Home' MHD Supply Chain Solutions : MHD Spt-Oct 2015 Contents of its inbound transportation, and stated:
"We didn't want to be a guinea pig. We
were looking for someone who had already
blazed the trail."
• Goodyear, the tyre manufacturer, came
closer to the logistics outsourcing partnership
aspects described earlier in this article with a
risk-reward and close multi-level management
relationship with its 3PL outsourcer.
This does not mean that the clients
concerned did not benefit from their outsourcing
agreements, even if innovation was lacking
throughout. However, it raises questions about
the future of logistics outsourcing and perhaps
the opportunity for an outsourcing provider to
disrupt and seize a sizable advantage by being
innovative where others are not.
Equally striking is the list from consultancy
Cap Gemini's 2010 outsourcing review of
reasons why clients decided to do their logistics
• 19% -- Logistics is a core competency at
• 15% -- Cost reductions would not be
• 14% -- Control over the outsourced
function(s) would diminish;
• 13% -- Logistics too important to consider
• 11% -- Service level commitments would not
• 10% -- We have more logistics expertise than
most 3PL providers;
• 9% -- Corporate philosophy excludes the use
of outsourced logistics providers;
• 8% -- Too difficult to integrate our IT systems
with the 3PL's systems;
• 6% -- Global capabilities of 3PL need
• 5% -- Issues relating to security of shipments;
• 5% -- We previously outsourced logistics, and
chose not to continue;
• 3% -- Inability of 3PL providers to form
meaningful and trusting relationships.
Once again, logistics innovation is conspicuous
by its absence, either as a reason to stay
in-house or to abandon an external provider.
What can logistics providers
do to foster innovation?
Two approaches could help client and out-
sourcers to move the cursor still further towards
business advantage through innovation,
although neither one is a quick fix.
1. Logistics governance
Borrowing from the idea of IT governance,
logistics governance positions logistics as a stra-
tegically important item for enterprises. Good
governance then depends on top management
understanding logistics enough to make appro-
priate demands from the logistics provider, while
the logistics provider also understands the client's
business well enough to offer insights into the
way good logistics performance in one area can
be replicated in another. IT governance often
involves board-level representation of IT manage-
ment. While this may be too ambitious in logistics
governance and an outsourcing provider, close
contacts with sufficiently senior management are
key to fostering logistics innovation, as well as the
two-way/mutual understanding between logistics
and the rest of the business.
2. Process-driven innovation, instead of ad hoc
Logistical innovation, if it happens today, is often
the result of a specific client need. It may not
immediately be reusable elsewhere. However,
an innovation-collection process that captures
knowledge from the outsourcer's personnel
can direct the focus to be on innovation that
uses technology and processes that are already
standard for the outsourcer. This multiplies the
chances that the outsourcer will then be able to
offer valuable innovation to different clients.
Logistics outsourcing partnerships need rules in
order to succeed. Yet as business environments
evolve, so must those rules. In some cases,
they may need to be broken -- or replaced by
more suitable ones. The strategic importance
of logistics and the difficulties of generating and
increasing logistical innovation are currently
leading to a situation of risk and opportunity.
Clients and logistics providers who do not develop
innovation in their partnerships could be stuck at
lower levels of business advantage. Those who
can break into logistical innovation on the other
hand, possibly by breaking a 'rule' or two, will be
eligible for mutual competitive advantage.
Rob O'Byrne is the founder and Group CEO
of Logistics Bureau. Rob writes regularly on
this topic and others at www.logisticsbureau.
MHD SUPPLY CHAIN SOLUTIONS --- SEPTEMBER / OCTOBER 2015 29
FREIGHT, DISTRIBUTION & 3PL 29
Links Archive MHD May-Jun 2015 MHD Nov-Dec 2015 Navigation Previous Page Next Page