Global Logistics and Supply Chain Strategies - April 2008 - (Page 58)

“We have a client that needed to expand its operations to Europe and do it in a hurry,” says Schneiderman. “The only way this growth could be accommodated was to outsource all the logistics to a 3PL.” According to Sulaver, cost was not really an issue in this situation, but in an increasing number of instances, cost pressure is a major accelerator for rapid outsourcing. “As logistics becomes more capital intensive and more dependent on big investment, it often makes sense to outsource activities that leverage the capital investments that 3PLs have already made,” says Sulaver. He points out that competitive logistics operations today require sophisticated software, state of the art facilities and materials handling systems, as well as expertise in international trade and regulatory compliance. “When a company is faced with a large expenditure to fund these projects, that is the trigger to look at what the big logistics providers can offer.” The decision to outsource is easier if it involves a common service that many companies use, so there is little advantage in looking for a competitive advantage or special handling. For example, every importer uses container consolidation, cross-docking, intermodal shipping and breakbulk services, but this concept extends to higher-value services. “Electronics manufacturing and supply have been so heavily outsourced throughout the globe because processes and materials are standardized across every link in the supply chain,” says Sulaver. “Where ever there is a common denominator, there is an opportunity to outsource with little pain.” Schneiderman and Sulaver caution that there are constraints on what companies can or should outsource. At the top of the list are processes that form a company’s value proposition, whether they involve manufacturing, procurement, logistics or aftermarket support. “A company has to control what makes its business unique,” says Schneiderman. However, narrowing down exactly how that activity differentiates a company is often hard to determine. One measure is to consider if an outside provider can, or will, perform the activity. “If a provider can’t make money investing in making you unique and keeping you that way, that’s an indication that it was meant to be kept in-house.” A related constraint on outsourcing is where there is a high rate of change in the product, the suppliers or customer requirements. “A third-party needs process stability to do a good job for the customer and to make money for itself,” says Sulaver. “Volumes can go up and down, but the processes and requirements cannot.” For example, Schneiderman points to a client whose products and orders require a great deal of special configuration. This client has the knowledge to handle its configuration needs, but it has not been able to transfer this capability to a 3PL on a global basis. There is just too much tribal knowledge to transfer. If there are too many rules that are not codified, a provider may not be able to pick and pack for a customer. If kitting decisions are too complex and require too 58 APRIL 2008 http://CratersAndFreighters.com http://CratersAndFreighters.com http://CratersAndFreighters.com

Table of Contents Feed for the Digital Edition of Global Logistics and Supply Chain Strategies - April 2008

Global Logistics and Supply Chain Strategies - April 2008 Contents Editorial GL & SCS Exclusive Fast Forward Up Front Cover Story: Continuing to Add Ever More to Their Offerings, 3PLs Are - At Your Service Over the Long Haul Opinion: Freight Audit Bill Can't Show All Mistakes that Hurt the Bottom Line Opinion: The ‘Good-Freight’ and ‘Bad-Freight’ Trucking Customers Industry Voices

Global Logistics and Supply Chain Strategies - April 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.