logistics providers is an indication that standard rules for engagement do not apply. If anything, it is the customer, and not the service provider, taking the lead in defining the role. The 4PL market is still very much a customer-driven phenomenon rather than a market change agent, acknowl- edges Bentz. “Logistics and supply chain management is the last part of operations that global companies want to experiment with,” he says.
network. It relied on these partners to keep track of shipment and inventory visibility, which inevitably presented a fragmented and inefficient approach to supply chain operations. Eaton started its journey toward a new supply chain model by setting the strategy. “We debated whether we should build a robust transporta- tion management group and system in-house or outsource. We chose to out- source,” explains Hegewald.
because that takes away from our core competency,” explains Hegewald. When bidding, Eaton undertook an extensive RFP/RFQ process, polling pro- spective service providers about their penetration in specific markets and the types of customers they worked with in those regions. Currently the company uses five primary LLP partners: three 3PLs–Penske Logistics, FedEx Supply Chain Services, and CEVA Logistics–to manage supply chain activities in North America, Europe, and Asia; and two for- warders – Expeditors and UPS – to manage transcontinental freight moves. With five operating LLPs, Eaton faces an element of fragmentation when it comes to supply chain visibility. Moving product from region to region means handoffs between multiple ser- vice providers. “When handoffs occur, we have to identify the LLP operating in that location to drill down on shipment information,” Hegewald acknowledges. The manufacturer also relies on its service providers to maintain data and provide analysis and alerting. But Eaton has plans in place to link up its service providers’ data systems with its own data warehouse. “Currently, customers contact us to get status information and our cus- tomer service department taps into our individual providers’ systems to get the necessary information. When we man- age visibility through a single interface, we will be able to direct customers to that system,” notes Hegewald. The organizational evolution of Eaton’s supply chain network in just three years is impressive. Management and control continue to float upward through Eaton’s supply chain, as the progression from a loosely aggregated group of 3PLs and ser- vice providers to its current interface of five primary LLPs matures. “We would prefer to have one LLP oversee our entire global operations; we just haven’t found one with the right capabilities yet,” notes Hegewald. “But we are moving in that direction.” From Tactical to Strategic Not all businesses have the vision or wherewithal that Eaton demonstrated in redesigning its supply chain network.
Industrial manufacturer Eaton Corporation’s 4PL strategy involves using five primary LLP partners, including CEVA Logistics. LLPs manage all of Eaton’s freight, maintain its supply chain data, and provide analysis and alerting.
Eaton Eyes LLPs for SC Redesign Eaton Corporation began rethinking its global supply chain network three years ago with an LLP model in mind. “The cornerstone of our strategy was outsourcing to 4PLs so we could gain better control of our transporta- tion management systems, capture data, and drive efficiencies,” says Mario Hegewald, director of global logistics for the Cleveland, Ohio-based company. At the time, the $12-billion diversi- fied industrial manufacturer was using more than 20 3PLs and hundreds of freight carriers to manage its global
Currently, LLPs manage all Eaton’s freight, collecting data on its shipping profile. Eaton then uses this data to con- tinuously optimize its network–locally, regionally, and globally. Eaton began the LLP bidding pro- cess in North America, then moved to Europe, and most recently Asia Pacific, where it partnered with CEVA Logistics to manage its regional supply chain. “Our goal from the beginning was to make the 4PL strategy work in North America, then move on to other areas. We don’t want to be in the business of owning transportation infrastructure
84 Inbound Logistics • July 2007
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