I had the opportunity to speak to Miguel Ramirez, Logistics Cost Implementation Lead, from Sisamex at the Oracle Value Chain Summit. Sisamex has had an interesting journey with the Oracle Transportation Management (OTM) solution. Sisamex, headquartered in Mexico, is a joint venture between Meritor, a Tier 1 supplier of automotive components, and Grupo Quimmco, a Mexican industrial consortium. Sisamex manufactures axles, brakes, related components and assemblies in Mexico and supplies Meritor plants mainly located in the US Midwestern states.
Miguel Ramirez (Click to Expand)
Sisamex has had an interesting journey. Originally, Meritor was using their OTM implementation to control all inbound and outbound loads to their plants located around the world. Inbound to Meritor, meant Sisamex’s outbound loads were being planned by Meritor. Because Meritor is controlling the inbound shipments of their key suppliers, they have a better ability to control service levels while garnering savings from consolidated loads.
Because this was a joint venture, Meritor planners were also planning all Sisamex’s inbound loads according to the established corporate parameters. In this case, inbound to Sisamex meant shipments from component suppliers, located mainly in the US Midwest, to Mexico. But the Meritor planners did not seem to be as diligent at optimizing transportation spend for Sisamex as they were when they planned shipments coming into Meritor. In particular, too many higher cost spot bids were being used.
Miguel was given the mission of correcting this problem. He visited Meritor’s headquarters in Troy, Michigan and spent three days learning the basic functions of OTM. At the conclusion of this trip, Meritor agreed to let Sisamex use the Meritor instance of OTM to plan their own inbound loads given that the freight was actually being paid by Sisamex.
Sisamex put their lanes out to bid, and developed five carrier options per lane with the carriers prioritized such that a tender first went to the preferred carrier, then the second rated carrier on that lane, etc. In the first year, their US freight costs fell by 30 percent thanks to the elimination of spot bids and the negotiation of full-truckload (FTL) rates.
Based on Meritor TMS experience, Sisamex, decided to buy their own server-based OTM solution in 2012 with the chief advantage being that the system could be parameterized according to Sisamex requirements. The system was officially launched in July of 2013.
After the company’s successful implementation, Grupo Quimmco, the holding company of Sisamex decided to roll it out across 8 other companies in the group. The strategic objective for this year is that the logistics operations of all the companies of Grupo Quimmco will be managed through OTM and there will be on-site control tower screens so that the users in the plants can have immediate visibility of shipments statuses.
After using this solution for a year, Sisamex was able to mine the data and detect additional opportunities for savings. For example, at one origin point they saw that a supplier was sending their company four to five less-than-truckload (LTL) shipments per week. They got that supplier to only send them truckload (TL) shipments. Last year, they saved a quarter of a million of dollars from just one supplier by gaining more LTL to TL conversions. Similarly, they mandated that their suppliers only send them shipments if the trailers were at least 90 percent full.
Another project involved setting up a consolidation center in Jeffersonville, Indiana where LTL loads could be sent and then consolidated into TLs by a 3PL partner. This saved money by reducing their inbound LTL shipments from 30 percent of the total to 20 percent.
Finally, the visibility to carrier moves means that Sisamex loads can clear customs faster. If critical parts are inbound, they have visibility to those loads and can prioritize the hot shipment. This involves sending the required documentation to customs before the actual arrival of the shipments.
In conclusion, in addition to thanking Miguel for taking the time to talk to me. I’d also like to thank Oracle for setting up this conversation. Of all ARC’s supply chain clients, Oracle does the best job of scheduling conversations with interesting clients at their events.
Very Interesting article!
Steve – Are the more of such case studies that you are aware of? My interest is in the field of inbound freight management withing the automobile industry.