We all use the term "one-stop shopping," applying it to everything from retail stores (where the term originated) to education, and everything in between. But in the logistics realm, at least, the term has a very specific meaning—the outsourcing of all of a shipper's logistics needs to a single provider.

At least three separate developments have spurred demand for single-source global logistics management in the past few years. First, corporate mergers and acquisitions are creating more multinational giants that source, manufacture and sell in every corner of the world. Also, economic conditions, including rising costs in some regions and faltering economies in others, are pushing more companies to source and sell internationally, so many are entering markets where they have no established presence. Finally, changing business practices have created the need for supply chain "visibility" if companies are to manage orders and inventory on a global basis.

Handing control of a global supply chain to a single provider sounds good in theory, but many logistics professionals question whether a single supplier can really do it all, anywhere in the world. So far, there have been no definitive answers. But some large shippers already are working with logistics service providers to move in that direction.

One of the key factors driving global one-stop logistics is the worldwide availability of third-party logistics services. Demand from multinational shippers for a single company to manage all of their logistics operations has led to a number of unions between third-party logistics companies and international freight forwarders. The marriages of Exel and MSAS, Kuehne & Nagel and USCO, United Parcel Service and Fritz Companies, FedEx and Tower Group International, as well as Deutsche Post and Danzas, AEI and DHL were all designed to merge international logistics expertise with domestic warehousing and distribution capabilities. These providers are using pre-existing infrastructure—either a network of freight forwarding offices or a small-package delivery system—as a springboard to creating "one-stop" global logistics service networks.

United Parcel Service is one example of the new breed of logistics service provider that wants to support every aspect of its customers' global trade activities. The carrier's 25 or so acquisitions of transportation and logistics companies over the past two years were intended to create a "global logistics footprint," said UPS Chairman Mike Eskew in a recent interview. At the same time, he said, UPS has been building up a technology infrastructure that is designed to help customers control global supply chains, including electronic commerce activities.

That strategy lets UPS offer shippers the "holistic supply chain approach" to managing global operations they say they need, Eskew said. To meet that demand, the company created "UPS Supply Chain Solutions," which offers customers a single point of access to its global logistics, freight forwarding and customs brokerage, transportation, trade financing, consulting and mail services subsidiaries, he explained. "Customers say they want one point of contact and one point of accountability for information about their supply chains," Eskew said. "...[O]ne point of contact makes a lot of sense in enabling commerce around the world."

Still, some industry observers question whether trying to be all things to all people is an effective model for logistics service providers. It may not be possible for third-party logistics companies (3PLs) to provide absolutely consistent service worldwide, says Dr. Robert C. Lieb, professor of logistics and supply chain management at Northeastern University in Boston and author of an annual study on third-party logistics. "Is it possible [for a 3PL] to have a true global network developed entirely in house?" he asks. "I think really it's not."

It may not even be desirable, Lieb continues. Developing a broad geographic presence may not provide the kind of in-depth expertise that manufacturers need when dealing with small, local suppliers, he says. In addition, logistics service providers that are dragged along by their big clients into new regions of the world are taking on significant financial risk, he observes. This has been particularly true in places like Latin America and Eastern Europe, where economic problems have wiped out newcomers' profits. "You need very deep pockets to pull this off," he says.

That's why some global 3PLs have been acquiring companies with specific local capabilities. Though that approach creates sticky systems integration issues, it can address one of the biggest roadblocks to one-stop global logistics: customs and trade regulations. Differing customs practices and the handoffs that are necessary often create a "black hole" whenever shipments cross borders, reports Mike Lane, senior vice president, international customs modernization project at Sandler & Travis Trade Advisory Services in Miami. "A lot of 'global supply chain managers' are really managers of the individual countries they operate in because of customs barriers," adds Lane, a former assistant commissioner of U.S. Customs and author of a forthcoming book titled The Myth of the Global Supply Chain. For the time being, he advises companies to seek information from the best transportation and logistics providers in each country.

Lieb's survey, now in its 11th year, bears this out. "When we first started the survey, shippers used multiple providers," he notes. "The average number of third-party providers fell for a while, but now it's rising again. Providers can't do everything everywhere, and companies are realizing that."

That may be one reason why some shippers are turning to "lead logistics providers" (LLPs) for help. Often referred to as "fourth-party logistics" providers (a term that has been trademarked by Accenture), lead logistics providers are charged with overseeing the activities of clients' logistics and transportation service providers. The LLP typically evaluates and chooses providers, administers contracts, implements an umbrella information system, and directs and monitors providers' day-to-day performance.

One shipper that's applying this model globally is Nortel Networks, the Brampton, Ont.-based maker of telecommunications equipment and systems. Nortel, which sells and services products in 150 countries, has been hit hard by the current economic downturn, so cost and inventory reductions have become a top priority, reports Tom Dorval, vice president, global logistics. Nortel also wanted to improve supply chain visibility and introduce uniform standards and procedures worldwide, he said last month in a presentation at the Council of Logistics Management's annual conference. "We needed someone to take our existing logistics infrastructure, optimize it, and then move it to a variable cost structure."

To carry out that mission, Nortel chose a newly established organization, KN LeadLogistics Inc. (KNLL). Among other tasks, KNLL was charged with improving Nortel's operating efficiency, reducing overall costs, creating a variable-cost logistics network without compromising service quality, delivering end-to-end supply chain visibility and developing a merge-in-transit model for site delivery. In addition, says David L. Stubbs, KNLL's executive vice president and general manager, his company is responsible for network planning, developing common processes, managing information technology, and controlling, monitoring, and documenting logistics performance. As part of the deal, KN LeadLogistics hired most of Nortel's logistics staff in several countries, leaving a small core of managers under Dorval's direction.

By using an independent company, Nortel sidestepped one of the biggest drawbacks of using a lead logistics provider: the potential for conflict and suspicion between the LLP and the logistics vendors it manages. KN LeadLogistics is a stand-alone division that is financially independent from its parent, Kuehne & Nagel—so independent, in fact, that it fired its parent company's third-party logistics subsidiary in one market and hired another provider instead.

To further reinforce the LLP's neutrality, Nortel and KNLL developed a selection process that was accepted by the bidders as being completely objective. Not an easy task, given that one of the stated objectives was to reduce the supplier base from about 20 "Tier One" third-party logistics providers and hundreds of second-tier vendors. So far, KN has negotiated five new third-party logistics contracts and will renegotiate others as they come up for renewal. (Kuehne & Nagel, by the way, "won some and lost some," says Stubbs.)

It's still early in the game, but six months into the contract, the benefits for Nortel already are clear. Dorval says his company is seeing faster cash-to-cash cycle times, increased order visibility worldwide, a sharp drop in fixed assets, improved on-time delivery, improved planning processes, and reduced inventory, carrying costs and product obsolescence.

KNLL is compensated based on its performance against the stated objectives, so the clear communication of expectations and accurate cost measurements are a must, said Dorval. "It has to be different from the standard shipper-3PL relationship," added Stubbs. "There's more sharing. It's more complex than either of us was used to."

Opinion is still divided over whether it's wise for shippers to put all of their eggs in one logistics basket. There's no single model that will work for every company, of course, so it's up to logistics managers to examine the options and choose the path that will be most efficient and cost-effective given their companies' unique needs.

For many companies, the right path will continue to be decentralized control of logistics operations. But for shippers that want single-source responsibility—and there are more and more of them, it seems—one-stop shopping could mean markedly improved operations. For these companies, the central question will be the providers' capability to truly cater to all of their clients' logistics needs. In the end, if even one critical item is missing from the mix, shippers looking for one-stop shopping won't bother going into the store.