Menlo Worldwide wins major DoD 3PL contract
The U.S. Defense Department on Friday named Menlo Worldwide as the winner of a major contract to outsource logistics management of its North American freight transportation network. The contract is potentially worth $1.6 billion, Transportation Command said.
The Defense Transportation Coordination Initiative (DTCI) is an effort in the works for several years to improve the efficiency and reduce the cost of military shipments. Defense officials want to use best commercial practices such as dedicated truck schedules, cross-dock consolidation, intermodal transport, better mode selection and load optimization to improve the reliability, visibility and predictability of shipments.
The contract marks a major change in the way the Defense Department does business. In the past component agencies, such as Surface Deployment and Distribution Command, arranged contracts with transportation providers that could be tapped into at the discretion of transportation officials at local bases and depots.
Some members of Congress, for example, are probing why the Defense Department ships some items by air instead of truck at double the cost. The transportation officer involved in one case, opted to use air for a less-than-truckload shipment to meet the requirement for arrival within three days. DTCI is designed to take the randomness out of transportation selection at the local level by centralizing decision-making, using sophisticated cost analysis to determine the best route, carrier and mode. Central oversight is also expected to save money by generating volume discounts.
“This award represents a significant accomplishment in our collective efforts to streamline distribution processes and provide better and more cost-effective support to our nation's warfighters,' Army Lt. Gen. Robert Dail, director of the Defense Logistics Agency, said in a statement.
Many truck brokers and motor carriers have protested the move out of fear that they will lose their Defense work.
DTCI will be implemented in three phases. Menlo Worldwide’s Government Services unit will begin managing shipments by early next year and over the course of 22 months will take over the process at all 18 Defense Logistics Agency distribution centers.
The second phase will commence during that period, expanding coverage to nearby facilities such as airports and DoD shippers. Transportation Command may require the third-party logistics provider to bring in up to 50 additional sites per year after initial start-up, but the total number of sites under the contract is capped at 260.
Phase III will also kick in before other work is completed and covers scheduled transport management at DoD bases. Implementation is expected to take 25 months.
The strategy is to start with high-volume, co-located sites that have regular routes to generate savings and efficiencies.
Certain categories of freight, such as cash-on delivery, sensitive or classified shipments, arms, ammunition and explosives, bulk and missile fuels, household vehicles and privately owned vehicles, are excluded from the DTCI contract
The three-year base contract is estimated to be worth more than $525 million. Four one-year option periods could be worth an additional $1 billion.
San Mateo, Calif.-based Menlo Worldwide is an operating company of Con-way, a $4.2 billion provider of domestic trucking and global logistics services. The rest of its team was not disclosed by Transcom.
Other known bidders for the outsourced logistics contract included UPS Supply Chain Solutions (partnered with 17 companies including YRC Worldwide, owner of largest less-than-truckload carrier in the nation); IBM (partnered with Schneider Logistics, among others); EGL or Eagle Global Logistics, which is now CEVA Logistics following a recent acquisition; C.H. Robinson, the largest U.S. truck broker; and Ryder System.
(For an in-depth look at DTCI, see “Privatizing military logistics,” January American Shipper, pages 22-30.)