Innovative Strategy
Alaska Communications (ACS) faces some unique challenges: extremely long distances between warehouses throughout the state, remote service locations, extreme weather conditions, and multiple customer types. As part of a large network of warehouse locations, ACS has a small warehouse in Juneau that serves all of southeastern Alaska and supports retail operations, counter services for installers, a broad array of wireless and wire line installation services, as well as repair functions that need to be highly responsive to natural events such as winter storms.
ACS prides itself on its ability to meet high customer expectations, and it is designing an innovative 3PL (third-party logistics) approach to meet its goals.
From Here to There
ACS has clear opportunities for logistics optimization. The company’s Juneau location currently orders materials from the Anchorage location, which serves as a distribution center for outlying warehouses.
In addition, it also is responsible for servicing its own customers: retail stores, construction projects, service vehicles and installers.
Anchorage gets a good portion of their material from suppliers that are located in Seattle. When Juneau needs to place a replenishment order, the items are shipped from Anchorage to Juneau via a combination of truck and ferry. This combination of modes is a necessity because Juneau cannot be accessed by road.
However, some shipments actually go from Anchorage to Seattle and are then barged north to Juneau. This means that the logistics chain for those items is Seattle to Anchorage, back to Seattle, and then to Juneau.
The Juneau location is operated by an in-house warehouseperson supplemented by other local personnel and occasionally by someone from Anchorage. They send replenishment orders by email or fax to Anchorage.
Movement of material is recorded as to purpose and project. Ultimately, that information is also sent to the Anchorage site.
Goals for Improvement
There are three primary goals for workflow improvement at the Juneau location. They are:
- Dramatically improved service levels
- Lower logistics costs
- Reduced inventory levels
This effort is part of a much larger warehouse and inventory process improvement program that is rolling out across the various locations.
Juneau has already supplemented its workforce with an outside contractor who has done many of their installations over the years.
3PL vs. In-House Management
Many companies use 3PL to help manage inventory and provide effective storage, management and shipment of their materials. A 3PL provider typically specializes in outsourcing operations, warehousing and transportation services and scaling these services to meet the customer’s needs.
The alternative is having an in-house network of warehouses and distribution centers to optimize inventory management and flow. Many companies consider it to be an either/or proposition, while some use a blend of both methods.
For ACS’s Juneau location, relying exclusively on 3PL isn’t an option. Local coordination is essential for immediate response to service requests, and for just-in-time (JIT) delivery to retail and other operations. At the same time, the size of the operation does not provide an adequate return on investment for a completely in-house operation. So, what to do?
A Unique Partnership
ACS has used a three-way partnership between itself, the Juneau contractor and a VMI supplier to develop an innovative approach to 3PL for supply chain and logistics management. To begin with, the company kept the physical space local to the Juneau office, allowing excellent service desk response and JIT delivery to retail operations.
Second, the company staffed the facility part time using its outside contractor partner who is intimately familiar not only with the parts, but with the location’s operations and needs. The contractor is on site several hours a day to fill orders and load out materials as needed.
Third, ACS partnered with its vendor-managed inventory (VMI) supplier in Anchorage to provide most of the materials the company needs. The supplier has a network of distribution centers in Alaska and around the western United States.
For the Juneau facility, the supplier service location is in Seattle, which cuts out half of the transportation currently required.
Staying in Control
In order to maintain an adequate level of internal control, materials issues are forwarded to the Anchorage staff for tracking. They know what should be issued to jobs and what has been transferred to retail locations, so they have a good idea of what should be moving out of the location. This not only helps replenishment but also provides control over what should be in stock.
The contractor records materials issues as he services demand at the counter. If parts are needed when the contractor isn’t present, the local general manager can provide the parts and issue inventory as needed.
The local employees know that if they don’t record what they take, there won’t be replenishment and they will run out of inventory, which serves as a good incentive to track activity.
Finally, a staff member from Anchorage travels to Juneau on a quarterly basis to conduct cycle counts and confirm inventory levels.
This three-way partnership helps fulfill the primary goals for workflow improvement, as well as keeping balanced control elements. Control of inventory is provided by:
- Knowing what is supposed to be issued (demand/design of the jobs);
- Quarterly cycle counts;
- Local monitoring by the general manager;
- Employee awareness of the process and the benefits to them.
The former warehouse person will be redeployed to customer service, which will actually makes better use of their skills and experience. This also helps to avoid a layoff, which would be counterproductive to the improvement culture the company is in the midst of developing.
By designing an innovative 3PL strategy that uses a mix of insourcing and outsourcing through partnerships with customers, suppliers and company personnel, ACS is working to solve their logistics problems in a way that normal 3PL probably couldn’t. The high service levels, low inventory and lower overall costs are achievements that the company and its partners all relish.
Rick Pay has been dubbed by his clients as the “Sherlock Holmes of Operations and Supply Chain Management.” He appears regularly as a speaker, is a frequent contributor to magazines and newsletters, and publishes his insights on his blog, Operations Payoff. Find out more at www.rpaycompany.com.