World Trade Magazine recently ran an article on customized solutions offered by logistics providers and 3PLs where it asked thirteen different experts how they would meet the logistics needs described in a ‘hypothetical case study’ for a leading developer or electronics. I think that this is one of the most interesting articles that World Trade Magazine has ever published because it clearly shows that even though a group of logistics providers might offer the same services, they might approach the solution in completely different ways and you likely won’t know who the best logistics provider is for you until you find out how they will handle your transportation needs.
A brief description of the hypothetical situation is as follows. The electronics developer jumped on the LCCS bandwagon and moved the majority of its manufacturing operations offshore. It established relationships with two major contract manufacturers and a major international logistics provider to ship product from factories in China and Hungary to distribution centers in Singapore, the Netherlands, and Memphis. The logistics provider was selected based upon freight rates and the promise of product visibility during shipment, which has been slow to materialize, forcing the electronics developer to make decisions based on the expected transit time, rather than a firm delivery date (as the provider is routinely off by as much as two weeks). In addition, invoicing is poor. Although they get the total bill weekly, details about each shipment are missing and they can’t allocate costs to a specific product. Finally, although the logistics provider is living up to negotiate freight rates, the electronics developer is constantly getting hit with handling fees that weren’t in the initial contract, as well as higher taxes and duties that may not be justified. How should the company proceed?
Expert number one, who noted that visibility is important, that a minimal level of connectivity is required between each node in the chain, and that predictive monitoring needs to be put in place, had the following advice:
- conduct a full review of existing contract provisions and identify gaps between promises and realizations,
- convene a summit meeting with the 3PL senior executives to discuss the gaps and develop a plan to address them, and
- if the 3PL cannot realize its commitments, find a replacement logistics carrier.
Expert number two, who noted that the electronics developer probably didn’t understand the concept of total delivered cost, needs to go back to the table and focus on measurable goals that will be committed to by all parties and then develop contingency plans if the current relationships fall through.
Expert number three, who noted that the electronics developer is probably not agile enough, pointed out that they need a services oriented supply chain based on a SOA (services oriented architecture).
Expert number four, who believed that the electronics developer underestimated the importance of due diligence when selecting a logistics partner, said that the developer has to work with the carrier to first and foremost satisfy customer needs, which will require better visibility and firm delivery dates. In addition, they should get tax help to reclaim likely overpayments if their taxes increased without any clear reason why.
Expert number five, who noted that the electronics developer is no longer master of its own destiny, advises the developer to “staple itself to an order” and map its entire order-to-cash process to obtain a detailed understanding of the physical, financial, and information flows. Then it needs to work strategically with its key vendors to resolve the issues.
And so on.
The key thing to note is that, just like each expert views the problem definitely, so will each 3PL and selecting the right one will require some research to find the one that has the same understanding of your supply chain as you do.