How to regain Control over your Supply Chain

Posted by Martin Verwijmeren on Nov 13, 2015 9:18:25 AM

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Outsourcing your logistics activities as a shipper (manufacturer, wholesaler, retailer) can be a strategic choice. In fact, many shippers have decided to do this expecting it would improve their supply chain performance. Recent studies[1] show a continuing, positive overall nature of shipper-3PL relationships. Shippers however, tend to outsource only those activities that are more transactional, operational and repetitive. This will no longer hold.

How to regain Control over your Supply Chainl by Supply Chain Orchestration ans SCM

As the world is changing rapidly, shippers need to reconsider their supply chain strategy. We see a rapid shift of power from shippers to their customers. Driven by the rise of E-commerce in global markets, customers increasingly demand control over “their” supply chain.  Shippers that best accommodates “Customer Chain Control” will become the winners.

Therefore shippers need to take a closer look at how their logistics activities are currently orchestrated. Of course by using smart tools and a smart strategy, not so much by executing their own logistics services again. Shippers might even want to start outsourcing more!

But how can shippers start improving?

Are your Logistics Service Providers still Future Proof?

Several developments drive shippers to regain control, for instance new E-commerce strategies and the consequent perceived lack of supply chain visibility. These changes urge shippers to check if their logistics service providers (LSPs) are still future proof.

As Supply Chains are becoming more complex, today’s supply chain settings might prove to be too rigid. It could even mean that shippers need to extend their current pool of LSPs. Shippers might require many more future proof parties and services in order to comply with these increasing customer demands.

Currently Shippers lack visibility on LSPs' performance and their impact on the end-customer’s satisfaction. So, how to extend outsourcing and keep control of those partners at the same time in an ever changing playing field?

Regaining Control leads to Savings and better Delivery Performance

The main reason why shippers started outsourcing transport and warehouse tasks to LSPs was because these companies could do this more efficiently and in addition cost were saved (or at least taken of the shipper’s balance sheet).  

As a consequence this development put many LSPs in the driver seat when it comes to Logistics control. Shippers were confined to black box outsourcing supported by quarterly KPI business reviews with their LSPs. Recent changes, such as the fast development of E-commerce, have made many shippers realize that it’s about time to regain control over their own supply chain. Potential cost savings and a better Supply Chain performance can jointly be achieved.

We should not think that this sudden change of mind implicates that a shipper is necessarily unhappy with the performance of  the LSPs. However, a closer cooperation between the two parties will certainly result in a more satisfied end-customer.  That’s what makes the difference between being best-in-class or being the laggard.

Start answering Questions of internal and external Customers

The steps a supply chain manager or director should take to regain control are relatively simple. The company’s logistics order data should be interchangeable between the ERP, WMS, TMS and a flexible Logistics Order Management system. Once this has been implemented the shipper can start answering the questions of increasingly demanding customers, both internal and external, B2B and B2C.

Combining customer intimacy and operational excellence in the supply chain can be achieved by scaling up or down the number of carriers or LSPs or allocate certain orders to one carrier and other orders to a different LSP. Smart supply systems make  such optimizations feasible.

Start monitoring and check SLAs

Once all logistics related data is visible in one (web based) system, a supply chain director can start monitoring the performance of his logistics service providers to the agreed upon performance criteria (SLA).

A nice benefit for the supply chain director is that he can create more awareness for the logistics challenges his department faces. Previously he was not even capable of answering simple questions as to why he was overspending or why customers were complaining about late deliveries. These answers were all hidden in the LSPs' black box.

Optimize all Stages in the Life Cycle of your operational Orders

Setting smart goals suddenly seems quite an easy thing to do. Really, all that needs to be done is making sure that the right tools are in place to monitor your LSPs' performance.

Make sure your supply chain is well orchestrated, as shown in the Mind Map that has been published in Supply Chain Magazine. The overview ticks all the boxes on how to manage your complex landscape of outsourced activities. It will offer you insight on how to regain control and optimize all stages in the life cycle of your operational orders, improve customer satisfaction and even reduce costs.

Best of all, this can be done while maintaining a good relationship and developing a better bond with your LSPs because you get a better understanding of each other’s activities and challenges. A true win-win-solution!

Mindmap Supply Chain Orchestration

[1] 2015 THIRD-PARTY LOGISTICS STUDY

Topics: Supply Chain Orchestration

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