Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
When Macy's, the giant department store chain, wanted to reduce its lead times for imports from Asia and trim warehouse inventories, it hired a consultant to help it figure out how to do that. The consultant recommended that Macy's implement a high-velocity, fully automated store-level distribution process supported by an electronic data interchange (EDI) platform. Key elements of the solutions included applying bar codes at the origin warehouse to eliminate manual receiving processes; leveraging volumes and equipment to improve utilization; and cross-docking at the destination. These and several other steps slashed cycle time by a two full weeks and made it possible for Macy's to redirect shipments in transit. They also saved the retailer more than $11 million annually in transportation and logistics costs.
What's unusual about this story—aside from the impressive savings—is the type of consultant that Macy's hired. Instead of bringing in a traditional consulting firm, the retailer worked with Maersk Logistics Supply Chain Development, the consulting arm of Maersk Logistics, a third-party logistics service provider (3PL). Unlike traditional consultancies, which typically deal in ideas, this one (along with its parent company) also implemented its recommended solutions and now operates the distribution centers and information systems.
The Macy's-Maersk relationship is not unique. A number of large 3PLs offer supply chain and logistics consulting services. UPS Supply Chain Solutions was among the first; others include Ryder System Inc., DHL Exel Supply Chain, and APL Logistics.
Why are 3PLs getting into the consulting arena? Often it's because customers ask their service
providers to redesign the logistics networks they operate. "The longer you perform well for a
customer, the more they push you into other areas that may stretch beyond what you can do,"
says Greg Aimi, director of supply chain research for AMR Research.
Another reason, says Dick Armstrong, chairman of the research and consulting firm
Armstrong & Associates, is that a lot of 3PLs would rather implement a solution of their own
design than carry out a plan developed by an outside firm. If 3PLs do the consulting project
themselves, moreover, they're much more likely to get the operational part of the business. In
short, it gives them control over the entire process, from idea through implementation and continuing operations, he says.
Says Clifford F. Lynch, executive vice president of CTSI, a freight payment and technology firm, and author of the book Logistics Outsourcing—A Management Guide: "I think the primary reason [3PLs offer consulting services] is they hope that they'll get the work after they do the analysis. ... It's a vehicle for getting new business."
But hold on—isn't that like putting the fox in charge of the henhouse? Won't a 3PL consultant inevitably design a solution that guarantees business for its parent or sister companies?
There's nothing wrong with getting new business as a result of a consulting assignment, say 3PLs, provided they truly are the best choice to handle those responsibilities. Besides, consultants that steer business to their parent or sister companies at the expense of their clients won't be around for long, says Marc Heeren, senior director of Maersk Logistics Supply Chain Development. "If by favoring your own organization you don't provide advice that really leads to the best efficiency and performance, then you will get very few projects before you have to close up shop," he says. "Credibility is critical."
Which is best?
It's clear why a 3PL would want to offer logistics and supply chain consulting services—although, as Aimi points out, few have been successful at forming profitable consulting organizations whose results can be accurately measured. But why would a shipper choose a 3PL over a traditional consulting firm?
For one thing, there's the appeal of working with a known quantity. "The most prevalent kinds of consulting projects generally are with existing clients, where the 3PLs have already proven themselves," says Aimi. "They have seasoned, competent talent who know the operation as well as or better than the customer, plus they can pull in ideas from their outside experiences with other companies."
There's also the matter of cost. Armstrong notes that much of this type of consulting is done at less than market prices because it creates opportunities that lead to other business. Some 3PLs will carry out a consulting project, and if they are chosen to implement the project and handle subsequent operations, then the shipper pays little or nothing for the analysis. If the shipper does not hire the 3PL, then the shipper pays for the consulting work. That offers some protection for the service provider, too, adds Lynch. It's not unheard of for shippers to gather as much information for free as they can, and then walk away.
For their part, 3PLs say there are two big advantages for shippers. First, the provider will recommend only what it knows can be successfully implemented, says Heeren, whose company offers a "Supply Chain Health Check" assessment and analysis service. And second, the 3PL's consulting arm can tap into deep operational knowledge in specialty areas or, as in his company's case, a broad spectrum of supply chain functions, from order to delivery.
Traditional consultants aspire to deliver the same results. But it takes more time for them to gain access to the organization and data, and more time to determine whether their recommendations can be implemented and succeed than it does for 3PLs that already have established relationships with shippers,Heeren says.
Even so, many times a traditional consulting firm is a better choice, says Lynch. "It depends on what the project is. If you have a transportation project, then you probably don't want to go to a warehouse-oriented [3PL] to get it done. They may have consulting departments and say they can do any kind of supply chain work, but I don't think you're buying from the experts in the field when you do that." When a project crosses several functional lines within a supply chain—for example, a project that involves warehousing, transportation, IT systems, and perhaps purchasing or production— shippers would be better off using a traditional consulting firm with a broad range of experience, he says.
Fresh competition
AMR's Aimi, who recently wrote a brief on the subject of 3PL consulting, sees this trend as a natural expansion of a maturing industry that serves a clientele with increasingly complex supply chains. Still, most logistics companies that offer consulting services remain focused on the area where they are most comfortable, such as transportation or warehousing. Only a few are doing more comprehensive, true supply chain consulting, he observes.
While Aimi expects to see more 3PLs offering consulting services, he cautions that success will be elusive unless they also take on the execution of their proposed solutions. And they could soon face some new competition for consulting work: business process outsourcing (BPO) firms. The BPO firms, especially those in India, are very large and very aggressive, and they are already involved with some aspects of supply chain management, he notes. They typically pitch their IT, human resources, and customer support services at the executive level—to CFOs, if not the CEOs, he says. Logistics service providers are not communicating at that high a level, which could put them at a disadvantage, he adds.
Regardless of which type of consultant a company chooses, though, the end result should be the same: a measurable improvement in supply chain performance resulting from a plan that offers the greatest possible benefits to the customer, not to the provider.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.