WAREHOUSING & DISTRIBUTION 2006 - Virginia diversion

By: | at 08:00 PM | Channel(s): Logistics  

East Coast strategy provides Johnson Electric logistics flexibilityBy Peter A. Buxbaum, AJOTJohnson Electric was looking to consolidate its East Coast distribution operations. To accomplish that end, it turned to its long-time logistics provider, Evans Distribution Systems.
Johnson Electric, a Hong Kong-based company and a manufacturer of electric motors, is a major supplier to the US automotive industry. Evans Distribution, based in Melvindale, Michigan, near Detroit, has a legacy since 1929 of providing warehousing, as well as other logistics services, to the same industry.
When Evans expanded its distribution operations to Hampton Roads, VA, in 2004, Johnson Electric went along for the ride. The manufacturer was seeking an East Coast hub and it was natural that it make the move to Virginia along with a company with which it enjoyed an excellent relationship since the 1990s. Johnson also derived an additional bonus from the move, at least for a time: reducing its transportation costs and improving delivery times by diverting half of its imports from China off-loaded at the Port of Norfolk.
“Our purpose for locating in Virginia was two-fold,” said Kevin Turner, manager of regional logistics at Johnson Electric. “We wanted to take advantage of the all-water service and we wanted to consolidate our East Coast distribution. We went with the Suffolk facility in conjunction with the all water strategy and also because we already had a partnership with Evans.”
Johnson Electric manufactures automotive motors that go into power door locks, mirrors, wipers and washers, ABS brakes, radiator fans, and fuel pumps. Other Johnson motors can be found in printers, DVDs, CD ROMs, copiers, and vending machines. The company’s manufacturing base is in China.
Evans Distribution Services is a third-party warehousing, packaging, and transportation provider serving the automotive, manufacturing, beverage, and chemical industries. Most of the company’s 200 employees work in Michigan but others are located at a facility in Devens, MA, near Boston, and in the 92,500-square-foot facility in Suffolk, VA.
“The normal terms with our customer are FOB warehouse,” said Turner. “Our customers pull from our facility. As we consolidated our warehouses it made sense to provide this facility for our customers, especially since we were achieving better transit time with the all-water service.”
Off-loading ocean cargo at Norfolk, which Johnson Electric did for a few months last year, was a strategy designed to circumvent congestion at West Coast ports. Adding those costs with land transportation, Johnson Electric calculated that it was achieving better transit times and saving on transportation costs by diverting its Chinese cargo go through the Panama Canal to Virginia. That situation did not last long, however.
“Within the last year, the situation has changed in that the all-water freight rates have increased quite a bit,” said Turner. “Now the all-water route does not provide a definitive cost advantage.”
Johnson Electric still finds it advantageous to position product on the East Coast, however, for the sake of customer service. In addition, the Virginia location provides the company with the option of diverting ocean cargo to Norfolk should circumstances warrant.
“Our carrier contracts are set up so that we have rates to the West Coast or to Norfolk,” said Turner. “If we see that there will be significant congestion coming through the West Coast ports, we can see if going with the all-water service will improve transit time.”
Turner described the East Coast facility as a “release valve” and the job Evans performs for Johnson Electric as “outstanding.” In addition to warehousing, Evans also provides Johnson Electric with testing, sorting, and repackaging services. “Their philosophy is based on the idea of partnership,” said Turner.
That type of relationship exemplifies trends in modern warehousing and logistics, according to Leslie Ajlouny, vice president of business development

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.