08 January 2009

Viewpoint : The Blog

Challenging times for 3Pls

Published:: 04 November 2008
Article Type:: Viewpoint
Byline:: Nick Allen

Are third party logistics service providers really giving the market what it wants? In recent years out-sourced logistics activity has become polarised between those offering essentially warehouse and transport related services and those offering more sophisticated value adding services across a wider geography. Logistics companies may be providing a wider range of services, but is the market looking for something more? Or perhaps even, just something different to what is currently widely available?

Judging by the animated discussion this subject generated at a recent roundtable event for heads of supply chain at some of the country’s leading retailers and consumer packaged goods companies, it would seem there is something of a disconnect between the 3pl and its customer base. It’s true that there were no logistics service providers around the table to give a balanced response, but then the participants were not constrained by the convention of politeness either, which gave rise to an interesting insight.

Those around the table seemed to appreciate the value an outsourced service provider could bring to a new operation through the speed with which systems, processes and people could be deployed, but beyond the initial set-up many thought drive and innovation were lacking. Several questioned the value in having an out-sourced service if the operation was essentially static.

Customers are looking for more in the way of intellectual input, suggestions on ways of improving the processes and systems needed to deliver greater value and service to the end customer. Others were looking for strategic input and creative thinking. However, the central issue of this hot topic was collaboration.

I suspect, however, that those around the table were not looking at collaboration as a cosy term for working closely or in ‘partnership’ with a 3pl, but more in a deep collaborative sense where risk is shared between the two parties. And here I fear is the crux of the issue – customers want more risk sharing with 3pls, but 3pls are reluctant to engage on that basis.

As the economy continues to shrink more manufacturers and retailers will be looking for collaborative partners who are willing to partake in risk sharing. The question is, will the contract logistics sector rise to the challenge?

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