management approach to a more cen- tralized LLP-driven model presents another example of how outsourcers and 3PLs, working in tandem, are raising the bar and taking logis- tics outsourcing to a new stratum of innovation and collaboration. SIGNPOST # 3 Outsourcing’s True Value This push toward collabora- tive outsourcing partnerships, and the concessions 3PLs and LLPs are willing to make to facilitate these arrangements, indicates that logistics intermediaries are not only mind- ful of their own limitations, but also the “value add” companies can glean from partnering with multiple spe- cialized players. For outsourcers seeking greater objectivity, custom- ized solution designs, and more effective customer service, this level of cooperation augurs even greater growth for the outsourced logistics industry moving forward. The types of partnerships com- panies such as Siamons and Eaton are forging with their partners, cou- pled with empirical data from the 3PL Market Insight Survey , reveal three emerging trend lines: 1. 3PLs are helping customers execute sophisticated supply chain initiatives beyond simply reducing transportation costs. 2. They are growing their customer bases at an annual double-digit clip, both organically and through strate- gic acquisitions. 3. Some service providers are look- ing to add further value for their customers by working collaboratively among themselves. All in all, telling proof of the exciting new dimension of global outsourcing.
FIGURE 3
3PLs RESPOND Should customers partner with one 3PL or more than one?
Use just one 39.0% Use more than one 51.2% Depends on situation 9.8%
SOURCE: IL 3PL Market Insight Survey, 2007
3PLs identify using one service pro- vider as the route outsourcers should take. This increasing parity pres- ents a striking anomaly: while the majority of 3PLs see multiple 3PL partnerships as a sound outsourc- ing strategy, citing the necessity to maintain “balance” and “options” in today’s unpredictable environment, an increasing number cite the value of having one point of contact over their supply chains. This difference in opinion may in fact be recognition that some cus- tomers prefer having “one throat to choke,” or need management sim- plicity because logistics challenges are growing beyond their capacity to control them. It may also reflect the growing complexity of logis- tics and supply chain outsourcing relationships. Either way, such a split could per- haps create a breaking point for service providers as they look to bal- ance their customers’ best interests with their own. In the context of today’s global environment, partnering with multi- ple service providers gives companies greater leverage to benchmark perfor- mance, while also holding partners accountable for agreed-upon service requirements. With increasing need for flexibility and reliability – given the inevitable supply chain disrup- tions and volatility of consumer demand – a roster of 3PL partners provides additional resources and
support to scale and adapt sourcing patterns as the need arises. The growth of outsourcing, in terms of scope and number of pro- viders, consequently has raised the presence and value of fourth-party logistics providers (4PLs) and lead logistics providers (LLPs). But while these specialized service provid- ers have traditionally been used to manage multiple outsourcing part- nerships, companies are now driving the 4PL solution design beyond these parameters. ( Read the full story, Outsourced Logistics: 4Ward Momentum , page 81. ) Cleveland, Ohio-based industrial manufacturer Eaton Corporation, for example, decided to rethink its global supply chain strategy three years ago, using LLPs to aggregate control over and visibility into its disparate networks. It currently partners with five primary LLPs to marshal sup- ply chain activities in North America, Europe, and Asia. Where Is Everybody? Eaton’s goal is to pare down to one provider as prudence and time dicate. This 4PL solution strategy lets Eaton leverage control over protocol where necessary and follow the lead of its 4PLs in emerging markets – all while using feedback from partners to further streamline and organize its global network. This ongoing progression from a fragmented supply chain
70 Inbound Logistics • July 2007
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