third party logistics distribution

l

whereby they become unable to move their contract to an alternative supplier because of their

dependence upon the contractor’s system.

• Systems support

While the cost of supply chain IT systems has fallen considerably, the cost of installation and the expertise required can be a major obstacle, particularly for small and medium sized companies. An outsourced provider’s familiarity with a particular system can significantly reduce the time and risk in installing a system. However, companies do need to be careful to avoid the risk of ‘lock in’

A bad reason to outsource

Unfortunately, the premise that ‘a problem shared is a problem solved’ does not extend to outsourcing. Outsourcing to address a logistics operation in disarray not only makes it difficult to conduct a tight tender process but is usually a recipe for ‘paying through the nose’ once the operation settles down. It is far better to use external support to sort out the problems and then tender the operation in a controlled manner when

a detailed cost and benefit comparison is possible.

Getting it right

Today’s complex supply chains and high customer expectations have changed the average outsourcing relationship from a simple buyer- supplier relationship into a more strategic ‘partnership’ deal.

While the justification for outsourcing may well be sound, if these deals are to work properly they require extreme care and due diligence in the planning, selection and transition stages. As a result, companies are increasingly enlisting the help of specialist consultants with the time and expertise to help them successfully negotiate this process.

But, while both the outsourcing decision and process require careful consideration and management, getting it right can still pay rich

dividends. ●

www.daviesrobson.co.uk

Gideon Hillman, of Gideon Hillman Consulting reflects on the company’s recent and current experience of managing major logistics tenders in a range of sectors.

Managing costs

M

ost companies just re- tender their current outsourced logistics and warehouse

operations at the end of

the contract term, which often does not yield the full cost and service benefits and opportunities offered by an effective tender process and does not sufficiently challenge the highly competitive market of Logistics Service Providers (LSPs).

“In reality the market place and service capabilities of the LSPs will probably have changed over the current contract term and our experience shows that just re-tendering the same operation can provide cost savings in the region of 10% of annual

spend,” says Gideon Hillman FCILT. “The potential savings however are far greater.”

In the last 12 months Gideon Hillman Consulting has managed and developed a number of logistics and distribution tenders (a mixture of OJEU and non-OJEU with the combined annual spend in excess of £20million) from the development of the scope of operations; through RFI and RFP processes to final response evaluation and supporting commercial negotiations, which in some cases have yielded savings of between 20 and 30% on existing annual logistics costs. These tenders have been a mixture of global, European and UK-based multi-modal distribution logistics,

warehousing and freight tenders across automotive, utilities, internet and high street retail, and food sectors. The specialist consultant team has proven that through evaluation of current and future logistics requirements and subsequent development of a more bespoke service requirement specification, while maintaining tight control of the tender process; much greater savings can be achieved. There is also the additional benefit in other areas of the supply chain such as reduced WIP and inventory savings as the logistics and distribution lead-times and therefore days within the supply chain are

reduced. ●

www.hillman-consulting.com

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