3PL Opportunity for the Future

My experience is that most logistics service providers operating at the present time fall under-whelm their customers with the level of service available that they provide to them.

Some 3PLs adopt a reactive approach to their dealings with their customers while others adopt a proactive approach. Both the reactive and proactive approach are valid strategies, however they offer different advantages and disadvantages from the point of view of the service provider themselves, as follows:

Reactive Approach

The reactive approach is characterized by the service provider responding (however effectively and efficiently this may be done) to customer requests to provide X, Y or Z service that the customer has defined. Sometimes this is accompanied by the customer teaching the service provider and investing in the service provider’s capabilities so that the customer gets the service that he wants.

The positives of this approach from the service provider’s point of view are that customer requirements are satisfied while minimizing investment. The negative is that the customer feels that he is doing all the running and will always be open to alternative service providers should these present themselves.  

Furthermore, while the service provider minimizes his investment and is content to hold on to the business, the customer appropriates most of the benefits of the improved efficiencies. This is particularly so where increased throughput is achieved with the same resource. In effect, the service provider remains a subordinate and expendable partner in the relationship.

Proactive Approach

The proactive approach is characterized by continuously engaging with the customer in a search for opportunities to add value and reduce waste from the supply chain as a whole. Here the service provider does not wait to be asked, but moves on to the front foot, examining all aspects of the supply chain in dialogue with the customer to challenge the status quo with value-added propositions.

Here the service provider moves away from simply satisfying customer requirements to exceeding their expectations. The challenge of this approach is that the service provider needs to upgrade technical and commercial capabilities in order to credibly conceive, propose, plan and implement solutions and to be viewed as an equal partner by the customer.

The greatest single advantage is that the service provider is now viewed by the customer as an owner of capabilities and knowledge that are difficult to replicate and substitute and becomes an integral part of the customer’s supply chain.

Furthermore, having provided much of the intellectual firepower and the resource behind delivering the improvement the service provider has a stronger hand in negotiations and an opportunity to appropriate a greater share of the savings and benefits accruing from the improvements for a longer period of time.

This approach requires a strategic view of investment to be taken in developing the full range of capabilities in people, processes and systems across the business.

As a Proactive Supply Chain Service Provider: What Kind of Things Would You Need to Be Able to Do?

You need to be able to:

* Go in to a customer’s business and look at what they do in their processes throughout the supply chain and then use this knowledge to come up with innovative solutions that deliver real business value.

* Work together with the customer to describe what the ideal supply chain would look like using process mapping/value stream mapping to map the current state supply chain and work with customer to develop a desired future state.

* Have people in your team capable of working in cross-organizational, multi-disciplinary teams to conceive, plan, implement and manage solutions.

* Develop Information and Communications Technology (ICT) systems and people skills to manage performance and provide required visibility to customers.

* Continuously engage to find out, understand and reflect on the evolving unique needs of the customer and keep on reinventing.

What are the Specific Opportunities?

Building upon the solid base of storage and delivery services there are a wide range of supply chain activities in which proactive service providers are driving cost out and service levels up. The range of activities outsourced by manufacturers to supply chain partners includes but is not limited to the following activities and services:

* Custom Kitting

* Retains Sample Management

* Line-Side and Kanban Replenishment JIT

* Logistics Management and Transport Planning

* Testing and Sampling

* Sub Assembly

* Packaging and Labelling

* Management of Reusable Packaging and Pallets

* Inventory Management

* Procurement and Vendor Managed Inventory e.g. sourcing and procurement of print media, packaging, consumables and other accessories.

* Bin Replenishment

* Market Localization

* Product Configuration

* Fulfilment and Distribution Channel Management

* Market Specific Product Configuration

 

Future Trends with Manufacturers and Brand Owners

The move towards focusing on core competence and using ICT developments to manage and coordinate the supply chain is an ongoing process that is opening the door of opportunity to a range of supply chain partners. The main future trends that are discernible are as follows:

* Manufacturers and brand owners are focussing ever more on core competences and building external support networks of service providers to take responsibility for ever increasing chunks of the supply chain.

  

* There is a simultaneous drive cut costs while maintaining quality and meeting customer demand.

  

* Increased speed of flow of inventory, fewer and lower inventory buffers and reduced absolute levels of inventory in the supply chain (notwithstanding strategic stocks to mitigate supply chain risks).

 

* Increased and deeper application of the principles of lean production out into the wider supply chain to cut cost and waste and improve flow.

* Increased use of ICTs (Information and Communications Technologies) to improve visibility and responsiveness up and down the supply chain.