APL Logistics Refocuses its 3PL Strategy
Atlanta, Georgia USA Warehousing Campus
May 7, 2008
By
Evan Armstrong

Key Personnel:
John Hurst, Vice President of Warehouse Management Services (WMS) – Americas
Rick Underwood, Vice President of Contract Logistics Sales – Americas
Bob Gaughan, Group General Manager – Atlanta
Dan Montgomery, Director of Logistics – Western & Latin America Regions
Kyle Oslos, Director of Logistics – Central Region

Overview

Over the last several years, APL Logistics has been best known for its international operations and for its 2000 acquisition of value-added warehousing third-party logistics provider (3PL) GATX Logistics. However, through the work of a new VP of Contract Logistics Sales, Rick Underwood, and a refocusing by upper management on 3PL growth in the Americas, APL Logistics is reemphasizing the “Logistics” in APL Logistics.

APL Logistics’ strength has been in the automotive and retail client verticals and utilizing its strong Asian base. APL Logistics has approximately 4,500 employees operating in over 260 locations in 55 countries. It has a warehousing footprint of 25.9 million square feet globally and significant transportation management and intermodal capabilities. Two-thirds of its $1.3 billion 2007 revenues are from value-added warehousing and distribution (VAWD). One-third is from its International Logistics Services (ILS) operations. Its 2007 core earnings before interest and taxes (EBIT) were $57 million. APL Logistics’ other segment revenue breakdowns are shown in Figure 1.

Figure 1 – APL Logistics 2007 Revenue Profile

Figure 2 – APL Logistics North American Warehousing Footprint

APL Logistics has core value-added warehousing services in manufacturing support, vendor managed inventory (VMI), kitting, sequencing, light assembly, packaging, labeling and client services. It couples these with its international and domestic transportation management operations to provide a true, integrated end-to-end supply chain management offering. Its key logistics clients include: Colgate-Palmolive, Electro-Motive Diesel, Avon Products, Kellogg Company, American Honda Motor Company, Ingersoll-Rand, Procter & Gamble, CNH Global, Dow Corning Corporation, Hanes Brands, Birds Eye Foods, Tyco Fire and Security, and Yamaha Motor Corporation, USA.

To support operations, APL Logistics primarily uses Manhattan Associates “PkMS”, HK Systems “Irista”, and its proprietary “WMSp” warehouse management systems. Each system has been integrated with its transportation management system (“NuLogx”), yard management system (YMS), visibility tool (“See Change”), and in many cases with client’s enterprise resource planning (ERP) systems for full order to delivery supply chain optimization and visibility. Integration with client’s SAP ERP systems is a core competency. Most of its warehousing operations utilize radio frequency (RF) devices integrated with the warehouse management system(s) for paperless putaway and picking and overall inventory management.

Tyco Fire and Security-Sensormatic retail security tags

Tyco Fire and Security-Ansul fire extinguishers

Tyco Fire and Security (ADT Worldwide)

Since 1998, APL Logistics has been managing Atlanta warehousing operations for Tyco Fire and Security, a division of Tyco International. The initial project focus was to consolidate the operations of nine distribution points in the Caribbean and North America into one centralized distribution center (DC) in Atlanta.

The main value-added warehousing services being provided are inventory management, kitting and component assembly, and order fulfillment. The 296,000 square foot operation has a significant amount of stock keeping units (SKUs) of products and parts and employs 190 people over two shifts.

The operation includes a restricted “clean room” where configuration specialists assemble and test electronic systems prior to distribution. APL Logistics also provides on-site office space for approximately 40 support staff.

Tyco Fire and Security drops a significant number of orders daily to APL Logistics, most of these orders are completed and shipped the same day. Many of the orders require kitting of product into specialized packaging for on-site repair technicians.

APL Logistics also provides export packaging and generates Customs required documentation for international shipments. The majority of outbound orders are small package, with the remainder being tendered to less-than-truckload (LTL) carriers.

A disaster recovery command center has been implemented to assure business continuity.

APL Logistics has built internal training programs and methodologies focusing its workforce on a Six Sigma approach to quality process improvements. This approach is reflected in many of the reengineered process improvements. Through its quality efforts, APL Logistics is averaging 99.9% order accuracy for this consumer electronics manufacturer.

Yamaha Motor Corporation, USA – Atlanta Regional DC Operations

Yamaha Motor Corporation, USA (YMC) has been an APL Logistics client for 34 years. In the mid-1980’s, it moved distribution operations from Jacksonville, FL to its current APL Logistics designed 428,000 square foot dedicated Atlanta regional distribution center (RDC). The APL Logistics RDC operation is one of six YMC distribution centers in the U.S. and distributes over 60% of YMC’s annual volumes to a network of just over 2,000 dealers. APL Logistics’ industrial engineers utilized i2 and CAPS network modeling software to assist YMC in designing its domestic distribution network and to reduce overall supply chain costs. APL Logistics also operates Chicago and Dallas RDCs for YMC.

Rhino ATVs ready for distribution

Rhino ATVs racked for optimal loading & delivery

The Atlanta RDC has an approximate staff of 25 and just over 1,000 SKUs of finished goods and parts are maintained in inventory. APL Logistics is fulfilling over 100,000 orders per year for YMC.

The majority of the Atlanta RDC facility supports YMC in its manufacture of Rhino all terrain vehicles (ATVs) at its plant in Newnan, GA. Value-added warehousing services provided by APL Logistics include: racking of 200-300 Rhinos per day for transportation, re-labeling parts and products, packing-out Rhino accessories, inventory management, and cross-docking. To date, APL Logistics is maintaining an average inventory accuracy of over 99.9%. To increase operational efficiencies, reduce transportation costs, and reduce damages, APL Logistics also worked with Yamaha Motors in designing non-crated, returnable racks for its products.

APL Logistics is also managing the outbound transportation for the Atlanta, Chicago, and Dallas YMC RDCs. The transportation services provided include: international ocean, domestic intermodal, port and rail container drayage, plant support, truckload, and LTL. The APL Logistics YMC transportation operations are staffed by one client service representative, two load planners, and five brokers. In Atlanta, APL Logistics is also running a dedicated fleet of 18 tractors and 50 trailers to

support inbound Newnan plant manufacturing and outbound plant to RDC loads. APL Logistics has been able to provide YMC with consistent on-time delivery service of over 98% for all of its transportation.

Other APL Logistics Atlanta Campus Operations

In addition to the above client examples, APL Logistics is running a 346,000 square foot multi-client warehouse. Next to the multi-client warehouse, APL Logistics also runs a 341,000 square foot warehousing operation for a large consumer package goods manufacturer.

Summary

With the support and commitment of its revitalized upper management team, APL Logistics is leveraging its international network scope and the capabilities demonstrated in its global warehousing and transportation operations in developing new 3PL business. Through its ongoing emphasis on training and Six Sigma and Lean process improvements; we anticipate APL Logistics will become an increasingly visible industry leader.