What challenge(s) do our clients face?
As consumers increasingly demand customized and ethical services, logistics operators are under greater pressure than ever to transform their businesses in response.
In recent years we have seen that efficiency requirements and complex consumer demands have put growing pressure on supply chains across industries. Logistics operators therefore face challenges not only in their own businesses but in the critical role that they play for their partners as well.
These challenges can be categorized by their three macro drivers:
Growing Business Pressures
- The importance of being operationally resilient and efficient is an emerging trend. This requires boosting risk management capabilities in the design and management of operations so that business continuity risks can be mitigated without needing to rely on costly idleness.
- Sustainability, from both an environmental and social perspective, is an ever growing supply chain pressure, especially given the potential emissions impacts from transportation.
- Cutting edge technology is vital for providing visibility and automation of these new requirements throughout the supply chain. Such technologies include blockchain, IOT and AI for example. Disruptive technologies such as vehicle uberization, 3D printing and autonomous vehicles will bring additional pressures as well.
3PL Market Reality
- The market is highly commoditized which causes tight margins and intense price competition as clients seek to optimize their value chains.
- The market is highly fragmented which presents growth opportunities through M&A, especially considering the importance of economies of scale.
- The market exhibits inconsistency in service levels; it is not immediately clear whether a global or local operator will be optimal in any given context.
Shipper’s Unique Needs
- As they focus on the end user experience, customers demand ever more specific customizations such as ultra-express deliveries, channel integration, real-time order tracking etc.
- Because each sector needs specific customizations, their logistics providers are faced with a trade-off between being flexible for these needs whilst remaining cost efficient
How do we help?
Our global experience on both sides of the logistics partner relationship allows us to support you in navigating these challenges with a tailored approach informed by best-practices.
There are three fundamental pillars to the way we can help logistics operators to overcome these challenges:
- Understanding of the 3PL market: We have an extensive knowledge base (benchmarks and best practices) built from delivering projects of a strategic nature with many of the world’s logistics leaders.
- Knowledge of the other side of the table: Having delivered 600+ Supply Chain projects in various industries around the world, we understand the reality and needs of logistics operators’ clients and the foundations on which a productive relationship is built.
- Tailor made, results-driven solutions: Each logistics operator has a different context and needs. We therefore work together with you and your team to develop fully tailored solutions that fit your service offering, structure, target markets and client requirements. This proximity also enables your team to carry on the project’s legacy after Integration has left.
We have worked with clients in different categories, geographies and positions along the value chain:
High tech. businesses (banks, data processors etc.) demand premium delivery services for high value-added parts that keep their operations running. Here, the challenge was to structure a logistics network capable of delivering spare parts within 2 hours in order to serve this profitable market. The project required a turn-key design and full implementation of this super-express logistics operation.
Integration supported from the initial strategic study through to the full implementation. We worked closely with the client to analyze the market potential and define their value proposition; this provided the basis for designing the logistics network and organizational structure necessary to achieve the super-express ambition.
To guarantee that the new model would run smoothly, we defined contracting models and bidding tools, alongside processes and KPIs for monitoring the effectiveness of the operation on an ongoing basis with continuous improvement. Finally, we managed the implementation of the new model, guaranteeing the transition to the new way of working on time with minimal disruption and preparing their team to continue the day-to-day execution after our exit.
The project created a new business division with high profitability and one of the highest growths rates within the company.
Our client was a leading payments operator with a logistics network of ~150 Distribution Centers. These were run by two major 3PLs (split regionally) and delivered 300k+ orders to 1.8m+ clients each month with ~40% of orders needing 4 hour express delivery.
To protect margins in an increasingly price-competitive market, the organization needed this high service level as a differentiator without increasing costs. Integration was asked to review their 3PL remuneration model with the objective of improving productivity.
In the assessment phase it became clear that to increase service level without increasing costs it would be necessary to re-design the 3PL remuneration and relationship model. This is because there were conflicts of interest that did not incentivize the 3PL to share the our clients end-consumer focus.
As remuneration is such a delicate point of negotiation, the findings of the assessment were presented to the 3PLs’ executives to protect the relationship. They agreed with the findings and in this sense “joined” the project, validating decisions in the re-design and buying-in to the disruptive new remuneration model because they understood how it delivered on the operational needs.
The project included the client and both 3PLs implementing the new remuneration model through a tender process. Integration supported this commercial negotiation by providing technical support and adjustments to the new model as required.
- The full model was implemented with success and became a benchmark in the market
- Full alignment and buy-in was achieved between the client and their logistics partners, driving a project legacy beyond the implementation phase
- 20%+ SLA increase whilst also improving geographical coverage
- 40%+ order back-log decrease
- 20+ pp increase in spare parts inventory accuracy