When a major cell phone manufacturer introduces a new product, more people sit up and look at the new offering than just consumers who've simply got to have the latest in telephonic fashion. There is quite a bit of interest back up the supply chain as well. There are the suppliers of the new handset, and then there is the 3PL tasked with transportation and possibly a host of other logistics services.
Packaging is one of those issues, and it was a primary concern for both Sony Ericsson and ATC Logistics & Electronics, when the former began making a new phone in 2006 for a major wireless carrier.
The traditional model called for Sony Ericsson's suppliers in Asia to manufacture handsets, then ship them by air to the U.S. for distribution. That was no longer feasible with the introduction of a new model that was to be sealed in a clamshell-design plastic package rather than the more familiar rectangular box. The new design would affect size and weight of the shipments and the number of units that could be packed in a given carton or container. Clearly, an alternative had to be found because you couldn't tell one of your biggest and most profitable customers sorry, can't be done.
Principals at Sony Ericsson and ATC Logistics & Electronics, a Fort Worth-based 3PL, already knew each other. The latter specializes in serving the wireless, broadband, electronics, medical, industrial and automotive industries, and it had provided some services to Sony Ericsson in the past. Moreover, they each shared the same carrier as a customer. So even though Sony Ericsson looked at some other providers, it was felt that ATCLE would be the best to help with the packaging solution, says Fernando Correal, Sony Ericsson's director of supply chain management for the Americas.
The answer was to postpone final manufacturing touches and packaging of the handsets until they arrived at ATCLE's distribution center in Texas, from which they were shipped either to the carrier's stores or directly to end users.
From Sony Ericsson's standpoint, there were at least two advantages to the new model. "We saw it as a positive trade-off between what ATCLE would charge us compared to the cost of bringing this blister pack product from Asia," Correal says. "We also saw an opportunity not only to save on transportation but also as a way to bring final customization of the product closer to our customer in Dallas. That gave our customer more flexibility with respect to the customization they wanted to make right up until delivery."
Inserting pamphlets or promotional material or even bundling accessories is the kind of last-minute customization a client may want, says John Bauschka, senior director of business development at ATC Logistics & Electronics. "By doing it just before it hits the store, so to speak, we're able to give the marketing folks a little more flexibility in making those decisions later in the program. Then we get everything bundled together, do our production and get it off to the marketplace."
ATCLE already was providing the carrier order fulfillment and return and repair services when the packaging initiative was broached. As the customer was mutual, Bauschka says, "It was in the interest of both of us to make that client happy."
The parties studied the alternatives, but the economics argued against palletizing, say, 200 units in Asia and flying them to Texas versus shipping 800 to 1,000 in bulk for final production.
Though successful, a project like this is no more lasting than yesterday's fashion in cell phones. What was next for the partners?
Sony Ericsson has expanded its overall relationship with ATCLE, keeping the final-stage customization model going. In fact, says Correal, most of his company's product comes through the 3PL's facility now so that he can offer his large customers the same kind of flexibility.
One of those customers is another carrier, which also is benefiting from the postponement strategy. "We were able to start off with this second big operator with a very positive supply chain performance in the first months of the relationship as a result of having ATCLE in the middle and being able to offer that extra level of flexibility and availability of product so they can keep their fill rate and inventory targets in place."
Though the relationship between Sony Ericsson and the 3PL is successful and continuing, it does not include transportation management at this point. That aspect is controlled entirely by Sony Ericsson, though discussions are under way to determine if the manufacturer might use an ATCLE foreign trade zone soon.
The 3PL also handles some exchanges and repair work. Under one program, it ships customers replacement units with the appropriate labels and cartons for the return of the unwanted or defective item. As for repairs, ATCLE does some "triage" on the phones, but anything beyond that goes to Sony Ericsson to work on.
Neither party is eager to publicly quantify the results of the relationship, but they are real, says Correal. For instance, since the direct distribution model didn't allow for buffer stock, you couldn't prevent customers from requesting part orders. "Product was either in Asia or on a plane." Part orders are no longer the headache they were because now he can get product on customers' shelves right away. And that's important because it avoids penalty clauses.
"We're subject to them if we don't deliver within a certain window, and they can be pretty high," Correal says. "We haven't incurred a single one for late delivery since having this solution in place with ATCLE."
ATC Logistics & Electronics, www.atcle.com
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