January 2011 | Sponsored | Knowledge Base

Protect Your Supply Chain From Merger Mania

Tags: 3PL

Brad Constantini, Principal/Executive Vice President, Comprehensive Logistics Inc. 330-539-1099, ext 288

In recent months, several third-party logistics (3PL) providers have merged to form large conglomerates, and consolidation in the 3PL market is likely to continue. Although the trend is not new, the New Year is a good time for companies to take a closer look at 3PL relationships and consider how they impact supply chain performance.

When companies merge, there’s always a risk of service disruption caused by culture clashes, integration hurdles and a host of other issues. Although the acquiring company typically paints a rosy picture, things can and do go wrong. A study conducted by U.K.-based SCALA Supply Chain & Logistics Consulting revealed that only 10% of companies that purchase logistics services feel that mergers and acquisitions among 3PL providers translate into better capabilities or customer service. And, while 97% of the merged provider companies claimed synergy benefits, and 83% claimed reductions in operational costs, just 24% of their customers received synergy benefits. Only 28% said they experienced cost benefits.

Because of these gaps between promises and results, supply chain consultants often advise companies to wait until they clearly understand the impact of the merger before renewing their logistics contract.

Companies that do not currently outsource logistics processes but are considering it can also prevent potential problems by looking for 3PL providers that offer the attributes proven to contribute to successful partnerships.

Service: It’s Still Number One

Chief among those characteristics is service quality, which can be measured in terms of openness, transparency, good communication, flexibility and collaboration.

Research conducted in recent years has shown that lean, mid-size 3PLs have an edge over mega-3PLs when it comes to customer relations. Lean 3PLs can be more nimble and responsive to market needs because their scale allows for close communication with clients.

With fewer layers of bureaucracy to slow them down, mid-size 3PLs can modify, adapt and execute quickly and on demand. They can transform their service offerings and operational capabilities at a moment’s notice since they aren’t tied to the one-size-fits-all approach that drives some of the larger providers.

Lean 3PLs also spend more time actively managing customer relationships because they view each customer as a valued strategic partner, not just a number. Disciplined process controls, combined with a collaborative, multidisciplinary approach to problem solving, help customers reduce costs while ensuring accuracy, quality and on-time performance.

Control Issues

Another attribute that leads to successful partnerships with 3PL providers is the ability for customers to monitor and manage the supply chain remotely.

Companies should look for 3PL providers that allow them to maintain control over their logistics processes while still receiving the benefits of outsourcing. Reputable 3PLs will provide customers with open access to item-level details 24 hours a day. Advanced information systems provide complete visibility into intricate logistics processes— from first mile to last. The ability to monitor every process step helps companies confirm that the 3PL provider’s operations are contributing to their strategic business goals.

A lean, mid-size 3PL like Comprehensive Logistics Inc. (CLI) takes transparency a step further by making technology an integral part of the customer relationship. Using the company’s sophisticated, Internet-based intelligence tools, CLI’s clients can access real-time logistics data on demand. CLI’s partners don’t just “see” their supply chains; they see through them. They can view the flow of raw materials, work-in-process inventory and shop-floor processes as they happen. They can monitor key performance indicators and receive alerts when shipments deviate from established processes. As a result, they maintain tight control over their supply chains while still receiving the benefits of outsourcing.

In these uncertain economic times, one thing is certain: The 3PL landscape will continue to change, and mega-3PLs will continue to emerge. For better or worse, customers won’t be able to control the outcome.

However, they can and should insist that their business partners commit to full transparency. In addition to seeing operational details, visibility also means having a clear view of how a merger will impact service levels.

After all, the stronger the 3PL provider— and bigger doesn’t necessarily mean better— the more resilient the supply chain. And that will lead to a sharper competitive edge and improved bottom-line results.

To learn more about how CLI helps companies reduce logistics costs and improve service— while maintaining control over their supply chains— call 800-734-0372, ext. 288, e-mail info@complog.com, or visit www.complog.com