Executive Briefings

The Next Wave of Logistics Outsourcing

Blanc, managing partner of The Triangle Group, shares her views on the trends that are driving yet another surge in global logistics outsourcing.

As the requirements for doing business become more involved, companies are increasingly turning to third-party logistics providers to handle that aspect of their supply chains, says Blanc. They are facing sharp cutbacks in staff and information-technology resources, even as they are being required to sell products through multiple channels.

The trend toward outsourcing doesn't mean that companies are absolving themselves of the responsibility to oversee their logistics operations. That might have been true 10 years ago, when the services being offered by third parties were fairly basic: transportation, warehousing, transloading, store delivery and maybe some pick-and-pack activities. Today, says Blanc, all of the functions that go into a logistics chain have become "fully integrated" with distribution-center networks. As a result, the various tasks related to that discipline have become much more complex. The shift has caused 3PLs to migrate from performing relatively low-margin functions to value-added services.

Retailers today are looking to 3PLs "to supplement, and in many cases replace, their distribution networks," Blanc says. Many providers are getting involved in the distribution of products direct to stores, a strategy that lowers costs while shortening order-cycle times.

All of this calls for a much tighter relationship between customer and service provider. "They have to talk to one another constantly," says Blanc. Critical data must also be flowing steadily in both directions.

In addition, the provider of outsourced services must have "a strong working knowledge of what your partner company is trying to accomplish." Training of staff on both sides of the fence becomes an essential element in achieving that goal.

At the outset of an outsourcing relationship, the partners need to engage in an "expectation-setting process," followed by a concerted effort to integrate IT systems. A third requirement is obtaining a complete understanding of "the physical process of how product will move," with respect to timing, storage strategies and replenishment.

Today's outsourcing model "is much more customer-centric, and truly integrated," Blanc says.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, inventory management, inventory control, 3PL, third party logistics, transportation management, logistics management, logistics services, supply chain planning, supply chain services, retail supply chain, warehouse management

As the requirements for doing business become more involved, companies are increasingly turning to third-party logistics providers to handle that aspect of their supply chains, says Blanc. They are facing sharp cutbacks in staff and information-technology resources, even as they are being required to sell products through multiple channels.

The trend toward outsourcing doesn't mean that companies are absolving themselves of the responsibility to oversee their logistics operations. That might have been true 10 years ago, when the services being offered by third parties were fairly basic: transportation, warehousing, transloading, store delivery and maybe some pick-and-pack activities. Today, says Blanc, all of the functions that go into a logistics chain have become "fully integrated" with distribution-center networks. As a result, the various tasks related to that discipline have become much more complex. The shift has caused 3PLs to migrate from performing relatively low-margin functions to value-added services.

Retailers today are looking to 3PLs "to supplement, and in many cases replace, their distribution networks," Blanc says. Many providers are getting involved in the distribution of products direct to stores, a strategy that lowers costs while shortening order-cycle times.

All of this calls for a much tighter relationship between customer and service provider. "They have to talk to one another constantly," says Blanc. Critical data must also be flowing steadily in both directions.

In addition, the provider of outsourced services must have "a strong working knowledge of what your partner company is trying to accomplish." Training of staff on both sides of the fence becomes an essential element in achieving that goal.

At the outset of an outsourcing relationship, the partners need to engage in an "expectation-setting process," followed by a concerted effort to integrate IT systems. A third requirement is obtaining a complete understanding of "the physical process of how product will move," with respect to timing, storage strategies and replenishment.

Today's outsourcing model "is much more customer-centric, and truly integrated," Blanc says.

To view video in its entirety, click here


Keywords: supply chain, supply chain management, inventory management, inventory control, 3PL, third party logistics, transportation management, logistics management, logistics services, supply chain planning, supply chain services, retail supply chain, warehouse management