October 14, 2008

Recovering from a near-3PL disaster

By DC Velocity Staff

The shipper, a well known consumer and retail company, was a veteran of outsourcing. Its new 3PL, a large multinational company, had vast experience managing its clients' DCs. So when the two went to lay the groundwork for their deal, they were meticulous in their preparations and planning. Yet the first few months after the "go live" were an unmitigated disaster. On Day 1, the DC only managed to get one truck out the door instead of the usual 35; and for the next three months, merchandise clogged the aisles, locating items became a chancy affair, and detention charges mounted. How could things go so terribly wrong?

In a lively and candid session at the CSCMP conference, Antonio L. Galvao Costa of JohnsonDiversey and Gerald W. Perritt of UTi Integrated Logistics told their audience exactly what went down and, more importantly, how they fixed the problems and salvaged the relationship.

Among the problems was JohnsonDiversey's overly ambitious agenda—the company implemented both a new enterprise resource planning (ERP) system and a new transportation management system (TMS) at the same time it switched third-party service providers. The changeover was also plagued by a capacity shortage and an unrealistic timeline. Yet another difficulty was UTi's failure to "kick the tires"—contractual terms had kept UTi from going into its client's facility until the actual switchover, which meant it had no chance to assess the scope of the operation for itself.

But the good news was that both parties were genuinely interested in salvaging the relationship. Over time, they managed to work through the troubles, although there were some personnel casualties along the way. Some of the fixes included reshuffling people to get the right team in place; handing over additional functions—like forklift and transportation management—to UTi (which improved visibility and communications); and opening a new DC to ease the space crunch. Today, the speakers reported, the ship has been righted and the partners are moving forward with a focus on continuing improvements.

What advice would they offer to others embarking on a similar venture? Along with the standard suggestions (maintain open communications, have a backup plan in place, set clear and measurable objectives), they urged their audience to refrain from trying to do too much at once, act swiftly if people fail to meet expectations, and, oh, yes, always kick the tires.