Thinking Logistically
Nashville Business Journal - by Jim Stinson Nashville Business Journal
Logistics can mean millions of dollars and are often the deciding factor in whether a commercial real estate deal happens.
That's why Nashville-based ProVenture Corporate Real Estate and Ozburn-Hessey Logistics use two complex software programs to handle the logistics consulting services they offer to clients.
Each program comes at a price in the low six-figures and crank out numbers and advice in the course of a two- to 12-week consulting period.
The savings the sophisticated software can generate are substantial. The average is about 15 percent off every logistics dollar, says Jeb Atkinson, vice president of ProVenture Commercial Real Estate, which has a strategic relationship with OH Logistics.
The software analyzes a variety of issues, from interstate roads to rail locations. Half of the project is refining the data the software will use, says William Maund, vice president of transportation management systems and strategic development for OH Logistics.
"The calculations that are involved are really amazing," says Maund.
A key factor in analysis is transportation costs. They account for as much as 80 percent of the long-term impact of the decision, Atkinson says.
"The payback can often be in the multiple of millions of dollars," says James Foggin, associate professor of logistics at the University of Tennessee. "The payback is huge."
Foggin uses a similar software product to teach undergraduates about logistics at the University of Tennessee.
Beyond benefiting from the software's ability to identify a suitable location, companies already established come back every two years, Atkinson says, to tighten up their delivery systems and re-route their logistical delivery and warehousing.
Atkinson says the biggest savings happen after mergers, when new supply chains have to be designed.
Some companies can grow by up to 40 percent a year, and then there are costs and problems.
Distribution companies can also merge with competitors and find themselves supplying many of the same clients.
Other clients face problems beyond their control, such as congested shipping ports, says Maund.
That happened to one of ProVenture's clients in 2004 and 2005, Atkinson says.
He says the joint port of Los Angeles and Long Beach, Calif., had fallen behind on expanding its operations.
The collective port is North America's largest, and when unloading slows, clients can get behind on distribution.
New York City and northern New Jersey were also looked at, but they had weather issues. The client's product could have easily frozen there, Atkinson says.
After examining options, OH Logistics and ProVenture recommended an inland port and a port warehouse in Winchester, Va., near the Norfolk port.
Clients are often not looking for one answer, but several options, and a clarification of numbers, Atkinson says.
OH Logistics will soon move one of its computers to Nashville from a St. Louis office. A full-time engineer will operate the software here.
The total and ongoing costs of the two programs can approach $500,000 a year, but company officials and logistics experts say the software is worth it.
One of the programs OH Logistics uses is Logic Tools by ILOG. Another is SAILS by Insight Inc.
Atkinson says clients tend to focus on customer service and costs and that some clients will balk at tightening up distribution centers and routes if it means they cannot deliver products to customers within their promised time frame.
jstinson@bizjournals.com, 615-846-4254
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