chains – and that outsourcers expect more value from their logistics part- ners, 3PLs are more adroit at helping customers drive efficiencies in other areas of the supply chain. By example, 3PLs also tell us their customers are concerned about tech- nology strategy and implementation (48.8 percent), reducing inven- tory (46.3 percent), business process improvement (43.9 percent), and reducing assets and infrastructure (41.5 percent). Noticeably, “reducing inventory” jumped 14 percent this year and offers a good example of the types of growing pains exacerbated by lengthening and deepening supply chains. By looking at strategies that reduce or better position inventory in the pipeline, follow demand- driven signals, and control inventory movement from point-of-origin, businesses are leveraging their 3PL partners to become savvy supply chain practitioners. This level of complexity also indi- cates that companies are equally judicious in how they envision their supply chains and the roles their 3PL partners play within their organizations. What’s In The Box Case in point: specialized mold manufacturer Siamons International requires its 3PL to support myriad logistics activities. ( Find details on this partnership in Go Ahead... Pile It On , page 74 ). In its partner, Siamons found a logistics bricoleur capable of not only handling core responsibili- ties including order processing and product packaging, but also out-of- the-box tasks such as building and shipping in-store product displays. Outsourcing in the new dimension is no longer simply a quick-fix solu- tion to a tactical problem, but rather a strategic process that identifies
areas for improvement, designs solutions, and streamlines these solu- tions beyond implementation. As part of this emerging dynamic, 3PLs are inclined and equipped to move past day-to-day operational prob- lem-solving to create and execute value-driven initiatives – and custom- ers are beginning to expect this. The real value-add for Siamons is the collaborative relationship that has developed between the two companies – a relationship that tran- scends the usual 3PL expectations and is indicative of the new global outsourcing trend. SIGNPOST # 2 The Power of Collaboration Over the past few years, the 3PL seg- ment has settled into a two-horse race between large, resource-laden inter- mediaries and smaller niche players that rely on strong customer service to capture market share. Increasing polarization within the industry is pushing medium-sized service pro- viders into the crosshairs of larger 3PLs keen to expand their businesses through new acquisition targets. 3PLs were mixed in their expla- nations for how they were growing, citing M&A activity, organic growth, and increased sales as the primary rea- sons. This variety of opinion reflects the bifurcation of the 3PL market. Large 3PLs can leverage their capital and clout to acquire comple- mentary businesses as well as seek out new growth opportunities by can- vassing their customers’ customers. A majority of 3PLs indicate they have made or are seeking key business acquisitions in areas such as China, Eastern Europe, Canada, and Mexico to broaden their operational scope. In addition to growing inbound
logistics practices domestically, glo- balization is a key factor in this shifting cycle, as businesses extend their reach into new markets and develop relationships with myriad transportation, warehousing, and technology partners. The Changing of the Guard In less obvious ways, the growing complexity of supply chain man- agement is helping small 3PLs gain market penetration. For one, the sheer size and scope of global supply chains has rendered the idea of a best-in-class global service provider nearly unten- able, and logistics companies that specialize in a niche vertical, region, or capability are of value to large and small outsourcers alike. Increasing complexity is also pres- suring logistics companies across all sectors to enhance value-added ser- vices beyond core operating strengths, ultimately blurring the distinction between freight carriers, IT devel- opers, consultants, and 3PLs. Small intermediaries that offer stand-alone, specialized service capabilities, and are committed to their core customer base, are more likely to stand out amid this mosaic – especially as some companies migrate away from the “one-stop shop” approach to outsourcing. 3PLs attuned to this shift recognize the strengths and weaknesses of their market position and how they match up with prospective clients’ needs. This is reflected in the fact that more than half (51.2 percent) of 3PLs polled in the 3PL Market Insight Survey believe customers should partner with more than one service provider, while 39 percent feel that a customer should work with only one partner ( see Figure 3, page 70 ). The remaining 9.8 percent of respondents say outsourcing strat- egies are contingent on the customer and the scope of the venture. Compared to last year’s data, more
68 Inbound Logistics • July 2007
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