Michael DeVault is Vice President of Global Distribution & Logistics for Timex Corporation. In this position, he is responsible for the design, execution and operations related to demand planning, supply planning, inventory planning and worldwide transportation and distribution. DeVault has 16 years experience in the supply chain field, having worked with such 3PLs as FedEx and in a variety of manufacturing arenas. He has experience in designing, implementing and operating logistics solutions in the automotive, high tech, fashion, retail, consumer, healthcare and chemical industries. He holds an undergraduate degree from Valparaiso University and a master’s degree from Webster University.



WT: At Timex, what is your current strategy for using 3PLs?

DeVault: Our strategy is to take advantage of 3PLs’ regional strengths. This gives us the ability to penetrate into markets where our current scale would create cost barriers for us: for example, the Benelux countries. It is much more cost effective to have a 3PL there, undertaking our distribution function than to establish our own full-blown distribution network. We deploy some 3PLs in the U.S., but our primary use is on the international side, where it continues to grow as we penetrate additional international markets. 

WT: How do you stay informed on the 3PL field?

DeVault: We invest a lot of time with organizations like the National Industrial Transportation League and various materials handling organizations. I encourage my people, when they attend annual events and regional events, to spend that time doing market research, meeting with people and seeing what other people in like or competitive industries are doing in terms of 3PLs, and what 3PLs they are using. I come from a 3PL background; I worked for two of the largest 3PLs—TNT and FedEX—so the bulk of my experience has been on the 3PL side.

WT: Do you go to prospective 3PL partners with a set request?

DeVault: We are not much motivated to put out an RFQ or RFI. I spent a great deal of time on the other side of the fence receiving those and turning out responses to them. They don’t get to the nature of what we want to achieve. If we send out a bunch of RFQs and RFIs, the information we get back is only as good as what we sent out. Likely, that information will come down to a price. I don’t think we gain any competitive advantage by making a price-based selection.

WT: How do you gain that competitive advantage?

DeVault: What we want is to differentiate ourselves from our competition. For us, that means we want to pick three to five providers in a region that we think can solve our issues. Then, we want to sit down with them and work collaboratively—explain what we are trying to accomplish; what our ultimate goals are; how we want to measure and mine that success. And, we make an effort to understand what it they are trying to accomplish in that market as well. Only then do we work toward a price. The equation only succeeds if both parties succeed. That’s a much more sustainable model for us.

WT: Are you aiming for a strategy-to-strategy match with your 3PLs?

DeVault: Absolutely. We spend more time than most organizations meeting with our 3PLs. We don’t talk just annually, or quarterly: we talk with our 3PLs multiple times each quarter. We try to understand their needs; what markets they are trying to penetrate; where their strengths are. And we also ask where their weaknesses are. We certainly don’t want to set them up to fail.

WT: How does 3PL performance vary internationally?

DeVault: The 3PL industry is strong and mature in Northern Europe and the U.S.; elsewhere, there are regional pockets around the world where 3PLs are very good. The top 3PLs all have good global footprints. The problem I would point to is that while they operate very well within a specific region, they have not really integrated their global networks. I can tell you first-hand there is not a seamless handoff between 3PL operations in Asia and their operations in Northern Europe.

WT: What are is weakest?

DeVault: Latin America probably is the least mature. When the Asian economies exploded, 3PLs rushed in to fill the holes in their service offerings there. I don’t think they’ve been as adept at filling gaps in their service offerings in Latin America.

WT: How have 3PLs themselves changed in the past three to five years?

DeVault: First, there has been considerable consolidation in the 3PL industry in recent years. Second, as 3PLs listened to what their customers were saying and started to recognize the gaps in their service offerings, they rushed to fill those gaps with a ‘build or buy’ strategy. But there has been such a push toward industry consolidation that the integration of the ‘build and buy’ has been lacking. 3PLs have done well in some areas—creating transportation out of Asia or adding warehouse distribution space in the Middle East. But integration has lagged. ‘Buy or build’ is the easy part; the difficult part is integrating the core services.

WT: Within Timex, what important supply chain issues will you be addressing in the next few years?

DeVault: We are a global company. We either manufacture or have manufactured on just about every continent. We have good international talent in all major markets. We understand, foremost, that Timex is a supply chain company. My focus for the next eighteen months will be to try to take the things we do well in Asia and replicate them in Europe; and take the things we do well in the U.S., and replicate them in Asia. What we need to accomplish in the next 18 months is to figure out how to take the talent and processes we have and use those processes to make our global operation closer to seamless.

WT: Can you cite examples?

DeVault: Our distribution capabilities in the U.S. and in Asia are excellent; our distribution capabilities in Europe and the Middle East aren’t nearly as good. Those are growing markets for us. We’ve operated our own distribution centers in Asia for a number of years; we’re just starting to operate to that level of skill in Europe and the Middle East.

WT: More general to the industry: you were a panelist at the Outsourcing Logistics Conference in Atlanta this past June. What were the anxieties you observed on the floor?

DeVault: The anxiety that moves to the top of people’s minds is the cost of fuel, and how that cost is going to effect transportation. The second concern is about capacity. When you look at moving things internationally, you are looking at air and ocean. The ocean industry has a limited capacity; air capacity is strained as well, in part because of profitability issues. Capacity is a concern for Timex. Our own products follow the retail trend; we have a peak holiday season and we have to struggle like everybody else to secure capacity.

WT: Regarding airline profitability, are you referring to air freight in particular?

DeVault: No. The profitability concern is with the airlines as an entire industry. Now, FedEx and UPS have no problems with profitability. But the amount of freight they can carry is limited—specifically, they face problems expanding their landing rights into Asia or China. Given that limit, we start making use of commercial air freight.

WT: Say, for FedEx, how big a concern is landing rights in Asia?

DeVault: I think that is a big concern for them. My suspicion is that they are today walking away from business in China, because they can’t get enough capacity on the ground.

WT: Your products are small relative to value; does that mean your distribution costs are lower than an industry average?

DeVault: No. The nature of our product is that you can get an awful lot of it into a small area. Still, our customer bass—like many other customer bases—wants to hold lower inventories. We could forward stock inventory closer to their distribution centers or their retail outlets, which would give us a capital cost of building the four-walls itself. Our preference is this: we have some strategic distribution centers in this hemisphere and some strategic distribution centers in Europe and Asia. We try to service our customer base out of fewer distribution centers than we did three to five years ago, relying more heavily on faster modes of transportation.

WT: At that Atlanta conference, was there a concern you think should have been expressed, but wasn’t?

DeVault: One thing that deserves greater attention is the question of the sustainability of the cost-down outsourcing model. After the panel discussions, I talked with some audience members who were looking either to expand their outsourcing or to embark on outsourcing relationships. Before offering any advice, I wanted to know why they were looking to outsourcing. Unfortunately, their reasons centered on ‘cost down’ solutions. And that’s not a sustainable model.

WT: Because?

DeVault: At first glance, people associate outsourcing with cheaper labor, with higher efficiency, and with the chance to utilize the 3PL’s IT function. They are looking for savings. Unfortunately, they don’t negotiate a program with their 3PL that has the ultimate goal of competitive advantage. They are looking for the ‘shot-in-the-arm’ of the cost-down solution. They plan to take that back to their leadership and say: ‘this is going to save us ‘x’ amount.’ And then next year, or the year after, the 3PL’s costs rise. That pushes people into the cycle of churning over their 3PL providers every three to five years, when contracts come up for renewal.

WT: What are the consequences of that?

DeVault: There are costs to that changeover. It disrupts your own supply chain; it disrupts your manufacturing process. Quite honestly, when you start turning over your 3PL, there is also disruption to your customers.

WT: And longer term?

DeVault: ‘Supply chain as a competitive advantage’ is a topic that there is discussion around; articles get written about it, and there is some movement toward it. Still, if you talk to a broad audience about their objectives for outsourcing and what they hope to gain from it, what you generally hear is they are looking to take costs out of the equation.

WT: How should the internal sale for supply chain be made?

DeVault: If it’s outsourcing—or a step that follows from the decision to outsource—the internal sale has to follow from a broad analysis. That analysis needs to include assessment of market penetration, market growth, market expansion, international expansion and the question of what competitive advantage may be gained from that outsourcing strategy.

WT: Can you give me an example?

DeVault: I just talked with someone from one of our regions who wanted to achieve 24-to-48 hour delivery to customers. I said we could absolutely provide a supply chain solution to do that by expanding an existing relationship with a 3PL in that market. My question was: what is the additional sales volume we can expect to achieve by doing this? The decision to expend resources—human capital—is easy to make if it will drive business growth and market penetration.

WT: Do supply chain people focus on dollar savings because that’s what they think management wants to hear or because that’s the only language they know?

DeVault: Historically, dollar savings is the language supply chain people learned: that’s how they talked about their business. As supply chain has gained a full seat at the executive table, I think the people filling those seats have a much better vocabulary and a much better knowledge base to speak to competitive advantage. And they should be doing so.

WT: Looking at the supply chain field itself, what’s the most general problem you see?

DeVault: When I get into conversations about the problems the industry faces, it comes down to the need for talent—on the manufacturing side; on the 3PL side. As supply chain organizations become more important to the success of a corporation, they’re going to be fighting with sales and finance for a higher level of talent. Top supply chain schools like Tennessee, North Florida, Ohio State, MIT and Georgia Tech are growing their enrollments in these majors, but I don’t know that they’ll be able to fill the need corporations will have.  wt

Sidebar: Waterbury Watch Goes Worldwide

Timex is a venerable name in watch-making, tracing its roots back to the 1880s when Waterbury Watch—an offshoot to Connecticut’s Waterbury Clock—manufactured the first reliable inexpensive pocket watch, introduced just as the nation was adopting standardized time zones. The company has long been the dominant maker of watches for the U.S. market. It has been aided in this by such marketing successes as the ‘Mickey Mouse’ wristwatch in the 1930s and such well-publicized ‘torture tests’ as being strapped to an outboard motor propeller, earning the tagline: “It takes a licking and keeps on ticking.”

Today, Timex Group B.V. is a privately held firm, with an international workforce estimated at 5,500. Timex maintains manufacturing facilities in Switzerland, France, India, China and The Philippines. Timex distributes these products on every continent, under the some of the most recognizable brand names in the industry, such as Timex, Ironman, Guess, Nautica, Marc Ecko, Versus, TX and Versace.