Two computer manufacturers needed different fixes. Here’s what they did

Two companies in the electronics industry had similar supply chain issues. Their needs were different. The fixes were too. Fritz companies teamed co-authors Brian Genjian and Steve Knepp to work with both companies, as we both understood the electronic vertical markets. We implemented both processes simultaneously. Needless to say we had a hefty travel budget to “get her done.”

While the definition of supply chain needs continues to evolve, the changes and implications can sometimes be a single step. This article will define changes between competitors that dramatically altered their processes without requiring any additional capital investments from either. Yet, the changes increased their cash flows and delivered an increase to the overall bottom line.

Each company was located in a different geographic area of the country.  The closest company was closer to the West Coast, while the other was almost considered remote in terms of domestic and rail fast service.

The two different approaches can be divided into administrative/financial, while the other is focused on the final mile of international logistics. At that time, both were using online sales exclusively, with FedEx and UPS serving as the primary home delivery providers. There were no brick-and-mortar stores. Both were built to specification, resulting in issues with their weekly demand forecasts. The problem affected their ability to maintain safety stock as orders either increased or declined every week.

Administrative/financial solution

The first company had six different international purchasing offices, each acting on a commission per order with standby letters of credit for payment. Furthermore, they would receive components from the purchase orders and assemble them in-house at their plants. Due to their inability to predict demand, they became somewhat cash-constrained, which affected their new product R&D efforts. Since they were located much closer to the West Coast, they could receive both ocean and air cargo with an average transit time of two days. Yet that did not include the customs clearance process.

The solution was to create a specific Vendor Hub environment. Goods would be moved directly, unclaimed, to a bonded warehouse on their campus. The goods are positioned for assembly in the warehouse without being cleared for shipment. The customs and payment to the vendors would occur as the components were on the assembly line, freeing up a lot of cash flow as the orders were already paid for. The only way this could work was by changing the original terms of sale from FOB origin to FOB destination warehouse. By keeping the terms of sale, the client's transportation provider for both air and sea would be their choice, not the supplier, if the INCO terms were changed to a landed cost perspective. The relationship between the customer and Fritz companies continued until UPS purchased us.

To enhance the process, we would install three of our people (in-house customs brokers and a transportation specialist trained to handle both air and sea transportation. Within a month of integration, the program was a massive success for all who were included in the concept.

Structural & logistics

The second company was a partnership between UPS Services and Fritz Companies, aimed at facilitating a strategic merger and consolidation of multiple vendors and factories into an inland hub in the USA.

The focus was on controlling finance, sourcing, supply chain controls, planning controls, and logistics, plus clearance on the WC for continuous communication from origin to destination hub to the clients. UPS would further assemble and distribute the finished product to the customer.

Logistically, controls need to be put in place with the client’s POs and planners to provide clear visibility to the Fritz Team, enabling effective communication so that the origin team and destinations team could manage the flow of product from multiple origins to a centralized hub.

By providing the service, we had to develop and manage the best ocean carriers, with the fastest ocean transit time and the quickest terminal services for transfer to fast rail connections to the USA hinterlands. 

All of this process had to be managed daily with the Fritz team in Atlanta, Georgia, communicating with UPS and the clients to determine the location of each container through international and domestic services.

The challenge was that all cargo was booked to the destination hub via rail service. However, when the client’s planning team confirmed specific products quickly due to sales growth, we had to divert the shipments from rail to team domestic drive WC terminals to the destination. That reduced the transit time by three days to the destination hub. We could run over 40 team drives per sailing, which can occur multiple times a week.

All cargo entering the WC had to be pre-cleared with customs to ensure excellent connections, either by rail or team drive.

Financially, the program saved millions of dollars through supply chain cost because the end client wanted to run the program via air freight.  

Fritz and UPS Service presented to the client an excellent overview of both the service and the financial benefits of utilizing the ocean program. This was all during the RD process.

The program was very successful. Even if the product were truly time-critical, we would airfreight it if needed. The ocean volume for Gateway 2000 was 5,000 40-foot containers annually, with a 94% on-time delivery from origin ports.

The two companies were Apple and Gateway 2000. The combined Fritz team, both offshore and domestically, was able to execute both simultaneously, working with many of the same vendors.

About the authors:

Brian Genijian has been in the supply chain/ logistics business since 1975. He currently owns BCG Supply Chain Consulting. His experience spans the supply chain and includes leadership positions with Cast North America Steamship Lines, Steamship Lines, Food Importers, and UPS Supply Chain.

Steve Knepp is a 40-year veteran in the global supply chain and logistics industry. His experiences span all sectors of the industry and modes of operation. He is as well experienced in the government sector designing and applying cargo movements in war zones. He is retired and residing in Knoxville, TN, and be reached at [email protected].

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