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  June 26th, 2014 | Written by

Colossal Logistics Collaborations

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Lino Santinelli, senior supply-chain consultant at DuPont, admits that his company was in a bit of a bind. The Wilmington, Delaware-based chemical giant needed to move critical shipments from the U.S. East Coast to the Asia-Pacific, but inclement weather thwarted DuPont’s plans. The solution, Santinelli reasoned, involved employing a third-party logistics (3PL) provider.DuPont tasked Miller Transporters Inc. of Jackson, Miss., with shipping the chemical products from a warehouse in Ohio to a facility in Los Angeles, transloading the truck into an ocean container and floating the goods across the Pacific Ocean. What could have been a crisis was quickly averted, Santinelli says.

That wasn’t the only time DuPont sought help from a 3PL, he says. After the Fortune 500 chemical company lost its warehousing lease in Atlanta, DuPont quickly relocated to one of Jacobson Companies’ facilities—a move Santinelli says tremendously boosted DuPont’s operations. The Des Moines, Iowa-based 3PL also took over DuPont’s largest warehousing activities in Virginia, where the company is currently manufacturing textiles. Although Santinelli acknowledges that some exporters prefer to handle their logistics in-house, he fully endorses the utilization of a 3PL.

“By using a 3PL, we’re not responsible for having to maintain the assets, whether it’s a warehouse, a truck or an ocean vessel,” Santinelli says. “All of that responsibility is put on the third-party logistics provider.” The 3PL must also staff and maintain the operations, as well as ensure that the shipper’s products are packaged, shipped and handled correctly. To Santinelli, allowing logistics providers to shoulder these shipping responsibilities enables manufacturers to focus on their core purpose: making quality products.

Pilot Freight Services’ Vice President of Logistics Services Steve Bullard agrees wholeheartedly. He says his company regularly works with big-name U.S. exporters and has often jumped in to save the day for shippers. One example that particularly sticks out in his mind is when Pilot set up a Miami distribution hub for a U.S.-based Fortune 100 company. (Confidentiality laws prevent Bullard from disclosing the company’s name.)  The company’s South American logistics team came to Pilot to run warehouses in-country, since they were no longer supported by their U.S. multinational parent.

Establishing a hub in several developing countries—core markets for the global manufacturing and service organization—was one option, albeit a rather costly one. Bullard explains that national authorities add surcharges on companies that are not established legal entities in those companies. Those value-add taxes can be as much as 40 percent of the services being contracted. Maximizing their client’s resources led Pilot officials to create the Miami shipping point and then move equipment in and out of Latin/South America on demand. “I know it’s almost counterintuitive that shipping from Miami to South America is cheaper than operating within those countries, but that’s not always true due to the VAT taxes that can be applied to the services in those countries,” Bullard says.

Under the new deal, Pilot stores tools and key parts in Miami and then services and calibrates them.

“We manage the entire process for them,” Bullard says. If the company experiences a critical need, Pilot will immediately ship the replacement equipment to the job site. “We coordinate the delivery to the site that quickly gets used,” Bullard says, “and then we literally bring it back to the U.S. to reconfigure, restock and recalibrate it and then get it ready for export back out to South America.” It’s a process that has worked seamlessly for Pilot and its valued client, he maintains.

Bullard says Pilot has also streamlined the export process for MarquipWardUnited, a Phillips, Wis.-based designer and manufacturer of machinery for the corrugated box and paper converting industries. Prior to MarquipWardUnited’s involvement with Pilot, the company was suffering from lengthy delays and downtimes in Mexico—one of its key export markets. The problem centered on Customs clearance, Bullard explains. Mexican Customs authorities only operate on weekdays during standard business hours, and MarquipWardUnited’s customers often demanded parts during off-hours. Bullard says Pilot overcame this obstacle by establishing a pre-clearance process for the U.S. manufacturer.

“We warehouse an assortment of products in Mexico City, which means their Mexican customers now all have 24/7 access to those parts,” he says. In fact, Bullard adds, Pilot can perform same-day or next-day shipping for MarquipWardUnited intra- or extra-Mexico, which has significantly bolstered trade links.

To Bullard, Pilot’s work to simplify the Customs clearance process for MarquipWardUnited, as well as its efforts to set up the distribution hub for the company, illustrate the 3PL’s ability to respond to differing client needs. He argues that it’s an advantage Pilot has over some of its larger competitors, because it can be very nimble due to its smaller size and compact company structure. “We can react very quickly to changes,” Bullard asserts.

Jerry Verghese, UPS’s director of International Marketing, argues that size can also be an advantage for a 3PL, citing UPS Supply Chain Solutions’ “unmatched” global network and full-service logistics portfolio. For starters, he says, UPS personnel have expertise handling electrical and industrial machinery, as well as high-tech goods, apparel, textiles and medical and optical equipment; plus, the company boasts a partnership with U.S. Commercial Service, the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration.

The latter benefit is particularly advantageous to U.S. shippers, Verghese says, since the agency develops national export strategies. He says UPS’s affiliation with the organization highlights the company’s commitment to strong customer growth. “Our goal for [U.S.] customers doing business internationally is to help simplify the process so they can actually do more international business,” Verghese says. Not that he advocates a one-size-fits-all approach to global logistics.

Verghese explains that UPS tailors its 3PL services to their customers’ specific needs. U.S. retailers, for instance, benefit from UPS’s proficiency in managing the intricacies of international logistics—such as tariffs and compliance issues—and returns services. “E-commerce may not have borders,” Verghese says, “but the real world certainly does,” which means exporters must be well versed in international regulations. He reveals that UPS Supply Chain Solutions also caters to industrial manufacturing and high-tech companies, introducing them to multimodal transportation channels and getting their products to market faster.

One way UPS is achieving the latter is through UPS Standard to Mexico, a door-to-door, small-package ground service from theU.S. to Mexico. With commerce between the nations surging 113 percent since 2003, Verghese says the UPS offering enables U.S. exporters to maximize trade opportunities with their southern neighbor. The service, launched in June 2013, has already seen strong volumes of U.S.-manufactured computer and electronic parts on Mexico-bound routes. To UPS officials, the big draw is that it enables more U.S. exporters to take advantage of Mexican demand for U.S. goods—not just companies located in the Southwestern border states.

Verghese’s colleague John Miltenis says the idea for UPS Standard to Mexico came after a company survey revealed that U.S. high-tech shippers need help navigating the complexities of emerging markets. “[We] recognize that in order for our customers to meet Mexican demand for U.S. goods, they require a partner that can provide international expertise, reliability and end-to-end visibility,” Miltenis says. “UPS Standard to Mexico does just that—while increasing supply-chain and cost efficiencies.”

Pilot Freight Services is similarly looking to gain share of the profitable U.S.-to-Mexico market. Steve Bullard reveals that the 3PL has developed stations where Pilot can scan freight and then build its own consolidations to put on commercial aircraft. Customer demand drove the development of such stations, Bullard says, since they lower the cost of hauling goods to Mexico. “The fact that we can scan allows us to tender directly to the [plane], which is really generating exports and allowing us to [offer] more competitive rates to our customers,” he says. “It’s significant.”

Also significant, Bullard says, is the way 3PLs like Pilot are improving outcomes for exporters across the globe. U.S. shippers, however, comprise the bulk of Pilot’s customer base. Bullard says ensuring that these clients remain satisfied requires Pilot to develop workable solutions for each company and overcome key logistical challenges. It’s where Pilot’s size comes into play again, he says. “Our mantra has always been that we’re kind of the ‘three bears’ of the industry, meaning that we are large enough that we have the global bandwidth to really support the Fortune 500 companies and up.”

Fortune 500 companies are undoubtedly taking note. Increasingly, more of these export giants are relying on 3PLs, and experts believe that the number of U.S. companies that outsource their logistics operations will only surge in the future. In the case of DuPont, forging a completely in-house operation led to better outcomes, shorter downtimes and fewer headaches. Lino Santinelli encourages other companies to follow DuPont’s lead.