Component Based Solutions Well Aligned with Needs of Service Logistics Providers Service Logistics supply chains are very dynamic. Achieving customer satisfaction depends not only delivering the right parts, but also the right people, the right tools and the right information to the right place at the right time. Two Service Logistics providers, TNT and IMI Bevcore, concluded that in order to effectively enable their processes, they had to implement logistics software based on component-assembly architectures.

1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN
ARC INSIGHTS
By Steve Banker
Service Logistics providers like TNT and
IMI Bevcore support many clients, each
with different processes and business
rules. In order to effectively manage
their operations, both companies
determined that logistics software
based on component-assembly
architectures are the best solution.
INSIGHT# 2003-38E
SEPTEMBER 10, 2003
Component Based Solutions Well Aligned with
Needs of Service Logistics Providers
Keywords
WMS, Third Party Logistics, Service Logistics
Summary
Service Logistics supply chains are very dynamic. Achieving customer sat-
isfaction depends not only delivering the right parts, but also the right
people, the right tools and the right information to the right place at the
right time. Two Service Logistics providers, TNT and IMI Bevcore, con-
cluded that in order to effectively enable their proc-
esses, they had to implement logistics software
based on component-assembly architectures.
Analysis
This Insight examines two Service Logistics supply
chains: TNT’s in Asia and IMI Bevcore’s in North
America. Both companies implemented software
solutions based on component-assembly architectures in order to power
unique business processes. Component assembly software, in contrast to
traditional solutions that utilize a table-driven configuration, allow service
providers to manage multiple warehouses and customers, each with differ-
ent processes and business rules, via a single instance of the solution.
Component architecture also allows companies to develop and provide
new services without paying for costly enhancements to the code and with-
out endangering the upgrade path.
TNT Logistics
After-market logistics is a niche market for TNT. It’s a market that requires
strategic and long-lasting relationships with clients due to the critical na-
ture of the services provided and the leverage provided by a preexisting
network of warehouses.
Companies like Cisco and Nokia contract with TNT to manage and execute
the spare parts service agreements they have with their clients. For exam-

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ple, TNT’s Cisco contract defines service levels for spare parts, whereby the
delivery window for non-critical parts is 24 hours, but for critical parts it’s 4
hours, with penalties charged if parts arrive late. In addition, part swaps
are typically involved, whereby replacement parts are sent to the customer
while the faulty part is sent back for repair.
Consequently, a large network of small depots with forward deployed in-
ventory is necessary. TNT has 78 facilities across 10 countries in Asia, as
well as single facilities in Germany and Holland. The configuration of the
network generally includes a country
central warehouse, many small for-
ward stocking locations, as well as
inventory at the customer site. Repair
centers are located in a separate loca-
tion from the regional or country
distribution center (DC). Logistics in
Asia is particularly difficult because
the customs rules of different nations
are not always transparent and it can
be difficult to estimate how long it
will take goods to clear customs.
Repair parts usually flow from the
forward stocking location closest to
the customer site. These sites, in turn,
have min-max or Just-in-Time replen-
ishment rules. The inventory to replenish them may come from the country
warehouse, other forward locations, or even in-transit shipments. Visibility
into these multiple sources of inventory is critical to effectively manage
these facilities and to reduce the layers of inventory across the multi-
echelon supply chain.
The swapping of parts means that reverse logistics is also important.
Swaps are more complex than might be imagined and there are several
variations. The process begins when an authorized customer engineer en-
ters a password-protected Website and requests a service (swap, advance
swap, etc.) The system verifies that (based on the contract agreement) the
customer engineer is entitled to the service selected and then generates a
Return Materials Authorization (RMA). Customer engineers can use their
PDA to query parts availability at the warehouse, place orders, and receive
Swap Type Description
Regular Swap Replacement part is issued and faulty
part is received at the same time
Advance Swap Replacement part is issued in advance
of the return of the faulty part
Repair & Return
without Loan
Faulty part sent to repair facility, re-
paired, and then returned to customer
Repair & Return
with Loan
Faulty part is exchanged for a loan
part. The faulty part is sent to the
Repair Center, repaired, and returned.
Customer then returns the loaned part.
Loan Part Loan Part is issued to the customer but
there is no return of faulty part. Sub-
sequently, the loaned part is returned.
Parts Issuance A new part is issued to the customer
and the customer is invoiced.
Types of Swaps

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notification when the parts are dispatched from the warehouse. The service
logistics system also tracks the faulty parts that engineers “owe” a stocking
location under an advance swap transaction.
The small forward stocking locations did not warrant an investment in RF
technology, so the real time data is provided by a combination of data en-
tries into the Internet portal and barcode scans. Event visibility includes
inventory availability, repair status, customs clearance status, in-transit
status, advance shipment notification, and expected receipt times. Users
can access real-time Web reports on inventory, service performance, order
status, and parts consumption and the system supports multiple languages
and currencies.
This service logistics system was developed by V3 Systems to TNT’s speci-
fications. The implementation began in March of 2002 and went live in July
of that year. Traditional client/server solutions would have required im-
plementations at 78 sites. The centrally-hosted V3 solution was
implemented much faster because it was installed at just one site in Singa-
pore. V3’s component architecture allowed one instance of the software to
support multiple TNT customers with different processes and unique busi-
ness logic.
IMI Bevcore
Bevcore is a new company in the IMI group of companies that opened its
doors in October of 2001. They are a spin off of the manufacturer IMI Cor-
nelius, a leading manufacturer of beverage dispensing and cooling
equipment. Bevcore distributes spare parts (from Cornelius and other
manufacturers) for the beverage service industry, where fountain equip-
ment is rented inexpensively to chains like McDonald’s and they’re
serviced by the beverage company.
Bevcore came into existence because the previous service model was not
fully satisfying customers. Cornelius had seven distribution centers scat-
tered across North America. When a customer placed a multi-line order for
spare parts, the inventory was often located in different warehouses. The
result was that orders were frequently shipped incomplete. In addition, the
existing systems did not support special services that could help grow the
business.

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Bevcore’s Monthly Shipments
PO Receipts
• 2,118 PO Receipts, 5,102 Lines,
762,019 Units
Shipments
• 6,745 Orders Shipped, 7,406
Cartons Shipped, 18,065 Lines
Shipped, 652,657 Units Shipped
• 2.7 Lines per Order
Cycle Counts
• 95 / Day
In contrast, Bevcore operates just one 70,000 square
foot distribution center that carries all 32,000 active
stock keeping units. Many parts are sold as part of a
regular replenishment purchase order, but Bevcore
also provides critical parts by next day air. Bevcore
considers itself competitive on price, but the com-
pany believes that its services differentiate it from its
competitors. For example, Bevcore won the business
of one customer by being able to create a custom la-
bel that upon being scanned at the customer’s
warehouse tells the worker where to store that inven-
tory in their DC. This customer went from doing put
away in three hours to 45 minutes. One key service is that a customer can
place a rush order first thing in the morning, another rush order at noon, and
Bevcore will often ship the two orders on the same overnight air shipment so
that the customer only has to pay one air bill instead of two. For large cus-
tomers, this can save thousands of dollars per month.
HighJump’s WMS was selected primarily because it allows Bevcore to con-
tinue to develop new services and operating efficiencies without paying for
costly outside enhancements to the code and without endangering the up-
grade path. For example, Bevcore’s small IT crew created the ability to scan
a barcode and have the system print the correct documentation for interna-
tional shipments without any use of any consultants. The HighJump
implementation helped enable a profitable new business model.
Recommendations
• Consider outsourcing service logistics. A 3PL with an existing network
of service warehouses will frequently be able to do this cheaper and
better.
• For unique or dynamic supply chains, consider a solution based on
component assembly architecture.
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