3PL Strategy: Reactive versus Proactive Approach

Patrick Daly is the founder and Managing Director of Alba Consulting. Patrick helps his clients achieve supply chain excellence to accelerate profitable growth. Patrick has worked with some of the top companies in manufacturing, distribution and logistics services in Europe, Asia and the Americas to achieve dramatic improvements in logistics capabilities and supply chain performance.
 
3PL Opportunities for the Future
 
My experience is that most logistics service providers operating at the present time under-whelm their customers with the level of service that they provide.
 
Some 3PLs adopt a reactive approach to their dealings with their customers while others adopt a proactive approach. Both the reactive and proactive approach are valid strategies, however they offer different advantages and disadvantages from the point of view of the service provider themselves.
 
Reactive Approach
The reactive approach is characterized by the service provider responding (however effectively and efficiently this may be done) to customer requests to provide X, Y or Z service that the customer has defined. Sometimes this is accompanied by the customer teaching the service provider and investing in the service provider’s capabilities so that the customer gets the service that he wants.
 
The positives of this approach from the service provider’s point of view are that customer requirements are satisfied while minimizing investment in innovation. The negative is that the customer feels that he is doing all the running and will always be open to consider alternative service providers should these present themselves.
 
Furthermore, while the service provider minimizes his investment and is content to hold on to the business, the customer appropriates most of the benefits of any improved efficiencies. This is particularly so where increased throughput is achieved with the same resource. In effect, the service provider remains a subordinate and expendable partner in the relationship.
 
Proactive Approach
The proactive approach is characterized by continuously engaging with the customer in a search for mutual opportunities to add value and reduce waste from the supply chain as a whole. Here the service provider does not wait to be asked, but moves on to the front foot, examining all aspects of the supply chain in dialogue with the customer to challenge the status quo with value-added propositions.
 
Here the service provider moves away from simply satisfying customer requirements to exceeding expectations. The challenge of this approach is that the service provider needs to upgrade technical and commercial capabilities in order to credibly conceive, propose, plan and implement solutions – to be viewed as an equal partner by the customer.
The greatest single advantage is that the service provider is now viewed by the customer as an owner of capabilities and knowledge that are difficult to replicate and substitute and thus he becomes an integral part of the customer’s supply chain.
 
Furthermore, having provided much of the intellectual firepower and the resource behind delivering the improvement the service provider has a stronger hand in negotiations and an opportunity to appropriate a greater share of the savings and benefits accruing from the improvements and for a longer period of time.
 
This approach requires a strategic view of investment to be taken by the service provider in developing the full range of capabilities in people, processes and systems across the business.
 
What Kind of Things Would a Proactive Service Provider Need to Be Able to Do?
The proactive service provider needs to be able to:
 Go in to the customer’s business and understand the processes throughout the supply chain. Then use this knowledge to come up with innovative solutions that deliver real business value.
 Work together with the customer to describe what the ideal supply chain would be. For example, using process mapping and value stream mapping to describe the current state supply chain and work with the customer to develop and implement the desired future state.
 Have people capable of working in cross-organizational, multi-disciplinary teams to conceive, plan, implement and manage solutions.
 Develop Information and Communications Technology (ICT) systems and people skills to manage performance and provide visibility to customers.
 Continuously engage with customers to discover, understand and reflect on their unique needs as they evolve thus reinventing the service offering on an ongoing basis.
 
What are the Specific Opportunities?
Building upon a solid base of basic storage and delivery services there is a wide range of supply chain activities in which proactive service providers are driving cost out and service levels up for their customers. The activities outsourced by manufacturers and brand owners to supply chain partners include, but are not limited to, the following:
 
 Warehouse Management,
 Transport Management
 Custom Kitting
 Retains Sample Management
 Line-Side and Kanban Replenishment JIT
 Logistics Management and Transport Planning
 Testing and Sampling
 Sub Assembly
 Packaging and Labelling
 Management of Reusable Packaging and Pallets
 Inventory Management
 Procurement and Vendor Managed Inventory
 Bin Replenishment
 Market Localization
 Product Configuration
 Fulfilment and Distribution Channel Management
 Market Specific Product Configuration
 and so on
 
Future Trends with Manufacturers and Brand Owners
The move towards a focus on core competence and using ICT to manage and coordinate the supply chain is an ongoing process that is opening the door of opportunity for supply chain partners to cooperate in new and innovative ways. The main future trends that are discernible are as follows:
 
 Manufacturers and brand owners are focussing ever more on core competences and building external support networks of service providers to take responsibility for ever increasing chunks of the supply chain.
 There is a simultaneous drive to cut costs while maintaining quality and meeting customer demand.
 Increased speed of flow of inventory, fewer and lower inventory buffers and reduced absolute levels of inventory in the supply chain (notwithstanding strategic stocks to mitigate supply chain risks).
 Increased and deeper application of the principles of lean production out into the wider supply chain to cut cost, waste and improve flow.
 Increased use of ICTs (Information and Communications Technologies) to improve visibility and responsiveness up and down the supply chain.
 
The opportunities are limited only by the capacity of service providers and their customers to innovate and work together in new and creative ways.
 
Are you a logistics service provider?
 
What’s your strategy?

Quelle: eyefortransport

Portal: www.logistik-express.com