The meeting called by TESSCO Inc.'s logistics leaders was anything but relaxed. Not a single person was happy—not the distribution manager, not purchasing, not product development, not sales. Everyone at the August 2005 meeting could cite problems with the shipments of telecommunications products that the company was importing from China.

The distribution manager complained that the cartons were arriving as a "jumbled mess." Because they weren't marked with purchase-order numbers or stock-keeping units (SKU), it was taking a full day to sort the goods before they could be received properly. Purchasing protested that it was impossible to stick to sourcing plans if some shipments took six weeks to arrive while others took a week. Product management, responsible for the products' profitability, wanted to get them onto shelves ASAP. And the sales team was anxious about delivering orders to customers when promised.

Those problems had been brewing ever since early 2005, when TESSCO began buying products such as cell-phone cases from factories in China and importing them to the United States. The company had long excelled in domestic logistics, but this was its first experience with handling imports directly, and it was proving to be a challenge. By the time the logistics team called the August meeting, it was clear that a new approach to managing the company's import process would be needed.

Telecom equipment company TESSCO distributes products to most of its customers from its Global Logistics Center in Hunt Valley, MD.

Founded in 1952 as the Towson Engineering Sales and Service Company, Hunt Valley, Md.-based TESSCO distributes technology products and solutions for wireless-service operators and direct-to-consumer retailers. Named one of the "200 Best Small Companies in America" by Forbes magazine in 1995, TESSCO isn't so small anymore: It now reports annual sales of about $500 million.

The company has three primary lines of business: test-and-measurement products for wireless carriers and their contractors; infrastructure products, such as components for cell-phone towers; and accessories for consumers' mobile phones and portable devices, including cell-phone cases, power adapters, Bluetooth headsets, and so on.

In the consumer category, TESSCO finds itself innovating regularly to keep up with the rapid development of new mobile-phone handsets. Each phone has its own core group of accessories, yet it may stay in the market for as few as six months. Timely, predictable delivery is imperative: Product that is late to market will likely have to be marked down—if it sells at all.

TESSCO prides itself on its logistics competency in domestic markets. In fact, its logistics skills are central to its mission of providing value to customers. For wireless carriers, TESSCO assembles and delivers kitted parts wherever the customer needs to build a new transmission tower—often in locations without access by a tarmac road. To accomplish that task, the shipper consolidates parts from the wireless carriers' suppliers and performs value-added services such as custom cutting of cable, cable tuning, and more. On the mobile-products side, TESSCO uses supply chain software to tie into its retail customers' point-of-sale systems so it can determine demand and quickly replenish the retailers' inventory.

"We really are a delivery company. We'll get the product where you want it, whenever you want it there," explains Jeff Shockey, vice president, business operations.

Rick Malanga, manager of logistics (left), and Jeff Shockey, vice president, business operations, spearheaded a successful effort to solve logistical problems that were hampering imports from China.

It was the shipments of mobile products that created such a stir last year. With its mobile business growing rapidly and communication becoming increasingly important for facilitating product innovation, TESSCO was eager to buy directly from the factories rather than from third parties.

Early in 2005, company executives set up direct-sourcing arrangements with several manufacturers in China, and shipments began soon after. The terms of sale that TESSCO negotiated required the Chinese factories to arrange and pay for local transportation and consolidation of shipments into full ocean containers, a system that seemed to be the simplest and least expensive.

Working with Intersource Enterprises Co., Ltd., a buyers agent that represents TESSCO's interests in China, the factories made all of the arrangements for the transportation of orders to the container-loading sites.

Difficulties surfaced right away. For one thing, neither TESSCO nor its freight forwarder, BAX Global, knew who was conveying the orders to the consolidation points. "It could have been a local guy with a pickup truck, or it could have been a known carrier," says Shockey.

Further problems emerged. The next information update was three weeks later, when the ship docked in the United States, and customs-clearance delays added to the time that product could not be traced. The costs of those delays quickly began adding up. "We were constantly trying to solve problems in the transportation channel," says Manager of Logistics Rick Malanga. "We were heading into the perfect storm."

By late in the second quarter, it became clear that the globe-spanning supply chain was creating as many problems as it solved. Multiple channels of communication between TESSCO, BAX, Intersource, and the factories, together with unpredictable deliveries to the container freight stations in China, kept the company's logistics team in reactive mode. The most they could do was to pick whichever options offered the best transit times when the shipments were ready.

At first, TESSCO imported shipments from China in ocean containers. It later switched to standard airfreight to gain more visibility and predictability.

His hunch was right: Product was shipping more frequently from the factories, only to wait at the consolidation points for the next LCL container to be filled. The long transit times and limited shipping data available from the ocean carriers, moreover, kept TESSCO's purchasing and product managers guessing. For a company that prided itself on its logistics prowess, this was a hard lesson indeed.

Meanwhile, shipment volumes were steadily increasing, and TESSCO could not afford a long learning curve. It was time to take action. At the August 2005 meeting of department representatives, Shockey and Malanga went around the table "allowing everybody to unburden themselves," as they put it, before asking for "perfect world" scenarios. They then used that feedback to create a preliminary request for proposal from transportation service providers.

By October, bids were coming in from a variety of sources, suggesting solutions that ranged from overnight airfreight services to chartered aircraft to ownership of containers. "We plotted out each one, not worrying so much about cost at that point, but more about flow—how we would minimize our problems with Customs, for example," explains Malanga.

Options such as express airfreight and air charters immediately fell off the list because they were impractically expensive. Reassembling the group, the team leaders led a review of the short-listed bids. The decision was quick: If the shipper wanted more predictability and visibility, standard airfreight was the way to go. It would be more costly than ocean freight but there would be less risk of customs delays and extra handling.

Malanga then coordinated a review of proposals from five airfreight carriers. Some provided good domestic transportation in China while others were strong in other types of services, such as break bulk. After careful consideration, TESSCO went with BAX Global, its existing provider of international and domestic airfreight forwarding services, which came in with the best package of services at an acceptable cost.

The first planeloads of TESSCO's products left the ground in China in the last quarter of 2005. By that time, shipment volumes were five times what they had been just six months earlier.

In just one year, TESSCO's imports from China grew fivefold. Now that is has an efficient import process in place, the company plans to further increase its sourcing from China.

This was hardly the best way to accommodate TESSCO's goal of steady and predictable product flow. But TESSCO had only tasked BAX with freight forwarding and not with managing its entire inbound supply chain, so the forwarder had limited control over the situation.

Shockey's team came up with a solution: The terms of sale were changed to "Ex Works," which gave the importer and freight forwarder full control from the time the orders were made available for shipment at the factories. The group also proposed twice-weekly shipments, on Tuesdays and Fridays.

The factories agreed, and now each Monday and Thursday they notify Intersource that specific orders will be shipped. Intersource then dispatches BAX Global to pick up the orders for shipment to the forwarder's Hong Kong station. Once in Hong Kong, the cartons are documented, palletized, and consolidated for air shipment to the United States. That system gives TESSCO much more information much earlier in the game. "As soon as BAX signs for it, I have visibility of it," says Malanga.

Another major improvement came from routing all shipments through New York. There, BAX clears the goods through U.S. Customs on a predictable schedule and makes twice-weekly deliveries to TESSCO's Hunt Valley facility. That predictability, the TESSCO team believes, has helped to minimize customs delays.

The most dramatic improvement that's resulted from all of these changes has been in transit time. Today, shipments from China consistently arrive at TESSCO's distribution center in one week, instead of taking a month or longer.

But other, less quantifiable benefits are just as important. For instance, TESSCO has been able to exponentially increase shipment volume without experiencing growth pains. The predictability of the twice-weekly flow allows Shockey to better schedule labor at TESSCO's distribution center. And the increased shipment visibility that is available through BAX's website allows for exception-based management. Finally, all of the costs associated with the door-to-door shipments are presented to the importer on a single bill, greatly simplifying and reducing paperwork.

The factories gain, too. They no longer have to concern themselves with delivering TESSCO's orders to the consolidation points. They also benefit from receiving smaller orders with greater frequency, and they can plan on growing their businesses to meet the shipper's rapidly expanding needs. Intersource, which acts as TESSCO's eyes and ears in China, is now helping the company expand its sourcing there.

Indeed, the system has created so many efficiencies for all concerned that in January BAX notified TESSCO that it would reduce the importer's airfreight rates by about 30 percent. The freight forwarder has even presented a similar operating model to a number of its other customers, according to Malanga.

While TESSCO is justifiably proud of taking control of its import traffic and turning a costly, inefficient situation into a great success, one of its most satisfying achievements has little to do with ROI and customer satisfaction. Recently the company was recognized by its home state of Maryland as an important job creator. "We've taken an import model—sourcing from China, no less—and used it to create economic opportunity for the state," says Shockey. That's a big win by anybody's standards.