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Consumerism
REAL REPORT
manufacturers never touch the products
they sell. Given the challenges we know that
exist in a consumer-driven supply chain, it
is not surprising that client expectations of
outsource providers have increased.
We are seeing a gap develop between
services rendered and the expectations of
manufacturers. According to the 11th Annual
Third-Party Logistics Survey 2006
by Professor John Langley Jr., Ph.D.,
Georgia Institute of Technology, “3PL users
clearly expect continuous improvements in
service levels and information technology
(IT) capabilities. Among the key challenges
for the 3PL industry in the future are capacity
management and innovation. While 3PL
users acknowledge innovations such as
lead logistics providers and fourth-party
logistics providers, signifi cant room for
improvement still exists in the knowledge
and use of these approaches.”
There are a number of potential
reasons for the emergence of
this expectation gap:
Supply chain value spans across
traditional supply chain functions
The domain expertise of many providers
is deep within traditional supply chain
functions. Many of the effi ciencies within
these functions have already been gained
and are no longer enough. Clients are
turning now to seek value in the total
integration of their supply chains across
these functions.
Fragmented systems infrastructure
resulting from acquisitive growth
Within the 3PL and contract manufacturing
space there has been a surge in large
consolidations developing through
acquisition. Unfortunately, there is a
lag existing in many cases within the
consolidation of disparate legacy
systems, despite the fact that the
capabilities are marketed under a single,
unifi ed global brand.
Alignment within the supply
chain
One third of Hau Lee’s Triple A supply
chain examines alignment issues within
supply chain. Due to the deep functional
origins of many providers, there may often
be confl icting objectives in serving clients.
For many providers there is a real potential
danger if they expand their supply chain
service portfolio to make their core business
more attractive. This raises the possibility
for 3PLs, repair providers and contract
manufacturers to provide expanded solutions
to ship more product, repair more product
or build more product respectively. Contrast
this desire with the typical OEM objective of
creating a dynamic and optimal alignment
between supply and market demand.
Raising the standard
As distinctions between the traditional BPO
labels become blurred, those that will make
a tangible difference to clients are those
that come equipped to solve real customer
supply chain problems. How do you deal
with issues such as demand variability,
SKU proliferation and channel volatility
in a global marketplace? How can you
effectively link supply chain strategy,
visibility and execution capabilities?
These problems—whether in-house or
outsourced—are beyond the realm of
isolated domain expertise or technology only
solutions. These challenges are leading to
the emergence of a new category of supply
chain BPO that is only recently attracting the
attention of the analyst community.
Probably closer to the traditional notion
of a 4PL, providers in this space will bring
a true supply chain focus and customer
alignment to their business.
Recent research articles from AMR
Research highlight a tremendous opportunity
in this space for providers, but it is
contingent to the appropriate investments
May 2010 Link 45