World Trade - January 2009 - (Page 21)

L ead logistics providers—logistics providers who manage other logistics providers—are the general contractors of the logistics world. You don’t always need a 4PL, but when logistics become overly complex or too expensive or a non-core competency to shed, the 4PL function can bring depth and unique expertise to process. And, as companies struggle to ﬁnd a new ﬁscal equilibrium in the downturn, there’s a good value proposition for consolidating the management of that process in the hands of a 4PL. In today’s constrained economy, as senior management increasingly eyes supply chain operations as a key enterprise driver, shippers are turning to 4PLs to ﬁnd more creative ways to accomplish their goals. Optimizing the supply chain is a common ﬁrst step, but their continued value lies in managing relationships and infrastructure, standardizing metrics for reporting and analysis, and pushing innovation through best practices. “4PLs take a purely collaborative approach,” explains Eric Bond, president of the 3PL Mach 1 Global Services. There are millions of great ideas wasting away in consultants’ PowerPoint presentations because the company was too busy to do further analysis or didn’t have the funds to implement them.” 4PLs, however, have the capabilities to identify the most effective of those ideas and implement them. Although the 4PL can add an extra operational layer to an organization’s business model, customers say it more than pays for itself in cost savings and efﬁciency. Diebold Incorporated needed such expertise when it took its ATMs, vaults, security systems and other banking products international a few years ago. “We expanded very quickly into more than 60 countries very successfully, but without a lot of supply chain optimization,” recalls Chris Kushmaul, director of global logistics. One notable component that wasn’t scaled to the expansion was logistics. Initially, Diebold worked through 3PLs. But the number of relationships they could manage with a small three-person logistics department was understandably limited. Eventually, Diebold contracted with Meno Logistics to act as their lead logistics provider. This arrangement enabled Diebold to leverage Menlo’s system, skill set and speed to manage a larger number of 3PLs. As another beneﬁt, Kushmaul says the 4PL had more resources and contacts that let him choose from among many freight forwarders and negotiate a better price than was possible with his more limited contacts. Diebold’s experience is increasingly common. “The complexity of the supply chain is so signiﬁcant that a single 3PL can’t do it all,” underscores Joe Gallick, senior vice president of sales, Penske Logistics, especially as shippers deal with multiple supply chains and management systems throughout the world. One challenge in managing multiple relationships is aligning different metrics and reporting formats. “Each typically has a different way to manage the supply chain, What’s in a Name? Although the industry itself is a bit confused over who’s what, providers generally agree that perhaps the key distinction between 4PLs and 3PLs is that the former doesn’t own assets and the latter does (e.g. trucking ﬂeets, warehouses). But even that’s not a hard and fast delineation as many 3PLs morph into 4PLs. “A true 4PL, in my opinion, essentially provides procurement and supply chain consulting services. But they also distinguish themselves from pure consultants by actually implementing and executing upon their ideas and suggestions to their clients,” says Eric Bond, president of Mach 1 Global Services in Tempe, Arizona. “The vast majority of 3PLs, even if non-asset based, offer integrated or a la carte four wall and transportation services. True collaboration with their clients is often disingenuous, if not impossible,” Bond says. The reason? They often have resources of their own to sell, which may encourage them to cherry pick the rates and services they offer in a bid process. The question is whether assetbased 4PLs can remain utterly objective when choosing between third-party assets and those of their own company? That’s why Whirlpool insisted on complete separation between its 4PL—Penske LLP—and Penske’s 3PL operations (which, as Penske Logistics’ Joe Gallick points out, “is used only when that makes sense for the customer”). Another concern is that some companies, which consider themselves 4PLs, lack the resources and expertise to perform. Bond uses the analogy of trying to ﬁt a square peg into a round hole. On the other hand, Raj Penkar, VP of customer solutions at UPS says, “Without assets, there’s very little you can add to long term value.” Both views have their merits, and the industry seems destined to debate the relative merits of each for some time. and a different way in which to report,” observes Richard Jordon, vice president, Performance Improvement Group, AlixPartners. “A 4 PL would normalize that data,” Jordan explains, making it possible to quickly compare data across the supply chain and across the company. For instance, Gallick says, “Penske knits together the 3PLs into a total, integrated solution.” It considers both inbound and outbound aspects of supply chain logistics to leverage synergisms and, thereby, deploy assets as efﬁciently as possible. Another key beneﬁt, Bond points out, is the analytic WWW.WORLDTRADEMAG.COM 21 http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - January 2009

World Trade - January 2009 Contents Supply Chain Finance Conference: The Right Stuff at the Right Time! Is the Dollar's 'Exorbitant Privelege' as the Global Standard at Risk? Supply Chain Watch Tradewinds The Rise of the 4PL An Evolving Tech Backbone Makes 4PL Service More Effective The Changing Landscape of U.S. Railroads Intermodal Grows Up Port of Hamburg Grows as Distribution Point to Eastern Europe Outsourcing Without Fear Measuring the Carbon Footprint

World Trade - January 2009

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