• 3.

Supply Chain Integration of Third-Party Logistics Providers *

Bobcat Logistical Solutions (BLS) is a third-party logistics service provider (3PL) serving the Ohio market (Columbus, Cincinnati, and Cleveland) as a noncontract partner with a broker that serves food and beverage processors and distributors including direct relationships with large food and beverage shippers. BLS owns a fleet of trucks used to serve the "spot" markets. Spot markets are the final destinations for food and beverage deliveries to grocery stores, institutions with large food service operations (public and private school systems, colleges and universities, prisons, etc.), franchised and independent restaurants, and large entertainment venues. Large shippers use 3PLs in spot markets when they need extra capacity or when major weather events keep large truck capacities off the road. Brokers usually act as intermediaries to utilize their carrier networks (including BLS) so shippers can deliver product to market. The largest food and beverage shipper in the United States has been challenged with three severe winters in a row along with natural disasters (hurricanes, tornadoes, floods) unlike any consecutive three-year period before. As the economy has grown, carriers who were not building assets during the recession now suffer from capacity limitations. During these severe conditions of the last three years, the use of 3PLs exploded, doubling the truck movements handled across the United States as compared to nonpeak capacity requirements.

Bobcat Logistical Solutions has experienced steady growth over the last five years, averaging 10 percent revenue growth each year. BLS has also taken advantage of the recent increase in spot markets with significant market share gains within its strategic group of 3PLs. The growth funded strategic initiatives for BLS included adding trucks to the fleet, purchasing warehouse space in key locations, integrating innovative electronic logging devices into all vehicles ahead of government mandates, and establishing a stable driver pool by collaborating with a specialized veterans recruiting and placement firm.

The increased ownership in warehouse space has established an effective distribution center model that has differentiated Bobcat Logistical Solutions from other 3PLs and brokers in their capability to handle freight. Using state and local tax incentives, BLS has been a leader in improving sustainability by reducing fuel consumption, electric bills, and greenhouse gas emissions. BLS has been working with a local university on a software project to develop a proprietary warehouse management system (WMS) to improve operations of the 24/7 distribution center using RFID technology, and to improve carbon footprints to meet sustainability targets. The WMS has added value by providing data directing changes in four areas:

Operating efficiencies with energy reduction gainsInventory movement analysis displays opportunities to reduce energy costs by cycling conveyer belts off during idle times and managing lighting with sensors that switch off lights in empty rack areas.

Partner with energy utilitiesData on energy use provide opportunities to work with local utility companies to purchase off-peak rates and make equipment scheduling adjustments.

Picking route schedulingMaterial movement scheduling can produce routes that are more efficient, save energy, and improve labor efficiencies. Efficient routing can reduce forklift usage in both numbers of forklifts needed and utilization of existing equipment, saving fuel costs, and reducing emissions. Well-organized picking routes in the warehouse eliminate unnecessary travel when using a WMS picking system rather than order-based picking (pick one order at a time).

Reduce packaging costsInformation from the WMS can aid in reducing packaging materials by optimizing the size of the box and amount of packing materials, maximizing cube in trucks, and minimizing damage to goods.

Discussion Questions

1. Identify and briefly explain the key items that Bobcat Logistical Solution's proposal should include to secure the 3PL contract with Midwest Food and Beverage Transportation's supply chain integration efforts.

2. What are the advantages for Bobcat Logistical Solutions to be part of this potential relationship?

3. What are the advantages for Midwest Food and Beverage Transportation to partner with Bobcat Logistical Solutions as an integrated second-tier supply chain member?

4. What are the potential risks?