A formula for outsourcing

A formula for outsourcing

From his perspective as a 3PL serving process manufacturers, Bob Shellman, president and CEO of Odyssey Logistics & Technology Corp., sees more shippers in the bulk chemical and process industries using transportation management systems (TMS) for “capital avoidance.”

Two types of assets come into play in this scenario. The first is the information systems asset and the intellectual capital required to develop and maintain it. For specialized systems like TMS, net-resident services like those offered by Odyssey free up the shipper from having to develop and maintain specialized information technology (IT) systems, maintain purchased or leased systems, or integrate upgrades as an IT vendor releases them.

In a broader sense, information is also replacing physical assets for many shippers. In the chemical industry, that spells significant cash for specialized transportation assets.

“These companies are in the business of producing products of high quality at a low cost,” says Shellman. “Owning specialized transportation assets is not where they live, and rarely will they be able to deploy or spend the money on the technology necessary to manage those transportation assets.”

In chemical transportation, the issue is not just the specialized equipment — it also involves specialized handling, pressurization, heating, product protection and cleaning. The first challenge is locating suitable equipment. Then it may also be necessary to track where and how the equipment was cleaned. One product may move out as an export, but a food additive like olive oil might be shipped in the same equipment on the return, explains Shellman. Add to that the fact that many chemical exports are dual-use products, so the consignees must be carefully screened against lists of denied parties. The specialized information flow very quickly becomes a major issue for a manufacturer's broad-based IT department.

The chemical industry focused on safety and security of its supply chain long before the development of the U.S. Department of Homeland Security. The industry's Responsible Care program and systems and mechanisms to comply with various regulatory requirements may well have put chemical shippers ahead of the curve in the current security-conscious environment, and may have eased compliance with new security requirements.

The lesson of the chemical industry is that, in its complex and highly regulated environment, a centralized industry effort like Responsible Care benefits the industry. It has also helped 3PLs to structure their services to fill those specialized needs for physical distribution and the supporting IT systems.

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February, 2004

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