Ask most supply chain managers to list their job responsibilities and they'll tick off logistics, warehousing, purchasing, and maybe inventory management. But Dr. Peter Connelly, director of supply chain for Trinity Industries' Rail Group division, could legitimately add international diplomacy to his list.

In 1999, when Dallas, Texas-based Trinity bought two Romanian manufacturers of railcars and components, Connelly was asked to assess the plants' capabilities and processes, then develop a plan to introduce U.S.-style logistics management practices, boost efficiency, and improve cost control. That's a big job by any standard, but in Romania, it meant nothing less than asking employees to throw out their existing business culture and adopt a new way of thinking. It's still a work in progress, says Connelly, but his company's experience to date clearly demonstrates how the supply chain in a developing country can be deeply affected by cultural issues.

Until a few years ago, Trinity's rail division had focused largely on business in North America. But in the late 1990s, the railcar and component manufacturer decided to take on the global market, beginning with Europe.

Why Europe? Not only was Western Europe the world's second-largest industrial economy, but it was also more economically stable than other regions. The European Union's focus on harmonizing product standards, moreover, was opening up new markets for railcar manufacturers as well as for Trinity's U.S. customers. Finally, a number of Eastern European governments were privatizing strategic industries like transportation and were putting formerly state-owned enterprises up for sale. Those companies, with their technical expertise and low labor rates, could provide a valuable entry point into European markets.

Two years ago, therefore, Trinity bought Astra Vagoane in the city of Arad, and Meva, located in Turnu Severin. Under state ownership, the railcar makers had employed more than 9,000 people. (Headcount has now been reduced to less than 3,000.) Almost the entire output of the sprawling plant complexes—just one or two cars per day—was sold to customers in Eastern Europe, a relic of the days when the Romanian government traded railcars to the Soviet Union for energy and raw materials.

When Connelly arrived, he found several culturally based conditions that would challenge Trinity's plan to bring logistics operations up to U.S. standards. To begin with, there was no centralized management of transportation and distribution, nor was there an objective process for choosing vendors of those services. Typically, he says, vendors were relatives or friends of employees who benefited financially from these arrangements. Almost everything involved one or more layers of middlemen, and some independent businesses were actually being run inside the company.

Transportation infrastructure within Romania was unreliable and underdeveloped, a problem that persists today. Because the national railroad's top priority is passenger traffic and its schedules are inconsistent, it is, ironically, impractical for Trinity to move inbound freight by rail. (Truck transportation can be up to twice as fast as rail, even though four-lane highways are virtually non-existent, Connelly says.) Crossing borders is problematic as well now that the Romanian plants are sourcing many components from Western Europe, including Spain, Germany and France. "It's hard to think about doing JIT [just-in-time delivery] when ... customs clearance is unpredictable," Connelly notes. "It could be three hours or it could be three days."

There was a knowledge gap too. "We have wonderful mechanical engineers, electrical engineers and other technical people, but they had zero experience in logistics," Connelly observes. The very concept of individual responsibility, moreover, was alien to the employees. "We have to train people to become purchasing and quality control managers. We have to teach them to become supervisors and make decisions," he says. "Traditionally, individual decision-making was not rewarded in Eastern Europe."

Connelly developed a strategy that revolved around four objectives: eliminate unwarranted middlemen from logistics purchasing channels, reduce the cost of goods to U.S. benchmark levels, purchase components directly from the manufacturers, and eliminate non–value-added logistics activities.

To implement this strategy, Connelly decided he would need a third party that could not only protect Trinity's interests but could also bridge the cultural gap between the U.S. managers and Romanian employees. He hired Fritz Cos., the San Francisco-based international freight forwarder that is now owned by United Parcel Service. Fritz already had an office in Timisoara, not far from Arad, and an extensive Eastern European organization based in Vienna, Austria.

Connelly, Eddie Morawetz, Fritz's director of Eastern European operations; and account executive Dick Sambrook worked with the Timisoara staff to develop a plan that would meet Trinity's immediate needs while working toward the long-term goal of creating an effective in-house logistics operation. As part of this effort, Fritz's Timisoara team spent time at the factories' import/export departments, talking with employees to assess current practices and capabilities—a task made more difficult by employees' failure to provide accurate information in hopes of preserving their jobs.

Ultimately, Fritz recommended that initial efforts focus on improving cost control, transportation purchasing, pricing and terms of sale, and shipment routing and monitoring, according to Sambrook. The plan would apply to interplant deliveries, ocean and air exports and imports, and cross-border trucking.

Based on those recommendations, Connelly made some important changes. He issued a policy that forbade employees from hiring family members or friends as outside vendors, and appointed Fritz to hire transportation vendors and provide freight forwarding and customs clearance services. "There was a lot of resistance," Connelly recalls. "It was hard for some people to accept that everybody had a piece of it before and suddenly they couldn't have a piece of it. They would say, 'Nobody else knows who those truckers are or how to get through those roads.' We said, 'Let us try.'"

Fritz installed an on-site coordinator at the Arad plant who acts as a customer service liaison between plant personnel and Fritz's staff in Timisoara and Vienna. That move has paid big dividends, Connelly says, because it centralized several formerly disjointed functions. "Now everyone has to go through Fritz, and that brought fiduciary accountability. It also brought best practices tied to U.S. and Western European business in-house."

The freight forwarder now arranges truckload shipments on its own vehicles or via contract carriers based in Western Europe. Fritz also has taken on responsibility for tracking purchase orders and coordinating them with production schedules. Before, Sambrook recalls, the plant in Arad would bring in large quantities of parts whether they were needed or not, a costly practice that tied up money in inventory. Although inventory plans still must take into account potential delays and disruptions—it can take two weeks for parts to arrive from France, for example—shipper and forwarder have been able to "tighten up the supply chain to a manageable level," Sambrook says.

Connelly believes that these operational changes, together with intensive personnel development, assure a profitable future for the plants and for Romania's economy. With Fritz's assistance, Trinity is offering training in logistics and general business management to its Romanian staff. The partners also have brought in computers and are teaching employees how to use them to analyze costs, measure performance, and make decisions.

Some of the changes Trinity and Fritz have made have been difficult, even painful, for employees, but Connelly firmly believes that they are playing an important role in the company's growth. In just two years, production has jumped from one or two to seven or eight built-to-order cars a day. There are several prototypes for new railcar designs requested by customers in production right now, and Trinity's recent merger with Thrall Car added plants in the Czech Republic and England as well as new products and customers. The supply chain executive expects that within the next two years, Trinity will become the largest railcar producer in Europe. In the meantime, the plants have even begun exporting parts to the United States. "That," notes Connelly, "says the quality is there."