Operations management

Amina Halilovic Razic

12.12.2013.

CASE STUDY – EXEL PLC

Exel plc is an international third party logistics company, providing freight management and
contract logistics to some of the world’s biggest companies, including Dell, Unilever,
Johnson&Johnson, Home Depot, Volkswagen, etc. The company was created through a
merger with the aim of providing end-to-end logistics solutions for their customer who, up to
that point, used only some of the services provided. Exel’s freight management network
consists of 675 locations in 112 countries and they offer contract logistic services in more
than 120 countries with 1600 facilities and approximately 170 million square feet of
warehouse space around the world. Some of those are multi user warehouses and some are
located near the customer’s manufacturing plants, so as to facilitate deliveries on just-in-time
basis. Exel has two types of contracts with its customers, open-book where clients have
insight into Exel’s costs and pay those plus a management fee (preferred by long time
customers), and closed-book contracts where the client pays a fixed amount (preferred by new
customers). Exel’s extensive experience lead them to develop new and innovative services
like in-store logistics and a new business model called Lead Logistics Partner, the concept of
which was for Exel to join forces with their customer and integrate completely processes of
manufacturing, inventory control, warehousing, transport and management of supplier
relationships. Exel’s own business of creating and selling services was carried out by four
different teams within the company focused on: business development, solution design,
implementation of solutions and operations. On top of this, Exel has global account teams
dedicated to servicing needs of specific large clients operating globally. Exel has a
sophisticated ICT system which integrates all of their operations in all the facilities and can
even connect to customers’’ ERP systems, thus ensuring complete flow of accurate data.

One of Exel’s biggest clients is Haus Mart, one of Germany’s leading retailers of home
equipment and textiles. HM has been using Exel for management of 5 of their 6 distribution
centers which supply over 300 of their stores, carrying over 5000 SKUs and receiving
products from over 650 manufacturers worldwide, as well as HM’s consolidation center in
Turkey. HM and Exel are considering furthering their cooperation and involving Exel in the
planning process at HM. Planning at HM has been done by merchants and planners who lack
the knowledge, experience and confidence in the supply chain to make the best decision for

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optimization of supply chain. Expertise needed for minimization of costs and maximization of
value added can be provided by Exel who have all of those and who will help HM improve
efficiency of their whole supply chain and achieve huge cost savings.

1. How is value added in supply chain management through better planning versus better execution?

Logistics companies have extensive experience, knowledge, human resources, connections

and IT systems that enable them to significantly reduce cost and improve speed and efficiency
of delivering products and managing inventories. They are able to provide their customers
best options for transportation, warehousing and all administrative tasks implied by the supply
process at the most competitive prices. Besides providing freight management, transportation,
customs management and warehousing, they can also provide value added services like
assembly, testing, warranty validation, failure analysis. With efficient management of their
customers supply chain they can reduce lead times, lower logistics costs, increase visibility of
customers' products, reduce number of errors and improving reliability of the supply chain.

Involving the logistics companies in the supply chain would mean including them in
forecasting of demand and then organizing the supply channel to better match that demand
while focusing on cost minimization. That can be achieved by better planning of production,
optimization of inventory of raw materials and finished products, reducing lead times and
optimizing coordination of transporters according to the needs of supply chain. Logistics
companies are able to do this because they have highly developed information systems for
collection of data, as well as forecasting and scheduling models which would give the best
options. Efficient planning would contribute to fewer stockouts, less markdowns, less write-
offs and less inventory.

2. Why do companies outsource freight management and contract logistics to third party logistic
providers (3PLs)? Why do 3PLs perform these activities better?

Successful companies understand that the key to success is focusing on their own business
and building their own competitive advantage in the market and they do not consider that
warehousing and transport of their inputs and outputs are among their core competencies, so
they make the right choice and entrust these process to the companies whose sole job is to
optimize the flow of goods, services and information from their origin to the customers. 3PLs,
whose job this is, are able to achieve economies of scale, negotiate best prices with the most
reliable transportation carriers, find best routes, hold optimal levels of inventory, stack
products in the most appropriate way and find all other ways to minimize costs in the supply
chain for their customers. The reason why they are able to do this is because they have
experience, knowledge of business processes, understanding of their customers’ needs, human
and technological resources to plan and implement best solutions for each of their customers’
needs. Especially important are the sophisticated information systems, many of which were
developed in-house and models enabling them to satisfy all the specific needs of logistics
processes. With these ICTs, 3PLs are able to constantly collect and update data about
inventory levels, sales (for predicting demand), best prices, routes, schedules. In-depth
analysis of this data with computer simulations and financial models, plus proper
understanding of customers’ needs provides best solutions for customers’ supply chain.
Sources of 3PLs capabilities are not only their experience, knowledge and wide resources, but
also their constant investments in further education of their staff and learning new project
management tools and techniques that would help them better serve their customers.

3. How would a deep understanding of supply chain execution and stronger capabilities in execution
allow companies to make better supply chain planning decisions?

Logistics companies have databases of all the information they would need in order to
improve a customer’s supply channel. These databases include best practices from the past, as
well as information about transporters, delivery routes, schedules, prices, possible cost
savings from optimal stacking of the trucks, best times for deliveries, etc. Cost savings can
also be achieved in the warehousing processes, for example how the work is organized, by
implementing more efficient work practices, by assuring validity of data about product
placement and inventory levels, so the workers don’t waste time correcting possible mistakes.
The best result in planning supply chain will be achieved if the demand is forecasted properly
and then matched in the best way possible to the available supply by careful planning of
production and then choosing best options for warehousing and distribution. 3PLs are focused
on understanding needs of their clients and then searching, recognizing, planning and
implementing the best solutions.

4. Should Exel move into joint planning with Haus Mart?

Yes, Exel should move into joint planning with HM because the current planning system
applied in HM is not good enough. Merchants and planners simply do not have enough
knowledge about supply chain and are creating unnecessary costs by trying to prevent stock-
outs and delays. This can be avoided by taking advantage of Exel’s many experiences and
extensive knowledge of best practices in transport (consolidating trucks, shipping on certain
days and particular routes), warehousing (using a WMS system to tightly control levels of
inputs and outputs available for delivery), inventory control and delivery to retailers.