4PLs, Emerging Markets and Green: Trends in Logistics & Procurement

Nov. 20, 2007
Given the global needs of most companies, 4PLs is more attractive from an organizational perspective.

Editor's Note: I spent a few minutes with Rick Jordon, director of ICG Commerce's Global Logistics Solutions Group, talking about trends in logistics.

Q: I'm seeing 4PL mentioned more lately and wonder if it's the future in logistics.

A: Let me start by differentiating 3PL from 4PL. Third party logistics is the management of logistic services beyond transportation. This might include storage, shipment and value added services as well as the use of subcontractors. Fourth Party Logistics (4PL) is the integration of all companies involved along the supply chain. 4PL is the planning, steering and controlling of all logistic procedures, i.e. the flow of information, material and capital by one service provider with long-term strategic objectives.

Given the global needs of most companies, 4PLs is more attractive from an organizational perspective.

In my company we do what I call a 4PL light. We do procurement outsourcing, source indirect material, secure pallet and packaging and office supplies as well as logistics. We can organize by category management so it is essentially looks like a 4PL model.

Q: Given that sourcing is expanding into emerging markets, how does your company assist newcomers in the market?

A: We see our role as helping companies find lost cost sourcing and in some countries that means getting involved in negotiating on behalf of the company. For example when we work in Vietnam, we help a company determine its landed costs and work with various vendors to get the prices they need.

Quality is another issue when it comes to emerging markets. We find that doing by doing audits, including surprise audits, it helps ensure quality standards.

Q: Where does the Green movement fit into the logistics industry?

A: The green movement is a hot topic that is not going to go away. What worries me is how prepared companies are to make these investments. Becoming compliant with standards or incorporating green practices into processes will not be cheap. A company may sometimes see 20% higher costs to meet sustainability requirements.

I liken it to when ISO entered the market 20 years ago. To meet that certification a company had to have a top down strategy and be committed to the program.

At the recent CSMCP Conference (Council of Supply Chain Professionals) I heard a presentation by Dell on how they have dramatically decreased their shipping materials. When they reviewed their design process they saw they were over engineering the packaging and could do a lot to reduce materials which in turn lowered shipping costs.

These type of sustainability improvements are now requirements not just a thought as they were two years ago.

Q: Looking at 2008 what does the transportation market look like?

A: It will be a tough year with increased costs. From the North American view capacity will have to be adjusted as ocean, air and trucking will decrease. That's not the case in Europe and Asia which are booming. They will take the capacity available and move some to North American.

In the next six to nine months the market in the U.S. will be soft. I don't see anything to indicate an uptick and I don't see the automotive sector regaining ground.

For more information on ICG Commerce visit http://www.icgcommerce.com/

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