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TheStreet Open House

A 3PL's Battle With Commoditisation -- Menlo's Solution

Stocks in this article: CNW





AMSTERDAM and SAN FRANCISCO, Nov. 25, 2013 /PRNewswire/ -- Gunn, Menlo's Managing Director in Europe, was also at pains to explain that a focus on reduced costs in the supply chain need not be at the expense of innovation; rather that the latter can drive the former through the use of a structured, continuous improvement programme.

Menlo, the global logistics and supply chain management unit of Con-way Inc. (NYSE: CNW) offers supply chain and transportation management services as well as 3PL and 4PL logistics solutions to a large number of companies in a variety of vertical sectors across the globe. However Gunn drew on his company's experience with a leading medical technology supplier to help answer the question, "How can the 3PL industry profitably innovate and win the battle against commoditisation?"

Gunn noted that many 3PL/shipper engagements are tactical rather than strategic. "Often shippers, in the main driven by their procurement functions focussing on cost reduction, make short-term choices based on volatile market demands. In the process they lose sight of greater efficiencies that can transpire from longer-term commitments to a logistics supplier," he noted and proposes a switch in focus from cost to quality and innovative relationships.

The Menlo executive outlined a value-driven supply chain transformation concept that, in his company's case employs the Lean methodology to achieve a culture of continuous improvement that unites shipper and 3PL in a mutual optimisation exercise. This method empowers employees of both parties to make beneficial changes to the supply chain process.

In the case of the medical technology client, it was revealed that such an approach produced supply chain savings of 16% in warehouse costs over a 24-month period. In Global Forwarding Management some 56% and 10% cost reductions were achieved across two logistics scenarios, respectively. The same analysis saw KPI performances of over 99% when measuring "ship on time," receiving and inventory accuracy functions. There were corresponding innovations in warehouse design and supply chain optimisation. The latter featuring shipment consolidation, improved planning to remove redundant transport legs and more efficient mode utilisation.

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