Note to readers. A more updated version of this article will be kept here…
Book on 4PL
We have recently been reading Fourth Party Logistics: The Future of Fourth Party Logistics: The Future of Supply Chain Outsourcing? by Serafettin Kutlu.
Serafettin sets up the scenario with the following:
1994 Andersen Consulting survey of 250 organizations in the UR round that two-thirds of respondents actually felt that their initial expectations of 3PLs were not being met. While many 3PL providers could deliver warehousing, transportation and fleet management services, few were able to cover the full range of supply chain requirements that included services such as logistics IT development and order processing. This shortfall in service means organization needs to assemble a combination of outsourced and in-house service components to manage its supply chain effectively.
Moreover, a 4PL vendor is free to find the best breed for each category. Large companies frequently hire consultants to review proposals from 3PLs, handle bids, select vendors, and align business processes with supply chain plans to put the best breed together, then the question becomes: Who needs to be in control of the supply chain, and who can manage it better.
4PL or RFP Development?
We think Serafettin is combining two different issues into one. One is that consulting companies help shippers develop RFPs for logistics services. The second issue is what a 4PL actually is. The definition that we adhere to is that a 4PL is an information integrator of both 3PLs and transportation and or warehouse companies. That they develop platforms to support this integration. Now creating RFPs might be a part of what 4PLs do, although we are not sure that is necessary, but it certainly should not be the majority of what they do. Serafettin’s approach is comingingly the two types of work, and in our mind papering over the limiting capabilities of consulting companies. Consulting companies make their money charging other companies to perform services. In systems this breaks into system implementation and outsourced management (things like data centers). There is a clear division between software companies and consulting companies, and for good reason. Consulting companies know how to place people on accounts and bill. That is the model all of the partners are used to. The partners are not used to, and not particularly interested in building anything. Good evidence of this is taken from the mediocre infrastructure of the major consulting companies. Even finding documents on their intranets is a challenge, and most of the software instances they do maintain (such as SAP training boxes) are typically held together on a shoestring. (again, investment is seen as cutting into partner comp).
Thus Serafettin’s statements regarding the inability of 3PLs to really integrate the supply chain rings true to us. At the end of the day, a 3PL is a glorified transportation and warehousing company. However, we disagree that consulting companies can fill this void.
On the final point, if you are a shipper, and you need to bring in help to put together RFPs, you need to hire more people. There are agency issues involved with having outside parties perform selection for you. I worked for a major consulting company and was approached by a company that wanted my firm to put together an RFP for an SAP SCM consulting project. The request was explicit, only help in developing the RFP. As soon as I communicated this back to my firm, I was called by 3 different partners at the firm, all of whom proposed that we get the client’s trust, pretend to put together the RFP, but then get them to drop the RFP and simply use our firm for the implementation. Another strategy the partners wanted to employ was to rig the criteria so we would win if the RFP was put out to bid. I seriously felt like taking a shower after several of these encounters. Thus, RFP capabitity must reside within the company that buying the service. Bringing in a person will be far less expensive than bringing in a consulting firm and will bring far fewer agency issues.
Looking for a Platform
Rather than looking to outsource the management of the outsourced logistics, why not search the internet looking for a firm that can provide you with a platform so that your company can empower itself . We will perform some searching ourselves and report back on what we find.
