Having had an extensive career in the 3PL sector – as a solution designer, client and a consultant procuring third-party solutions – it has given me a vantage point to understand the strengths of the sector and consider what future service opportunities could help providers differentiate themselves.
First, let’s talk about the strengths. The UK market is very mature and outsourcing of logistics operations, especially in retail, is very much the norm (inhouse operations are increasingly becoming the exception). 3PLs have now honed their solution design and service offerings to the point where – more often than not – it is far more cost-effective, service-efficient and adaptable to outsource logistics operations. It’s become a question of why wouldn’t you as opposed to why would you? This strength leads me on to the weakness of selling third-party logistics solutions – differentiation.
Every provider, especially blue-chip organisations, has now advanced their service offering to such an extent that many traditional differentiators such as zero-risk onboarding, systems deployment, efficiency, accuracy and personnel engagement are now industry standards across the board. These are the bare minimum. So, if every provider is offering the same, how can they differentiate themselves?
Historically, one area has been overlooked which – if deployed correctly – will get providers more deeply integrated in their client’s business, give them a voice at board level and help to attract and retain long-term major clients. Demand planning.
In almost every outsourcing I’ve been involved with, there is a contractual requirement for clients to provide demand plans to the logistics provider so they, in turn, can create a capacity plan. And, in most cases, the one thing that all parties recognise is the demand plan will be rubbish. Why? Many companies (SMEs especially) lack the resources, skills, time and software to deploy quantitative planning approaches. They need help and it should be logistics providers riding to the rescue.
Logistics providers have a unique position where, with the client data that is already within their systems, combined with analytical acumen and process, instead of passively receiving a demand plan they could be proactively developing quantitative plans for their clients. They could take those plans and engage directly with the client’s finance, sales and marketing teams to produce a cross-functional single integrated business plan. They could become the owner of the client’s S&OP or IBP process; no longer a passive receiver of a demand plan but the proactive leader delivering forecasts, inventory projections and portfolio management insight on a long-term horizon.
It seems logical to me, given that demand planning is very much within the remit of supply chain, for logistics providers to take the step into this field. It could even be another central service offering,
like quality, HR or IT, where the logistics provider has a core dedicated central team allowing multiple clients to ‘plug-in’ to demand planning skills, systems and processes, which otherwise may not be cost-efficient for them deploy.