Exel plc – Supply Chain Management at Haus Mart
Executive Case Summary
EMBA 7310
Team Four – Mon/Wed
8/15/18
Andrew Means
David Thigpen
Grant Gipson
Sydney Rubin
Travis Williams
Background
Problem statement
As a leader in supply chain solutions, Exel’s team has successfully managed Haus Mart’s rate management and logistic services. However, Exel believes it can create a benefit to Haus Mart’s supply chain by participating in more than just supply chain execution and taking advantage of supply chain planning strategies that would result in efficiencies and economies of scale for Haus Mart. Although Exel is confident in its ability to leverage its previous success to create further savings in the Haus Mart supply chain, its management is still hesitant to take on supply chain planning because of the risk associated with taking on this very sensitive stage of the supply chain process. In addition to the fact that Exel does not have experience managing supply chain planning, if Exel gets a decision wrong it could lose customers for Haus Mart and damage its reputation. If Haus Mart loses customers and money, Exel takes part in these losses. In theory this is a motivator for Exel to keep Haus Mart’s best interest in mind, but it also leaves both companies at risk if the synergy does not go as expected.
Recommendations
Exel plc is a well-established global leader in supply chain management and has demonstrated successful supply chain management and logistics coordination with HM (Per Case Exhibit 4). Created in 2000, by the merger of a freight management and contract logistics company, Exel plc already had a headstart on its competitors in both the freight management and contract logistics industries, as both industries were fragmented and starting to merge more frequently, while Exel already had a few years’ head start. Upon the completion of the merge, John Allan of Exel said, “Marrying together international freight management with ground logistics capabilities would enable us to create end-to-end solutions, which we thought would have significant appeal to our customers…”. Allan’s comment refers to Exel’s intended commitment to an end-to-end process, and the question facing the firm of whether or not to pursue a joint supply chain model seems to align very well with this early intention.
While the decision to pursue joint supply chain management is innately risky, Exel should pursue the venture with Haus Mart. Exel’s operating capabilities and global reach set the company up to not only operate across all channels of the supply chain but also directly manage the coordination of the channels. In addition, Exel has proven success with customer relationships and building upon them, shown by the expansion of services to Goodyear, Home Depot, and Maxtor, specifically. Exel’s successful management of integrated logistics with Maxtor led to the expansion from a specific distribution network to management of Maxtor’s entire distribution network. Maxtor further expanded services from Exel to include consolidation centers, distribution centers, additional services, and eventually the entire network. This resulted in various quantifiable measures of success including decreased lead times and finished goods inventory by 16%.
Success with integrated logistics relationships as demonstrated by various customers, including Maxtor, is very indicative of Exel’s ability to take the integration a step further towards a full-blown joint supply chain management approach. Both the service provider (Exel) and Haus Mart would need complete transparency and open lines of communication to see optimal performance, decreased lead times, finished goods inventory, etc., as was experienced by Maxtor. However, one of the largest hurdles would likely be the creation of the control tower that Exel’s Lead Logistics Partner model would require. Physically building a control tower on customer property is not only invasive but could be seen as more intimidating than a traditional partnership. Exel and Haus Mart would likely benefit from leveraging a change management consulting firm to help both companies’ employees adjust without personnel issues and risks of employee departure and other following HR issues. Something as simple as poorly managing this change could derail the project from the very beginning.
Exel might not have explicit experience with joint supply chain management, but it has displayed many times how the company can not only serve additionally requested services but surpass expectations and deliver documented business value for its customers. Without well-coordinated personnel and operational infrastructure, a firm like Exel would not be able to adjust as fluidly as it has in the short time since its creation. The existing Four-Team Approach is helpful to establish clear responsibilities but also emphasize “team,” a mindset that is crucial for any kind of joint venture, especially between a customer that does not possess a competitive understanding of supply chain management.
Supply Chain Management is the total system approach to managing information, services and materials, end-to-end, so it should come as no surprise that our recommendation is to support the Exel and Haus Mart joint initiative. Haus Mart’s internal employees do not have a sufficient understanding of supply chain in general, as can be seen by their ongoing “just in case” behavior patterns such as purchasing additional inventory to serve as a buffer, and having items shipped a week prior to the optimal shipping date, in case an unforeseen supply chain setback were to occur. This, in itself is a key area on which Exel can capitalize by focusing its supply chain services pitch.
If Exel and Haus Mart implement the vertical partnership, their first undertaking should be to replace Haus Mart’s existing logistics system with the one used by Exel. Exel’s platform would then leverage data from multiple logistics variables such as routes, schedules, requested delivery windows, and pricing to determine when Haus Mart should manufacture and ship their products. Based on the demand at that time, the logistics software will leverage the same inputs to determine the most cost effective delivery method that aligns with the customer’s needs. Exel’s managing director, Perry Watts commented that the largest costs and opportunities, for both parties, are those related to matching of supply with demand.
That’s where the biggest payoff is—for HM and for us. So I think it is time that we moved
into joint planning with HM. As we have discussed before, combining planning with execution has
incredible potential.”
Lecture concepts
Minimizing total system cost
Specificity (logistics delivery
Supply chain strategies
Keiretsu – have your suppliers become part of a company coalition