Penske Logistics Europe
December 12, 2007
Joe Gallick, SVP Global Sales
Erik van Egmond, Managing Director Europe
Dirk-Jan Zwagerman, Director of Sales
Edwin Holleboom, Contract Manager
Marco Stroeken, Senior Manager Chemical Unit
Richard Edelman, Manager TMS Operations
Necessity is the mother of invention and when Erik van Egmond took over as Managing Director of Penske Logistics Europe, the need was great. The operation needed to convert from a red ink trucking company to a black ink third-party logistics provider (3PL). To make it tougher, the new Penske Europe operation had to compete with very large competitors in a mature logistics market.
Out of necessity, new, better and more market attractive services had to be designed.
By 2002, Penske was an i2 test site. By using i2, it was developing a solid transportation management (TM) capability. About the same time, GE’s quality management program got introduced at Penske Logistics.¹ Erik van Egmond and his team melded the two together. They now use this state of the art Process Improvement (PI)/TM offering to land new business against major Europe based competitors. The new approach has significant “C” level appeal among customers.
Penske now offers customers an optimized transportation system allowing for better reporting, transparency for all inbound and outbound inventory, consolidation of less-than-truckload (groupage) and better trucking equipment utilization. Penske can model the system before beginning its TM role. As a consequence, major structural changes such as distribution center relocation may result early in the process. Often, however, it takes 6-12 months of managing the operation and developing baselines to hone in non-conformities which disrupt processes. A host of performance measurements are taken on the process. Root cause analysis is done on the non-conformities. Processes are then improved, controlled and re-measured.
Penske quality instruments begin with entry of all shipments, continuous monitoring of all shipment pickups, deliveries and any damage or loss. Failures to perform are dealt with quickly. Carriers utilized under contract to Penske are given monthly scorecards. Failure Mode and Effects Analysis and 5-Why Analysis are used to get at process execution, order entry and customer service failures. For example, a 5-Why late delivery analysis might reveal that a traffic jam occurs regularly at certain times on a route. Changing to an alternative route can solve the problem.
Penske’s attention to detail allows its customers to shorten order cycle times, reduce inventory in the pipeline and plan more precisely.
Standard practices are:
- Weekly non-conformance meetings of operating people
- Monthly operations meetings by account for personnel from customer service, planning and contract managers
- Weekly transportation management system (TMS) management meetings with regional directors, supervisors and contract managers attending
- Daily, weekly, and monthly key performance indicators (KPIs) and team quality reports
- Periodic (Six Sigma) analysis
- Complaint resolution
- Carrier management reporting
- 5-Why analysis
- Supplier performance reporting
- Inbound order defect review
- Failure mode and effects analysis
- Voice of the customer reporting through C.A.R.E. (Customer Account Retention Efforts) and CTQ (Critical to Quality)
Using its PI/TM approach, Penske has won some key accounts for whom it is now the Lead Logistic Provider (LLP). Bombardier, Eaton, DSM, Ford Europe and Merck Sharp & Dohme are examples.
Bombardier Transportation (BT) builds locomotives, bogies, light rail vehicles, and propulsion and control systems. It has 32 production sites in 12 European countries. 1,000-1,500 different suppliers make 100,000 shipments a year.
BT selected Penske as its LLP to manage its supply chain. Penske now manages all inbound and outbound. It also runs materials sequencing centers for production.
As a result of Penske’s activities, BT gets optimized material flows, information control and new value-added services. Penske’s service went live October 2007.
A key change has been to take control of transportation Ex Works allowing for better rate negotiation and optimization. Outbound transportation includes freight forwarder management for global distribution. Value-added services performed are sequencing parts for production, kitting, subassembly and continuous improvement.
Penske prevailed over other notable global supply chain managers (GSCMs) to win BT’s business. Subsequently, they have collaborated with Schenker to provide transportation services – a strength for Schenker in Europe. Similarly, Penske works with UTi as a primary freight forwarder. Over 25 BT personnel from different divisions reached agreement on Penske as the LLP. Previously, each division had operated independently.
Penske has implemented most of its TM control and system. Value-added services are being initiated mid-2008. When fully implemented, total transportation managed should exceed $80 million.
The BT account contact is Dirk-Jan Zwagerman, director of sales. Dirk joined Penske a year ago. Other new, key sales personnel are Marco Stroeken, senior manager chemical unit and Edwin Holleboom, contract manager. Holleboom’s principal account is Eaton. Zwagerman, Stroeken and Holleboom have been instrumental to Penske’s development into a competitive European player.
Eaton has four divisions – electric products, fluid power systems, truck drive train and automotive. Penske has served all four divisions in Europe since 2006. Penske has also served Eaton’s truck and auto divisions in the U.S. since 2005.
Eaton was looking for a standardized logistics process with increased visibility to lower inventory and logistics costs. About 100,000 transactions a year are involved including inbound and outbound TM. The service includes performance reporting including freight bill payment.
Penske’s solution provides for a standardized process with continuous improvement. An interesting modification to normal 3PL procedures was for Penske to forego gathering data on previous operations. Instead, i2 was implemented within weeks allowing for complete data capture to be used in baseline establishment. Penske took control of carrier management and converted inbound shipments to Ex Works where necessary.
Quickly process improvements and network redesign were instituted. As a result, over the first year more than one million euros have been saved.
Standardized reports are generated by carrier, customer locations (24) and for the system. Penske handles all freight bill payment and auditing.
Penske uses a set of quality control steps for process improvements. Opportunities are logged and qualified. (There are currently 75 items on the qualification list.) Those opportunities with the greatest potential savings are assigned for team action. Savings are tracked.
As part of this value creation process, an assessment is made. The customers’ strategic direction and critical supply chain needs are jointly affirmed. Metrics are cascaded to all involved personnel. The cross-functional account team moves forward with continuous improvements. About two million euros of additional process improvements have been identified.
Originally, DSM mined coal as the Dutch State Mines. Today its main business lines are nutrition, pharmaceuticals and plastic materials.
Penske has served DSM since 2004. This account was developed before Penske had its new Customer Experience Account Management effort honed. As a result, there are individual contracts with each division.
As a LLP, Penske handles 60,000 shipments yearly. For two divisions, it provides 10 trucks in dedicated contract carriage (DCC). This operation is designed to provide maximum efficiency on shorthaul, high-density routes. Penske also manages air and ocean shipments with UTi as the preferred carrier. Warehousing operations are provided for food and composite resins.
Penske reports and manages supply chain processes for each division. It continues to gain new business as part of this process. Shipment consolidation, changing modes, and elimination of unnecessary premiums carriage have been the main cost savers.
ABX – Strategic Alliance
As part of our visit with Penske, we got to spend some time with Andreas Marienberg, Deputy Managing Director Air & Sea for ABX, a Brussels based global supply chain manager. As a result of their strategic alliance, ABX and Penske have established a joint venture in Brazil. Penske has extensive Brazilian value-added warehousing and dedicated contract carriage capabilities. ABX adds air and sea forwarding capabilities. The relationship is very complimentary and allows both companies better global service. Penske is larger and has the greater IT capability but ABX’s PROCARS freight forwarding software adds a critical component.
ABX’s new leadership joined over the last 2-3 years. Its new private equity owner, 3i, has given top management a mandate to remake the company. ABX is looking to expand into larger accounts. Currently it handles about 550,000 TEUs a year and has turnover of $3 billion. Geographically it adds Asia coverage for Penske, with 16 China offices and a significant Japanese operation.
Assessing Penske’s Strengths
Erik van Egmond and his team’s tenacious improvements have created in Penske a legitimate European supply chain manger. It’s a tough market but revenue will exceed $100 million this year and Penske has evolved into a player. And there is no questioning Penske’s automotive logistics and LLP capabilities on a continental basis. Penske does contract logistics better than many of its larger competitors. Short term, the ABX freight forwarding strategic alliance and TM of companies like UTi will suffice.
However, we believe an acquisition of a global freight forwarder would round out Penske’s offerings over the next 2-3 years. At times, it is advantageous to have GE as an owner.
¹GE now owns 70% of Penske Logistics.
Sources: A&A Primary Research, http://www.penskelogistics.com/