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Editor's Viewpoint

Outsourcing and Creating Collaborative Solutions

by Fred Moody

Third party companies are building alliances with logistics, consulting, technology and other companies. They are forming groups comprised of the best-of-breed service providers to afford solutions that go far beyond those services traditionally offered by just one provider.

In this issue, where we focus on outsourcing, a quick survey of the landscape shows that there is a trend toward a departure from the traditional outsourcing paradigm.

Many logisticians conduct their business entirely inhouse to exercise greater control over a company’s supply chain, and today they often employ sophisticated software to orchestrate all of the elements in the process, from tracking and tracing to strategic planning.

But in a rising number of instances these functions are being outsourced to third party providers.

In outsourcing there are many models to follow. But a handful of logisticians are changing their roles to act as a powerful fulcrum to leverage optimum performance levels from their suppliers at each facet of the supply chain. These logisticians are providing exacting instructions and directives to their suppliers, telling them what to do and when, no matter where they are acting as agents in the supply chain.

Nicholas Seiersen, KPMG, likens this type of approach to General Electric’s way of covering all the bases in its business, or Disney’s control of the entire gamut of services and products in its own arena, from trademarks and licensing, to the production of films and CDs and theme parks.

Giants in the corporate landscape such as General Motors, Ford, DaimlerChrysler and others are now are looking at this means to attain greater efficiencies from their suppliers. Some companies are already acting to provide a comprehensive means directing all the facets of supply chain for their suppliers to follow. This seems to be the next frontier for some firms.

In the evolving role of third party providers, integrating logistics services can also have a significant impact. Warehouse operators, for example, are now often providing more logistics and transportation services. Conversely, trucking companies are offering logistics as part of their function. The lines between the various components of the supply chain are blurring, as Keith Hart, Vice President, Schenker, points out in his feature this issue.

Efforts to make these far-reaching and integrating enhancements to the supply chain can include all of the elements you would expect, such as operations planning, distribution management, procurement, sales and technological leadership. The implementation of these enhancements involves people throughout the organization to ensure the process is successfully driven.

It also often means going beyond the traditional model for outsourcing and third party providers. It can involve a second look at procurement, IT, demand forecasting management, inventory, manufacturing, as well as other elements as part of the process.

In this issue we feature a new columnist, Ian Lodge of i2, a leader in providing Web-based solutions for supply chain management, whose article provides an insightful look at streamlining the connection between all of the participants in the supply chain.

Traditionally, third party logistics providers have often limited their services to operational and implementation issues and not sought to use technology to develop and support a more strategic execution of supply chain tasks and requirements.

But Nicholas Seiersen points to Schenker’s Logistics Account Management System as being exemplary and innovative in terms of pinpointing opportunities for improvements throughout the supply chain and optimizing performance. Schenker Vice President Eric Dewey has helped to hone processes that provide customers with greater control and flexibility throughout the supply chain globally.

It not only enables Schenker to pioneer new ways to master and enhance clients’ tracking and tracing, creating visibility throughout the supply chain on a worldwide basis. The program also enables clients to optimize their supply chain management and planning.

As part of the first step, Schenker’s U.K. developed software, called SoliNet3, provides supply chain modeling analysis to find opportunities to optimize the supply chain for a client. At the implementation level, the system monitors events through the supply chain worldwide and harnesses the Internet to provided accountability. This monitoring process enables Schenker to continually pinpoint areas to enhance the customer’s supply chain, and this information is compiled into a database on an ongoing basis for further initiatives.

Dewey suggests that, until recently,, this type of application is something logisticians have only been able to dream of. But today the Internet and Web-based technologies are clearly important and essential elements in defining these new integrating concepts in supply chain outsourcing.