What's the right role for global 3PLs? (page 2)
-- Logistics Management, 2/1/2006
Page 2 of 4 -- It's worth digging deeper into the concept of globalization. It certainly means continued dispersion of manufacturing: Recent studies by Deloitte Touche Tohmatsu showed that 37 percent of all North American manufacturers were planning to locate or expand factories in China, with 23 percent expecting to do so in Mexico and 13 percent looking to Eastern Europe. Many U.S. manufacturers are already well-positioned overseas, and they don't have to be giants to be global in reach.
Globalization also means selling further afield, catering to increasingly affluent consumers in huge emerging markets such as China, India, Russia, and Brazil. Selling into those and similar markets often imposes local sourcing and logistical demands on shippers.
Adding to the complexity confronting logistics experts are pressures to deliver customized products and to bring more new products to market more quickly. On top of it all come tumbling trade barriers, deregulation, tighter security requirements, and technology's leveling effects. It is hardly surprising that roughly four-fifths of logistics and supply chain executives already use 3PL services, and the percentage of logistics budgets they spend on outsourcing continues to climb, notes the TLI study.
So if today's most pressing logistics decisions are more about how to outsource than why, what influences those decisions? If one global 3PL cannot handle every logistics need, is there an ideal mix of in-house and contract resources? There are several key points to bear in mind:
There's more than one supply chain.The supply chain for spare parts will have markedly different requirements than the supply chain for, say, low-volume outbound products or for inbound raw materials. The key business drivers today are asset rationalization and customer service. Containerloads of electronic components arriving at an assembly plant will have narrower delivery windows than identical components shipped to aftermarket repair centers. And increasingly prevalent reverse-logistics pipelines have unique characteristics. The mix will be different for each company in each market, and so the mix of logistics resources must be unique to each.
Methodology matters.Some shippers are starting to develop frameworks that allow them to track the trade-offs between scale and specialized logistics expertise. The goal is to determine where economies of scale lend themselves to expanded relationships with larger, multinational 3PLs and where local knowledge and local relationships will produce the best returns. Hewlett-Packard is moving toward this goal as it starts to identify further procurement savings among business units that have been sourcing components and materials independently. The computer giant wants to pinpoint where the value of a process specialization—in customs brokerage or fleet management, for example—will produce better results than the "deep local knowledge of the local guy," says Ed Feitzinger, HP's vice president of worldwide logistics.
Shippers that lack the expertise to build such frameworks themselves can find plenty of help. Consultancies such as PRTM, Accenture, and many others have methodologies for defining the scope of worldwide logistics activities, for determining the appropriate balance of activities among regions and between internal resources and 3PLs, and for defining the necessary metrics and organizational responsibilities. Continued...
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