EXEL

At the Center of Global Supply Chain Management

January 8, 2009

By

Richard Armstrong

Key Personnel:

John Gilbert – CEO, Exel Americas

Mike Gardner – Chief Development Officer, Exel Americas

Brian Newton – Vice President – M&A, Exel Americas

Andrew Hadland – Sr. Vice President, Exel Transportation

David Vieira – President, Exel Direct

Patrick Kelleher – Sr. Vice President, Retail Americas

Robert McCormick – Vice President – Design and Delivery, Exel Americas

Steve Nissen – Director of Operations, Retail Americas

Derrick Flood – General Manager, Retail Americas

DHL delivers a huge global logistics network.  Key components are the world’s largest freight forwarder, the world’s largest contract logistics operation and the third largest express company.  The core of many of its globally integrated supply chain solutions is DHL Exel Supply Chain. 

With revenue approaching $5 billion, DHL Exel Supply Chain operates as Exel in North America and DHL in Latin America.  The breakdown goes like this:

The Americas operations are 26% of DHL Exel Supply Chain revenues.  The UK and Europe operations are each about one-third with APAC delivering the balance.

Exel handles more retail and consumer goods products than any other third-party logistics provider (3PL).  Its emphasis is on the Fortune Global 250.  The 12 companies it serves in the Columbus, Ohio, area are a microcosm of that emphasis.  For example, it has an 800,000 square foot, high quality supply chain management (SCM) operation for Goodyear.

Exel has other multi-million square foot campuses in Atlanta, Chicago, Dallas, Detroit, Harrisburg, Houston, Los Angeles, Toronto, Mexico City and Sao Paulo.  These campuses often include smaller, multi-client operations as well.

Befitting its #1 ranking is the Class A operation conducted for Toys"R"Us in Columbus.

Toys"R"Us

DHL Exel performs global supply chain management for Toys"R"Us, managing purchase orders and transportation for vendors principally in Asia to the Americas and Europe.  Much of this work is done using the Internet-based solution LOG-NET by the ISC (International Service Center) operation based in New Jersey.  Typically shipments flow to Yantian in the PRC where consolidation is done as necessary for China and other Asian origins.

Figure 1 - Exel's End-to-End Retail Supply Chain Services

The start-up for the Groveport, Ohio operation started April 3, 2006, after Toys"R"Us divorced itself from Amazon.  Exel took over 350,000 square feet on a short-term basis to house the stock from Amazon and began filling orders.  A second building of 574,000 square feet was set up in the meantime as a permanent solution.  The first shipment from this mechanized location was made on June 25.  The labor demand was so great during the first peak season that Exel personnel from the home office and the Pennsylvania campus were pulled in to get the job done.  Nearly all of the 350 headquarter personnel did double duty during the period from Nov. 15–Dec. 20, 2006 to ensure this highly complex startup was a complete success.  The contract with Toys"R"Us was signed in May 2006.

By Nov. 1, the two picking towers in the building were operational and more than 10,000 SKUs (stock keeping units) were available for selection.  By the end of November, the product line increased by another 20%.  The facility now handles well over 50,000 orders a day in season with 1,100 personnel.  Out of season, orders run about 10,000 a day with 250–300 core, year round personnel.  To handle the variation, Exel has set up its own temporary employment service.  This arrangement provides for more returning seasonal employees and better productivity year to year.  In addition, Exel’s quality improvement process has led to a 30% increase in efficiency since November 2006.

The warehouse management system (WMS) used to run the facility is Manhattan’s PkMS with the addition of RedPrairie’s labor management system.  Outbound transportation management utilizes Oracle TM.

Replenishment is done primarily on the third shift.  Conveyors are run 20 hours a day.  And, if you want your order wrapped for Christmas, Exel has a host of people to do it.

Exel’s high volume, high quality operations for Toys"R"Us are repeated for several other major companies.  Wal-Mart, Goodyear, and Alpargatas are examples.

Transportation

Because of the size of its value-added warehousing and distribution (VAWD) operations, one might overlook a couple of sizable transportation operations owned by Exel.

Exel Direct is a “white glove” home delivery business operating throughout the United States.  It has a well organized call and appointment control center in Columbus.  Exel Direct operates over eight hundred 26-foot delivery trucks.  Home appliances and furniture deliveries/installations are the core of this challenging, customer sensitive business.  Exel Direct has centralized tracking for all vehicles and stops.  This capability provides real-time support.  Exel Direct has 66 dedicated and 81 agent locations.  Major customers include: Crate & Barrel, JCPenney and Williams-Sonoma.

Exel Transportation is the third largest freight broker/transportation manager in the United States with $1.5 billion of freight under management and net revenue in excess of $120 million.  It has 400 employees and 280 agents across North America.  Its principal transportation management locations are Akron, Chicago, Dallas, Houston and Mechanicsburg.  Day-to-day freight brokerage operations use Tritan (MercuryGate) IT.  Systems transportation management is done with Oracle TM (G-Log).

In addition to truckload (TL) and less-than-truckload (LTL) work, Exel Transportation is heavily involved in intermodal and rail car management activity.  For many customers, such as Frito-Lay, Exel Transportation provides brokerage services across multiple modes.  The partnership with Frito-Lay is a long-standing one and, in 2007, the company honored Exel with its carrier of the year award.

Figure 2 - Exel Transportation Overview – Integrated Capabilities

On the freight brokerage side, Exel Transportation handles over 300,000 truckloads a year.  Its growing LTL business covers Canada and Mexico as well as the United States.  IMC (Intermodal Marketing Company) activities are about 40% of total activity.

A unique part of Exel Transportation’s IMC business involves its 500 reefer trailers.  These GPS/CARD units are used primarily for coast-to-coast fresh produce loads and run on BNSF’s expedited service.  This operation is a principal competitor with MARTRAC, a UPS operation.

TMC (Transportation Management Center) operations involving Oracle TM are based in Mechanicsburg and Houston.  The Akron TMC operation is on-site at Goodyear and utilizes the Manugistics TMS.  TMC operations include carrier contracting, transportation planning, network optimization, freight payment and performance management.

For Goodyear, Exel Transportation manages 1.9 million orders annually (1.15 million shipments).  The staff of 40 runs a 24/7 operation.  Shipments are 53% TL, 17% LTL, 17% small package, 9% dedicated and 4% rail.  This service is complementary to the Exel contract logistics operation in Groveport, OH.

For Diageo in Mechanicsburg, PA, Exel handles a mix of truckload and intermodal loads.  There are about 80,000 shipments annually handled by 22 on-site staff members working two shifts.  On-time deliveries exceed 97%.  On-time pickups exceed 99%.  All shipments are web visible and EDI (Electronic Data Interchange) is used extensively.

Thinking Outside the Box – Oil Sands Logistics

A large area of Northern Alberta is now one of the largest sources of petroleum in the world.  Canada supplies one-sixth of the U.S. petroleum supply and what happens with the Alberta oil sands is critical to our economy.

Exel is working with the largest producer in the oil sands region to provide logistics support for its tar sands mining and processing operations.  Exel covers MRO Solutions – Maintenance, Repair, Operations.

Exel’s services include dedicated transportation (supplier sweeps plus expedited transportation), inventory management and warehousing, plant services, field services and contract management.  This new solution set expands Exel’s procurement, IT infrastructure segments and ability to operate in a remote, unhospitable area.

DHL Global Forwarding – Chicago

The largest air freight operation of DHL Global Forwarding (DGF) in the Americas is located 1.5 miles from O’Hare Airport in (Franklin Park) Chicago, IL.  This 24/7 operation has 400 employees.  The facility is 490,000 square feet of which 410,000 square feet are utilized for its cargo operations, as well as warehousing.  This warehousing space is used routinely as part of supply chain management for smaller customers who need 5,000–20,000 square feet of space for U.S. distribution.  The facility is U.S. Customs Bonded, USDA (U.S. Department of Agriculture) and DOT (U.S. Department of Transportation) compliant and has cold storage capabilities.  Customers include: Caterpillar, Baxter Healthcare, Hewlett-Packard, Siemens, John Deere and a host of others.

DGF services the world from O’Hare doing air freight consolidations seven days a week.  There are about 6,000 consolidated shipments and more than 7,000 air import shipments per month.  Export and import cargo consist of over nine million kilograms moving through the facility monthly.

There are 11 licensed customs brokers at this location.  They interface continually with the U.S. Customs AMS (Automated Manifest System).  DGF is ISO 9001:2000 and C-TPAT (Customs-Trade Partnership Against Terrorism) certified as well as TAPA (Technology Asset Protection Association) compliant.  It is now the largest mover of the air transportation containers manufactured by Envirotainer, and Chicago is also a QEP (Qualified Envirotainer Provider) site.

Security at the facility is well controlled.  Closed-circuit television (CCTV) covers the warehouse and property.  Within the warehouse, there is a limited access security cage and a security manager on site.

For cargo delivery purposes, DGF has 25 tractor trailer combinations, three roller-equipped flatbed trailers as well as a number of cargo vans.

Summary

The combination of DHL Exel Supply Chain and DHL Global Forwarding yields tremendous global supply chain management capabilities.  Moving forward, John Gilbert, CEO for DHL Exel Supply Chain Americas, plans for more extensive integration of services.  He indicates that the biggest challenge will be to continually find enough good people.  The team we met was uniformly solid. 

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