Inbound Logistics | July 2007 | Digital Issue

CEVA Logistics (formerly TNT), which acts as both a 3PL and a 4PL, built its reputation in China’s automotive logistics market. Now it offers that expertise to companies in all industries that find it daunting to go it alone in Asia.

partner to push logistics targets down the chain. “By appointing a lead pro- vider, the responsibility to achieve savings or improve quality shifts to that provider,” explains Tap. But as with any outsourcing ini- tiative, the stakes are equally high when relinquishing control to a third party–especially when the responsibil- ity amounts to managing a company’s entire global supply chain. The notion of a 4PL arrangement can be troublesome for companies, especially when analyzing costs, says Ritchie. The layering of profit for multiple providers may seem ominous for the outsourcer; and for the service provider, it stresses the importance of bird-dogging strategic value to mitigate these concerns. “We need to ensure the services we offer and the service providers we man- age are right for the present and the future,” says Ritchie. Companies also worry that once they partner with an LLP they inexorably lose leverage over their operations. For Eaton, however, this has not been the

case. The company maintains robust relationship management processes to communicate needs and make sure LLPs are compliant, and uses both qualita- tive and quantitative metrics to ensure its LLPs are acting in its best interests. This also allows Eaton to facilitate bi-di- rectional communication between and among its partners to share best prac- tices and streamline its network. Staying Flexible It also has the flexibility to manage and dictate protocol where necessary. “In North America, for example, Eaton maintains important, long-standing relationships with LTL carriers, and we have assigned these contracts to our LLPs. This is not the case for our truck- load, rail, and ocean freight. But if we have volume, and decide to hang on to a contract, we can,” says Hegewald. Third-party logistics providers are not without their own concerns about 4PL relationships, especially if a competitor is managing their operations for a cus- tomer. 4PLs can hold 3PLs accountable

for their performance, and theoretically, businesses can use this oversight to benchmark their outsourcing partner- ships. In this way, 4PLs may very well drive and dictate a 3PL’s value propo- sition–perhaps more so than logistics service providers want to admit. As a result, the new, emerging 4PL dynamic requires 3PLs to develop closer, more collaborative partnerships with both their customers and their peers. “Some 3PLs see this as a positive shift, because they understand how the services they provide fit into the buyer’s strategic and tactical activities. Others view the change negatively because they only focus on containers, truck- loads, and pallets,” says LTD’s Craig. Market demands inevitably com- pel 3PLs to reevaluate and reconsider strategies that can push their value proposition forward to meet the needs of cost-conscious customers. Many companies in the transportation, warehousing, and IT sectors have devel- oped value-added services that go well beyond the scope of their core business

88 Inbound Logistics • July 2007

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