Although "third party" has become industry shorthand for contract logistics service provider, LSPs are not the only third parties lurking in the underbrush of supply chain management. The weeds are also full of management consultants.
They're everywhere. They're at every conference, seminar, and convention. They're on the Internet with Web sites, e-newsletters, webinars, and spam. They're in all the trade publications—and that includes the authors of this piece.
Who are they? What do they do? Do they help—or hinder? Is there really a value proposition involved? In answer to that last question, we contend that management consulting at its best is a high calling and a noble endeavor, requiring enormous amounts of both talent and integrity, as well as strong senses of mission and urgency. At its worst, it is an embarrassment on a good day, and a scandal when all the results are in.
Big fish in the global pond
As for who they are, consultants come in all shapes, sizes, and flavors. But in general, a consultancy will take one of the following forms: mega-firms, other big (but not enormous) players, small/midsized houses, sole practitioners, and academics.
Let's start with the mega-operators. This category is made up of huge organizations with thousands of people. They may be partnerships; they may be corporations. They are increasingly multinational.
Many have their roots in the giant public accounting firms.Severalyearsago,eachof theso-called "Big Eight" U.S. CPA firms had enormous consulting divisions. They generally attempted to be all things to all clients and would undertake consulting in any channel that held the promise of growth and/or profit, including public sector operations. As they created multinational accounting conglomerates, their consultancies likewise added at least the appearance of international capability, which tended to be more promise than practice.
Today, as a result of mergers, acquisitions, and divestitures, those origins are not always obvious. Accenture spun off from Arthur Andersen, which itself disappeared, thanks to Enron. KPMG became BearingPoint. Ernst & Young, itself a merged operation, was folded into Cap Gemini to form CGE&Y, which later changed its name to Capgemini. PwC, another merger product, was acquired by IBM after an attempted purchase by HP, and disappeared as an entity. Deloitte Consulting, yet another merger/acquisition, retains its corporate identity but is legally a separate LLC entity.
The overall business model for the mega-firms is a hierarchical organization dependent on sales genera- tion by a relatively small number of rainmakers to provide billable hours for large numbers of analysts and managers. Thorough methodology and process development is supposed to allow relatively inexperi- enced consultants to tackle complex problems in consistent ways.
The model has been likened to bringing in busloads of bright kids who have been indoctrinated into the corporate culture and provided with workbooks full of process descriptions and solutions. They must then hope to come across a client who is asking the right questions. Sometimes they become confused and come to believe that the answers are more important than the questions.
(Full disclosure: Both authors are alumni of one of the mega-firms.)
The next tier
In the next tier down from the mega-firms are a handful of companies that might be described as big and important but perhaps not overwhelming in size. This category is populated by consultants that have all con- centrated on strategy but have taken differing direc- tions. Some (e.g., McKinsey) tried their hand at tactics and implementation to grow the business, but strug- gled to bridge the gap. They remain successful in oper- ational issues with strategic implications. Others, like Bain, have opted to take equity positions and manage cor- porate operations. Still others, like Boston Consulting Group, have stayed focused on strategy and related topics.
Several entities opted to concentrate on performance standards, productivity, and cost reduction. Alexander Proudfoot was a pioneer and the model for much of the productivity consulting segment. The practice survives today as a unit of Management Consulting Group PLC.
The business model for these companies is often based on the engagement of contractors, who are off the payroll as soon as their assignment is complete.
Small and midsized houses
The small and midsized consultancies tend to be built upon limited, but deep, functional experience. They come and go, and wax and wane while they are here, but some have demonstrated remarkable staying power. These players, which are too numerous to name here, can be local, nation- al, or global in coverage. They may be franchises, or they may be real companies. They may affiliate with "stringers" in several locations, handing out business cards to anyone with a suit and a laptop, or they may grow more organically. Some achieve greater functional breadth through working partnerships with other consultancies or broaden their geographic coverage with multinational alliances. They may follow the hierarchical organization model or they may be flatter partnerships, with more hands-on consult- ing involvement from senior partners.
The supply chain field has spawned quite a few of these operations, and many of them deliver cost-effective and sustainable results. Some are highly specialized, while others offer a broad range of supply chain strategy, planning, and execution services.
(More disclosure: One of the authors is a partner in a small/midsized supply chain consultancy.)
Hanging out a shingle
Next come the sole practitioners. The solos run the gamut from internationally renowned specialists to prematurely retired managers to those who set up shop after being shown the door by their previous employer. The subcategories are not mutually exclusive.
There are many excellent one-man (and one-woman) shops. For the right kind of problem, they can often offer an on-target solution at the right price. The best of them recognize their limitations and are brilliant at enlisting other specialists to work on solving the fundamental problems. The worst of them believe their own press clippings and hesitate to bring in people smarter than themselves to help deliver the right answers.
(Still more disclosure: One of the authors is a sole practitioner, and the other not only has been but will be again.)
Tales out of school
There is one other important category of consultants to consider. Many respected academics practice consulting, on either an institutional or a private basis.
Often, their consulting contains a research component directed at a technical solution to a specific, knotty problem. Sometimes, they are able to assemble teams of students to observe and assess operational problems and practices. Other times, they might conduct and analyze industry surveys.
There are times when the right approach to a problem is to build a team with academic and consulting components, to develop an effective blend of esoteric and practical solutions.
One other category deserves mention—and caution. Many service providers—3PLs, motor carriers, parcel com- panies, real estate firms, and the like—offer consulting services. It is possible for a service provider to dispense honest, independent advice. The test—often difficult to evaluate in advance—is whether the "consultant" describes, and offers up, competitive alternatives to his own service.
Editor's note: Next month, we'll look at why companies use consultants, what services they can provide, and how to find and select a consultant.
