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Integrating the supply chain

Integrating the supply chain

What impedes progress in the 3PL arena? According to Ian Smith, division CEO of Exel, the biggest impediment to integrated supply chain management is the procurement mentality fostered by discrete outsourcing. Such a strategy might get you the best rate, but you’ll miss the bigger picture, says Smith.

It’s a challenge for manufacturers and retailers to figure out how much they spend in different parts of the supply chain and in different parts of the world, he observes. Five to 10 years ago, supply chain integration wasn’t possible because the information technology systems weren’t able to control and coordinate the data across a supply chain. Today, however, IT — coupled with the Internet — is an enabler of technology and services outsourcing. A tech-savvy 3PL should be able to offer web-based IT capabilities that can optimize a company’s supply chain.

Integrated supply chain management focuses on the total logistics spend with a goal of lowering the total systemic logistics costs by a target percentage — say 20%, Smith points out. This is the area with the greatest potential for most organizations.

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October, 2003

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