Getting the account was the stuff of dreams. Servicing it held the potential for nightmares.
The client: Ford Motor Co., one of the largest industrial companies in the world. The provider: Vastera Inc., a seller of software and services in support of global trade. The task: taking over Ford's massive managed-services operation for all of its imports and exports.
Dulles, Va.-based Vastera was no stranger to the ins and outs of global trade. But its managed-services product was just getting off the ground. And it had little experience in the automotive sector.
"Ford dwarfed anything else we had at the time," says Mark Palmera, senior vice president of global services with Vastera. Yet the vendor was being asked to take over an operation that handled some 300,000 transactions a year in the U.S. alone, supporting 112 Ford plants in 25 countries.
Historically, Ford had always managed its global trade processes internally. Now the whole thing would be handed over to Vastera - people, systems, and all.
It had to happen fast. In early 2000, Ford was experiencing several developments that called for quick action. Chief among them was the spin-off of Visteon Corp., the automaker's parts division. Ford could no longer act on the newly independent unit's behalf, says Alex Kobylecki, manager of international logistics and customs. At the same time, the company needed to cut the cost of managing a growing number of trade-preference programs, such as the North American Free Trade Agreement (NAFTA).
The idea was to spin off Ford's existing customs department in toto, making it a revenue-generating venture on its own. Other companies might then benefit from the unit's years of expertise in managing the trade activities of Ford. That notion meshed well with Vastera's desire to go beyond software and databases into the world of managed services.
The switchover, under a 10-year agreement, occurred in the U.S. between August and September of 2000. Approximately 90 percent of Ford's employees involved in global trade management went to Vastera, Kobylecki says. Today, the provider maintains a staff dedicated to Ford of around 30 in the U.S., with another 35 in Mexico and 12 in Canada, according to Palmera.
Systems and software are making the transition as well, although that process has yet to be completed. Ford had managed its trade activities through a variety of legacy systems, crafted over the years in-house. Kobylecki expects it to make a complete shift to Vastera's systems by the third quarter of this year.
The term "managed services" covers a broad range of processes. On the export side, they include order screening, license determination and application, document generation, shipper's export declaration (SED) submission, tracking and tracing, and landed-cost modeling. For imports, add Harmonized Tariff classification, pre-entries, duty drawback, liquidation, invoice adjustments and inbound landed cost. Between those two stages lies the oversight of freight forwarders, carriers and customs brokers. All of those duties are now handled by Vastera, on Ford's behalf.
Among the vendor's most important tasks is minimizing duties through adherence to trade pacts such as NAFTA, and Customs' drawback program, which generates millions in unclaimed duties each year. Kobylecki says Vastera was chosen in large part for its trade expertise in such areas, as well as its "strong technology platform."
Ford wasn't overly concerned about Vastera's inexperience on the managed-services side. "Vastera had other big clients at the time," says Kobylecki. "Their management team had come from large companies, and appreciated the scale of this." His only concern is the possibility of losing trained experts, as they shift over to service accounts other than Ford's.
So far, the benefits have outweighed any worries Ford might have about Vastera's lack of exclusivity. Kobylecki has seen up-front savings through better use of NAFTA benefits. "It allows us to keep our cash, rather than pay and recover later," he says. In addition, Vastera has helped to streamline border crossings through new broker contracts.
Vastera took over Ford's Mexican trade operation in January 2001, and Canada two months later. Plans to roll it out to Europe and Brazil are on hold, due to what Ford describes as internal issues. That could delay Vastera's efforts to increase its managed-services client base.
Still, Ford remains committed to the arrangement, as well as to the prospect of additional services. "We look at Vastera to take us into the future, with regard to opportunities in automated options that are out there," Kobylecki says.
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