Partnership is a word that is bandied about all too easily in logistics but when two companies really do work together effectively it can bring significant rewards to both sides. TNT Logistics and aerospace manufacturer Rolls-Royce have jointly improved several areas of the latter's supply chain over the last few years, winning the MT Award for Partnership as a result. The relationship began as a transport contract within the UK but has developed into many other areas including international movements, warehousing and supplier collections.
The contract started in 2000 and was renewed in 2003 for a further five years. It is based on open-book terms of costs plus a management fee with a 'Benefit Share' clause, where savings made in the first year of any logistics initiative are shared between the two firms - by the time of the award this had resulted in payments of £500,000 to TNT. Mel Button, senior general manager of Aerospace & Defence at TNT Logistics, says that a key element of the partnership is openness. The two teams physically sit together in Rolls-Royce's Derby headquarters to create a 'one-team' approach and share IT and administration systems.
"We have an open plan office and our team is integrated with that from Rolls-Royce. If people visit our office they are unable to tell who is from which firm," he says. Apart from a feeling of camaraderie that this brought from the very start of the contract, there are practical advantages. If, for instance, there is an operational glitch it can be quickly sorted out between the two teams. "It completely stops problems festering and getting out of hand," Button explains.
Another important element to the relationship is patience and the acceptance that, although they can move forward together, with two large firms this can only be achieved at a certain pace. So far there have been several benefits to the business. There has been a 20% improvement in delivery performance and a 30% increase in productivity in the transport process. The number of vehicles serving the operation has been reduced despite a 40% increase in demand and there has been a 2.7m reduction in annual miles.
There have also been improvements in the use of IT and administrative procedures leading to a halving of goods receipt queries and barcode scanning efficiencies have led to a 30% reduction in cross-dock labour. Before the contract started TNT installed an on-site team to analyse the needs of the business, in conjunction with Rolls-Royce. This became the basis of a business plan which is nowadays developed annually but reviewed every two weeks to ensure that targets are being achieved, to reset planned activities or to introduce new requirements.
For each new initiative a 'Pre-Project Charter', setting the objectives, scope and risks, is created and signed off by all those involved. An appropriate level of resources is allocated to the project and joint teams are drawn from the two sides. To manage the contract effectively there are daily updates, weekly reviews and monthly steering groups, with senior directors conducting quarterly reviews. In all there are 170 TNT employees assigned to the contract at various locations in the UK, along with five people at Rolls-Royce's office in Indianapolis.
Rolls-Royce supplies the civil aerospace, defence, energy and marine industries and TNT's work can involve moving anything from small parts to large aircraft engines, such as the Trent 900 engine for the giant A380 Airbus. The workflow can be uneven due to the project-based nature of many of the end uses of the equipment. "We come up with clear objectives to meet Rolls-Royce's business plan. They may say they need to move x number of engines, so we would sit down and see how best we would support that plan," Button comments.
"It is a non-adversarial process. If our counterpart says 'Can you do this?' we might say 'Yes we can do this but it might affect something else you're doing'. It is a question of give and take." Button says that introduction of new factories or relocation of specific engine production calls for detailed logistics planning. Recently production of the V2500 engine was moved from the UK to Germany and this involved redesigning the inbound supply chain and final delivery routes.
"The golden rule is to prepare for new services or changes with good planning and communication," he says. Where necessary TNT will add to the infrastructure to support any new developments in the business. It has invested £7m in vehicles, buildings and IT systems over the years, as well as introducing corporate administration and quality processes.
TNT and Rolls-Royce jointly developed a system for tracing materials from collection through to delivery to the end customer. This is known as E-Manifest and links directly into Rolls-Royce's host SAP system. The system was developed in conjunction with Microlise and Red Prairie and covers 150 UK suppliers, who make up 80% of suppliers by volume and cost. It is currently being extended to Rolls-Royce's international supplier base.
If a collection is made at a supplier, the system will know exactly how many items should be collected and, once the correct amount has been loaded onto the vehicle, a message is transmitted back to the centre. The system will then identify it as Material-in-Transit and knows it will arrive in a certain amount of time. Once it does so it identifies it as Material-on-Site before tracking the rest of the production and delivery cycle.
Button expects the relationship between TNT and Rolls-Royce to develop in the future, as the market changes. The supply chain is becoming more extended towards the Far East and there is pressure to manufacture engines faster and then move them faster. The aftermarket for aircraft spares is also growing in line with the rising popularity of air travel. The partnership will develop accordingly, Button believes. "There was a common bond and a feeling of being in it together from the word go but you learn to trust your counterpart more as time goes on," he says.
UK NETWORK
One of the most important initiatives TNT and Rolls-Royce put in place was centrally-managed inter-site transport within the UK. Rolls-Royce has eight sites around the country and previously product would be moved directly between them but is now sent via a central hub. For example, if material needed to be moved from Bristol to Glasgow this would involve a 3-4 day round trip. Nowadays product is taken to Derby where it is cross-docked for delivery in Scotland the next day, with the original vehicle going back to Bristol with a return load.
A supplier collection service has also been put in place to pick-up from 150 leading suppliers. This has made the flow of products more reliable and smoothed any peaks - rather than sending products in large batches suppliers now have them collected in smaller but more frequent consignments. Often the needs of Rolls Royce business units are identified when they ring TNT's call centre to book a delivery and these are either accommodated in transit timetables or other transport is arranged.
Ad-hoc deliveries outside the timetable are managed by a dedicated team in the call centre who take bookings and optimise the transport networks. Such movements are kept to a minimum by frequent reviews of the timetable to check it is still fulfilling Rolls-Royce's requirements. "It is possible to spot emerging trends. For example, there could be a change of suppliers or a loading of production from one to another," Button says.
SCOPE OF OPERATIONS
TNT and Rolls-Royce have developed a number of extra services over the years, beyond the UK transport operations. Supplier collections are made from Europe and the US for use in production plants in the US, Germany or the UK. As well as dealing with Rolls-Royce, TNT needs to build relationships with transport sub-contractors, freight forwarders and carriers - for example material that needs to be transported by air from the US to the UK or Europe is carried by KLM. These companies are considered as part of the Rolls-Royce team and an open relationship is encouraged between all parties.
Other new services developed during the life of the contract include warehousing of aftermarket spares for the energy and naval marine parts industries, along with storage of aircraft engines at the Derby site. "Our approach is that anything is in the scope of the contract unless there is a good business reason why it is not in scope," Button explains.
WHAT THE JUDGES SAID:
- Strong, clear presentation supporting true partnership processes and shared benefits.
- Shows real evidence of a long-term partnership with benefits to both parties as a result of operational improvements.
- Good joint entry with a clear process at all levels with shared benefits. A strong winner.
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