August 2004 | Commentary | 3PL Line

Outsourced Manufacturing Changes the Face of 3PLs

Tags: 3PL

The debate over outsourcing American manufacturing jobs to overseas workers continues to stir controversy in politics and business.

Economists argue that offshoring is the only way to save American industry; the money saved frees capital for research and development and creates top paying jobs. The political entities, in the interest of both the already and nearly-unemployed, lean toward limiting the exodus of jobs. While the heat of the argument distracts the attention of the marketplace, practical-minded logistics professionals need to thoughtfully examine the implications for our industry.

Outsourcing will, of course, create fewer big boxes for manufacturing with less product produced in America. The idea that logistics is merely warehousing and distribution will be challenged. Those who fail to recognize the big picture will surely disintegrate.

The more pragmatic will see the need for regional distribution from points of entry to the rest of the country. They will recognize a desperately serious need for value-added services such as reverse logistics, product customization and rework to avoid the expense of either scrap or return to distant points of manufacture.

Beyond the obvious changes lurks an even more serious challenge to the industry—the exacting professional approach to supply chain management. Those in logistics who are pre-eminently competent to evaluate multi-faceted elements of supply chain costs will be in greater demand by corporations that will soon be scrutinized by stockholders to evaluate their decisions to offshore.

The complexities of transportation costs, e-commerce, and the global procurement of raw materials will require logistics professionals who uniquely understand integrated supply chain systems.

The question quickly emerges, "How will industrial producers identify the best logistics providers?" The easy answer is to look at the largest logistics companies that have managed to survive through multiple mergers and acquisitions. The right answer may be far more elusive.

In an increasingly networked world, it becomes more and more difficult for production entities to identify genuinely independent and unbiased opinions. Perhaps the future of professional consultation will reside with those who have not been crippled by serving the narrow interests of global outsourcing.

A New Breed of Provider

Innovative logistics providers have been quietly accumulating the intellectual capital sloughed off by manufacturers during downsizing and off-shoring. Coupling their increased knowledge base with powerful IT systems in inventory management, these up-and-comers are emerging as the "points of trust" in a rebirthing of our industry.

How will you recognize these providers? They will:

  • Have a diversity of employee skills, assembled specifically to assist a wide range of customer needs.
  • Listen carefully before offering quick solutions, and the solutions they provide will be multi-faceted.
  • Have remained on the edge of innovation, taking risks and sharing benefits with their customers, investing in themselves and the best IT available.
  • Be open to moving into areas where their customers need them, not locked into networks of warehouses from obsolete patterns of distribution.
  • Offer to track, measure and report their key performance indicators so that both success and failures can be openly examined.
  • Focus on quality, ethics, and customer service.
  • Be able to balance the delicate scales of size, strength and flexibility.

We cannot turn back the hands of time, nor can we wring our hands in despair at the ever-shrinking world of economic interactions. The globalization of production will require a new logistics professional.

Perhaps these new industry leaders are just beginning to emerge.