Global Logistics and Supply Chain Strategies - April 2008 - (Page 56)

been twofold. “We have the benefit of the space reallocation variability and the human resource reallocation,” says Campeau. “This has been a big win for us.” Orders for new products and aftermarket parts worldwide are fulfilled from the Fremont location. Lam has no warehousing of its own, but to meet very stringent service level agreements with customers, it maintains spare parts inventories in 45 locations around the world. About half of these forward stocking locations are in customers’ fabrication facilities. The other half are with various providers close to customer locations. “A machine that is down is very costly to customers, so these forward locations allow us to have parts available to customers anywhere in the world within four hours,” says Campeau. “Service level agreements are a key aspect of our business.” Menlo helps Lam meet its tight SLA standard by expediting parts for emergency fulfillment anywhere in the world. For each level of emergency for each customer location, Menlo follows a routing guide it has established with Lam. In Europe, Menlo also provides an emergency depot and cross-dock operation in Amsterdam. A major part of Menlo’s responsibility is shipping outbound orders worldwide. Assembling, packing and shipping a complete new system for a customer is no small task. Because of their high value and delicacy, Lam’s products move by air. A complete shipment can weigh 10 tons and consist of 35 crates so large they have to go on the upper deck of a 747. Many of the pieces require processing in a clean room before packaging and shipping. Before the logistics was outsourced to Menlo, the shipments were assembled in the warehouse and then shipped to Lam’s manufacturing facility for processing and packaging in its clean room. When Menlo took over, it worked with Lam to set up a clean room in the warehouse, so all preshipment processes could be handled in one location. Campeau notes that Lam’s six years of intense outsourcing has taught it what makes sense and what does not. Logistics is at the top of the list. “I am a programmer, and here I am managing logistics,” says Campeau. “Logistics and warehousing worldwide is not something we are ever going to be good at.” However, Lam closely monitors its inventory and shipment visibility in-house with its SAP system, which it uses to connect to customers and other providers even at the smallest depots. “We have enhanced the inventory management capability of the SAP system, so everyone in our supply chain can see just what they need.” Getting Started For most companies, however, outsourcing has been a short-term answer to a tactical problem, not a strategy integrated into the fabric of the business. How can that change? A company cannot simply jump headlong into a widespread outsourcing campaign, according to Bill Schneiderman, founder of The Results Group (TRG), a consulting firm based in Mountain View, Calif., that specializes in outsourcing and business process improvement. “Outsourcing is best adopted as a gradual progression that builds on success after success,” says Schneiderman. In the case of logistics, outsourcing progresses from lower value activities such as storage warehousing to higher value activities such as order configuration and fulfillment. Mike Sulaver, a principal in TRG, explains that his firm has helped a semiconductor client gradually increase its logistics outsourcing. It first outsourced its North American warehousing, and then it outsourced its transportation management. More recently, it has opened up its European operations to outsourcing. It then outsourced its manufacturing warehouse to that same 3PL, having it co-locate the distribution warehouse near the manufacturing facility. “That semiconductor company is growing rapidly, so they no longer have the time or resources to handle tasks that are not core to the company growth,” says Sulaver. No company transitions immediately from no outsourcing to massive outsourcing, but there are drivers that speed the progression. The most powerful driver is business urgency caused by expansive market growth. Logistics Outsourcing – A Little or A Lot? Outsourcing advisory firm Pace Harmon offers supply chain executives the following tips for determining how much of their logistics systems/infrastructure to outsource. Five signs you should consider outsourcing a lot: 1. You do not have the scale, volume, or immediately deployable capital that would merit investing in your own, captive physical distribution network. 2. You need global warehousing and distribution capability quickly. 3. You require end-to-end services—including warehousing, fulfillment, light configuration and transportation—with flexible locations, skill sets, and capacity. 4. You do not have the need for, nor do you want to manage, a geographically dispersed internal team. 5. You require direct, contractual levers to manage supply chain performance. Such levers may include specific service levels with corresponding performance credits, the ability to replace personnel quickly if necessary and/or contractually provided service obligations. Five signs you should consider outsourcing a little: 1. You have a physical infrastructure in place that costs less than current market pricing or is a substantially depreciated asset base. 2. You have an asset base in place that accommodates your capacity and geographic needs, with those needs expected to remain static. 3. Your warehouse procedures include highly customized processes, assets and/or delayed product differentiation that require specific skill sets to execute. 4. You consider logistics capability to be a core competency and competitive differentiator. 5. You do not require end-to-end fulfillment services or you require specific point solutions such as certain transportation lanes. Pace Harmon is an outsourcing advisory, strategic sourcing, and technology consulting firm headquartered in Tysons Corner, Va. Visit www.paceharmon.com. 56 APRIL 2008 http://www.paceharmon.com

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Global Logistics and Supply Chain Strategies - April 2008 Contents Editorial GL & SCS Exclusive Fast Forward Up Front Cover Story: Continuing to Add Ever More to Their Offerings, 3PLs Are - At Your Service Over the Long Haul Opinion: Freight Audit Bill Can't Show All Mistakes that Hurt the Bottom Line Opinion: The ‘Good-Freight’ and ‘Bad-Freight’ Trucking Customers Industry Voices

Global Logistics and Supply Chain Strategies - April 2008

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