Inventory management a la 3PL

Recent economic trends have resulted in a slight uptick toward increasing safety stocks at distribution centers. Shippers are now being challenged to control inventory levels by balancing the need to get product into their customers' hands while maintaining lean supply chains. That's making visibility into extended supply chains more important than ever, which helps explain why many companies are relying on third-party logistics providers (3PLs) to manage their inventories.

Since January 2004, when consumer packaged goods company Phoenix Brands was formed, the company has relied on Menlo Worldwide Logistics (www.menloworldwide.com) for its warehousing proficiency. Phoenix Brands is actually a collection of four former Unilever brands — Sunlight Dish Detergent, Niagara Spray Starch, Final Touch Fabric Softener and Rit fabric dye — all of which are manufactured in the U.S. and Canada. The company sources raw materials, manufactures products and moves them on to final customers, and of necessity, Phoenix warehouses some stock.

"With Menlo we ran a supply and demand analysis for individual products to determine where their supply points should be located," says Sanjiv Mehra, Phoenix's chief administrative officer. "Based on that we picked our warehouse locations. We serve the same end customers out of our locations."

Not only does Menlo handle warehouse stock and final mile delivery, it also performs inventory planning for Phoenix, which includes basic sales & operations planning (S&OP) as well as demand forecasting on a rolling basis, which turns into specific factory production orders.

"We basically manage the supply chain from end-to-end for Phoenix," explains Claudell Germain, Menlo's director of operations. "We take it within our system from the planning stages all the way to the end customer."

Though going the outsourcing route, Phoenix remains actively involved in inventory management on a daily basis for whatever needs to be handled, Mehra notes. "We have S&OP meetings and monthly inventory planning and forecast reviews where key people evaluate the quality of the forecast. We're a young organization and are pleased with the success-we've had to date in reducing inventory-significantly while maintaining consistently high customer service levels."

Shipment visibility for shippers using American Port Services (www.amportserv.com) — a 3PL that provides port transloading/deconsolidation, warehousing and distribution services — begins with a billing notice posted by the steamship line carrying the cargo as it leaves the overseas port. That information is put into its TotalView visibility tool.

American Port has arranged to receive EDI (electronic data interchange) information from its customers, carriers, forwarders and customs brokers into the TotalView system, explains George Powers, American Port's president. "It starts with the message from overseas. We'll get information on the progress of shipments from the steamship lines. As the ship makes its way to the U.S., we receive messages from the customer and Customs broker telling us when it is cleared, what's in the shipment, seal number, container number — all of the information we need."

When the ship hits port and its cargo is discharged, American Port receives notice from the Customs broker that it is at port and has been discharged, and that they have a line release. At that point the 3PL dispatches its truck to the port for container pickup. The company has a private fleet of 200 drivers, scattered at the various ports. Powers explains that the company's fleet handles 95% of the haul from the ports and it moves 70% of needed over-the-road trucking.

"Typically we will move containers to our own distribution center (DC) or cross-dock operation," says Powers. "We do some trucking of containers or breakbulk directly to a final customer, but most of the cargo comes to one of our facilities first for processing, storage or whatever is needed."

At press time, lead logistics provider Schneider Logistics (www.schneiderlogistics.com) announced it signed an agreement to acquire American Port, which will continue to operate under its own name as a wholly owned subsidiary. Powers will continue as president.

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