It's a brand so associated with filmmaking that it's hard to think of it being in any other line of work. Yet over the years, Technicolor SA has built a successful third-party logistics (3PL) business, first in the video and entertainment field, and then in other industries. The company, based in the Paris suburb of Issy-les-Moulineaux but with a strong U.S. presence, has long supported its traditional core customers with logistics and distribution services. However, several years ago, it decided to leverage those capabilities in a bid to branch out beyond video and entertainment.
In an interview with Mark B. Solomon, DC Velocity's executive editor-news, Elaine Singleton, Technicolor's vice president of supply chain, describes how the 3PL services came to be, what drove the company to explore opportunities outside its core business, and how the changes in the way content is distributed influenced its strategy.
Q: Can you describe the history of your 3PL strategy?
A: The impetus came about a decade ago as Technicolor began to review opportunities to expand our service offerings in the logistics space. We started offering full-blown logistics services to our core studio customers by, among other things, providing final-mile deliveries. This included parcel, truckload, and less-than-truckload (LTL) shipments to retail distribution centers (DCs) as well as direct-to-store shipments.
Technicolor was able to leverage its expertise in time-sensitive upstream capabilities in manufacturing and distribution so that studios could rapidly fulfill orders to retail. We've demonstrated our ability to help studios reduce infrastructure cost and cost of goods.
Q: Did Technicolor's background as a distributor provide a tailwind?
A: Definitely. We have a track record as a supply chain conduit that ensures new releases or titles can be delivered to the right place at the right time to more than 9,000 retail locations simultaneously for a product launch. Precision in our business is critical. Getting product to a destination too soon creates logistical problems for store-level execution, and getting it there late is obviously a non-starter.
Our experience has allowed us to build solid relationships. This is important because there are many intricacies in understanding which stores require which capabilities, which distribution centers have windows for receiving, and how the product will arrive. Should it get there on a pallet or should it arrive in cartons in a floor-load environment to then be conveyed through the DC?
These intricacies and complexities need to be taken into consideration when providing logistics services to retail. Both studio shippers and retailers are customers. For Technicolor, it is important to have a clear understanding of vendor routing guides for inbound freight delivery. This insight laid the foundation for our 3PL strategy.
Q: Most companies that are not already logistics specialists don't establish 3PL operations. Were there factors, such as the shift to streaming and satellite transmissions from hard discs that might have impacted your core business, that influenced your decision to go all in on 3PL services?
A: With the home entertainment industry's shift to digital distribution via on-demand and streaming, our migration to new customers became an equally important initiative. Over the last five years, we've explored different ways to build our 3PL services for other verticals and markets. We've grown the non-studio business 20 to 30 percent year over year over the past five years. Most of the growth is coming from verticals such as electronics, consumer products, and manufacturing of industrial supplies such as raw materials and dry goods, as well as from direct-to-consumer services. We now provide full-service supply chain coordination for high-profile time-sensitive new product launches in retail that require very precise distribution and store deliveries. We are no longer just about transporting media content.
Additionally, we are entering into market verticals such as heating/air conditioning, postal distribution, and automotive with diverse customer segmentation. As our customer base expands, so has our people, process, and technology infrastructure.
Q: Your deep knowledge of the film and entertainment industry helped you design effective logistics solutions for companies in your field. Yet you decided to go beyond your core vertical. What prompted you to expand, and what challenges did you face in doing so?
A: One of the biggest hurdles we faced revolved around preconceived notions attached to the Technicolor brand. When you say "Technicolor," people have not traditionally thought of logistics.
We are well known for creating and delivering content by offering post production, visual effects, sound effects, etc., for movies, episodic TV, and games. The Technicolor brand resonated with our studio/games customers, resulting in an end-to-end supply chain solution, including final-mile delivery.
This effort early on has enabled progress as we migrated into servicing new customers within new verticals. We began by investing time and effort devising a strategy to begin calling on potential customers in adjacent markets (print, corrugate, cases, etc.).
At the end of the day, a widget is a widget, and a truck is a truck. It's ultimately about having the economies of scale, experience, technology, and customer mindset to perform well while serving up competitive rates.
Q: How do you see your 3PL business evolving as your core field becomes less reliant on "hard" commodities that must be distributed and shipped, and more on streaming and satellite, which have a totally different model?
A: The demand for packaged media is still stable and not diminishing as rapidly as many predicted 10 years ago. There's definitely been a downturn in demand, but Technicolor Home Entertainment is still producing over a billion optical discs a year. We continue to perform due diligence month after month to make sure we understand the key trends, so we are prepared for any cliff that we may come upon.
Q: Can other shippers and distributors pull this off? What needs to happen, culturally, strategically, and operationally, for other companies to do what Technicolor has done?
A: There are some universal success factors. The long-term customer/supplier contractual environment is about seamless relationships that are highlighted with candor, smart ideas, and, above all, mutual commitment.
We must be totally focused on the customer's need to make sure that the logistics solution is completely in tune with the receiving end, whether it's Wal-Mart, Target, Costco, Best Buy, or the local variety store.
The situation is a bit different in shorter-term wins that come about on the open market. First impressions are lasting and will build into long-term relationships when we are fully transparent about obstacles, solutions, and failures, and when we enact practices to mute negative events. We see these as opportunities to build long-term relationships.