ford logistics--Consolidating Logistics Operations Under One Umbrella

Penske immediately developed an aggressive logistics transition program with Ford.  Penske would provide Ford with a single point of contact for all logistics operations.

By working with individual plants and corporate management, Penske established a baseline of current operations and outlined the proposed solutions.  The new logistics program would establish a Penske Logistics Center that included the following core functions:

• Network Design Optimization - implement a more efficient inbound materials strategy through order dispatching centers (ODC)
• Carrier and Premium Freight Management - manage all carriers and logistics companies, while reducing premium freight costs
• Information Technology System Integration - achieve real-time visibility of supply chain shipments, schedules and orders
• Finance Management - improve freight bill payment, claim processing and resolution throughout the supply chain

Upon development of this new plan, the Penske/Ford team began evaluating Ford's existing network design.  Under the plant-centric approach, suppliers would make multiple deliveries of the same parts to different plants.  A supplier would pick up a small load, deliver it to one plant, pick up another small load of the same parts and deliver it to another plant.  Carriers with half-empty trucks would often cross routes with each other en route to the same plant.  Aside from being highly inefficient, this design allowed for excessive inventory and storage costs at the plant level.

To centralize transportation and distribution operations, Penske implemented a new network design consisting of 10 new ODCs.  The ODCs would be a central delivery point for suppliers.  Different supplier shipments going to the same plant would now be cross-docked into trailers at the ODC.  Loads would be consolidated and delivered on a scheduled basis to reduce the amount of milkruns, less than truckload shipments (LTL) and premium freight charges.  To meet Penske's new transportation and distribution standards, more than 1,500 suppliers were trained on new uniform procedures.

For carrier and premium freight management, Penske's goal was simply stated: maximize carrier service, minimize carrier costs.  Penske refined Ford's carrier bidding process by placing more stringent requirements on carrier partners.  Carriers were now required to meet specific safety, equipment and technological specifications; provide experienced and certified drivers; and show proven experience of on-time delivery/pickups.

Penske's new procedures required carriers to meet established route pick up and delivery windows within 15 minutes of the scheduled time.  Additionally, carriers would supervise loading and unloading operations to verify order accuracy, adequate packaging and labeling, and freight damage.

With new stringent carrier requirements in place, Penske closed the accountability loop by implementing a Carrier Rating System.  All incidents would be recorded and reported.  Carriers would issue corrective action reports for actions that negatively impacted Ford's operations.  If a carrier accumulated an excessive amount of incidents on their "scorecard," Penske would issue a low carrier rating, thus jeopardizing the carrier's ability to participate in future bids.

Penske also implemented several information technology solutions throughout the logistics network, including its proprietary Logistics Management System and RouteAssist, an advanced routing tool.  Other programs included a web-based metric reporting system and order tracking software.  Drivers were provided with PDA scanners and an electronic driver log.  Carriers were now required to have satellite communications and engine monitoring systems on all trucks for load tracking.  ODCs were provided with integrated RF cross-dock scanners that tracked the delivery of individual parts.

Prior to implementing a centralized approach, Ford was unable to gain a clear view of the financial status of logistics operations.  With approximately 1,500 suppliers handling more than 20,000 shipments per week, freight billing was complicated.  As part of its carrier management system, Penske would now provide drivers with a single set of paperwork procedures to ensure delivery documentation was collected and submitted to accounting.  Penske developed a new freight billing system that would capture freight costs and allocate those costs by plant.  As a result, Ford could see which plants had the highest and lowest freight costs and which carriers were most cost effective.