Diebold Inc. has long been the North American leader in automated teller machines (ATMs) and related equipment for the financial industry. The $2.9bn-company is now finding its greatest growth abroad, in more than 90 countries, each of which has its own requirements and challenges. But the path to greater success in both North America and around the world is through more efficient, more agile supply chain capabilities. The 150-year-old company, headquartered in Canton, Ohio, has been increasingly finding the answers it needs by outsourcing more and more of its supply chain activity to third-party logistics providers.
Diebold's primary 3PL is Menlo Worldwide Logistics, with which it originally contracted, in 2005, just to provide transportation management services. Today, nothing moves in North America for Diebold that is not routed by Menlo's transportation group.
"Menlo's TMS solution provides transportation capabilities that we cannot get from our enterprise resource planning or other systems," says Chris Kushmaul, director of logistics for Diebold. "We have gained visibility into what we are moving, where we are moving it and how much we spend. That is critical to our saving money and finding where the opportunities are for better supply chain operations."
More recently, Diebold has been optimizing its network of warehouses in the U.S., and it is again looking at outsourcing as a path to better, more flexible operations.
"We are dealing with constant changes in markets and demand, and sales patterns change, but our network has been fairly static for many years," says Kushmaul. "We decided that our U.S. network had to keep up with these changes by right-sizing our footprint."
Diebold's U.S. distribution network was totally decentralized with each regional branch having a small warehouse attached to its office. The cost of that warehouse and the local inventory was embedded in the price of the product to the customer, which impacted margins and customer service. With the help of Menlo, Diebold analyzed this network and determined that a more centralized approach would lower supply chain costs and improve on-time customer delivery.
"Last year, we closed a lot of warehouses, downsized others and created three regional DCs that support any location in the U.S. by ground within 24 hours," says Kushmaul. "We are 90 percent done with the network changes. The remaining rationalization is about sizing the few branch warehouses that we will keep."
Menlo operates all three of Diebold's regional DCs. Two are dedicated and one is a shared facility.
The DCs are in Tolleson, Ariz.; Pataskala, Ohio; and Greensboro, N.C.
An Evolving Role
While Menlo's original roles were to drive transformation of transportation management and network optimization to gain cost efficiencies and service improvements, it is increasingly operating as a lead logistics provider (LLP).
In this role, Menlo works in close concert with Diebold's corporate staff to provide supply chain expertise and sophisticated IT tools. Menlo's capabilities allow Diebold to perform value stream mapping-analyzing the end-to-end supply chain to see what value and cost are incurred by each activity and supply chain partner.
"By working backwards through the value stream from customer delivery to the supplier, opportunities for optimizing value and minimizing cost to all the stakeholders become much clearer," says Kushmaul. "We are doing a much better job of synchronizing sourcing and production to meet demand requirements."
Menlo's IT systems provide Diebold with a true vision of what is happening throughout its supply chain, and this capability has been the most important contribution that Menlo has made, both as a 3PL and LLP, according to Kushmaul.
"Having this IT capability has been like entering a dark house and turning on the lights as you move from room to room," he says. "We see our operations more clearly than ever before, and we are finding opportunities to streamline our supply chain every day."
Diebold is rapidly increasing its global business, so its relationship with Menlo is becoming even more important. As one of the world's largest 3PLs, Menlo is a major buyer of international transportation services. Diebold can tap into Menlo's global logistics expertise, or it can leverage Menlo's worldwide volume to gain better rates and contracts.
For example, when Diebold bids out its ocean volume, Menlo collects all the requests for proposal information from the carriers and brings them to Diebold. Menlo analyzes the data for Diebold's review and the final award of the ocean contracts. In some cases, however, Menlo actually holds the contracts in its name, especially where they are able to leverage the volume of other shippers.
"My team oversees the governance and compliance on our end to make sure that everything that happens is in the best interest of Diebold and that we are in compliance with our own policies," says Kushmaul. "The hands-on logistics activity is managed by Menlo as our 4PL. The oversight, the governance and compliance are managed by Diebold."
Diebold is now integrating Menlo's detailed global expertise into its logistics team, especially as it covers foreign countries where country-specific knowledge is crucial to serving these markets.
"We are finding regional synergies with carriers, new ways to serve manufacturing plants and better ways to optimize our distribution network," says Kushmaul. The LLP activity that Menlo brings is centered on this approach of finding value through better information."
As Diebold's LLP, Menlo is increasingly assuming responsibility for projects, work streams, operating plans and management of service providers executing logistics functions, with the goal of further streamlining Diebold's global supply chain, reducing logistics costs and improving product velocity and delivery.
"Menlo's expanded responsibilities are especially focused on global warehouse network rationalization and optimization, and implementation of processes to identify and reduce waste and inefficiency," says Kushmaul.
Diebold's international network consists of a manufacturing plant in North Carolina that supports the globe, a plant in Budapest, Hungary, that primarily supports the Europe and Africa, and plants in Shanghai; Goha, India; and Brazil. Some plants make ATMs just for their region of the world and others make unique models to supply the global market. In Budapest, Diebold also has a warehouse managed by Menlo that serves Europe and other global markets.
Diebold has two paths for global distribution. It uses distributors for emerging markets such as Russia, Kazakhstan and Saudi Arabia. For established markets such as in Europe and parts of Asia, it ships from its plants to company-owed sales and service entities that handle final preparation and installation, as well as after-sales service. All service parts originate in the U.S. and are shipped globally through the Menlo transportation network.
Menlo has also been helping Diebold lower its foreign sourcing and inbound transportation costs. For example, after analyzing the pricing of inbound product from offshore suppliers that sold on Incoterms DDU [delivered duty unpaid], Menlo determined that the embedded logistics costs were too high. Menlo showed Diebold how it could buy the transportation for less than the supplier was charging if it changed the terms of sale.
But doing business in these emerging nations adds additional complexity. Such markets are literally a different world that requires a supply chain that can adapt to varying logistics requirements and customer needs. Change management is needed to be successful in building these markets, but it is equally important to understand and respect what is important to customers, suppliers and service partners to allow the change to happen. By working with Menlo's experience in these emerging markets, Diebold has been able to create a vision where each party understands its role and responsibilities and can focus on customer satisfaction.
Emerging markets such as Russia and the CIS countries are huge opportunities for Diebold's growth, according to Kushmaul, if the company can build the right infrastructure to manage those opportunities.
"Just as we optimized our North American network over the past year or two, we will do the same network reconfiguration in Europe and other markets in 2009," he says.
Diebold has already started to find incremental improvements by making changes to its supply chain operations outside the U.S. For example, Diebold is shifting away from a decentralized transportation model where each country organization chooses and manages its own freight forwarders and carriers. Instead, Diebold is centralizing the transportation responsibility under a Menlo transportation management team.
"We are able to leverage our spend across many markets with Menlo, which gives better rates to all of our country organizations," says Kushmaul. "The challenge is to show our many foreign divisions that this change is beneficial to them."
The divisions are giving up some hands-on control of orders and shipments, but they are gaining better rates and service throughout their network with Menlo managing the transportation. The division maintains the ability to review and audit invoices and to have oversight of transportation on their P&L statements, and they are relieved of the burden of managing carriers and 3PLs.
"By working with one logistics organization that provides total online transportation visibility, the divisions can track shipments and get delivery time updates from every carrier or forwarder from the Menlo TMS system. Any delay produces an advanced notice that can be passed on to the customer before the shipment is actually late. Or, the Diebold office can request expedited delivery through the Menlo routing center.
"Supply chain visibility extends to all warehouses in our network, including the three U.S. DCs, the Budapest warehouse or a consolidation center like the one we have in Greensboro, N.C., that is run by Schenker," says Kushmaul. "Visibility includes shipments and inventory at rest in these facilities."
Diebold has extended Menlo's TMS capability to its Chinese domestic shipments, so it has full visibility into transportation costs and lead-times for delivery from Chinese suppliers into its Shanghai plant.
Kushmaul explains that its growing relationship with Menlo has been a journey where each success leads to another improvement.
"Without the three Menlo DCs, I would not have the opportunity to optimize transportation by converting LTL to TL shipments and milk runs," says Kushmaul. "It is a never-ending process. When you have data, you see optimization opportunities and you can make the changes that make a huge impact in the transportation costs and the other logistics costs."
The expanded work scope calls for Menlo to work with Diebold's executive supply chain management team to further examine and recommend improvements to Diebold's global logistics infrastructure, particularly its network of warehousing and fulfillment operations, initially in North America and Europe. As an LLP, Menlo will help Diebold redesign its global logistics footprint by analyzing material and information flows, physical network layout and capacity needs, and then recommending new solutions and designs to streamline functional execution, operations and service.
Like many successful multinational manufacturing companies, Diebold has adopted a global strategy of employing best-of-breed logistics expertise from key providers, while focusing internal resources on the core competencies of designing, manufacturing and marketing its products. Diebold's work with Menlo has enabled the company to strategically re-engineer portions of its supply chain to derive better cost visibility and performance.
"We look forward to continuing our close relationship, and leveraging Menlo's expanded role into further benefits that improve supply chain speed and efficiency," says Kushmaul. "Together, we continue to lower our costs and increase our competitive advantage worldwide."
Menlo Worldwide Logistics, www.con-way.com
DB Schenker, www.dbschenker.com
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