Making logistics partnerships work
Or… "the enemy of my enemy is my friend…."
One of the dilemmas in the 3PL world is how to deal with the pressure from the marketplace that seems to want "one stop shopping" and the realities of running a business.
In the early 1990's some transportation companies took the "field of dreams" approach to building logistics capabilities. In response to a perceived need for warehousing services, multimodal capabilities, freight payment support, etc, would-be "logistics" providers went out and leased warehouses, bought systems, and acquired companies… they then threw open their doors and said "come on in". To their disappointment, they found that while the customer wanted "warehousing" services – they wanted it somewhere else… while they said needed multimodal services, they weren't quite ready to put all their eggs in one basket, and while freight payment support sounded like a good idea, perhaps they weren't ready to turn that over to a 3PL division of a transportation provider.
As Laurie Tucker, Sr. VP of what used to be known as "Fedex Logistics" or "BLS" said when asked about reducing the bricks and mortar of warehouses and not offering everything to everyone, "been there, done that", she said. Instead, Fedex chose to concentrate on its "core competency" which it views as expedited transportation and information management. Their logistics strategy is much more focused now, as is the case with many providers who have given up the dream of being everything to everyone.
Yet there is a need to provide comprehensive logistics services that offer transportation, warehousing, light assembly, information management, domestic and international multimodal services.
Enter "Co-Opetition"
Adam Brandenburger of Harvard business school and Barry Nalebuff of the Yale School of Management recently authored a book called "co-opetition" and it dealt with the reality that business is both war and peace. Sometimes, a competitor may be a "complementor," particularly when together you can expand the size of the market.
This seems especially true in logistics. In trying to get a customer to outsource a previously internal function, such as warehousing, order fulfillment and transportation management it‘s a difficult job getting functional managers to see the "big picture". If they could turn to a single provider that could deliver the needed expertise in all these areas, it may be just the impetus they need to go ahead and outsource the whole thing. The needs of an individual function may not be enough to entice someone into turning it over to a third party.
The airlines, forwarders and shippers as co-opetition
The relationship between forwarder and the airlines may be a good example of "co-opetition". While the airlines need forwarders and forwarders view airlines as "partners", they are also competitors. The airlines have their own pickup and delivery network through ACI and are capable of competing against the forwarders, and sometimes do.
It’s like an ecosystem where even predator and prey have a co-dependant relationship. Most logistics companies are not large enough to survive on their own if they have to be all things to everyone; so they must turn to competitors for complimentary capabilities. These programs can work if the roles are clearly defined, but make no mistake, it’s not easy and probably works best when there is a single lead provider managing subordinate third parties rather than two equals trying to, well, be equitable.
Transportation Development Group
Toll Free at: 800-949-4834Telephone 310-302-0808Fax 310-302-0809E-mail: Info@logisticstraining.com
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