Penske Logistics

Increase Supply Chain Agility by Planning Ahead

Natural disasters, supply chain bottlenecks and infrastructure challenges can all disrupt the movement of goods, and shippers are looking for ways to adapt to unforeseen circumstances, respond to disruptions and increase agility.

“Coming out of the pandemic, everyone in the supply chain is a little bit shell-shocked and thinking about what’s next,” said Amy Ilyes, vice president of logistics engineering for Penske Logistics. “Everyone needs a contingency plan. If you have done some type of planning and examined different scenarios and costs, you know the highest risk areas of your supply chain and can pivot to the most advantageous scenario.”

Contingency Planning

Data, the technology to run what-if scenarios, and supply chain visibility are at the core of an effective contingency plan. When evaluating various scenarios, Penske creates risk scores associated with different regions. “It may be a political risk or the potential for a calamity of some sort. As we look at different alternatives, we think of the risk associated with each of the network designs,” Ilyes said.

As a solution, shippers are looking to shorten their supply chains through nearshoring and adding suppliers to help reduce potential disruptions. “We can run what-if scenarios to see what the impact will be from a supply chain perspective if they nearshore or diversify their supply base,” Ilyes said.

Engineers can simulate supply chain networks using different ports, routes, suppliers, modes of transportation and inventory levels. The models help shippers determine which channels should be served by which locations, optimal supplier base locations, the best ports of entry and the ideal positions of brick-and-mortar warehouses.

The recent Francis Scott Key Bridge collapse in Baltimore, Maryland, the current drought in the Panama Canal and ongoing labor talks at North American ports have highlighted the need to identify backup ports and alternative transportation solutions. Plus, being able to react quickly is becoming even more important as customer expectations continue to rise.

Optimal Distribution Case Study

For example, in 2021, an agriculture, turf and construction equipment manufacturer was seeking solutions to pandemic-induced disruptions. By leveraging route modeling software to analyze historical and forecasted data, a new optimized distribution model was identified for maximum product availability.

A strategic overhaul of the manufacturer’s network engineering improved their lead times and freight costs. Penske managed this by:

Changing the port of entry for specific construction equipment from Savannah to Baltimore
Optimizing freight into multistop truckloads direct to dealers closer to the Baltimore port
Bypassing the national distribution center for equipment, reducing lead times by eight days

Transforming the distribution process also enabled the manufacturer to cost-effectively bring equipment to market faster, boosting their market share as a result. Bypassing the national distribution center serving the northeast market also eliminated eight days of transit time.

No one could have predicted the Francis Scott Key Bridge collapse in 2024 — but because Penske makes it a practice to conduct continued network design evaluations, the manufacturer was able to quickly divert shipments to an alternative in Norfolk, Virginia. This port was identified in a previous engineering study as a cost-effective solution to transitioning away from Savannah and only added one to two days of transit time versus halting distribution altogether at the Port of Baltimore for an extended period.

Having a contingency plan is crucial to be able to pivot in times of uncertainty. In some instances, such as a port closure, business can be halted and even shut down entirely if a backup plan is not quickly enacted.

Diligent contingency planning enabled Penske to provide value to the manufacturer with:

A $5 million cost reduction in transportation by bypassing the national distribution center and shipping more directly
An 8-day lead time improvement to dealers

A market share increase with improved product availability

Now that the Port of Baltimore has reopened, the manufacturer is looking to redirect equipment imports there again.

Visibility

Visibility is also a critical tool that can increase agility. Having a comprehensive view of the supply chain enables shippers to identify suppliers, routes or regions experiencing delays and adjust operations. Visibility can also help companies manage inventory and identify the best locations to use when sourcing products.

“You want to be sure your inventory visibility is at 99.9% so you know that when an order is placed, the goods are in the facility,” Ilyes said.

Information comes from multiple sources throughout the supply chain and knitting it all together can be a challenge. “Shippers may have one provider that does warehousing and one that does transportation,” Ilyes explained, adding that Penske’s ClearChain® technology suite pulls together information to create a real-time, high-level, connected view as well as granular specifics that can inform decision-making.

Transportation Management

To help gain control of the supply chain, more and more companies are interested in managing the transportation into their facility rather than relying on their suppliers to transport goods. “We’ve had a lot of requests to help shippers unbundle the cost of the product on the transportation portion of the contract,” Ilyes said.

Shippers may not even know where their suppliers are shipping from, but Ilyes said there are opportunities to create a supplier compliance program that specifies which distribution center they ship from. “It may be one that is closer, which will give you better service,” Ilyes explained, adding that compliance programs should be audited regularly.

Evaluating the whole network — including sourcing locations, inventory levels, product demand and transportation providers — can help shippers improve the overall engineering of the supply chain, increase efficiency and build resiliency. Ilyes recommends companies review their networks and transportation providers regularly to remain flexible. “You want to be able to make changes quickly based on engineers’ feedback,” she stated.

Supply chain resiliency is a fundamental principle, and to remain competitive, shippers and their logistics providers have to be able to pivot quickly in the face of adversity.

To learn more about Penske’s tools to increase agility, contact us.

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Manufacturing Growth in Mexico Creates New Service Demands

According to the Office of the U.S. Trade Representative, U.S. goods exports to Mexico in 2022, the latest year for which numbers are available, were $324.3 billion, up 17% from 2021 and 50% from 2012. U.S. goods imports from Mexico totaled $454.8 billion in 2022, up 18.9% from 2021 and 64% from 2012.

Nearshoring is on the rise, and a growing number of manufacturers are moving production to Mexico to reduce delivery times, increase agility and take advantage of favorable trade conditions. In addition to new businesses moving into Mexico, companies already doing business there are expanding, increasing demand for cross-border and intra-Mexico transportation solutions and warehousing.

Operating in Mexico

“When people think of Mexico, the first thing they think of is the border. But Mexico is a large country, and there are a lot of kilometers to traverse ,” said Bob Black, vice president of operations at Penske Logistics. “You need to have an understanding of the country, the infrastructure and regulatory requirements. It’s also invaluable to have people who are knowledgeable about operating in Mexico, have lived there and understand the culture.”

Black said it is essential for logistics providers in Mexico to thoroughly understand the labor, government, city and state requirements because they can be unique. “There are new regulatory requirements on the patrol of goods that we’re seeing now, and we anticipate more coming as Mexico matures,” he explained, adding that the existing government has prioritized labor reform.

Knowledge of the country also aids in change management and agility. “Understanding where resources are, quickly determining short-term solutions, such as warehousing or parking, and anticipating what could come next based on historical issues or experience creates an advantage,” Black said.

Mexico recently experienced heat waves that created power challenges, and the power grid is becoming strained due to growth. “We’re seeing manufacturing facilities that have had to shut down for certain periods,” Black said. “Cities in Mexico are moving as fast as they can to upgrade their infrastructure, but these are things that aren’t necessarily top of mind.”

Managing the Border

By moving operations to Mexico, companies can take advantage of Mexico’s shared border with the U.S., which is the world’s largest economy. Mexico also has multiple trade pacts, including the United States–Mexico–Canada Agreement.

Scenario planning and visibility are even more crucial at the border. “The number of U.S.-based companies operating at the border with little to no visibility is shocking. Penske’s mission is to bring visibility to them,” added Black. “It’s very difficult to pivot in the supply chain. We’ve helped partners build solutions and temporary balances for things like strikes, and that’s why it’s important to bridge a gap on the other side.”

Labor Considerations

Lower labor costs in Mexico have also made the country attractive. However, new growth is making the market for talent more competitive. “When considering labor, it is important to be an employer of choice in Mexico through publications and surveys. That also means that you’re properly compensating monetarily, providing benefits and supporting employees emotionally with things like paid holidays,” Black said, adding that as the market grows, wages will have to increase, which has the potential to change the ROI.

In some areas of Mexico, pulling employees from nearby areas may be necessary. “We first try to staff with locals, but we have experienced situations where we provided transportation and brought employees in from outside the city,” Black said.

Optimizing Operations

Growth is also increasing demand for warehousing and industrial space. “Size and market dictate availability. Our customers are asking us to analyze the market and identify suitable facilities,” Black said.

Businesses are also seeking guidance on their existing operations and locations in Mexico. “A lot of companies have experienced natural growth over the past 10 years, so you can see a patchwork of facilities. We can look at it to see if it makes sense to consolidate into larger facilities,” Black added.

Penske’s engineers can create models and run what-if scenarios that analyze transportation network design, warehouse sizes and facility locations. Engineers can also look at the ripple effect network changes can have throughout the supply chain. For example, companies doing business in Mexico are often Tier 1 suppliers. “If they introduce a new model into a Mexico plant, other tiers in the supply chain are impacted as well,” Black said. A large part of Mexico’s industry is automotive manufacturing. New vehicles and model changes can require Tier 1 suppliers to ensure their supply chain is prepared to support the production needs of these manufacturing operations.

Most companies doing business in Mexico are multinational, which means decision-makers are often located abroad, adding to the complexity of their operations. “You have to know where the final decision-maker is and know and understand the local operations so you can meet their needs,” explained Don Klug, vice president of sales for Penske Logistics.

Serving Customers

Penske has provided freight management, warehousing and brokerage solutions in Mexico for over 20 years and is a registered service provider. With thousands of team members located throughout the country, Penske can provide engineered solutions, execution and day-to-day management of any company’s supply chain requirements in different verticals.

“We have built a solid team that understands the requirements, intricacies and challenges of operating in Mexico,” Black said. “We are excited about the anticipated growth in Mexico in the coming years and the growth of our footprint in the market.”

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3PLs Lease More Warehouse Space as Shippers Seek Out Their Services

Third-party logistics providers are now leasing more warehousing space than any other sector amid growing demand for 3PL services. CBRE's 2023 North America Industrial Big Box report found that 3PLs accounted for 41% of all lease transactions at traditional warehouses and distribution centers, with at least 200,000 square feet in 2022, surpassing retailers and wholesalers for the first time on record.

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Eight Things You Need to Know About the Food Safety Modernization Act

The Food Safety Modernization Act (FSMA) is transforming the nation’s food safety system by implementing best practices and requirements designed to prevent foodborne illnesses in consumers. Many of the FSMA provisions relate directly to the supply chain and keeping food and beverage products safe, fresh and enjoyable.

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Core Supply Chain Principles: Getting Back to Basics

The supply chain continues to deal with ongoing disruptions, which have become increasingly numerous, larger in scale and more simultaneous. While technology plays a critical role in keeping products moving, 3PLs and shippers can’t overlook the value of getting back to basics and focusing on core supply chain principles that have proven successful time and time again.

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Logistics Service Providers Add Value

Increasing consumer expectations, ongoing volatility, and the drive to increase efficiency and control costs continue to enhance the value logistics service providers offer to shippers. The supply chain and logistics sectors have relied significantly on third-party providers to create and deliver value to end-user customers and consumers, the 27th Annual Third-Party Logistics Study reported.

“As the relevance of the end-to-end supply concept continues to advance, it has become clear that the quality of relationships between 3PLs and shippers is a valuable component of overall supply chain success,” according to the report, which was sponsored by Penske Logistics.

Dr. John Langley, a Penn State University supply chain professor and the founder of the Third-Party Logistics Study, wrote within the report that shippers continue to leverage what logistics service providers offer, and this facilitates optimization of the supply chain, minimization of costs and creation of value. Here are three ways logistics service providers are adding value to their customers.

Logistics Service Providers Drive Efficiency

The use of outsourcing can drive efficiencies, and each shipper organization needs to diligently assess the need for all of its supply chain services and determine which strategies relating to outsourcing best fit their needs, according to the study. The percentage of total logistics expenditures directed to outsourcing was slightly higher at 42% in the 2023 study, versus the 40% reported in the previous 3PL study.

There has been a continuation of the most frequently outsourced activities, which tend to be those that are more transactional, operational and repetitive, Langley wrote. The most prevalent activities shippers outsource is domestic transportation (69%), freight forwarding (60%), international transportation (52%) and customs brokerage (51%).

Technology Provided by a Logistics Service Provider

The 2023 Third-Party Logistics Study highlighted once again how important it is for logistics service providers to provide a range of IT-based services to help create value for their shipper customers. Shippers are increasingly aware that if they do not have the technological capabilities to accomplish their goals, they should partner with those that do.

Technology is increasing at a rapid pace and 65% of shippers stated that their expectations have been increasing, while 78% of 3PLs believe that shipper expectations have increased in regard to the technology solutions they offer.

Shippers appear to be becoming more confident in 3PLs’ technology offerings. Execution and transaction-based technologies tended to increase over the previous year, including transportation management-planning (62%), transportation management-scheduling (57%) and warehouse/distribution center management (48%), according to the study.

The majority of shippers — 94% — agree that IT capabilities are a necessary element of 3PL expertise, and 56% of shippers agree they are satisfied with logistics service providers’ IT capabilities, which the study identifies as the “IT Gap.”

Access to Analytics is Critical

As the amount of available data increases, shippers and their logistics partners will need to be able to take the available information and make it relevant. Many logistics service providers are already making significant investments in technology that allow them to analyze shippers’ operations. Nearly half of shipper respondents (48%) said advanced analytics and data mining tools are a “must have” information technology.

Various studies have documented the need for analytics to improve business planning and operations, and a number of these have focused specifically on applications and implications for supply chains and the key processes implied therein, Dr. Langley said.

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How to Restart the Supply Chain After a Shutdown

There are several reasons why a production line may unexpectedly shut down, including a lack of supply, a lack of employees or a cyberattack. During COVID-19, production lines were shuttered worldwide, causing unprecedented supply chain disruptions. Restarting a supply chain, especially when stoppages are widespread, can be complex.

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Adapting the Supply Chain to Deliver New Products During a Crisis

Several companies stepped up to meet new demands during the COVID-19 global pandemic and pivoted their production lines to make much-needed items. Automakers shifted their manufacturing abilities from vehicles to ventilators, fashion designers started making face masks and distilleries learned to make hand sanitizer.

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Take Control of Inbound Freight Supply Chains to Keep Freight Moving

Visibility and collaboration are at the core of a successful inbound freight operation. By successfully improving overall visibility, you can identify a potential problem earlier and build in a necessary contingency plan.

This new e-book from Penske Logistics includes information about how to create the perfect inbound solution, by taking a detailed look at a variety of options, including:

How to effectively make a change in providers
What private fleets can do for you
The best way to incorporate freight management services
Dedicated contract carriage and the ability to secure capacity
Keys to finding the right transportation partner

Then take the necessary steps to discover how you can maximize your freight management solutions.

Complete the form below to request your free copy

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The 5G Revolution is Changing Logistics.

The fifth generation of mobile phone networks, commonly known as 5G, has arrived, and the list of cities with 5G access continues to grow. According to the 2022 Annual Third-Party Logistics Study, 5G is designed to provide comprehensive connectivity among virtually everyone and everything, including machines, objects and devices, enabling users to move more significant amounts of data more quickly. As a result, it should enhance supply chain operations, performance and real-time communications, ultimately driving the digital supply chain.

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Case Study: Optimizing Activities in the Distribution Center

For this global industrial manufacturer of vehicles and engines, production depends on exceptional and reliable service throughout the supply chain. When the manufacturer was looking for a partner to manage its distribution centers, it sought a company familiar with the challenges of automobile supply chain management and decided on Penske Logistics. Penske has managed inventory in two of the manufacturer's facilities in Mexico since 2002.

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Three Ways to Control Supply Chain Costs

There are three fundamental approaches to reducing and controlling supply chain costs: avoidance, mitigation and improving performance. Understanding each helps companies to decide which is more likely to deliver the most bang for the buck within their supply chains, and what measures need to be taken to capture the full benefits.

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Contingency Planning

Optimal Distribution Case Study

Visibility

Operating in Mexico

Managing the Border

Labor Considerations

Optimizing Operations

Serving Customers

Increasing Efficiency

Managing Surges

Investing in Staff and Resources

Providing Value-Adds

Drawing on Experience

Here Are 8 Ways Penske Helps Customers Meet Their Goals:

An Owned or Leased Fleet

Brokerage

Contact Us

Best Practices Apply

Shippers Hold the Most Responsibility

Requires Strict Procedures and Record-Keeping

The Ability to Track-and-Trace Is Essential

Temperatures Are Critical

Supply Chain Partners Must Share Information

Training Is Required

There Are New Requirements on the Horizon

Establishing Effective Relationships

Recruiting and Retaining Talent

Investing in Data and Analytics

Looking Ahead

How to Reduce Border Wait Time

Avoiding Miscommunication

Maintaining Data Accuracy Amid Changing Regulations

Logistics Service Providers Drive Efficiency

Technology Provided by a Logistics Service Provider

Access to Analytics is Critical

1. Examine Your Carrier Base

2. Assess Your Supply Base

3. Review Your Assumptions

4. Ensure Visibility

5. Start Early

Visibility Reduces Supply Chain Complexity

3PLs Help Manufacturers Pivot Rapidly

Complete the form below to request your free copy

Thank you for your request.

Suplemento de Carta Porte

Proyecto de Integración Tecnológica Aduanera

Risks of Non-Compliance

Cross-Border Operations

Multifaceted Innovation

An Ongoing Story

A Digitalized Future

Improved Supply Chain Visibility

Inventory Control

Increased Inventory Accuracy

Labor Management Improvements

Operations in Mexico

Continued Growth

A Market Ripe for Change

Multiple Pressures and Responses

A New Breed of Supply Chain

Engaging the Supply Chain Technology

Flexible Transportation Options

Complexity and Opportunity Ahead for Consumer Goods Logistics

Logistics Route Optimization

Optimizing Inventory Location

Is Your Customer Base Changing?

Modeling Short Supply

Careful Preparation Pays

1. Avoidance

2. Mitigation

3. Performance Improvements

Planning the Road Ahead

More Complexity

Routing Analytics

Future Innovations

The Role of the 3PL