Chain Reaction

By Jim Thomas -- Logistics Management, 1/1/1999

In supply chains, like physics, every action has an equal and opposite reaction. Success often depends on how well companies manage these reactions.

Three years ago, the "action" of increased sales at NCR's Systemedia Group caused a challenging "reaction": strain on the fulfillment networks as manufacturing and distribution operations competed for space in order to meet increased demand.

"We had two choices," recalls Michael VanDemark, Systemedia's director of supplier management and logistics for global operations. "We could add bricks and mortar, or we could go out and find a partner with the expertise to run a world-class warehouse operation."

As it turned out, Systemedia needed to make a decision fast. The Miamisburg, Ohio-based division of NCR manufactures and distributes paper and imaging supplies for ink-jet, laser, impact, and thermal-transfer printers. It also develops automatic-identification solutions that include bar-code labels, ribbons, software, and printers. In this market segment, competition has heated up and customers--especially mass retailers--are demanding. "When customers want a product, they want it yesterday," reports VanDemark. "We need to keep inventories down and costs low, but we must have product where customers want it when they want it."

Outside Expertise

VanDemark and his colleagues decided to solve the company's capacity crunch by hiring outside warehousing expertise. Using a third-party logistics provider (3PL) would spare Systemedia the direct expense of adding new distribution facilities and allow the company to focus on manufacturing and selling products. Outsourcing, moreover, would provide Systemedia with the flexibility needed to open new distribution sites quickly.

Systemedia based its 3PL selection on four major criteria: excellence in administration, operations, systems capabilities, and competitive pricing. After a brief search, ADP Logistics, a subsidiary of less-than-truckload carrier A. Duie Pyle, earned the business.

By signing on with ADP, Systemedia not only gained access to the West Chester, Pa.-based 3PL's expertise in warehousing, it also was able to take advantage of ADP's information systems to provide customers with full visibility of inventory in Systemedia's network. "The system is fully integrated into NCR's order-management system," says Brendan Cearley, program manager for NCR's online inventory/order-entry program in the United States.

When customers connect online to the Internet-based system, they can place new orders, check order status, or view inventory levels. Customers get a "seamless" picture of their inventory, whether it is located in a Systemedia warehouse or in one of three facilities that ADP operates for the shipper. The system helps to manage customers' inventory as well, says Cearley, because it establishes reorder points for them and monitors their inventory levels. If inventory falls below a certain level, the appropriate sales representative is notified automatically.

That kind of visibility allows Systemedia to make manufacturing and distribution decisions based on a complete picture of inventory at its 10 primary warehouse locations in North America. "The system assures consistent and accurate reporting from all distribution locations, so Systemedia can make better, more timely decisions," says Anna Hummel, ADP's logistics manager. The ADP system also generates customized inventory reports that are sent to Systemedia over the Internet, she adds.

Perhaps the greatest advantage of the ADP system is its adaptability, VanDemark says. Say, for example, a potential customer in Wisconsin demands 24-hour delivery. To meet that demand, a vendor would have to open a warehouse nearby, which means the vendor that can establish a warehouse operation the quickest is likely to get the business. Systemedia would be very competitive in such a situation, says VanDemark, because it could overlay the ADP template on a proposed warehouse and have it up and running well in 30 days. It's that kind of flexibility, he adds, that provides the kind of competitive advantage that makes all the difference in the marketplace today.

Company: NCR's Systemedia Division

Challenge: Meet demands of increased sales without disrupting manufacturing operations

Solution: Hire ADP Logistics, a third party, to provide warehousing and information systems

Payback: Full visibility of customers' inventory levels, increased flexibility