Panalpina – Transparent Global Supply Chain Manager
Morristown, New Jersey USA
April 13, 2009
Lucas Kuehner, Managing Director, USA
Markus Wegmann, Head of Operations, USA
Armin Heinlein, Vice President & Head of IT Competence Center, Americas
Norman Rasmussen, Head of Luxury Goods
Tim Hotze, Manager of Logistics and Supply Chain Solutions
Valerie Kilburn, Director of Customer Systems
Some guys can do it and some guys just talk about it. Panalpina is a doer and one of the few real global supply chain managers.
Panalpina’s supply chain capabilities are built on its freight forwarding and cross docking operations. Panalpina is the third largest air freight forwarder and fourth largest ocean freight forwarder. It has 500 owned offices and 242 warehousing locations. In short, it has the scale and scope to carry out global operations as a global freight forwarder and then add-on a host of integrated Logistics and SCM value-added services. The value-added services are the complement for door-to-door, full service, supply chain management (SCM).
The life blood of Panalpina is its ongoing financial stability and transparency. Its gross profit runs 20%, EBITDAs (earnings before interest, tax, depreciation and amortization), EBITs and net incomes consistently run among the industry’s best. Like all of the truly strong players, these results are clearly and straightforwardly reported for each financial period. Gross profit (net revenue) runs 43% for air freight, 31% for ocean freight and 26% for SCM.
Feeding the profitability of the company are 14,800 employees operating in Panalpina-owned offices with standardized procedures and solid IT. This, however, is to be expected because Panalpina is culturally a “Swiss” company at its core. The structure allows support for creativity and innovation.
Value-added warehousing and distribution activities include all the standard major third-party logistics provider (3PL) capabilities from pick & pack execution to postponement, light assembly to vendor managed inventory (VMI), just-in-time (JIT) and reverse logistics. Milk runs, merge-in-transit and direct-to-store programs are also standard offerings.
Of course, global supply chain management depends on best-in-class IT systems. Panalpina utilizes standardized hardware and software environments, running an IBM server System-p (AIX) and System-x (Wintel) server farms. The System-x (Wintel) applications are published via a CITRIX virtual desktop. A customized version of Manhattan Associates Warehouse Management System (WMS/ILS)/Transportation Management System (TMS) is used with MS Exchange deployed as middleware.
The System-p (AIX) servers are used to host Panalpina’s proprietary Forwarding Systems, SAP (ERP) and several other specialized WMS solutions. Panalpina’s environment is highly virtualized on both the System-p through IBM server virtualization and System-x through VMWare ESX. The company is working closely with telecommunications companies around the world to efficiently maintain their network of offices. The network is globally connected via two global telecommunications partners Verizon and British Telecom (BT).
Not everything is standardized, however. Certain country specific items like customs brokerage filings are handled locally. For the U.S., Panalpina has been driving the development and consulting process for a Customs application with a leading software provider. The servers running the U.S. customs and local systems are based in New Jersey. The Forwarding Systems are hosted in six datacenters around the world with the main one located in Basel and a backup datacenter a few miles away.
Panalpina’s IT platform depends on a centrally-integrated communication repository of data operating in real-time. Interfaces, multiple data entry and redundancy are minimized.
Figure 1. Panalpina’s Integrated IT Platform
The Logistics and SCM applications are grouped together under the PANLOGIC Application Suite. PANLOGIC has three major parts – tracking, supply chain management and warehouse management. The applications cover communications software, supply chain activity, advanced planning/collaboration and local tools. Supply chain activities are order management, fulfillment, inventory and transportation management.
Panalpina mainly employs two track & trace systems. PANTRACE is the publicly accessible system with basic shipment tracking information (accessible at www.panalpina.com). INTRAC is the proprietary sign-in system for vendor booking and supply chain visibility. INTRAC information covers orders (suppliers, pickup, warehouse receiving, compliance/consolidation/booking, tendered/in-transit shipments, destination arrival, customs clearance, domestic transport and delivery) and is applied for efficient purchase order management.
Figure 2. Overview of INTRAC’s Purchase Order Management Tool
In the more advanced collaboration SCM platform called Supply Chain Application (SCA), the user is presented with a set of screens for data management in which data is congruent and telescoping for purchase orders (buyer and supplier), transport orders, shipment legs, license plates (pallet and case levels) and item/stock keeping unit (SKU) numbers. SCA is built on a Manhattan Associates software base incorporating all the INTRAC capabilities but allowing for even greater detail and additional functionalities such as the supplier enablement module and fulfillment. At the screen level the user starts with Dashboard, Purchase Orders, Transport Orders, Shipments, Loads, Inventories, Fulfillment, Notifications and Administration. Reports are customizable and important documents like bills-of-lading and invoices are scanned in at origin and are attached to every purchase order/shipment file.
Figure 3. Supply Chain Application
Warehousing and inventory management are fed by radio frequency (RF) terminals and barcode scanners. CubiScan, a laser based, automated system, is used for weighing and dimensioning freight.
Figure 4. CubiScan for Small Packages and Pallets
Panalpina has a broad portfolio of warehouse management systems and also operates its proprietary transit warehouse management system, iPAWS. The warehouse management systems feed information via a global shipment database into SCA (and back), and as such allow for a seamless logistics execution. The warehouse management systems are sourced from Xelog, Manhattan Associates and Hal Inc. (C2C). The latter is the industry standard in the oil and gas industry and as such an important addition for Panalpina’s extensive oil and gas project logistics operations (oil and gas project logistics accounts for 10-15% of Panalpina’s revenues).
For transportation management, Panalpina has used a series of proprietary and off-the-shelf systems. For transportation procurement, Panalpina’s AirWarder and SeaWarder are being used. On the trucking side, LBase is deployed for dispatch, control of pickups and deliveries.
A major TMS upgrade is in the works in partnership with SAP. The prototype will be tested in the fall of 2009.
Supply Chain Management Customers
Panalpina maintains a North American Luxury Goods Hub in Secaucus, NJ. This customs bonded warehouse is 175,000 square feet with 16 dock doors, a 28′ clear roof, high-value cages, 48 surveillance cameras and motion detectors. The warehouse is high-touch with extensive garment on hanger (GOH) operations.
The customer list is a who’s who of high-value goods and includes: Armani, Gucci, Diane von Furstenberg, Louis Vuitton, Bally, and others. Because of the high-value, time-sensitive nature of the goods, a significant amount of air freight is involved.
A partial list of value-added services includes:
- End-to-end GOH
- Direct Store Delivery
- Item Pricing and Labeling
- Kitting and Light Assembly
- Customs Pre-classification
- Reverse Logistics
- Pick, Pack, Relabeling, etc.
Armani & Diane von Furstenberg GOH
Panalpina prepares floor-ready-merchandise for some customers. Items are priced and labeled, then moved directly to the floor. This process is more efficient and hence more cost effective than preparing merchandise in the stores. Of equal importance is service quality, especially meeting the twice-yearly sale peaks of retail customers.
A good European example of Panalpina’s complete supply chain management is Leder and Schuh (Leather and Shoe), an Austria-based company. Seventy percent of the company’s manufacturing is now done in China and Vietnam. Customers are primarily in the Central European countries where Leder and Schuh is a major player. Panalpina performs purchase order management from 200 suppliers involving 50,000 orders and 800,000 items a year. Services are managed by Panalpina end-to-end all the way through to store delivery.
Other Vertical Examples
Panalpina operates an 800,000 square foot complex in Montgomery, AL for automotive manufacture support. The principal customer is the nearby Hyundai plant. Panalpina provides sequencing, light assembly and JIT support.
Oil and Gas
The oil and gas logistics segment, especially involving air freight of large cargoes, has been consistently expanded and Panalpina is the market leader in this field. Panalpina covers a host of challenging destinations in West Africa and the Middle East to meet its clients’ needs.
High-tech customers utilize a significant amount of air freight and value-added services. Panalpina is a natural choice for customers like IBM, Celestica, Hewlett-Packard, Palm and Philips Consumer Electronics, to name a few.
Panalpina, for instance, engages in high-tech fulfillment operations. In Huntsville, AL, it completes high-volume configure-to-order fulfillment requests. Returns are also handled through these facilities.
Panalpina engages as the 4PL for Telus Communications, a provider of next-generation cell phone base station and peripherals technology. Panalpina manages their purchase orders and engages in marshalling of sales delivery orders. Due to the nature of the business, most deliveries are assembled as single loads to be delivered to special construction sites. Panalpina manages the to-site delivery which regularly incurs special rigging activities.
Healthcare and Chemicals
Panalpina operates a unique own charter operation between hubs in Luxembourg and Huntsville, Alabama. Several 747-400 aircrafts run the lane called the Dixie Jet. Panalpina has cooler facilities at the Huntsville airport and can offer an integrated cool supply chain for pharmaceutical companies. Panalpina has direct tarmac access in Huntsville and as such can turn around the aircrafts extremely fast. In addition, Panalpina can supply Envirotainer equipment for temperature-controlled end-to-end cold chain moves.