Keeping with the latest trends, customer demands continue to drive the overall logistics market. The desire to meet service levels set by end consumers have improved one aspect of the logistics relationship but have not necessarily aligned companies with their third party logistic (3PL) providers. Some believe business sustainability metrics may be a new and common platform for improved 3PL relations.
Traditionally two major factors have been at odds in outsourced logistics decision making. Professionals have been torn between the value of integrate business operations with logistics providers and business risk of ‘vendor lock-in’ due to high switching costs. Too often the result has be an under performing or misaligned relationship that has become too costly to replace. However, there may be a solution on the horizon.
Consolidation of the logistics outsourcing industry through mergers and acquisitions has become the primary avenue of growth for many of the very large 3PLs. This combined with increase regulation and the increased use information technology to deepen visibility logistics cost drivers, presents an avenue for alternative performance discussions.
For the most part, today’s logistics systems rely heavily on the use of air and truck delivery. These transportation modes come with significant environmental and social touch points. The improvement opportunity for distribution can now go beyond traditional efficient, timely and cost effective delivery. Companies taking business sustainability action:
• Measure the 3PL performance in the context of business sustainability improvements.
• Understand the available opportunities (modes and processes) to reduce the carbon impact of distribution activities.
• Focus on areas to minimize environmental and social impact.
• View actions to be an economic value opportunity not a cost of doing business.
Most outsourcing relationships seek to gain visibility into direct cost or other traditional performance metrics, seeking to define negative aspects of the business relationship. Our sustainability consulting sees a shift in focus towards monitoring the pathways of outbound product and the opportunities for business sustainability improvements.