Kuehne + Nagel Lead Logistics Solutions (KN LLS)

Joins the Elite Global Supply Chain Managers

November 13, 2009

By

Richard Armstrong

Key Personnel:

Dr. Juergen Rahtz, Ph.D., Senior Vice President, KN LLS – North America

Stewart Dunsmore, Senior Vice President Global Business Development, KN LLS

Dennis Williams, Vice President Solutions Development, KN LLS – North America

Peter Haver, Vice President Business Management, KN LLS – North America

Kevin Smith, Vice President Operations, KN LLS – North America

Steve Guthrie, Vice President Business Development, KN LLS – North America

Bill Roberts, Senior Director Marketing – U.S.

Kuehne + Nagel Lead Logistics Solutions (KN LLS) designs and manages supply chains.  Solutions can be managed by on-site Kuehne + Nagel personnel with an extensive involvement of Kuehne + Nagel’s industry leading ocean, air, land and contract logistics operations or be neutral and 4PL (fourth-party logistics provider) in nature.  The model is independent of service modes, focusing on solution design and management of logistics service providers (LSPs) responsible for execution.  Of course, it is advantageous for 4PL relationships that KN LLS has very strong third-party logistics service providers (3PLs) in the immediate family.  Kuehne + Nagel is first in ocean freight forwarding, fourth in airfreight forwarding, third in global contract logistics and sixth in European truck/rail.  The size and scale of the support of these sister companies is very similar to the global supply chain scale immediately available to a very few 3PLs like UPS SCS.

Juergen Rahtz explains that Kuehne + Nagel is well qualified to help clients redesign their logistics networks, processes and procedures.  “Today’s clients need someone who can integrate multiple services and LSPs into a comprehensive, global solution, complete with operating metrics and end-to-end visibility to their supply chain.”

To manage its varied service offerings, KN LLS relies on a suite of third-party- and in-house-developed technologies.  These modules provide coverage for the full range of activities in door to door global supply chain management.  The technology gives the user shipment and inventory transparency plus an ability to design reporting capabilities.

KN LLS divides its managed integrated and neutral 4PL solutions into four main service areas:

• Supplier & Inventory Management

• 4PL Supply Chain Design, Execution and Monitoring

• Service Parts Aftermarket Management

• Supply Chain Technology Services

Supplier & Inventory Management is globalized vendor managed inventory on steroids.  The origins are usually contracted manufacturing facilities in Asia.  The customer distribution centers (DCs) are in America and Europe.  The object is to control inventory supply to the DC operation for distribution to retail stores and end-users.  Collaborative Planning, Forecasting and Replenishment (CPFR) methods are used to shorten lead times and rationalize inventories.  Typically, KN LLS has an assigned team managing these integrated solutions.

4PL Supply Chain Design, Execution and Monitoring usually is anchored by a control tower.  Modern technology has strengthened the importance and frequency of control towers.  KN LLS has visibility and management of shipments/orders from the factory (procurement location) through all of the land – sea (or air) handoffs to distribution centers and, where required, to end customers.  High levels of visibility and information gathering allow for ongoing redesign, process improvement and cost savings.

As part of the 4PL global supply chain process, KN LLS manages 3PL execution, evaluates key performance indicators (KPIs), plans capacity and pays the bills.

Service Parts & Reverse Logistics Aftermarket Management for KN LLS involves maintaining 175 parts distribution locations worldwide.  These services often include last mile handling and hand-offs to service technicians.  Returns are handled as requested including cartridge collection and waste management.  Typical customers for this segment are medical machinery, device manufacturers and high-tech/computer companies.

Supply Chain Technology Services include consultative evaluation of systems; custom business-process and systems design; and hosted solutions with call center support.  Carrefour, the major French based grocery operation, is one such KN LLS customer.

Select Customer Solutions

Tomo Therapy

In 2006, Tomo Therapy selected KN LLS to design and manage a global spare-parts network with requirements that included critical spare-parts delivered globally within 10 hours.  KN LLS maintains a 24/7 call center, 18 regional stocking locations and manages a global transportation network, including next-flight-out services.  A dedicated KN LLS team manages more than 12,000 annual service orders.  The call centers handle orders including critical needs and turns, tracking and tracing.  The solution allowed a start-up company to have immediate access to a global infrastructure able to support a fast-growing installed equipment base worldwide.

Motorola

KN LLS developed a transportable CPFR solution for Motorola, a leading mobile device manufacturer and one of its key telecom clients, to assist in the control of cell phone inventories.  The phones were manufactured in China and moved from Shanghai to Dallas-Ft. Worth.  From the manufacturer’s distribution center in DFW they were forwarded to cell phone company DCs in the U.S.  Before the CPFR approach, there was 8 to 10 weeks of inventory in the pipeline.  After implementation, using the telecom provider’s DC as the test site, the inventory chain was cut to seven weeks.

The key controlling report was a weekly spreadsheet.  The spreadsheet listed orders booked, shipments, phones on hand and the sales forecast.  Weekly discussions were held between personnel from KN LLS, the manufacturer and telecom provider to discuss the following week’s inventory needs.  Outbound and inbound electronic data interchange (EDI) messaging provided the latest info.

The telecom provider benefited by having inventory consistency available for a hot product, improving inventory turns and cash flow.  Motorola benefited by better matching production to sales.  It had a much clearer idea of what was currently selling best and where.  Both companies benefited from more forward communication between them.

With full implementation for the carrier’s DC, turns increased from 9 to 53, and weeks on-hand dropped to one, with annual carrying costs decreasing by $11.2 million.  In addition, the controlled supply chain allowed for sales to increase by more than $30 million.  Overall supply chain inventory dropped from 12 to fewer than five weeks.

KN LLS has rolled this solution out several times for other cell phone and high-tech companies.

Jabil

The electronics solutions company did not know when its vendors were shipping and which forwarders were being used; 20% of shipments moved by expedited transportation.  True freight costs per part were hard to calculate and company staff was spending a disproportionate amount of time putting out fires.

KN LLS took the following steps:

• Calculating the ready date for the supplier to ship

• Communicated through the Web portal to the supplier, then confirming ready date, size of shipment, etc.

• Consolidating shipments from same origin and optimizing by mode

• Monitoring transportation movements through delivery

• Handling payments and reports

The solution brought clarity to the company’s inventory network and significantly reduced costs.  For example:

• Overall costs reduced 20%

• Expedited freight reduced 40%

• Delivery performance increased 20%

• Standardized order to delivery process

• Improved supplier responsiveness

Imaging Systems Company¹

KN LLS has contracted to operate as a global supply chain/4PL manager for a major European company that manufactures MRI machines and other medical devices.  The customer needed global end-to-end visibility through a Web portal and a 4PL that could design, standardize and manage supply chain manager operations.

KN LLS involves 60 personnel in 25 locations, tied together by regional control centers.  Most of the personnel transitioned to Kuehne + Nagel from the customer’s operations when the contract was signed in 2008.

KN LLS manages inbound shipments from eight manufacturing locations in four countries.  Orders are cross-docked at regional warehouse locations or delivered direct to customer locations.  Imaging machines are handled on a “white glove” basis to the installation rooms of final destinations.

Associated global control tower services provided by KN LLS:

• Network design and optimization

• LSP sourcing and contract management

• Warehouse management

• Inventory control and management

• Customer order management

• Freight bill payment and auditing

• Transportation execution management

For the KN LLS customer, annual savings are expected to be $10 million.

Airbus

Airbus chose Kuehne + Nagel, Inc. to manage and standardize all of its European production logistics operations as a European LLP.  Kuehne + Nagel supervises the transportation of fuselage parts from six European factories and sequences the parts for delivery on a just-in-time basis to the assembly lines.  It also handles engines and other parts to the facilities.

Summary

Kuehne + Nagel Lead Logistics Solutions, an extension of Kuehne + Nagel Contract Logistics, is one of the select global supply chain design, redesign and management companies.  It incorporates an ongoing improvement process to provide more sophisticated solutions for companies with expanding domestic and global operations.

¹The shipper’s identity is protected by a non-disclosure agreement as part of the contract.

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