The changing role of the 3PL in the electronics industry
September 1, 2006 by SwizStick
Filed under 3PL, Contract Logistics, Supply Chain Management
As this article from Intelligent Enterprise Magazine points out, the increasingly complex global supply chain and demand for ever specialized services from the electronics industry has lead to new services and changing roles for 3PLs that service the industry:
The challenges facing logistics companies are immense: an expanding global supply chain that is moving into new geographical territories in Europe and Asia, growing demands from customers for more flexible and customized services, and end-of-life issues for various technology products that must be disposed of in an environmentally friendly way. Service providers must respond with innovative programs that establish deeper relationships with their electronics customers, according to industry sources.
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One logistics provider adjusting to the new realities is United Parcel Service of America Inc. (UPS), which has a reverse-logistics program with Toshiba Corp., tailor-made for servicing laptops under manufacturer warranty. In a bid to reduce costs and improve customer service, the Japanese company turned to UPS six years ago for an integrated logistics model that entailed moving its parts warehouse next door to the technical-repair center at the UPS hub in Louisville, Ky. UPS also provides the technicians who repair the laptops.By relocating its parts warehouse and the repair center — previously some 20 minutes away from each other in Memphis, Tenn. — Toshiba eliminated the travel trips between locations. More important, by leveraging the UPS stores and transportation services across the country, customers can either drop off their computers or have them picked up and delivered to an airport hub that has a 19- to 20-hour operating window.
“Because we are at the end of the runway, we can get it in at 5 o’clock in the morning and we can ship until 1 o’clock in the morning,” said John Pinto, director of operations for service and support at Toshiba digital products division.
Pinto said the model has shortened shipping and repair times that used to take seven or eight business days — four days of repair time and three to four days for shipping. Today customers can request the express model. “We can do it as quickly as three days, because express units are also prioritized at the depot. So one day shipping, one day repair and one day back — that’s three days; that’s the express model,” Pinto said.
Raj Penkar, director of consulting services and an electronics industry expert at UPS, said the company’s inventory-tracking systems, its transportation infrastructure and its airport facilities are a perfect combination of services that assist its repair program.
“The whole reverse-logistics process that we put in place for service parts is very useful for repair and returns operations,” Penkar said.
Certainly, Toshiba’s choice of UPS was easier because the two companies had already worked together on a much smaller scale. But when Toshiba put a request for proposal out to other large providers of logistics services, Pinto said UPS had something the others didn’t.
“Our primary objective was not just selecting a third-party logistics provider; it was selecting a repair partner,” he said. “What we were looking for was an end-of-runway solution, so UPS’ supply chain ended up being our best fit.”
Don Stevens, DHL International’s vice president and sector head for the electronic components division of its global customer solutions business unit, said his company would gladly arrange a swap for items that are malfunctioning or to diagnose a problem. It has no intention of going even deeper into the supply chain to provide manufacturing or repair services.
“We have technicians doing a limited amount of work,” Stevens said. But DHL’s repair program in no way matches that of UPS. “If you are comparing us to UPS, we are not as far down the road as they are.”
Similarly, Federal Express Corp. says it does not have a repair program, preferring to stick to its core competency — the shipping and transporting of goods.
The reverse logistics program that UPS developed with Toshiba, complete with UPS supplied technicians, is quite innovative and shows a level of specialized service that I believe most 3PLs would not be able to match, as both DHL and FedEx have indicated above. Catering to the electronics industry requires constant innovation and changes in strategy. Those 3PLs that want to continue servicing the industry or gain an advantage will need to come up with consistently innovative services that add increasing value to the industry’s supply chains.
However, before running off to devote time and energy to developing such specialized programs at your own 3PL, take note of FedEx, which says it prefers to stick to its core competency. Companies have rarely succeeded when they deviated significantly or abandoned their core competencies when endeavoring on a new strategy. That’s not to say you shouldn’t try new things, just that you need to consider how a new product or strategy fits with your company’s core competency.
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