Best Practices

Conducting business on a global scale is challenging enough, but having to deal with a slew of third-party vendors that provide different supply chain, transportation, customs brokerage and warehouse services adds a whole other layer of complexity to the equation. So it’s no surprise that companies involved in global trade are looking to outsource those managed services in order to interact with fewer vendors.

With a growing number of large enterprises having sourcing and manufacturing capabilities throughout the world, supply chains have become intricate and complex. Raw materials flow across borders to manufacturing plants scattered around the globe; are then forwarded on further in the supply chain where they’re made into finished products; then, advanced to the packaging phase; and then sent out to various distribution center stops before finding their way to a retailer’s shelf or directly to a consumer’s door.

Decades ago, many large enterprises managed these cross-border transportation activities in-house, with their own transportation assets roaming the globe. However, in recent years we have seen a migration to the outsourcing of many supply chain activities and the emergence and rapid growth of the third-party logistics (3PL) industry, which today is roughly a $150 billion market in the United States alone. 

Managing Your Providers

Despite this shift to outsourcing, shippers and importers still require large teams of people to manage their vast number of 3PL providers. More recently, many companies have developed managed services business models that manage their clients’ networks of 3PLs, allowing the importer to outsource not only the underlying transportation and/or other services, but also the management of those services.

These managed services businesses are popping up all over the supply chain to help importers and shippers streamline their supply chains. Technology is simplifying the management process and creating greater efficiencies within the entire network. This allows companies to save time and money while simultaneously improving performance and growing their businesses.

We have seen many of these managed services business models in different parts of the supply chain. Truck brokerage is a good example of an industry that has long provided companies with management oversight of third-party trucking companies. Increasingly, transportation management providers contract on an enterprise basis and sit on top of a network of truck brokers and the overall trucking industry. Improving transportation management systems has unlocked the value proposition of these network oversight providers; they integrate systems with advanced technologies and build portals with advanced interfaces to provide importers with easy-to-see activity.

Businesses have also evolved in the customs brokerage industry with managed services entities that oversee a broad network of brokers throughout the world, particularly on behalf of shippers with complex global supply chains. Once again, technology evolution has been the key to the development of business models that can deliver superior quality oversight of a network of supply chain providers with expertise in a specific niche.

Similarly, software providers are developing applications that integrate with carriers domestically and globally to provide a retailer, and ultimately consumers, with visibility and time-definite information on the movement of small parcel deliveries as they flow through the carrier network. What’s necessary in this instance are technology systems that integrate with UPS, FedEx, USPS and alternative carriers such as regional overnight or city-specific same-day carriers, providing for visibility in the carrier system irrespective of the carrier. This evolution is particularly relevant for the rapidly growing e-commerce sector, where consumers can increasingly obtain precise and real-time data on delivery time expectations for their purchases. 

Getting Results

The benefits of the global sourcing and manufacturing ecosystem are vast, having allowed companies to optimize their supply chains to deliver the most competitive product offerings at the lowest prices. Developing the logistics to provide for global supply chain has been a challenge, but more entrepreneurs are finding ways to simplify these activities.  Enterprise-level, managed services outsourcers provide the latest in a long evolution of models that allow importers to focus on their core businesses and outsource yet another function of their supply chain.

With software allowing for the management of a network of providers like never before, managed services business models can in some cases provide better results to importers than mega-diversified global 3PLs. Consider what Uber has done for the taxi industry, dramatically changing the way consumers find, pay for and rate taxi services. Uber provides the consumer with a managed services technology-enabled offering to easily interact with a large network of taxis. It’s clear that similar changes to supply chain management are happening with the continued evolution of managed services providers.

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