concern. So Menlo inspects all trailers to ensure that the equipment won't scratch or dent the valuable merchandise. Wherever possible, says Morgan, the Electrolux line is handled by carriers with "white-glove" service, even if that means a somewhat higher freight rate.
This year, Menlo has started deploying modeling and simulation software for supply chain design, based on technology developed by CAPS Research. The goal is to identify opportunities for cutting cost while further improving service. "We are in effect asking them to pay for their service based on optimization," says Bagwell. "In 2007, we did that. Our savings exceeded the cost of utilizing Menlo."
Menlo Worldwide, www.menloworldwide.com
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