Delivering IT solutions                 
                        to the 3^rd Party Logistics market

USER STORY: March 2001

Westpac invests $250m in 4th party logistics contract

Australia is following the growing US trend of outsourcing non-core activities to specialist contractors, to maintain a competitive edge in an expanding web-enabled marketplace. Westpac has recently taken the plunge in a bold initiative to contract out its entire print, e-procurement and associated logistics operations.

The obvious key benefit of outsourcing at this level is access to specialist infrastructure and management without large capital expenditure. In this case, Westpac's new print e-procurement system will be built around a sophisticated Australian developed software core from specialist Advanta Software.

The five-year $250 million contract was awarded to a consortium of Mayne Logistics, Websdale Print, Lilyfield Printing, and Stream Solutions who is Australia's largest dedicated print management company.

Within the consortium, Mayne Logistics provides the logistics and runs Westpac's internal mail rooms and warehouses, and Websdale and Lilyfield Printing provide print services. Stream Solutions, whose share of the contract is worth approximately $100m over five years, provides the warehousing and procurement systems, as well as the IT infrastructure.

After extensive business analysis, Stream in collaboration with Australian-developed software from Advanta Software has built a customizable print e-procurement system, which will integrate directly with Westpac's own corporate systems.

First integration of its size in Australia

This is the first installation anywhere in Australia where a print management, logistics and e-procurement system has been fully integrated to a client operating system of this scale. This contract is setting a benchmark, it's the tip of the iceberg in a potentially huge market, and industry players and watchers alike will keenly follow its progress.

Andrew Price, Stream Solutions' Managing Director comments, "We are very pleased to have a client so well progressed in e-procurement enabling us to put our comprehensive systems through their paces. We'll be using the Westpac business case as a showcase.

"We've trimmed out a whole range of functionality and systems that Westpac have been able to get rid of by installing this e-procurement system. They have really streamlined their internal processes and I think it puts them at the leading edge."

Strategic software alliance

Stream's strategic alliance with Sydney-based Advanta Software has afforded the print management company a backbone of sophisticated software functionality, integral to Stream's spiralling success in the print management sector. Andrew Price comments: "Our alliance with Advanta has certainly given us the edge in the software sector - in significant customised systems such as the Westpac e-procurement system, as well as paperless and wireless warehouse and logistics systems pushing us so far ahead in the industry."

How far ahead? "In its first year of operation Stream grew by over 250 per cent, and will continue to enjoy double digit revenue growth as more clients become aware of the advanced functionality we can bring to their organisations."

When the Westpac systems are up and running later this year, Westpac staff can access an electronic catalogue of all printed material (from stationery and catalogues to holiday leave forms) from their desktops. Westpac staff place their orders via the e-procurement system - which is then internally authorized. The Stream system then processes the order and feeds back all relevant information within seconds. The ordered product is then picked and packed at a Stream warehouse and dispatched by Mayne Logistics. An order placed before noon anywhere in the country will see the product delivered the following day.

Steven Nelson, Sales Manager at Advanta Software explains, "This system cuts out several steps in the supply chain, cutting administration costs and drastically increasing efficiency, with the benefit of greater management control."

Increased management control, decreased overhead

Andrew Price continues, "Through outsourcing the entire print and print logistics function to us, Westpac will increase management control of these processes quite drastically. This system provides comprehensive real-time reporting and online visibility. Reporting is based on key performance indicators, and flexibility of both information analysis and delivery is a true strength of this system. This level of performance visibility literally means Westpac managers can manage by exception rather than by rote."

Advanta's Steven Nelson concurs, "Though our EIS (executive information system) tools Westpac managerial staff can receive automatically generated reports in hard or soft copy, electronically or via a secure and limited access website - whatever their preference and all in real time. A wealth of information is available, but Westpac managers can easily drill down to whichever level of detail required. For example a product can be tracked across all states, and drilled down to a specific warehouse or specific location. Westpac staff can then use the EIS tools to cut, slice and dice information in whatever way is meaningful."

Self imposed productivity penalties

Stream is so confident in these systems that it has written in a range of penalties linked to fulfillment times into its contract with Westpac. "We've put guidelines into the contract as to minimum service levels we can achieve, and we've attached financial penalties. That's how confident we are this new system will perform - we know we can do it," says Andrew Price.

As the contract progresses, Stream will introduce increased software tools to the system. These originating from the Advanta stable and include Demand Forecasting, to estimate coming print inventory demand; a DRP (Distribution Requirement Planning) module to greatly balance inventory supply and demand- and effect real cost savings in the region of a further two to three per cent; and RF picking - barcode-based radio frequency wireless warehouse picking.

Will other organisations follow the 4th party logistics trend? Andrew Price answers, "I would say all of the major of Australian financial organisations recognise they need this level of functionality to optimise internal processes and leave them to concentrate on financial expertise. Up until now Westpac is the only one to put such a system in place - it is at the leading edge. In such a competitive market it's doubtful the other main financial players can allow Westpac to effect this much of a productivity gain."

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