What challenge(s) do our clients face?
As consumers increasingly demand more 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 not only face challenges in terms of their own businesses but also in terms of the critical role that they play for their partners.
These challenges can be categorized into 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 risks related to business continuity 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 automating these new requirements throughout the supply chain. Such technologies include blockchain, IoT and AI, among others. Disruptive technologies such as vehicle “Uberization”, 3D printing and autonomous vehicles are likely to introduce additional pressures as well.
3PL Market Reality
- The market is highly commoditized, leading to 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&As, especially considering the importance of economies of scale.
- The market is rife with inconsistency in service levels, and it is not always clear whether a global or local operator will be optimal in any given context.
Shipper’s Unique Needs
- With a 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 types of customization, logistics providers are faced with a trade-off between being flexible for these needs while striving to remain cost efficient.
How do we help?
Our global experience on both sides of the logistics partner relationship allows us to support our clients in navigating these challenges with a tailored approach informed by best-practices.
There are three fundamental pillars we use to support logistics operators overcome these challenges:
- Understanding the 3PL market: We have an extensive knowledge base of benchmarks and best practices built from delivering strategic projects with many of the world’s leading logistics companies.
- Knowledge of the other side of the table: Having delivered over 600 supply chain projects in various industries around the world, we understand the reality and needs of the clients served by logistics operators and the foundations upon which a productive relationship must be built.
- Tailor-made, results-driven solutions: Each logistics operator has a specific context and needs. We work with our clients’ teams to develop fully tailored solutions that are a best-fit for their respective service offering, structure, target markets and requirements. This proximity enables our clients to effectively carry on the project’s legacy even after the Integration team has left.
Commonly applied services
We have worked with clients in different categories, geographies and positions along the value chain:
High-tech businesses such as 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 provided support from the initial strategic study through to 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. To close, we managed the implementation of the new model, guaranteeing the transition to the new way of working on time with minimal disruption, and prepared 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.
This client is a leading payments operator with a logistics network of ~150 distribution centers. These are run by two major 3PLs (split regionally) that deliver 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
TALK TO US
Alejandro is a Managing Partner in our Mexico office. Alejandro has spent over 20 years within consulting, as well as within Industry, having been factory manager and chief of production for Kimberly-Clark. He has worked extensively across Mexico, Latin America and the United States developing deep experience in Consumer goods, Retail, Manufacturing, M&A and particularly [...]
Ana Queiroz is a engagement manager at Integration’s Supply Chain Practice and has been with the company since January 2021. Much of her experience includes implementation, planning and logistics projects in the areas of cosmetics retail, food, mining and glass manufacturing. Her work has focused on structuring and developing analyses, support requirements, processes and tools, […]
Gilberto is a founding Partner at Integration. Over the course of more than 25 years he has led the development of Integration`s award-winning Supply Chain practice, advising international clients across Latin America, Europe and USA. With a background in Engineering, he frequently participates in events and lectures across the world, to discuss latest trends and [...]
Luis C Vidal
Luis is a Managing Partner at Integration where, since 1999, he has been working in the Supply Chain practice. During this period, he has led projects in the most diverse sectors and in themes such as Logistic Optimizations, Process Efficiency, Planning (S&OP), Industrial Strategy, Go-to-Market Strategy and Distribution Structure. His international experience encompasses the opening [...]