Outsourcing of logistical services: in search of quality and cost reduction
While some companies keep their logistics operations under lock and key, considering them strategic in a highly competitive market, others delegate these operations to third parties, focusing on their core business. These are the interviewees of this special article from Logweb Digital.
Aquarius Antennas: carriers divided by region
Aquario Antennas offers technology solutions for 40 years. Its line is divided into products for TV, such as external and internal antennas, digital converters and accessories; cellular line, desktop, rural, signal repeaters, chargers, cellular antenna, antenna adapter and accessories; Internet, with wi-fi routers, professional Internet and accessories; and radio communication, including PX radio, PX mobile antennas, UHF antennas and accessories. The highlights are the Smart Box, which turns any television into a SmartTV, and the WEX 350, a wi-fi router. The entire logistics operation of delivery and post-sales of the company is outsourced. “Currently, the carriers we use are divided by region, observing the criteria of best cost and quality of operation,” explains Julião Moreira, logistics analyst at the company.
He also comments that they adopted this strategy because they believe it is the best way to: invest only in assets that will be used in the core business; use the best service providers to execute the operation; improve the efficiency of deliveries and post-sales logistics; simplify processes; and reduce administrative and operational costs. In the process, orders are separated, invoiced and shipped to customers through the carriers defined for each region. “For clients where delivery schedules are required, we carry out all the scheduling and inform the carriers. Alongside this we monitor 100% of delivery operations and after-sales logistics”, explains Moreira. But for these operations to be carried out satisfactorily, some challenges are faced. “Currently our main challenge is to serve customers with a variable purchasing profile: we serve large retailers, distributors, medium and small shops, as well as e-commerce. Another great challenge is the search for the reduction of deadlines for answering orders, allied to the reduction of costs, however, without reducing quality. And, finally, operational inefficiency in the receipt of orders by some customers, which ends up increasing the cost of some operations”, adds the logistics analyst.
As for the solution to these problems, he says that the reduction of costs and deadlines and better efficiency in operations are achieved by improving the analysis of Aquario’s operations. “To this end we are adopting tools that will enable a better understanding of the operational gaps we have. Allied to a better understanding of the operations and needs of our customers, the adoption of multiple modals and regional DCs can provide operational and cost gains”, he adds.
Atlas Ceramics: outsourcing aims at reducing costs
Manufacturer of porcelain tiles and ceramic tiles, Atlas Ceramics uses outsourced transport services for the raw materials used in the manufacture of tiles and also for the delivery of the final product to their customers. “We outsource these operations because we opted for cost reduction and the security that the management is done by companies with know-how in logistics. That is, hiring companies with expertise in logistics ensures cost reduction and increased quality in the cargo transport services”, explains Rui Valeije, general sales manager of Atlas.
However, not everything “are flowers”. The manager says that, with this outsourcing, he is usually faced with teams without training to handle the products and with a fleet which is not suitable for transportation. “In our case, we have strict criteria for the selection of service providers, taking into account the training of the team and the quality of the fleet, thus avoiding problems for our suppliers and customers”, he adds.
Uni Foods: outsourced operations for shorter delivery times
Today Uni Foods has four product lines. In 2015, it came up with a line of tapiocas, the following year, it brought a line of snack biscuits. Last year, it was the turn to give way to Chips Brasil, a line of chips made from cassava and sweet potato. Recently, it launched Farofas da Fazenda, made in palm oil. “In São Paulo, we have our own fleet that redistributes the products that leave Caieiras, SP, to the entire state of São Paulo. For the other states, we distribute the products with an outsourced service, through the large networks that have fleets in the region.”
Vagner Gomes, founder and CEO of Uni Foods, also highlights that they use outsourced operations to be able to deliver the products within a shorter time frame and to reach all the networks with competitive prices. “We use fleet outsourcing because of the partnership we have with the chains that sell our products. In addition to reaching the points of sale with a much more competitive price, we have also achieved partnerships to continue expanding our brand,” he added.
Pioneer Brazil: in Uberlândia, MG, warehousing and distribution of products manufactured in Manaus, AM
Pioneer Brazil is a world leader in the automotive sound segment. In terms of logistics, it works with two outsourced operators, one in a warehouse regime, located in Uberlândia, Minas Gerais, in the central region of the country, and the other in São Paulo, on Anhanguera Highway, near the ring road. “In Uberlândia we do storage and distribution of products manufactured in our unit located in the industrial hub of Manaus, AM. We serve the whole country, via road transport, with outputs from the Uberlândia warehouse, except the North region, which receives outputs directly from our factory in Manaus. With this maneuver, our clients, although they receive the NFs with a Manaus address, count on the fiscal benefits of a company from the Manaus free zone, having a differentiated delivery time, because physically the products are leaving Uberlândia. For example, the deliveries made to the capital of the State of São Paulo, leaving Uberlândia. In this case, we got to attend in D+2, and if invoiced directly from the plant in Manaus, on the road, they would receive in at least D+13″.
As for the outsourced warehouse in São Paulo,” continues João Paulo Oliveira, Sub-Manager of Logistics, “it performs four large operations: parts and pieces; service to the network of authorized technical stations throughout Brazil; OEM operations and service to assemblers; and imported and promotional materials, with which Pioneer attends marketing events. Oliveira also emphasized that they chose to outsource their logistics and transportation because Pioneer’s business is technology, developing and producing high quality equipment, and also because their cargo profile is high value-added and low volume, which makes it uncompetitive to maintain its own logistics. It would not be competitive to maintain its own logistics, and having a Distribution Centre just to distribute devices, given its current sales volume, would be better to develop partners with great capacity and know-how, and together with other clients with Pioneer’s cargo profile, they would certainly have a better freight and delivery negotiation. “Another point for which we opted for outsourcing is the issue of risk management. We know that the current situation in our country is not favorable when we talk about cargo theft. That is why we entrust our cargo to capable people who deal with risk management on a daily basis, always being up-to-date with the best in the market to mitigate risks.”
The logistics assistant manager also recalls that some points are very favorable when we talk about outsourcing. “Unfortunately, our country is not experiencing a good moment and transport is suffering from the situation, thus making it difficult to transport in Brazil. I can cite some faults: high value of fuel, with daily variation according to Petrobras’ new policy, precarious roads, our railway network is almost nothing if compared to the size of Brazil, cargo robberies and time restriction in large centers, among other difficulties.” That is why, continues Oliveira, outsourcing is a great benefit, because we leave in the hands of specialists, skilled and experienced people who will know how to manage all these difficulties that cover the logistics system. “And I didn’t even get into the people and asset management part – the trucks.”
On the other hand, in the case of Pioneer’s logistics and transport, the main problem in outsourcing the operation is depending on one or a few quality suppliers: depending on the product sold, there is seasonality, where on certain dates, there is an increase in sales, causing a shortage of manpower for service. “We can cite the example of ‘Black Friday’ in Brazil. In this period, we are forced to increase the delivery time for some regions, in order not to cause greater dissatisfaction to customers, due to lack of assets and manpower of partners. We have to remember that all delivery expertise is the responsibility of our partners and, in an eventual change, the learning curve for the new partner will be high, due to the particularity of each client.
To minimize the impact a little, in an eventual problem with outsourced partners, the company has at least two homologated partners. “For example, we can cite the Post Office. Almost every year there is some kind of stoppage, and to cover these moments, we have another partner with a homologated freight table, to cause less impact in these moments.” Regarding the expertise of the deliveries that are in the hands of the company’s partners, to mitigate any inconvenience in the event of a change, a customer delivery manual was created. Each Pioneer client has its own manual, with specifications about deliveries, including schedules, reception times, an online agenda on the portal or by email, cargo values, and other particularities of each client.
Brandili: outsourcing ensures continuity of services
Offering clothes for people from 0 to 18 years old, Brandili Têxtil outsources a large part of its logistics operations. Carlos Eduardo Guethz, logistics coordinator, recalls that, firstly, the transport of deliveries and collections at factories is outsourced. “All deliveries of cut parts for sewing, raw materials, thread and other items for making garments are carried out by an outsourced transport company, with trucks exclusively for this operation. The finished pieces are collected in the factories by the same trucks, and are delivered to Brandili’s expedition on the return of the vehicles.”
According to Guethz, vehicles are also outsourced to the quality, administrative and faction service sectors. “We have a fleet of small rented vehicles to supply all external activities of employees during the working day, being support in factions, quality inspections, commuting between units, purchasing, DHO and other necessary trips.”
Finally, there is vehicle tracking. All of the company’s own vehicles, rented vehicles and the trucks of the faction delivery transporter are tracked full time, to monitor routes, usage times and services, as well as the safety of drivers, passengers and assets. The logistics coordinator also recalls that there are several reasons for outsourcing. For example, cost reduction. “By outsourcing we reduce our fixed costs with payroll and vehicle maintenance.”
Another important factor is the question of continuity of service, that is, in case of holidays, illnesses or breakdown of vehicles, by contract the service provider needs to meet the demand, replacing equipment or labor. These are companies specialized in the field of activity, improving the quality of the service. Therefore, Guethz lists maintenance and labor cost reductions, in the case of faction delivery and collection vehicles, as benefits resulting from outsourcing. For the administrative vehicles, Brandili has opted for the ease of changing and renewing its fleet, with servicing and insurance included in a single contract. The tracking of the vehicles provides effective control over all movements, control of delivery and collection times and route control. “When using an outsourced service, we are open to possible situations, such as distancing and not being fully integrated into the company’s culture. But we have never had work-related problems. We always try to keep the outsourced companies in the service branches as needed, specify all the points of attention, introduce the company culture to the service providers’ employees, as well as our company processes,” adds the logistics coordinator.
Predilecta: daily monitoring of delivery performance
Within the logistics area, the entire internal operation, such as handling and storage in the factories of Predilecta (Phone: 0800 55.2727) – one of the largest food producers in the country, supplying tuna, condiments, sweets, preserves, sauces, soups, pasta, vegetables and guava – is its own. “We outsource most of the transport, and currently around 82.5% of the volume and all the external stock in the states of Mato Grosso do Sul, Goiás and Pará are the responsibility of Logistics Operators.”
Also according to Fernando Passos, manager of the company’s Logistics Operation, when the activity is outsourced and at a distance it is necessary a much greater commitment from the team responsible for stock control and deliveries. “We monitor delivery performance on a daily basis and inventory stocks on a monthly basis. Next November we will install the COMPROVEI system, which will monitor in real-time the status of deliveries, occurrences and scheduling of all invoices issued by the industry through a control panel in the company and an application on the mobile phone of the drivers of the fleets and carriers, which today number over 1,000.”
Passos also points out that the company outsources operations in certain areas to achieve cost reduction without losing quality. An example is the operation of fractional deliveries. “As we serve the entire national territory, we accredit specialist carriers in their region to distribute our products.” The manager of Predilecta’s Logistics Operation also recalls that when you outsource to companies that work with excellence in their area you get lower initial investment and greater control over variable costs, service quality is improved, value is added to the brand, costs are reduced and you have more time to work on core business. “With the current tax model, some states provide tax benefits and we always have to be on the lookout for those opportunities.”
Among the problems faced with outsourcing, Passos also reveals that the difference between cultures in a territory as extensive as Brazil is a point. In this branch of logistics understanding the activities of each partner and measuring their work is a big challenge. “We try to be increasingly closer to service providers, sharing with them the reasons that led us to seek outsourcing, what the company expects from the partnership and together we evaluate the results and opportunities to improve the process,” concludes the manager, when asked about how to overcome these problems.
Sika Brasil: homologated warehouse justifies the outsourcing
Sika Brasil outsources the transport and storage area. “All cargo transportation at Sika is contracted with several carriers. And the operation of storage of chemical products is classified, which requires an approved warehouse.” Still according to Eliseu Ribeiro, purchasing manager of the company, the transport is outsourced because it is not the Sika business – and involves high costs of investments in vehicles, personnel and system. On the storage case, the company doesn’t have a warehouse approved for storage operation of classified chemical products – which, also, would imply in high investments.
Ribeiro also highlights that outsourcing provides cost reduction in manpower and investment, in addition to providing guarantees. But there are also problems with this option. “First, the lack of quality of service and also the specialization that is expected by hiring a company for transportation or storage leaves much to be desired. To solve these problems, you need more attention to the needs and culture of the customer – customizing the service.”
Newell Brands: a shortage of transport service providers
Newell Brands A&C Brasil (Fone: 4020.2905) supplies a wide range of electroportables, such as kitchen, home, thermal comfort and beauty and health. And its logistics at the head office, in Piçarras, SC, involves an average of 40 vehicles/day, while at the branch in Feira de Santana, BA, there are around 20 vehicles/day. “Between fractional and dedicated dispatches there are more than 50 trips/day, from Piçarras and Feira de Santana to the whole national territory and Mercosur,” explains Nicklas Gehardt Meyer, operations director. And, in addition to road transport, the company still uses cabotage, because of the cost.
Also, to support its business volume, Newell Brands A&C Brazil has two Distribution Centers, one in Piçarras, with more than 30,000 m², and another in Feira de Santana, with more than 10,000 m², totaling almost 40,000 pallet-positions. Referring to the biggest logistical challenges faced by the company, Meyer highlights the lack of a greater variety of transport service providers with good standards and that comply with agreements and, after the tabulation of self-employed, hold freight increases. “These problems could be solved by developing current and potential carriers and partnering through operational synergy with other companies,” says the operations director. After all, in terms of his company’s logistics specifically, Meyer says it has a level of accuracy and flexibility in processes that no one else has in the market – “this being one of the big reasons our customers rate us very highly in their annual satisfaction survey.” And to adapt to the market, and in terms of logistics, the company has trained employees, reviewed processes, adopted a Carrier Qualification Program, adopted management through indicators and improved operational infrastructure.
Tintas Sherwin-Williams Brazil: also in use the maritime modal
“Transfer and distribution transport and Logistics Operator in the automotive line are operations collected in our DCs that are located next to our plants in São Paulo, in the cities of Taboão, Sumaré and São Bernardo do Campo, and one in the city of Igarassu, in Greater Recife, Pernambuco.” Also according to Paulo Pinho, Director of Operations Brazil at Tintas Sherwin-Williams, these collections are made daily and go to the central offices of the carriers that, from there, depending on the volume, are combined with the other customers of the carriers. In the case of full loads, these go directly to the customers. “We also use the sea modal always with full loads.
And the Logistic Operator when there is peak demand, which has been happening in one of the plants, and that temporarily meets our needs. There, full pallets follow and return to the DC complete also, and are used as a lung of the central stock”. Pinho also comments that transport is outsourced because it is not the company’s core business, and because of the high availability of carriers in the market, besides the reduction in labor costs and the elimination of fleet management. As for the Logistic Operator, for temporary circumstances.
“Brazilian laws lead large companies to focus only on their core business due to cost problems, mainly, but also for the management and optimization of assets”. On the benefits arising from outsourcing, the Operations director lists: greater flexibility of costs and demand. “We often have demand peaks in some weeks and idleness in others, which can lead to the mistake of having excess assets to meet the peak and shortage for cost reduction and fail to meet demand and worsen the level of service. With a partner, we have the flexibility for him to manage demands according to the profile of his clients”.
But, recalls Pinho, it can happen that when there is a concentration of sales, availability and punctuality is reduced. “Some partners need to evolve according to market needs. Few partners present novelties in the transport area and in service improvement and are restricted to freight price auctions, and not attentive to something that adds value to clients and clients’ clients. The transport in Brazil is very concentrated in road transport and there should be investment by the government in waterways because the value is low and the return is high, besides relieving the road network. The maritime and rail modes are also underused”.
The Operations director believes that these problems would be solved by working together, on the initiative and incentive of the shipper, “and Tintas Sherwin-Williams has been investing in technology, and some partners have accompanied us. The market will demand and the trend is a funnel of those who will survive this demand. This point is specifically about the road, but the way out is to open the modals with investment in railways and waterways and greater clarity and less bureaucracy for maritime companies to operate in Brazil, especially with the privatization of ports”.
Besides transport seeking a high indicator of OTIF, including availability of products, punctuality and reduction of delivery time, the company is investing in technology and customers will be able to track their orders. “We review frequency and modal to be used and constantly align the expectations and needs of our internal and external customers. We have meetings with our Sales, Marketing and Operations areas, we align the demand of the current month and the expectations for the next three months. With this, our production planning works in an organized manner and in sync with the market, increasing our customers’ satisfaction”.
Mazzaferro: attention to the difference of culture between contractor and contracted
Today, Mazzaferro Monofilamentos Técnicos, within its logistics operations, only outsources the freight process, i.e. transport, since its culture is focused on entrepreneurship, innovation, results, governance and sustainability. “We are looking to double our ROL in three years, so the total focus is on the core business.” Tania Abbomerato Zantut, Supply Chain manager, continues, explaining that when the company’s focus is not logistics, as is the case of Mazzaferro Monofilamentos, it should seek to outsource the secondary businesses, those whose performance does not affect the final result of the product, focusing on its true activity, on what really matters, which is the result of sales of its products.
Tania also reminds us that the benefits of outsourcing involve cost reduction and focus on the business. The focus in the logistics area, as in all areas, is to achieve results with the lowest possible cost. “The biggest advantage of outsourcing in logistics is cost reduction for the simple reason of sharing costs, which becomes variable, instead of fixed, and the company only pays for what it actually uses, generating good savings in a short time.” The Supply Chain manager also points out that if the company opts for its own logistics, it is necessary to set up a very complex and costly operation with all the necessary structure and the costs involved, purchase of its own fleet, payroll, place for the vehicles and all the department management, which makes the final product more expensive and directly affects the competitiveness of the product in the market. “With the outsourcing of logistics, one can optimize processes and costs, controlling and simplifying this activity. The outsourcing company takes full responsibility for mapping, process design, operation routine and controls.”
To achieve positive results in the outsourcing of logistics, still according to Tania, it is necessary to count on serious companies, technologically prepared with hardware and software, tracking applications that generate greater efficiency in information, more modern vehicles and which have periodic maintenance, ensuring greater speed in delivery and more security for the contractor, but this does not exclude the responsibility of the contractor in following up the process, monitoring the performance indexes in order to achieve the expected result. “When you decide to outsource – emphasizes the Supply Chain manager – you count on appropriate tools for that environment where companies already know what worked and start using such a tool and, consequently, the quality of the service delivered is much better. So, lower cost and quality are allies”. On the other hand, Tania says that one of the problems in outsourcing can be the very quality of the service delivered if a suitable partner is not found. Another problem may be the difference in culture between the parties, contractor and contracted party.
To solve these problems, she suggests doing a lot of research, seeking indications of partnerships, analyzing the costs involved before approving the supplier and, in the case of a cost that is too low in relation to the market, being concerned. It is necessary to research the history of the company before hiring it, in order to check if it already operates with similar cargo to the one you intend to send, start the service with shorter routes and gradually increase in order to understand the capacities of the carrier, know which are the communication channels, including post-sales, and accompany at least initially the loading, unloading, handling and storage process of the carrier company. All these actions, says the manager, will bring greater confidence in hiring the service, minimizing the possibility of problems.
Mazzaferro Monofilamentos was founded in 1984 and is the largest producer of technical yarns in Latin America, serving more than 50 different industrial processing chains. Besides the Monofilament business unit, the company also operates other sub-units: Linea Bella (houseware), Mazzaferro Medical (medical devices) and Mazzaferro Color Charts (catalogues and displays for the cosmetics sector).
Published in Logweb magazine on October 30th, 2018: