3PL Relationships: From Arm's-Length to an Embrace

April 23, 2012
A new level of intimacy is becoming the new normal for many in logistics. Service providers are now service partners for manufacturers reaching out to global markets. I spoke with several 3PLs recently who explained how close they've gotten to some ...

A new level of intimacy is becoming the new normal for many in logistics. Service providers are now service partners for manufacturers reaching out to global markets. I spoke with several 3PLs recently who explained how close they've gotten to some clients that, in the past, preferred a good arm's length between themselves and outsiders. Here's what those 3PLs told me:

Tony Zasimovich, vice president of international logistics services for APL Logistics, brings engineers in as part of his service for large customers to do an analysis of their supply chain. It starts with their international business, but soon narrows down to domestic and eventually down to the very loads they ship and receive. The result is often shipment consolidation. This can produce big savings for companies sourcing from Asia.

“We have warehouse stations in Asia at the ports,” Zasimovich says. “We'll receive product from multiple vendors then consolidate for an importer. We'll optimize the first leg and then consolidate to get best loadability. We're using bigger boxes, including 53 ft containers, both for international and domestic shipments. In the end, by controlling the booking process overseas and managing that, the customer will ship fewer ocean containers and have a nice savings on ocean transportation. The bigger the box, the better loadability and the lower the per-unit cost.”

On the domestic side, Zasimovich said his organization is helping customers convert from truckload to intermodal, partly because of the driver shortage and fuel cost increases. They'll analyze the customer's supply chain flows and shipping data, and if there are stretches of road longer than 800 miles, that route could be a candidate for conversion to rail.

Scott Aubuchon, director of global marketing for UPS Freight Forwarding told me with the market volatility clients have seen in the last couple years, several have converted from air to ocean service. Then there are those that have used ocean but can no longer afford its large time window, making air freight in smaller quantities more attractive. Many of these are global manufacturers going to a more distributed mode to take advantage of serving new markets having growing populations of middle-class consumers.

“That real complex distributed supply chain encompassing parts and raw materials from a large variety of places only to come together in one or more hubs for manufacturing and then redistributed to markets all over the world is more common,” he said.

That supply chain complexity is getting more common because global distribution exposes companies to global risks—like tsunamis. The need for more options yields greater complexity.

Then there's internal complexity that comes with mergers and acquisitions among global clients. Steve Roche, director of transportation products for Menlo Worldwide Logistics, said the integration of information systems among such companies is his challenge. He cited one client as an extreme example of this. Imagine having to deal with 26 different ERPs. That's the kind of project upon which long-term relationships are built—and navigated using a “continuous improvement roadmap.”

“We may have a relationship start at the shipment level and then over time we'll work with their IT groups and start working on trading fiscal budgets, supporting integration of orders, part information, and optimizing the network to provide supply chain information as opposed to just transportation information,” he explained.

So there could be different strategies tied to every year of such a relationship, depending on that client's evolving internal objectives. In the case of that client with 26 ERPs, a huge objective is data unity. For example, such a company is unlikely to have a unified parts master list. The question becomes, how do you start cleaning that data set?

“By going to a web-based solution where their people can actually input the data and we share that back and forth in lieu of them doing it themselves,” he answered. “Their internal IT strategies may be more manufacturing or sales focused as opposed to supply chain driven. With integration on the supply chain side they can see 12% savings compared to just 5-6% using their approach. We do lean in the supply chain and that goes into warehousing, transportation and value adding.”

Relationships with service providers dedicated to going beyond transactional and tactical approaches can raise an entire supply chain's performance. It's the old strength-in-numbers wisdom mom and dad told you about—brought into a new era where such strength is delivered in a cloud of computing power.

Related Editorial:

Service You Should and Shouldn't Expect

Maybe Service is Rocket Science

Supply Chain Managers Get Physical with the Internet

How Warehousing will Cope with 2012

About the Author

Tom Andel Blog | former Editor-in-Chief

As editor-in-chief from 2010-2014, Tom Andel oversaw the strategic development of MH&L and MHLnews.com, bringing 30+ years of thought leadership and award winning coverage of supply chain, manufacturing logistics and material handling. Throughout his career he also served in various editorial capacities at other industry titles, including Transportation & Distribution, Material Handling Engineering, Material Handling Management (predecessors to MH&L), as well as Logistics Management and Modern Materials Handling. Andel is a three-time finalist in the Jesse H. Neal Business Journalism Awards, the most respected editorial award in B2B trade publishing, and a graduate of Cleveland’s Case Western Reserve University.

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