Menlo Worldwide Logistics Continues its European Network Expansion

Maastricht, Netherlands and Gyal, Hungary Site Visits

September 27, 2010

By

Evan Armstrong

Key Personnel:

Bob Bassett, Vice President of Sales and Marketing

Todd Johnson, Vice President of International Operations

Tony Gunn, Managing Director Europe

Arthur van Gerven, Sr. Director, Business Development, Key Account Management and 4PL Services

Jori Liebrand, Site Manager – Maastricht

Samantha Sawelberg, Lean Coordinator – Maastricht

Kornel Matos, Logistics Manager – Gyal

Menlo Worldwide Logistics Europe Overview

Menlo Worldwide Logistics generated gross revenue of $1.3 billion and net revenue of $514 million in 2009. In addition, for the first two quarters of 2010 it has realized record profits and revenue gains. Menlo’s global staff of approximately 6,500 manages operations in 20 countries on five continents. Menlo’s expanding operational footprint has moved it into a select group of third-party logistics providers (3PLs) which we classify as tier-one major market 3PLs.

In Europe, Menlo has a staff of over 450 operating out of 15 locations in seven European countries. The 15 locations include value-added warehousing and distribution operations in: Belgium, Czech Republic, Germany, Hungary, Ireland, Netherlands, and United Kingdom. Menlo’s primary service offerings in Europe include both dedicated and multi-client warehousing and multi-modal transportation management. Its total warehousing footprint is just over 80,000 square meters (SQM). It also manages two transportation management routing centers; Eersel, Netherlands and Gyal, Hungary. Menlo Europe’s transportation management services include pan-European ground truckload, less than truckload (LTL), airfreight, ocean and last mile delivery services. Besides these 3PL services, the Menlo European team also provides 4PL services to some global accounts. Its key European customers are in the high-tech, consumer, medical devices and industrial industries.

In a recent visit, we had the opportunity to tour Menlo’s European operations in Maastricht, Netherlands and a smaller warehousing operation in Gyal, Hungary. These are detailed below.

Maastricht Value-Added Warehousing and Distribution Operations

In December 2009, Menlo took over the management of a dedicated service parts warehousing and distribution operation in Maastricht for a high-tech equipment manufacturer. Over 10,000 stock keeping units (SKUs) of parts inventory are maintained by Menlo in the 19,300 square meter warehouse. With a staff of 65, it is providing the following services: inbound materials receiving and processing, parts inventory management, parts repackaging, outbound order fulfillment, and outbound transportation export documentation and routing administration. The warehousing facility itself is U-shaped, has 30 foot high ceilings, and is split into 10 sections. Parts orders come in through the customer’s order management system into warehouse management system (WMS) for picking using wireless scanners. The operation distributes parts orders to Europe, Russia, the Middle East, and Africa. All outbound orders processed by 6 P.M. are shipped the same day.

Menlo Maastricht Netherlands Warehouse

As with all of the Menlo warehousing operations we have toured, Lean management principles to drive out waste and improve operational efficiencies are being deployed in Maastricht. Menlo has transitioned the operation from its customer and implemented a new organizational structure. It is reengineering operations and has worked with the customer in significantly reducing on hand parts inventory while maintaining service levels. In its first six months of operation, Menlo was able to reduce the required warehouse inventory space by just over 2,500 square meters and has an ultimate goal to reduce it by 5,800 square meters. The reduction in required warehousing space yields a significant cost savings to the customer and provides Menlo with space to add new accounts within the operation and convert it from a dedicated to multi-client facility.

Specific steps taken to transition the operation from the customer to Menlo management and implement Lean management principles have included:

Ø	Menlo taking over the contract for the facility.
Ø	Development of a Menlo/customer Business Contingency Plan.
Ø	Started to integrate environmental, safety, and health programs.
Ø	Relationship management to grow the two cultures towards each other.
Ø	Integration of quality processes into daily operations (outbound check, error file, empty location check, root cause analysis).
Ø	Conduct Lean/5S/Value Stream Mapping training.
Ø	Performed a “Red-tag” campaign to identify unneeded equipment in work areas.
Ø	Started the first “5S walk” and created the first VSM (Value Stream Mapping) to map inbound process flows and reengineer the process.
Ø	Started implementation of work area “visuals”, for example: work area pictures, and pick cart organization pictures.
Ø	Implemented a “star card” program to reward employees for exceptional work performance.
Ø	The operation has started to perform and implement process improvements from Kaizen events.

The Maastricht operation is on track to obtain Menlo’s Lean Bronze level by the end of 2010.

Gyal Multi-Client Value-Added Warehousing and Transportation Management Operations

Menlo’s 3,500 square meter Gyal bonded warehouse is located just outside of Budapest, Hungary. Its value-added service offering includes: customs brokerage, packaging, labeling, vendor managed inventory programs, just-in-time production kitting and sequencing operations, and regional and global transportation management. To support its warehousing operations, Menlo is using its proprietary “SIMS” WMS and “LMS” transportation management system.

The primary customer is a high-tech manufacturer in the financial services industry and a Menlo global customer. Menlo manages the customer’s global finished goods distribution and runs its European transportation routing center onsite at the customer’s manufacturing plant that is in the same industrial park as Menlo’s Gyal warehouse. The Gyal operation performs work for another four customers as well.

Menlo’s European routing center management staff work hand-in-hand with the customer’s purchasing personnel to manage inbound vendor material shipments to the plant. The majority of the customer’s materials are sourced from Asia, Europe, and the United States. In addition to the inbound freight, the routing center manages outbound ocean and air shipments destined to the United States, South America, Middle East, and Africa. Menlo’s transportation management has provided the customer with significant double-digit transportation savings in each of its first three years of operation.

In terms of adapting Menlo’s Lean operating philosophy, the Gyal operation completed its first Kaizen event in the first quarter of 2010 and Menlo’s 5S processes have been implemented and managed in its warehouse. The operation is on track to obtain Menlo’s Lean Bronze level in the third quarter of 2010.

Summary

In addition to its European and Americas operations, Menlo has developed a significant presence in mainland China, Asia Pacific and has developing operations in Australia. Its expanding global footprint has allowed Menlo to advance to become a true tier-one major market supply chain manager. Through its Lean management philosophy, Menlo has been able to attract significant new business, increase its profitability and reduce costs for its customers. Its Lean approach is making Menlo especially attractive to high-tech and healthcare vertical industry customers. In summary, Menlo is on the right track and we anticipate that it will continue to grow globally and build upon its recent profit gains.

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