Global Supply Chain Management – Kuehne + Nagel’s Is Top Quality
Chicago, Illinois USA
September 26, 2007
Rolf Altorfer, President
Lauren Carribean, Regional VP – Sea & Air
Sean Kelly, Regional VP, Sales, Central Region – Contract Logistics
Bill Roberts, Dir. Marketing & Communications – Contract Logistics
Tom Gault, Dir. Sales, Midwest – Sea & Air
Global freight forwarders have decentralized operations with dozens or hundreds of offices. A major requirement for global supply chain management is that all of those locations have to be hooked together on a single worldwide computer network. The major integrators, UPS, FedEx and DHL, have robust solutions of this type for global, small package shipments. For freight forwarders, robust IT solutions like those of the integrators are rare. Kuehne + Nagel has an integrator-like capability for larger shipments of value moving globally. Its 830 offices share a globally standardized, robust IT solution that has been carefully developed over the last 15 years.
Kuehne + Nagel’s IT solutions give it the network necessary to be No. 1 in ocean container transportation (more than 2.5 million TEUs a year), No. 4 in airfreight (725,000 tonnes) and No. 3 in contract logistics (400 locations in 55 countries).
The information system runs on AS400 hardware based in data centers in Hamburg, Germany, Hong Kong and Naugatuck, Conn. The software, CIEL 4000, a single global operational platform, is used to create documentation, plan transportation and manage events. The internet overlay for users is a suite of information value products, underscored by the KN Login web-enabled visibility suite. Interfaced to it are the transportation management system (TMS), warehouse management system (WMS), electronic data interchange (EDI) and other capabilities.
In the United States, Kuehne + Nagel uses Oracle (G-Log) TM extensively in coordination with its contract logistics (VAWD) operations. In Europe, i2 is used for contract logistics and the Rail & Road Logistics division. Rail & Road has expanded significantly in the last two years in competition with Schenker/Railon, DFS and others.
5,200 Seafreight division personnel rely on the CIEL 4000 software to manage its ocean container shipments.1 There are extensive paperwork and filing requirements for non-document international shipments (invoice, bill of lading, advanced manifest, etc.) plus a series of cargo control events (handoffs) for any shipment. In today’s logistics environment, it is as important to move information as it is to move cargo, thereby creating a dual workload responsibility for all operational staff around the globe. ISO quality systems and protocols underscore all Kuehne + Nagel operations to provide uniformity and standardized productivity. The program is QSHE (Quality, Safety, Health, Environment and Security).
A useful feature of the CIEL system is that photo imaging of all documents works very well. For any shipment, an invoice, bill of lading or other paper document can be retrieved and reviewed. Kuehne + Nagel is ahead of its major competitors with this capability.
For every shipment, Kuehne + Nagel’s information value products provide visibility from booking through delivery. Planned and actual events are time defined and exceptions are quickly and systematically identifiable. Reporting of events, for internal staff and clients alike, can be customized by each user with a customized dashboard. In addition, Kuehne + Nagel has deployed a robust global reporting platform, Business Objects™, which pools all data generated from the globally standardized operating applications in order to provide flexible and scalable reporting solutions.
These systems afford Kuehne + Nagel the ability to act as an IATA certified, Cargo 2000 Phase II provider for all stations around the globe. Cargo 2000 Phase II entails the door-to-door monitoring of heavy weight shipments against predefined route maps which are systematically maintained, monitored and updated. The route maps serve as the baseline which all events of a shipment are measured against. Kuehne + Nagel is the only airfreight forwarder with this process for their entire network. Kuehne + Nagel’s airfreight operation handles about 30,000 shipments per week.
Unique to Kuehne + Nagel, customs brokerage operations are also integrated into the globally standardized applications wherever possible. For example, in the U.S. brokerage operations are conducted through 41 offices by 250 personnel within the CIEL system and its customs brokerage subset. One-third of Kuehne + Nagel brokerage staff members hold individual licenses. Over 300,000 entries were filed with the bureau of U.S. Customs and Border Protection (CBP) in 2006. Real time Automated Broker Interface results are online in KN Login. Kuehne + Nagel can handle and clear shipments centrally through Chicago or the closest CBP office.
Kuehne + Nagel handles post entry work such as Customs Form 28/29. Periodic duty payments, foreign trade zone entries, insurance and carnets for trade shows are routinely handled. Remote location filing, electronic invoice processing, automated classification, and electronic 7501 data migration are standard processes of advanced entry services.
In conjunction with the organization’s ISO 9001 protocols, Kuehne + Nagel has developed a standard operating procedure for quality brokerage management. Kuehne + Nagel is C-TPAT certified and validated.
A useful feature for Kuehne + Nagel customers is its ability to “burn” a CD of entry documents indexed by entry number. Also, scanned documents can be sent as PDF files to customers’ secured servers. This assists Kuehne + Nagel’s partners in compliance and regulatory matters.
Lauren Carribean’s operation, based in the Chicago suburb of Elk Grove Village, has 150 people and operates seven days a week. Lauren is also responsible for smaller offices in St. Louis, Kansas City, Denver, Minneapolis and Detroit (with 7-45 people in each office). In Chicago, there are 16 employees in customs brokerage. Seven staff members are licensed brokers.
The Chicago office handles about 10,000 shipment transactions a month. About 4,500 are airfreight, 3,000 are ocean and 2,500 are in customs. Ocean freight inbound runs twice as heavy as outbound. A major challenge, for forwarders and shippers alike, is the reduced staffing levels at the steamship lines which slows communications. At the same time, the challenges posed by container lines make it easier for Kuehne + Nagel to offer its high quality service. About 80% of Kuehne + Nagel’s container volume is from customers with 100-1,000 containers a year.
Carribean’s Chicago dock operation has 127,000 square feet of dock space. It runs heavy on airfreight particularly on Friday night and Saturday morning loading consolidations to 150 destinations. Twice a week Kuehne + Nagel operates its own 747F charter service to and from its Frankfurt hub. Cargo for the charter flights, as well as commercial uplift, is all handled in the Chicago facility.
Kuehne + Nagel loads and unloads all types of airline pallets or Unit Load Devices. “Cookie sheets” (one type of airline pallet) are frequently used as a base for 10 or 20-foot groupings of airfreight shipments. These devices are transferred to and from the airlines on roller bed trucks. Ocean containers are loaded tightly using lumber and airbags. The airbags are inserted and inflated to prevent cargo from shifting. Kuehne + Nagel professionally stuffs containers to eliminate cargo damage.
Cargo is tracked in the warehouse with barcode labels, license plates and guns. There is a security cage and some racked storage is done. Air and ocean shipments are sent daily. The largest customers are in the high-tech, pharmaceutical and medical industries.
Complimenting the Elk Grove forwarding operations are two suburban Chicago value-added warehouses. Kuehne + Nagel Contract Logistics grew substantially with the purchase of French-based ACR in 2005. Kuehne + Nagel has more than 400 contract logistic warehouse locations in 55 countries. 25,000 employees work in contract logistics. The customer list covers all verticals but pharmaceuticals and high-tech accounts are especially prevalent.
The main service lines are single client, dedicated warehouse solutions and multi-client contract operations. Profitability in large, single client dedicated warehouses is driven by product value and the degree of value-added services. Kuehne + Nagel’s multi-client warehouses also emphasize high value products with extensive value-added services but allow for more labor saving practices and normally higher margins. A key marketing aspect of multi-client warehousing is to keep the space filled with complimentary operations.
For its WMS, Kuehne + Nagel uses CIEL and Provia’s FourSite. These WMS routines are integrated to KN Login and the TMS. As a result, customers have carton level visibility to all inventory at all times. Radio frequency (RF) labeling and reading practices are standard.
Kuehne + Nagel’s list of value-added services covers the gamut. Product transformation activities include sub-assembly and postponement/build to order.
Kuehne + Nagel has 25 multi-client warehouses in the United States. There are six in Mexico and six in Canada. Fifteen dedicated distribution centers are operated. The Mexico operations are among the best in that country. All of these operations have the Oracle (G-Log) TM capability and KN Login visibility
Kuehne + Nagel’s Critical Service Logistics (CSL) supports field engineers with deliveries within pre-specified periods of time by incorporating flexible contact center capabilities, visibility tools and forward positioning of inventory from more than 175 stocking locations across the globe. Customers include Sun Microsystems, Xerox, Johnson Controls and TomoTherapy. Returns are tracked to repair vendors.
Kuehne + Nagel’s two multi-client facilities in the Southern Chicago suburb of Alsip are just off the I-294 and I-80 highways.
Alsip 1, on Pulaski Road, is 370,000 square feet with 37 dock doors and one drive-up ramp. There is 21,500 square feet of temperature controlled space. The anchor tenant is Merisant (Equal). Kuehne + Nagel provides complete SCM services, including returns, for Merisant. Also in this facility is MAN Roland’s printing press replacement parts inventory. This location is MAN Roland’s global parts depot. This operation has 21,000 SKU’s some of which are kept for printing presses still working after 50 years.
Alsip 2 has a set of high value, healthcare and parts related customers. It’s a good example of Kuehne + Nagel’s contract logistics market focus. This 235,000 square foot warehouse includes 41,000 square feet of temperature controlled space. Takeda, a manufacturer of Actos (an insulin sensitizer for type 2 diabetes), occupies over one-half of this space. Alsip 2 is the U.S. distribution location for Takeda. PTS Labs takes a chunk of the rest.
Another major client is Omron Healthcare. Omron manufactures diagnostic equipment such as blood pressure monitors and thermometers. Kuehne + Nagel handles ASN (USC 128) orders, retail compliance, picks and packs and manages transportation in and out. An onsite lab is maintained by Omron. Alsip 2 is Omron’s North American distribution center. Radio-frequency identification (RFID) is used for Omron’s Wal-Mart business.
Another healthcare related customer is U.S. Surgical, a division of Tyco Healthcare. Services for this customer include cross-docking.
Non-healthcare related customers include Rheem, Denso Automotive, Woodward Governor and BMW. For Rheem, Kuehne + Nagel provides postponement and wiring services. Denso is a Toyota dealer supplier of alternators and other parts. Alsip 2 is Denso’s North American distribution center (store, pick, pack, route and ship). The Woodward Governor operation is similar.
The BMW business is housed in a separate facility. It is reverse logistics and cores management. The cores are sent to Germany for reprocessing.
Alsip 2 is a well run warehouse. All the KPI’s are very good. But the thing that really struck me was the mix of high value commodities and the capability to maximize operations in this multi-client warehouse. These Kuehne + Nagel customers are the kind who need and can support high quality, global supply chain management.
1 A&A estimates that Kuehne + Nagel handles 450,000 TEUs a year in the Asia-China line. Most of this traffic is handled as Blue Anchor Line, its Federal Maritime Commission approved NVOCC. Included in this ocean freight volume are 40,000 TEUs of consolidated LCL shipments.
Sources: A&A Primary Research, http://www.kuehne-nagel.com/