Lexmark International Inc. created a worldwide logistics council to help it get a handle on its ocean shipping costs. But the council, a collaborative effort involving logistics, purchasing, and operations managers, brought about improvements in a number of other aspects of the company's distribution operation, earning Lexmark third place in our awards contest.

Lexington, Ky.-based Lexmark, which makes and sells printing solutions for the home and office markets, is well known for its laser and inkjet printers. The company reported $5.3 billion in global revenues last year.

Lexmark manufactures its products in the Philippines, Mexico, Scotland, the Czech Republic, and Slovakia as well as in the United States. Most of the products that are manufactured overseas are shipped by ocean; they then move from the port of entry via rail and truck to Lexmark's customers.

Until a few years ago, each region of the world managed its own transportation expenditures. As a result, the company did not have visibility into the details of its transportation spending and was unable to adequately control and reduce those costs.

Lexmark's vice president of operations at the time, Donna Covington, was determined to gain better control over non-manufacturing costs, including those for logistics. "We wanted to consolidate [transportation] providers and better leverage our spending to optimize results globally instead of regionally," she explains.

To achieve that objective, Covington and Director of North American Operations Thomas Morrison in 2002 led an initiative to set up Lexmark's Worldwide Logistics Council. The group includes senior executives involved in operations, logistics, and purchasing in the United States, Latin America, Europe, and Asia.

Council members confer monthly to track and analyze freight expenditures. "The council was a way of bringing together everyone who works in logistics to work on logistics spending in conjunction with our purchasing organization," Covington says.

The council's initial objectives were to reduce Lexmark's carrier base worldwide by 75 percent and its expenditures on ocean transportation by 10 percent. The group met those goals in its first year of operation, when Lexmark achieved ocean freight savings totaling $6 million. Thanks to the council's work, in fact, Lexmark has been able to reduce its ocean transportation spending by 10 percent annually for the past three years, despite rising steamship rates.

Although ocean-freight cost reduction was the initial impetus behind the formation of the logistics council, the executive committee has since brought other benefits to Lexmark's global supply chain. At the council's initiative, for example, Lexmark turned its worldwide management of ocean carriers to two third-party logistics companies: Exel in the United States and Kuehne & Nagel for the rest of the world. "These partners help you understand where to take goods through which port for faster transit times," says Covington, who has since become Lexmark's vice president of customer service.

The Worldwide Logistics Council's decisions also have driven improvements in transit times for international shipments, and the group has undertaken analyses of other areas of logistics expenditures, such as warehousing, outbound transportation, and other modes of transportation. Additional improvements include better contractual terms, more effective information technology tools, and a restructuring of the company's purchasing organization.

"We have found the council a great place to generate ideas," Covington says. "I see this council as a permanent part of the Lexmark landscape."