Assignment Task:
Bobcat Logistical Solutions (BLS) is a third-party logistics service provider (3PL) serving the Ohio market (Columbus, Cincinnati, and Cleveland) as a noncontract partner with a broker that serves food and beverage processors and distributors, including direct relationships with extensive food and beverage shippers. BLS owns a truck fleet that serves the "spot" markets. Spot markets are the final destinations for food and beverage deliveries to grocery stores, institutions with large food service operations (public and private school systems, colleges and universities, prisons, etc.), franchised and independent restaurants, and large entertainment venues. Large shippers use 3PLs in spot markets when they need extra capacity or when major weather events keep large truck capacities off the road. Brokers usually act as intermediaries to utilize their carrier networks (including BLS) so shippers can deliver products to the market. The largest food and beverage shipper in the United States has been challenged with three severe winters and natural disasters (hurricanes, tornadoes, floods) unlike any previous three-year period. As the economy has grown, carriers who were not building assets during the recession now suffer from capacity limitations. During these severe conditions of the last three years, the use of 3PLs exploded, doubling the truck movements handled across the United States compared to nonpeak capacity requirements.
Bobcat Logistical Solutions has experienced steady growth over the last five years, averaging 10 percent yearly revenue growth. BLS has also taken advantage of the recent increase in spot markets with significant market share gains within its strategic group of 3PLs. The growth-funded strategic initiatives for BLS included adding trucks to the fleet, purchasing warehouse space in key locations, integrating innovative electronic logging devices into all vehicles ahead of government mandates, and establishing a stable driver pool by collaborating with specialized veterans recruiting and placement firms.
The increased ownership in warehouse space has established an effective distribution center model that has differentiated Bobcat Logistical Solutions from other 3PLs and brokers in their capability to handle freight. Using state and local tax incentives, BLS has been a leader in improving sustainability by reducing fuel consumption, electric bills, and greenhouse gas emissions. BLS has been working with a local university on a software project to develop a proprietary warehouse management system (WMS) to improve operations of the 24/7 distribution center using RFID technology and to improve carbon footprints to meet sustainability targets. The WMS has added value by providing data directing changes in four areas:
- Operating efficiencies with energy reduction gains-Inventory movement analysis displays opportunities to reduce energy costs by cycling conveyer belts off during idle times and managing lighting with sensors that switch off lights in empty rack areas.
- Partner with energy utilities-Data on energy use provides opportunities to work with local utility companies to purchase off-peak rates and make equipment scheduling adjustments.
- Picking route scheduling-Material movement scheduling can produce more efficient routes, save energy, and improve labor efficiencies. Efficient routing can reduce forklift usage in both the number of forklifts needed and the utilization of existing equipment, saving fuel costs and reducing emissions. Well-organized picking routes in the warehouse eliminate unnecessary travel using a WMS picking system rather than order-based picking (pick one order at a time).
- Reduce packaging costs-Information from the WMS can aid in reducing packaging materials by optimizing the size of the box and the number of packing materials, maximizing cubes in trucks, and minimizing damage to goods.
While the increased utilization of 3PLs increased capacity to reach spot markets, the increased cost of adding broker fees and 3PL capacity has negatively influenced budgets for the large food shippers that Bobcat Logistical Solutions serves. The large food shippers across the country are resetting strategic initiatives related to using Brokers and 3PLs. They need to reduce exposure to volatile spot markets, increase service consistency, accurately forecast capacity and reduce added or unbudgeted costs of using spot market brokers and 3PLs. Much ample food and beverage shippers are setting new broker/3PL net-work targets with drastic cuts to the total number of brokers and 3PLs used. This initiative seeks to reign in the costs of added margins of brokers and 3PLs, geographic overlaps, and inconsistent service. A second approach for some shippers includes developing a more robust network with asset-based 3PL carriers. This initiative focuses on strategic partnerships with a smaller number of brokers who work with asset-based 3PLs or directly with the 3PLs. These partnerships are generally contract-based, so volume will be optimized and product handling and capacity secured. The most desirable 3PL partners will be in essential spot markets and be more technology-based providers. The third initiative for a few more extensive food and beverage shippers involves connecting with 3PLs. They have been active in mergers or acquisitions of 3PLs in strategic geographic regions of the country. Partner- ing with these 3PLs provides many advantages: the expanded scale of warehousing operations, broadened service offerings, expanded geographic coverage, more assets and technology, new management talent, new customers, more market share, more excellent knowledge in a targeted industry, and some instances, reduced need for broker networks.
An ample food and beverage manufacturer has approached BLS as part of their supply chain integration management effort. Midwest Food and Beverage Transportation (MFBT) extends the process integration beyond its most extensive food and beverage shippers to second-tier supply chain partners and has targeted several 3PLs.
Questions to Answer:
Q1. Identify and briefly explain the essential items that Bobcat Logistical Solution's proposal should include to secure the 3PL contract with Midwest Food and Beverage Transportation's supply chain integration efforts.
Q2. What are the advantages for Bobcat Logistical Solutions to being part of this potential relationship?
Q3. What are the advantages for Midwest Food and Beverage Transportation to partner with Bobcat Logistical Solutions as an integrated second-tier supply chain member?
Q4. What are the potential risks?