Integrated Strategies for Logistics Outsourcing

Extended 4PL Enhances Planning Systems and Furthers Optimization

In the current economic crisis many shippers are re-examining their outsourcing methods and capacities. LOCOM Consulting's concept Extended 4PL (X4PL), developed in cooperation with partners, enhances conventional models and increases efficiency, improving both quality and reliability for customers.

Particularly large scale shippers are now examining their logistics outsourcing. Looking for short-term cost reduction, they are disappointed with how service providers have reacted to the reduction in quantities shipped, missing the mark of continued improvement.

Efficient Supply Chains need Transparency and Integrated Control

Another reason is that supply chains and networks are becoming ever larger and more sophisticated, requiring increased guidance and control if they are to meet customer needs. Network operators do what they can – for instance, by providing Tracking & Tracing services – but the need for integration persists.

Planning systems are what it takes to achieve integration. They take available information and fine-tune supply chains. Often customers already have the tools they need, but do not know how to make the right data available and transparent for productive use.

Interruptions in the flow of logistics-relevant information are one major impediment. These barriers, called "silos", prevent the joint use of data and information along the value-creating logistical chain. Fact silos may exist in various departments: in sales, production, and so on. By hoarding data, they limit transparency considerably. They may be caused by dissimilar system landscapes along the supply chain, incompatible incentive schemes, or the lack of skills offered by planning systems.

New approaches are what it takes to overcome these kinds of information barriers. X4PL approaches focus on two topics: How to functionally enhance existing planning systems and which organizational design can be applied to 4PL/LLP approaches that are currently in use.

Extended Planning Systems

The functional approach basically combines organizational functions from supply chain planning (SCP) with those of transport management. Demand, stock, production capacity and needs specified in detailed piece lists, all determined at various points along the value-creating chain, are first examined in the SCP tool by a standardized schedule service in a transport management engine to see whether they can be bundled or optimized when viewed as potential shipments. These are then compared with existing shipping schedules to check timing. Experience from transport management can then be fed back to the SCP tool to create a new schedule based on improved timing. The process is iterative and breaks off automatically when no further improvement can be achieved.

Besides improved ATP skills, a reduction in stock along the supply chain and reduced shipping costs can be expected. Today both fundamental tools are already available and in use in successful supply chains. LOCOM Software's Logistics Designer and its features for planning and simulating time-discrete networks enables the detailed models of route schedules in sea and air freight, KEP networks, and piece goods networks.

An Impartial Authority Guarantees Continued Improvement

The second advantage of the X4PL approach is that it introduces an impartial aspect into planning and optimization. An instance of control obligated solely to the best flow of goods, unhampered by contacts and tasks involved in the choice and running of diverse 3PLs works to uphold a continued commitment to improvement. This reduces conflicts of intent that are so difficult to resolve otherwise, such as the struggle between using capacities to their fullest and resorting to outsourcing, or between standardization and dynamic control. It paves the way for more improvement.