KEEP IT RUNNING the Quintessential Spare Parts Logistics Report

KEEP IT RUNNING The Quintessential Spare Parts Logistics Report

January 2017

Phone: +1-800-525-3915 Website: www.3plogistics.com Email: [email protected] ABOUT ARMSTRONG & ASSOCIATES, INC. Armstrong & Associates, Inc. (A&A) was established in 1980 to meet the needs of a newly deregulated domestic transportation market. Since then, through its leading Third-Party Logistics (3PL) market research and history of helping companies outsource logistics functions, A&A has become an internationally recognized key resource for 3PL market information and consulting.

A&A’s mission is to have leading proprietary supply chain knowledge and market research not available anywhere else. As proof of our continued work in supporting our mission, A&A’s 3PL market research is frequently cited in media articles, publications, and securities filings by publicly traded 3PLs. In addition, A&A’s email newsletter currently has over 30,000 subscribers globally.

A&A’s market research complements its consulting activities by providing continually updated data for analysis. Based upon its unsurpassed knowledge of the 3PL market and the operations of leading 3PLs, A&A has provided strategic planning consulting services to over 30 3PLs, supported 16 closed investment transactions, and provided advice to numerous companies looking to benchmark existing 3PL operations or outsource logistics functions.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopied, recorded or otherwise, without the prior permission of the publisher, Armstrong & Associates, Inc.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Armstrong & Associates delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such, Armstrong & Associates can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.

Global Spare Parts Logistics Market 1 UPS Post Sales 4 FedEx Critical Inventory Logistics 10 DHL Global Service Logistics 12 Ryder Aftermarket 18 DB Schenker Spares Logistics 20 SEKO Spare Parts Logistics 25 CEVA Spare Parts Logistics 28

Global Spare Parts Logistics Market Supporting the machinery and devices of modern globalization has required the development of sophisticated worldwide spare/service parts logistics (SPL) networks. A handful of third-party logistics providers (3PLs) have answered the market’s demand and service most of earth’s area and population. As a result, the spare parts logistics network, which relies on companies like UPS, FedEx, DHL, DB Schenker, Ryder, SEKO, and CEVA has grown to $52.7 billion a year, representing approximately 6.9% of total 3PL revenue.

The major vertical industries in the spare parts logistics network are Automotive, Industrial, and Technology. In short, the spare parts logistics market is driven by high-value manufactured products and their maintenance. To a smaller extent, the Elements and Healthcare sectors also play in the spare parts logistics space.

To arrive at estimates for the spare parts logistics market, we begin with some basic Armstrong & Associates’ research results. Each year, Armstrong & Associates estimates global third-party logistics market revenue. We then split total revenues by Fortune 1000 industry verticals. We also apply assumptions based on industry trends and growth rates. The base year used in this analysis is 2008. Our estimates for 2016 indicate a compound annual growth rate (CAGR) of 5.5%.

Table 1, on the following page, breaks down global 3PL SPL revenue by select vertical industries. The portion of total SPL revenue is highest for the Automotive industry, accounting for $18.1 billion, or 34.3%. This is closely followed by the Technological industry ($17.7 billion, or 33.5%), driven by the Computers and Office Equipment; Electronics and Electrical Equipment; and Aerospace and Defense subsegments. Industrial accounts for $10.9 billion (20.7%) of total SPL revenue, predominantly due to the Construction and Farm Machinery subsegment. Elements and Healthcare make up smaller portions of the total: $3.9 billion (7.4%) and $2.1 billion (4.0%), respectively.

Table 1. Global 3PL Revenues by Select Industries & Sub Segments (US$ Billions)

Geographically, 3PL spare parts logistics revenues follow the distribution of major markets and industrial production. Asia Pacific accounts for $18.2 billion (34.5%), North America for $13.1 billion (24.9%), and Europe for $10.9 billion (20.7%). The rest of the world accounts for $10.5 billion (19.9%)

Table 2. 3PL Spare Parts Logistics Revenue by Region – 2016E (US$ Billions)

In analyzing the distribution of transportation- and warehousing-related costs, we estimate that transportation accounts for 70% to 75% and warehousing accounts for 25% to 30%. The transportation component is higher in North America and Asia than in Europe.

Major Players UPS Post Sales Overview UPS’s SPL business, referred to as “Post Sales” is part of UPS Supply Chain & Freight. Post Sales operates five global central stocking locations (CSLs) to run its network complemented by 1,000+ global field stocking locations (FSLs), which serve as local inventory sites. The network is leveraged to ensure that the right type and quantity of parts are in optimal locations to best meet the needs of UPS customers’ end-clients in order to maximize service while reducing costs.

This network is continually adapted in size to meet client needs and serves over 125 countries. UPS has clients across many segments including High Tech, Medical Equipment and Devices, Industrial Manufacturing, and Aerospace. UPS has a multi-functional global group 100% dedicated to managing this business within the larger Supply Chain organization. The group defines the Post Sales Strategy and Mission as outlined below.

Figure 1. UPS Post Sales Mission

The global central stocking locations are located in: • Louisville, Kentucky – SC Logistics Center and UPS Air Hub • Roermond, Netherlands – Cologne Air Hub • Singapore – APAC • Miami, Florida – Central/South America • Dubai, United Arab Emirates

Figure 2. UPS Post Sales Network Coverage

UPS has a very large global capacity with over 1,000 field stocking locations (FSLs) and over 23,000 global UPS Access Points, including over 7,500 in the U.S. FSLs are located throughout the U.S. to serve a vast number of customers; FSLs are located within two hours from 79% of the U.S. population, and within four hours of 99% of the population. Similarly, in Europe, 99% of businesses are located within four hours of a UPS FSL. Extensive use is made of courier services for same-day deliveries and NFOs (Next Flight Out) as needed.

UPS also offers a proprietary “Service Parts Returns Solution” that can dynamically route parts from a service technician back to the optimal final destination (return-to-stock, repair vendor, recycler, etc.), saving days in transit and transportation legs and reducing truck stock.

Services Overview UPS’s Post Sales provides critical order fulfillment; reverse logistics; network and parts planning; and test, repair, and refurbish services. The company’s Fast Turn implementation can get new customers on- boarded and running within 30-60 days (depending on solution complexity).

• Critical Order Fulfillment: Critical Order Fulfillment includes inbound inventory of parts, warehousing, outbound, and associated management services. Customers use the UPS-maintained global IT platform, which offers global order and inventory visibility.T ypical client solutions include

placement of parts inventory in strategic field stocking location (FSL) sites for either same-day or next-day delivery to support end-client Service Level Agreements (SLAs). In addition, customers can place inventory in UPS central stocking locations (CSLs) for replenishment of parts to FSLs or shipping direct to end-user sites supporting next-day SLAs.

• An efficient returns process is provided throughReverse Logistics services. The benefits can include visibility throughout the returns process, expedited on-site disposition by field engineers, and efficient disposition of used/obsolete goods. The UPS Service Parts Returns Solution enables field engineers to disposition products on-site and route parts dynamically to the optimal final destination (return-to-stock, repair vendor, recycler, etc.).

• Network and Parts Planning: UPS assists with strategic site planning, inventory level planning, stock rebalancing, and replenishment to minimize inventory while meeting SLAs. In addition, UPS partners with Baxter Planning Systems to offer a deeper level of inventory planning and execution to maximize service with the minimum amount of inventory.

• Test, Repair, and Refurbish: UPS core services include returns/RMA processing, whole unit and component repair capability in North America, and screening/return-to-vendor capabilities.

Integration with UPS Transportation Services UPS integrates UPS transportation capabilities and the UPS global network of operating facilities to provide service supply chain efficiencies. For example, just as customers leverage the network for small package pickups and returns, Service Technicians can pick up and drop off parts at convenient locations, such as UPS Access Point Locations (including 4,400 The UPS Store locations).

Another example of the integrated network is demonstrated at UPS’s Louisville central stocking location. The CSL is located just a few miles from the UPS Worldport transportation hub. Orders can be placed as late as midnight for next-morning delivery via affordable UPS Next Day Air services. The diagram below includes other UPS Network sites that UPS Post Sales services can leverage in its solutions.

Figure 3. UPS Network

In addition, Post Sales leverages the entire UPS Return Services transportation portfolio for additional value.

Figure 4. UPS Return Services

Finally, UPS can offer importer/exporter of record services combined with freight, brokerage, and trade management services to help clients navigate complex global requirements to grow into new global markets.

Technology UPS’s global SPL IT platform is called SPLUS. The system provides consistent global order placement, visibility, and control to help customers and UPS efficiently manage a service logistics network. A dedicated IT group manages this global system. Like its major competitors, the system provides extensive online, real-time information and research design. Customer orders and advanced ship notices feed the inventory management module, which is supported by order management, warehouse management, parts return, shipping, and reporting (including receipt confirmation).

Baxter Planning Systems Baxter Planning Systems is UPS’s exclusive Parts Planning partner. Baxter, which is fully integrated with UPS systems, provides inventory planning and optimization software designed to reduce inventory, reduce days-of-supply, improve SLAs, and reduce expedites. Baxter’s software-as-a-service system and tools are an extension of the UPS IT system and help customers select the optimal number and location of field stocking locations, as well as stocking levels for each location. The software can automate reverse logistics, replenishment, repair and supply order, and the distribution of parts.

Customers Table 3. Select UPS Post Sales Customers

Case Studies eSecuritel: Decrease transit time while maintaining high quality standards eSecuritel is a mobile device insurance and replacement company. When mobile customers file a warranty claim, eSecuritel provides replacement equipment. The company’s goal in working with UPS was to decrease the time between acceptance of a warranty claim and end-user receipt of replacement equipment, while maintaining its high quality standards.

Operating within a growing market, eSecuritel experienced a tenfold growth in distribution requirements over two years and expected rapid future growth. Inventory was stored and kitted at its parent company’s facilities, but the distance to transport facilities was impacting transit time.

eSecuritel, already a UPS customer, expanded the relationship to include Post Sales services. Inventory was moved from the parent company’s facilities to the UPS Worldport hub in Louisville, Ky. UPS now

handles value-added services, such as seasonal staffing, kitting, and warehousing. The transition to UPS systems was completed quickly; enterprise resource planning (ERP) integration was completed in 110 days. The setup will scale to accommodate the expected rapid growth of eSecuritel’s business.

K12: An unexpected use of SPL services in an expanding service portfolio partnership K12, an online education company with over $800 million in annual revenue, has achieved rapid growth since its launch in 2000. K12 delivers physical course materials and computers to its customers. The company had already outgrown its own logistics infrastructure, as well as the logistics offerings of previous partners. K12 sought an improved logistics and returns solution that could handle operational excellence, flexibility, and capacity. To add to the complexity of its needs, K12’s deliveries are highly variable. The company sends customized packages to hundreds of thousands of unique addresses each year. As the business corresponds with the school year, the delivery schedule is also highly seasonal.

K12, which had been working with UPS since 2009, engaged UPS as its SPL partner. UPS now provides 200,000 square feet of warehousing space in California and Elizabethtown, Ky., for storage, kitting, and fulfillment. UPS packs up to 19,000 kits per day. In addition to delivery services, reverse logistics services allow for the recycling of old course materials – rebound books and repaired lab equipment, for example. Finally, repair and refurbishment services are provided so computers can be routed back to the Louisville hub, refurbished, and loaded with custom software. If computers are in poor shape, they are sent to another vendor to be salvaged for parts.

Carestream: Reduce manual processes and decrease field engineer repeat visits Carestream Health, a dental and medical imaging systems provider, sought UPS’s SPL services to replace manual planning processes, control costs while providing global same-day or next-business-day delivery, and reduce repeat technician visits.

UPS moved Carestream’s service parts to 70 UPS FSLs around the world. UPS and Baxter Planning Systems provided consulting and analysis using Baxter’s planning software. Implementation of the UPS Order Management System allows order placement, route planning, and shipment tracking visibility.

In the pilot phase, Carestream experienced a 23% reduction in emergency orders and a 3% increase in first-call completion rates for field engineers. Full roll-out savings is projected at $500,000.

3D Printing In 2015, UPS launched a project with Fast Radius linking its global logistics network to 3D printers at more than 60 The UPS Store locations, as well as at the Fast Radius On Demand Production Platform and 3D printing factory in Louisville, Ky. More recently, the network was expanded to Asia, with a 3D printing factory in Singapore. The goal is to expand 3D printing options to a larger user-base. Customers place 3D printing orders on the Fast Radius website, which are then directed to the optimal manufacturing or The UPS Store location. A variety of factors – speed, geography, and required quality – determine the location. Orders can then be shipped the same day. UPS plans to leverage this 3D printing capability to further strengthen its service parts logistics value to clients.

UPS also offers distributed manufacturing via a partnership with SAP. This partnership, established in 2016, capitalizes on UPS’s transportation and logistics strengths, SAP’s manufacturing supply chain and internet of things (IOT) solution acumen, and the 3D printing capabilities of providers such as Fast Radius. UPS and SAP offer an end-to-end solution to simplify industrial manufacturing processes such as digitization, certification, order-to-manufacturing, and delivery.

The benefits of using UPS’s additive manufacturing solution include quick production of parts to meet time sensitive needs, fulfillment options for low-quantity and one-off orders, production of semi- or fully-custom goods, rapid prototyping, iteration with adaptive 3D designs, inventory reduction, and even possibilities for reimagined product design.

FedEx Critical Inventory Logistics Overview FedEx has 788 stocking locations in 24 countries. Its control towers in Memphis, the Netherlands, Hong Kong, and Shanghai control Critical Inventory Logistics traffic flow. The control towers optimize fulfillment locations, routes, and shipping modes, 24 hours a day.

TNT Express – Service Parts Solutions In May 2016, FedEx acquired Netherlands-based TNT Express. TNT supports its South American SPL network with direct flights to major cities from Asia, North America, and Europe. Brazil, Chile, and Argentina are the major focus. Express operations are used throughout South America. Middle East services are over-the-road.

Boeing 747s operate between Europe and China five days a week. APAC regional service locations are Tokyo, Bangkok, Kuala Lumpur, Singapore, Sydney, and Melbourne. Intra-APAC service is primarily over- the-road.

Services Industry-specific value-added services include inspection, testing, packaging, and labeling for the healthcare sector. For the technology sector, FedEx offers testing, kitting, repackaging, and relabeling.

Returns services include asset exchange, returns monitoring, inspection, and validation. Frozen and refrigerated services are available.

Figure 5. FedEx Returns Services

TNT Express Services • Service Parts Solutions: Storage, delivery, and return of spare parts for use in corrective and preventive servicing of installed base products.

• Centralized Parts Solutions: Centralized storage and direct distribution of spare parts for end use, repair, or stock replenishment.

• Returns Solutions: Return handling and fulfillment of product for re-use, recycle, refurbishment, recall, repair, or replacement.

Technology FedEx uses its Global Supply Chain Manager to provide real-time order management and shipment tracking. Expedited airfreight options are utilized as necessary. Orders can be filled using multiple stocking locations.

TNT Express Technology Figure 6. TNT Express Service Logistics Technology

DHL Global Service Logistics Overview DHL Global Service Logistics started in 1996. Today, it has approximately 220 customers and serves 140 countries. DHL’s supporting infrastructure consists of 50 large, regional warehouses and more than 1,000 local storage locations. Controlling the global information and event flow are four multiple-language Command Centers, located in Columbus, Ohio; Budapest, Hungary; Dubai, United Arab Emirates; and Singapore. The Command Centers provide round-the-clock support through five international call centers, with service available in nine languages.

Table 4. DHL Global Service Logistics Locations

The commonly used, global IT system is “SeLECT.” The platform is integrated with DHL’s centralized order processing and connected to most transportation networks.

DHL’s SPL industry emphasis is on technology-related companies.

Overall benefits include flexibility and speed, a vast global network of stocking locations, full control and consistency through standardized processes, and a single IT platform with real-time visibility.

Services DHL’s Global Service Logistics infrastructure is shown in Figure 7.

Figure 7. DHL’s Globally Integrated Infrastructure

DHL offers storage and inventory management, integrated transportation management, reverse logistics, and value-added service for spare parts logistics.

• Storage & inventory management - Distribution, storage, and inventory management of replacement items. Service Logistics’ Warehousing offers an intelligent, integrated, and secure warehousing solution, providing a network view of stock. ❒❒ Warehouse infrastructure includes: ▷▷ Tier 1 – Global/Regional Service Logistics Centers ▷▷ Tier 2 – Country Service Logistics Centers ▷▷ Tier 3 – Decentralized warehouses for extremely urgent parts and components, serving a local region out of a metropolitan area ▷▷ Command Centers, call centers, etc.

• Integrated transport management - All after sales deliveries with full visibility. Services include: ❒❒ Transportation in 228 countries and territories offering a mix of transportation modes. ❒❒ Distribution and replenishment of warehouses in Tiers 1, 2, and 3 ❒❒ Critical deliveries from local Tier 3 locations to meet emergency orders with timelines as short as 2–4 hours ❒❒ Economical non-critical deliveries ❒❒ Economical shipments for reverse flows ❒❒ Capability to integrate with over 180 different carriers with integrated label creation for multiple carriers and end-to-end checkpoint visibility for next-day orders

• Reverse logistics - One-stop shop for returns, repairs, and product service needs. Products are routed either to repair vendors or back to manufacturers for return to stock. Repair activities can also be covered.

• Value-added services - Client Support Services, Maintenance Repair and Operations (MRO), and Technical Services. Services include: ❒❒ Smart Field Services via technical couriers, field engineers, and spares lockers ❒❒ Technical Services including screening, testing, and light repair ❒❒ Parts financial management – planning, procurement, and financing ❒❒ Maintenance Repair and Operations (MRO) ❒❒ Trade compliance ❒❒ Aircraft on Ground (AOG) and Vehicle off Road (VOR) ❒❒ Client Support Services with an emphasis on proactive support, relationship management, performance management and analysis, change management, continuous improvement, and innovation

Markets/Industries Served The majority of services are provided in the Technology sector, with Life Science and Healthcare, Engineering and Manufacturing, and Aerospace and Aviation growing rapidly. DHL has developed bespoke solutions for these sectors within Service Logistics.

Technology The SeLECT integrated global IT platform provides real-time visibility, resource and inventory optimization, and best-practice processes to Service Logistics customers. Functionality includes:

• Access and Integration ❒❒ Web based system with standard interfaces ❒❒ Easy access and seamless integration • Order management ❒❒ EDI and/or manual orders capability ❒❒ Real-time ETA calculation for mission critical service fulfillment • Warehouse management ❒❒ Best-practice processes for inbound, storage, and outbound • Same-day integration ❒❒ Real-time visibility for mission critical shipments • Business intelligence ❒❒ Back-end reporting and front-end analytics

Strategy Service Logistics is an essential part of everyday life, through its people, processes, and unparalleled global reach. DHL aims to help customers manage their challenges in providing essential services needed for everyday life delivered with excellence, innovation, and consistency.

Service Logistics is part of the DHL Supply Chain 2020 Strategy (Focus-Connect-Grow). Service Logistics is a key global product to drive growth through more customer-centric, specialized solutions.

Customers DHL Service Logistics has a 98% customer retention rate. Select customers and locations are included in Table 5, below.

Table 5. Select DHL Service Logistics Customers

Case Studies An Executive Jet Manufacturer Seeks Best-in-Industry Customer Service An executive jet manufacturer needed to ensure replacement parts availability at short notice. While the company has a network of 75 service centers serving 60 countries, warehouse locations were not optimized, resulting in delays. Furthermore, lack of global visibility could result in costly downtime, limitations on urgent executive travel, and issue escalation to the CEO. Finally, carrying stock at each of its 75 service centers resulted in high carrying costs, while still not guaranteeing the availability of a necessary part.

The company had top industry ratings for customer service, but wanted to improve operations to ensure it maintained leading service standards. The manufacturer’s goal was to improve customer service through overnight or same-day delivery of parts while using an IT solution to proactively identify and handle delays.

DHL executed a global distribution model to deliver same-day (within two hours) and overnight spare parts, which can be ordered late in the day and shipped as late as 11 p.m. DHL instituted a global distribution center in Memphis (near DHL and other carriers’ air hubs), supporting North America, and regional hubs in Brussels, Dubai, and Singapore. FSLs are located near high-traffic areas (New York, London, etc.).

The DHL command center uses the company’s SAP-integrated IT platform for tracking and visibility.

Finally, the manufacturer uses DHL’s cloud-based Document Management system for on-demand access to quality certification documentation.

The manufacturer has reduced inventory cost by $50 million per year while achieving 99.5% on-time delivery. Global visibility allows the manufacturer to proactively respond to any delays, rather than waiting for customers to report issues.

A Petrochemical Joint Venture Integrates its Maintenance, Repair, and Operations A growing refining and petrochemical joint venture based out of Saudi Arabia was using two MRO service providers for the handling of spare parts, chemicals, and raw materials. The company’s goal was to consolidate and integrate the incumbent MRO service providers into a single, global supply chain. A successful implementation would result in increased visibility, a focus on continuous improvement, and the flexibility to accommodate further company growth.

DHL, delivering Lead Logistics Provider services, integrated the current MRO service providers, established leaner processes, and implemented the proprietary SCI (Supply Chain Integrator) track- and-trace tool. DHL also initiated a control tower and a customs clearance network for inbound and outbound logistics. Finally, DHL’s expertise in the global energy industry resulted in the application of best practices and assurance that Health, Safety, Security & Environment procedures were in place.

After a two-month LLP implementation, DHL began acting as a single point of contact and now manages 100% of shipments via the DHL network. The SCI track-and-trace tool allows real-time visibility of goods from more than 800 suppliers and helped the company achieve a return of stock rate of 2.2%. All other customer KPIs have been met, including 100% accuracy in order pick-ups and transit time performance. Finally, the relationship has been able to support company growth of more than 10% in volume.

Improving Getac Technology’s European Repair Service Getac Technology is a global manufacturer of rugged computers (i.e. computers that are resistant to dust, water, vibration, and shock resistance). Getac operated its European service operation out of the United Kingdom, which became increasingly strained as sales increased in continental Europe. Even though the nature of the equipment results in low per-unit service requirements, Getac was serving continental service needs via cost-prohibitive air transport with sub-optimal service levels. The company wanted to reduce costs, reduce carbon emissions, meet industry-standard SLAs, and improve efficiency.

DHL transferred the base of European repairs to DHL’s End of Runway Logistics Centre at Brussels Airport, situated for central air and road connections. DHL also created a dedicated repair wing at the Logistics Centre. The program was piloted in four weeks, and, after a six-month implementation, became Getac’s centralized repair hub.

DHL now handles 200–300 weekly repairs for Getac, and the standard repair time has decreased from 96 hours to 72 hours. Premium-tier turnaround is as short as 24 hours. Getac also achieved service quality improvements, as measured by fewer units requiring re-repair. The company transitioned to a variable cost model to maintain high SLAs while reducing expenses. Finally, Getac’s sustainability goals were achieved; the centralized location resulted in a 15–20% reduction in carbon emissions.

Urgent Electronics Parts Delivery in the Expanding Asia Pacific Market A U.S.-based electronics company operating in the Asia Pacific market faced stiff price competition

in the region. The company’s goal was to improve its aftersales distribution and service operations to achieve a competitive advantage. The company wanted to implement two-hour, four-hour, and six-hour SLAs across 17 countries and 24,000 delivery locations in the region. The solution had to be flexible and scalable in order to cater to the rapidly changing market.

DHL provides service parts delivery and defective parts returns management, including call center management, urgent delivery management, over-the-counter dispatching, parts field recovery, merchandise returns coordination, and parts disposition. DHL reduced costly manual processes by implementing a business rules-based IT system. The system handles parts allocation, alternate parts sourcing, estimated-time-of-arrival, stock replenishment, and kitting. DHL also staffs a Client Support Services team. Finally, DHL provides warehousing and transportation solutions. The company established a global distribution center in Shanghai, where upstream supply chains are consolidated. The facility is strategically located near suppliers and supports 86 hubs. The solution serves 17 countries, including China, India, Japan, Pakistan, Bangladesh, and Sri Lanka.

DHL’s solution resulted in an on-time delivery rate of 99.8% on annual deliveries of 8.5 million parts. DHL and the electronics company continue to embark on joint initiatives, resulting in an estimated annual savings of $10 million.

3D Printing DHL believes 3D printing will play an increasingly important role in logistics, particularly in spare parts logistics and individualized parts manufacturing. While the company projects that 3D printing will complement, not replace, traditional manufacturing, DHL anticipates certain product ranges could be created completely on demand with 3D printing. DHL has already tested the technology at its Innovation Center. The quality of printed spare parts nearly reached the quality of traditionally manufactured parts. At this juncture, however, DHL has determined that the costs of materials, hardware, and handling are prohibitive. Furthermore, complex and large parts could take up to several days to print, meaning SLAs could often not be met. Even so, the promising findings about the quality of parts leaves DHL optimistic that 3D printing spare parts could become an attractive process as costs decrease over time.

Image 1. 3D Printer at the DHL Innovation Center

Ryder Aftermarket Overview For more than 30 years, Ryder has provided Aftermarket services through its Supply Chain Solutions division. Ryder supports 19 Aftermarket networks across North America. The company has five Primary Logistics Centers, four Secondary Logistics Centers, and 750 Ryder Fleet Management Solutions (FMS) Maintenance Shop Locations. These locations allow Ryder to reach 85% of the population within one day.

Primary Logistics Centers are located in Ontario, CA; Carrollton, TX; Portage, IN; Douglassville, PA; and Lawrenceville, GA. Ryder’s Secondary Logistics Centers are in Seattle, WA; Portland, OR; Denver, CO; and Miami, FL. Figure 10. Ryder Aftermarket Logistics Center Locations

Ryder has been delivering service parts through its transportation and cross docking network to Mexico’s main cities for 14 years. Based in Mexico City, Ryder Mexico also has regional offices in Guadalajara, Monterrey, and Saltillo. Ryder Mexico’s Service Parts Operation (SPO) serves five major customers in Mexico at over 170 delivery points.

Services Ryder provides:

• Inventory Analysis and Network Optimization – Support is provided by Ryder’s Supply Chain Excellence team. Llamasoft (technology) is used for supply chain planning and network optimization.

• Parts Distribution Management – Parts distribution operates in five Flow-Thru Centers, each of which is approximately 250,000 square feet. These are shared-use commercial structures with particular focus on consolidation/deconsolidation and cross docking.

• Dedicated Delivery Services – Dedicated, integrated, and shared transportation routes are available. Ryder also uses standalone routes for 170 customer branch locations.

Markets/Industries Served Ryder Aftermarket provides services to the Automotive, Consumer Products, and High Tech sectors. The company also provides internal Fleet Services solutions.

Technology Llamasoft is used for supply chain planning and network optimization, demand classification, and cost- to-serve analyses.

Case Studies Warehousing and Transportation for an OEM in Mexico Ryder has been working with a particular OEM in Mexico since 2005. The company, which manufactures parts in the United States, engaged Ryder to manage Warehousing and Transportation for parts distribution in Mexico.

Ryder provides over 1,000 square meters of warehouse space through the company’s cross docks in Monterrey, Mexico City, Guadalajara, and San Luis Potosí, and a partner’s site in Minatitlán. Ryder also provides value-added services including re-boxing, re-labeling, material inspection, and returnable containers management.

Ryder also provides Transportation Management to the OEM, including Dedicated Contract Carriage shipment planning and execution, network design and optimization, and routing and scheduling services.

Supply Chain Solutions services include inbound and outbound flows between dealers and distribution centers and track-and-trace to support cross-border management.

As a result, the OEM has been able to achieve 99.98% inventory accuracy and 95% on-time deliveries to its 48 dealer locations. Lead time to dealers is 19.5 hours. Ryder provides monthly KPI scorecards, SLA adherence rates, and cost reviews to the OEM. Operational efficiencies include low turnover and synergies with other automotive accounts.

Figure 11. Ryder OEM Customer U.S.-Mexico Network

DB Schenker Spares Logistics Overview DB Schenker Logistics has extensive Spares Logistics applications in the Industrial, Automotive, and Aerospace industries.

Automotive Spares Logistics services are a natural add-on to Schenker’s extensive operations supporting car assembly in Germany, the Americas, China, France, and Malaysia. Customers include BMW, Mercedes Benz, Volkswagen, Volvo, and Bosch.

DB Schenker has a significant presence in the support of major operating equipment in semi-conductor manufacturing, operating equipment, printing, and alternative energy businesses. Many of these operations include value-added services that entail sub-assembly, kitting to custom packaging, or preparation for highly controlled operating environments such as “white rooms.”

In the Aerospace sector, DB Schenker provides integrated global spare parts services, including aircraft on ground (AOG) management, to a wide variety of aircraft manufacturers, their direct suppliers, and part/service providers. Current major locations for running the network are London, Paris, Singapore, Dubai, Miami, and Seoul. Customers include GE, SIA, Airbus, Boeing, Messier-Bugatti, Embraer, Revima APU, and Rockwell Collins.

Figure 12. Aero Hub Model Overview

Services

Figure 13. Aftermarket Logistics Services

DB Schenker offers the following Spares Logistics services:

Inventory Management ❒❒ Mullti-site visibility ❒❒ Stock level alerts when reaching reorder level ❒❒ Automated backorder management ❒❒ Vendor managed inventory

Returns/Reverse Logistics ❒❒ Pick and pack services ❒❒ Product recall support ❒❒ Return to vendor support ❒❒ Serial number management ❒❒ Technical inspection ❒❒ Tool crib service/calibration data

Tailored Logistical Requirements ❒❒ Differing picking strategies ❒❒ Kitting ❒❒ Assembling to order ❒❒ Packaging solutions ❒❒ Technical inspection

Customs ❒❒ Warehouses within Free Trade Zone ❒❒ WMS including serial number management, customs numbers, and customs stock ❒❒ Local customs expertise ❒❒ AEO certified

Performance Monitoring KPIs ❒❒ Tailored KPI reports ❒❒ Real time reporting ❒❒ Quarterly Business Reviews

Global Support ❒❒ Global support for all functions described above

Markets/Industries Served DB Schenker serves the Automotive, Aerospace, Industrial/Energy, and Electronics sectors. Revenue from each sector is approximately 30% Automotive, 30% Aerospace, 30% Industrial/Energy, and 10% Electronics.

Technology DB Schenker uses a variety of high quality commercially available systems as well as in-house systems developed specifically to support unique markets such as Aerospace. Between DB Schenker and its customers, information flows are primarily by EDI and an internet-based integrated environment which is refreshed in real time. Extensive use is made of handheld scanners and Zebra printers. A single control center is used for each customer. Multi-client warehousing is standard. Reporting inventory visibility and event activity are very good.

Strategy DB Schenker identifies Spares Logistics as an under-exploited market with high profit potential. DB Schenker cites the potential of greater than 10% EBIT (as a % of revenue) for Spare Parts, while the majority of companies generate less than 20% of their revenues from the Spare Parts sector.

DB Schenker also cites industry trends favorable to the aftermarket sector, such as a quickly changing

business environment, increased use of technology, and increasing market demands. Many companies regard aftersales as a profit center. At the same time, industry experts predict growth in the aftermarket, forecasting an increased portion of manufacturing revenue from the aftermarket.

Customers Select customers and locations are included in Table 6, on the following page.

Table 6. Select DB Schenker Service Logistics Customers

Case Studies Logistics for the Industrial Sector Vestas, a wind turbine manufacturer, engaged DB Schenker as the Lead Logistics Provider for its Spare Parts business in Central Europe. Prior to the relationship with DB Schenker, Vestas was responsible for nearly 14,000 wind turbines in the area and managed a staff of 1,200 field service technicians. DB Schenker now manages the supply of wind turbines, field engineers, and service stations, including over 11,000 square meters of warehouse space. DB Schenker established a central warehouse and three satellite warehouses. Service levels are tiered (Emergency, Express, and Economy). DB Schenker handles central returns processing, transportation planning and execution, test monitoring, and other value-added services. DB Schenker reports KPIs, monitors processes and shipments, and instituted a successful reverse logistics process for Vestas.

Heidelberger Druckmaschinen utilizes DB Schenker for its SPL facility in Indianapolis, Indiana. DB Schenker set up an operation with FTZ (free trade zone) accreditation in Indianapolis to handle Heidelberg’s printing press spare parts. DB Schenker’s WMS is integrated with Heidelberg’s SAP system and round-the-clock coverage is provided. Thirty-six thousand stock keeping units (SKUs) are handled. This warehouse, like all DB Schenker operations, uses quality methods to continuously improve processes. These include a “Permanent Optimization Program” (POP) which is KAIZEN-based and Six Sigma/Lean logistics focused.

Regional Distribution for the Automotive Industry Volkswagen Group (VW) contracted DB Schenker to establish a Regional Distribution Center and Customer Distribution helpdesk to serve the Asia Pacific region. Previously, all VW and Audi parts were delivered directly from Germany. DB Schenker provides value-added warehousing, IT solutions, and a dedicated customer service team for all transportation modes out of its 45,000 square meter Schenker Singapore Logistics Center. The VW Group realized drastic lead-time improvement; air, ocean, and courier lead times all improved by 40–50%. Furthermore, VW has enhanced visibility and reduced stock levels.

Spares Logistics for the Technological Sector DB Schenker manages Distribution Logistics for Siemens in Central China. Services include management of bearings in a Baoyang warehouse, management of in-plant materials and finished goods in Minhang, crane carry services, and transportation management.

For Océ in Columbus, Ohio, DB Schenker runs a “Mega Center.” This operation supplies service parts to field technicians, as well as consumables for machines to customers. Copy machines are supplied regionally with deliveries to customers via “white glove” carriers. The Mega Center is housed within a 217,000 square foot facility. In addition, the center is automated with “pick to light” technology that supports high velocity picking from horizontal carousels containing 26,000 locations. Océ field technicians perform both emergency and regular service calls. DB Schenker processes approximately 800 spare parts orders each day, including emergency, replenishment, and next flight out shipments for critical repairs. In addition, it ships machine supplies to Océ customers, customized copiers, and three to four sizable dealer orders daily. The WMS used in Columbus is Exceed (Infor). It is used as the control center to communicate with multiple applications internal and external to the operation.

Spares Logistics for the Aerospace Industry One of DB Schenker’s Aerospace customers is Messier-Bugatti, a leader in aircraft brakes. For Messier- Bugatti, DB Schenker maintains parts at five global locations. Three hundred eighty Airbus parts are

maintained in Singapore, Sydney, and Dubai. Stocking and aircraft on ground (AOG) services are featured in Singapore and Sydney and run 24 hours a day. Delivery statuses are confirmed in 15 minutes.

For Bombardier, DB Schenker manages a 4,500 square foot warehouse space at the Narita Airport hub. About 3,000 SKUs are maintained. A one-hour window is used to address AOG situations.

SEKO Spare Parts Logistics Overview SEKO Logistics has more than 120 offices in 40 countries worldwide. The company offers implementation experience and expertise across many industry sectors, including the aerospace, industrial, and medical industries. A suite of customizable high-standard logistics services is offered for high-value shipments.

Aerospace services include global aircraft manufacturing logistics support, as well as both civilian and military aircraft operations and fulfillment services. For the industrial and medical industry sectors, SEKO specializes in heavyweight transportation; critical factory parts logistics; transportation for medical, surgical, diagnostic and imaging equipment; and transportation for pharmaceutical products, trials, and samples. For the technological sector, SEKO runs facilities specifically for high-tech hardware and equipment and warranty returns.

SEKO operates more than 100 forward stocking locations (FSLs) across the U.S. and has spare parts logistics centers in core locations across all continents, with a particular focus on outsourced forward stocking locations for the aerospace sector.

Figure 14. SEKO Primary Spare Parts Hubs Locations

SEKO’s Authorized Economic Operator (AEO) and International Standards Organization (ISO) certified spare parts logistics centers fulfill spare parts and OEM parts to general contractors at the final destination.

SEKO’s regional hub in Amsterdam receives inventory through all modes of transportation. Goods are then globally distributed via ground, air, and sea. Shipments are distributed to end-users, sub-assembly plants, final assembly plants, and regional distribution centers. The regional distribution center in Dallas offers spare parts and OEM distribution parts to sub-assembly or final-assembly for the customer. Other services include customs brokerage, fiscal representation services, quality control inspections, and default testing.

Figure 15. SEKO Process Flow

Technology SEKO’s proprietary web-based supply chain software, MySEKO, provides full supply chain visibility, as well as TMS, WMS, inventory management, purchase order management, and asset management solutions. Spare parts field inventory can be tracked using MySEKO’s asset management technology or mobile WMS. SEKO also provides asset recovery services.

Customers Selected SEKO customers are shown in Table 7, on the following page:

Table 7. Selected SEKO Customers

Case Studies Priority Parts Return for Jaguar Land Rover Jaguar Land Rover (JLR)’s global priority warranty parts returns service, called Priority Parts Returns (PPR), allows the company to address early functional anomalies, with a premium on speed, customer satisfaction, and minimization of warranty costs. JLR sought a 3PL partner for PPR, with the aim of improving already high quality standards and while reducing costs. Additionally, identifying a flexible service provider was imperative, since production operations requirements could change.

JLR engaged SEKO under a multi-year contract to manage global parts transportation, returns, and imports and customs. SEKO provides end-to-end shipment tracking, providing visibility to JLR engineers. SEKO established tiered priority levels, including priority, super priority, and hazardous shipments. Returns are routed to the original suppliers or to JLR’s UK dealerships.

JLR relies on the tracking tool provided by SEKO; engineers monitor returns and manage scheduling based on parts availability. SEKO provides KPI monitoring and reporting, and suggests proactive improvements including a “responsiveness league table” to measure dealership parts returns performance. SEKO also applies best-practices developed with other customers.

CEVA Spare Parts Logistics Overview CEVA (and its previous incarnations, TNT Logistics and CTI) has been heavily involved in automotive logistics for over 20 years. It has developed and executed very well a series of automotive logistics business models. The principal components are inbound logistics, materials management, sequencing centers, and kanban manufacturing support. Development of its spare parts logistics capability was a logical extension. Consequently, SPL has grown to 15%+ of revenues for CEVA.

CEVA maintains a series of key central locations for managing its global SPL network. They are:

❒❒ North America (Detroit, Michigan and Jacksonville, Florida) ❒❒ South America (Sao Paulo, Brazil) ❒❒ Europe (Antwerp, Belgium and Barcelona, Spain) ❒❒ Asia (Singapore) ❒❒ Australia (Sydney)

Services CEVA’s core internal model for spare parts logistics management (“Smart Spares”) is a stepped approach beginning with a central warehouse. Parts channels are provided direct to customers, service partners, end users, and field service engineers. The central warehouse and its central center are responsible for controlling inventories throughout the flow process. Regional warehouses are the main parts suppliers for car dealerships and retail locations. Replenishment for service partners tends to be predictable, scheduled, and involves multiple line stock orders. Forward stocking locations (FSLs) carry small inventories of critical parts. Service from these locations can be scheduled or “mission critical.” Field service engineers (FSEs) normally pick up parts from FSLs or pickup and delivery “lockbox” locations. Returns by FSEs are normally to FSLs.

Figure 16. CEVA’s SPL Execution Services

Transportation from suppliers to the central warehouse is optimized using the least-cost mode that can meet stocking requirements. Service is measured in terms of days. Similarly, most central and regional warehouses can modally optimize distribution to customers. PUDO (pickup and delivery locations) transportation is normally scheduled and overnight. The most challenging transportation involves FSLs where networks of ongoing courier services are used, or outbound and airfreight replenishment is often required. Occasionally, next flight out (NFO) emergency service is required when mistakes or unexpected failures occur. A variant of in-night distribution is the delivery of parts to auto dealers during the night using drivers with “key” access.

Table 8, on the following page, lists the services offered by CEVA for automotive SPL.

Table 8. Automotive SPL Services offered by CEVA

Technology CEVA’s solutions are supported by a host of IT solutions with multiple WMS (warehouse management systems), TMS (transportation management systems), and interconnecting capabilities.

Customers CEVA’s automotive customer list is long and includes most car companies and several major (Tier 1) suppliers. The only major brand missing is Toyota. CEVA counts John Deere, Case New Holland, and Komatsu among its automotive customers.

Figure 17. CEVA’s Spare Parts Logistics Worldwide Network

A major CEVA initiative for many years has been to expand its vertical industry penetration beyond automotive. CEVA’s efforts have been successful in the high-tech vertical.

For Apple, CEVA handles iPod and iPhone board replacements in Australia. Returns are forwarded to a recovery center. For IBM in Thailand, CEVA handles a mix of servers, ATMs and other products through a 25,000 square foot warehouse. In Italy, CEVA does cell phone logistics for Telis/TIM.

Table 9. CEVA’s High-Tech and Telecom Customers

For Getronics, CEVA provides advanced replacement services. This operation is a good example of CEVA’s high-tech spare parts ability. Getronics is a leading information and communication technology (ICT) service provider and the largest in the Benelux region. CEVA’s services for Getronics are next-day and same-day. Overnight service orders are sent to the pick-up and drop-off locations. Same day orders are couriered to the service required location. Returns are sent to the recovery center and refurbished when possible.

Figure 18. Getronics: Advanced Replacement