The biggest office supply retailer in the world Office Depot ships goods anywhere customers wish, but the $11 billion (sales) company relies on other drivers to get the deliveries executed. With the help of third-party logistics partners, the fast-moving 853-store chain has learned how to change its logistics wheels without making a pit stop.
"We use 3PLs for our inbound vendor-to-warehouse shipments," says Dennis Cohen, transportation director at the number six company on the RIS News Top 50 list of retailers.
In addition to vendor-to-warehouse, Office Depot taps its 3PL providers for warehouse-to-store shipments, managing international logistics or import programs, and for specialized fulfillment one-of-a-kind or promotional activities.
Inbound & Out
To better manage the logistics function for inbound freight, Office Depot outsources all inbound management to Transplace (www.transplace.com). "A major reason for choosing Transplace was their load building and optimization software," Cohen observes. "Transplace also provides a platform that collects EDI data from carriers, makes sure the data is complete, and then transmits that data to Office Depot."
For most outbound shipments from Office Depot's warehouse locations to its stores, the retailer utilizes three companies that provide dedicated contract fleets. In addition, Office Depot has a Web-based, real-time service and performance-monitoring package that the company had developed by the e-business software developer Logisoft Corporation (www.logisoft.com) in conjunction with one of Office Depot's 3PLs, Cardinal Logistics Management, Inc. (www.cardlog.com).
Office Depot is experiencing "improved cycle times, a better ability to avoid out-of-stocks, and enhanced customer service," Cohen points out. "We have also been able to better integrate inbound, outbound, and international operations."
For both inbound and outbound shipments, the technology solutions are fully integrated with Office Depot's ERP system. The Internet provides freight visibility with password-protected Web sites that allow suppliers, carriers, and warehouses to call up and view information about inbound shipments.
Benefits of Experience
After nearly five years of experience with 3PLs, Office Depot still finds new value in a program it began in search of flexibility. "I would advise anyone that the caliber of the people the 3PL has on your account should meet or exceed your expectations," says Cohen. "In selecting a 3PL, you need to analyze the software, but be sure to interview the people as well."
For the reward side, the retailer has to understand what keeps the 3PL partner awake at night and then act on it, according to Cohen. "It's important to gain an understanding of what drives success in the 3PL's business, then work together jointly to develop bonus goals," he says. Office Depot's experiences with 3PLs have taught the company how to derive greater success in its 3PL relationships (see sidebar: 3PL Checklist).
The flexibility the company sought from its first encounter with 3PLs came with a boatload of benefits. It allowed Office Depot to change its logistics architecture on a dime, while continuing to deliver a high level of personal service to customers. "Our distribution requirements this year could differ from next year," Cohen says. "With the 3PL strategy, we're better positioned to make changes as needed."
Where the company uses managed freight techniques, it also uses its 3PL architecture to keep costs under control. "We decided to pursue managed freight on a collect basis, for better cost, service, and visibility," Cohen points out. Meanwhile, for its specialized fulfillment needs, the company looks at each project individually to make the correct distribution decision. "Depending on the balance between cost and service, we elect to use UPS (www.ups.com) or FedEx (www.fedex.com) for direct-to-store delivery," says Cohen. "If the volume is substantial, we may go through our warehouse network."
Staying Out Front
Cohen sums up his company's future plans for 3PLs by saying, "We will continue to evaluate our business needs, and to do ongoing benchmarking of 3PLs and their technology as we stay at the forefront of supply-chain management."
He concludes, "In keeping up-to-date as technology evolves, we intend to rely on the marketplace to develop technology and tools. We're not looking to develop homegrown solutions for supply-chain management. We will depend on 3PLs and software vendors for R&D in the future. We also expect to have more global 3PL players in the future, to provide solutions to all aspects of our company's international supply-chain activities."
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