Portland Group has just completed a research project to determine the strengths, weaknesses and opportunities for Australian companies in the procurement of outsourced logistics services.
We talk to Simon Coates, Associate Director of Supply Chain at Portland Group about the findings...
So what were the key findings of your research?
The survey found that the majority of the respondents perform some of their logistics procurement activities some of the time, but few organisations perform all of the activities all of the time. This performance gap represents an opportunity loss to Australian organisations, to the extent of potentially foregoing one time cost savings of up to 20% and subsequent year on year real cost reductions of two to three percent.
Are organisations achieving benefits from their supply chain strategies?
While almost all respondents articulated that their logistics strategies were firmly focused on achieving cost savings and improving customer service, few respondents have robust processes and systems in place to achieve these outcomes. There is a strong development opportunity open to Australian organisations to improve logistics procurement practices.
In which areas can Australian companies improve their logistics procurement practices?
Data - Respondents lack data and analytical capability to provide visibility of current logistics operations and costs.
Negotiation strategy - Respondents often fail to bring competitive tension to negotiations and they lack cost target benchmarks.
Performance management - Only a minority of respondents have service level agreements with suppliers. It is unclear how suppliers' performance is managed effectively.
Optimisation - Respondents rarely review and optimise their networks; they often put up with poor load planning, and they tend not to use back haul programs.
What is the main concern amongst buyers of third party logistics services?
Reducing competition. Logistics services providers are consolidating (i.e. road, rail, sea and air) and are growing more powerful, which poses the threat of increasing costs, decreased flexibility, and reduced competitive advantage, particularly for smaller enterprises.
What is on the supply chain practitioners' wish list according to your research?
The list is potentially as long as my children's letter to Santa but there are some common themes, including:
- improving HR capabilities and skills in supply chain management
- increasing collaboration with suppliers, customers and service providers
- better coordination and visibility of activities and costs through improved deployment of technology.
How can companies improve their procurement practices?
- Optimise your network first: paying a little less for the same poor logistics practises is unlikely to provide the best outcome for your shareholders.
- Understand your supply market. Logistics service providers are not all the same - there are regional, competency and size differences that should be taken into consideration before developing your short list.
- Develop a relationship and a contract that ensures continuous improvement and rewards both parties for achieving aligned goals.
Ultimately, the extent to which Australian companies execute the processes to procure and manage logistics services can mean the difference between achieving a sustainable improvement in supply chain performance and entering a relationship with high expectations only to be disappointed.
Simon Coates, Associate Director - Supply Chain, Portland Group
Simon has over 25 years operational and strategic supply chain experience in the UK and Australia and has led supply chain engagements across numerous industries including hardware, fashion, 3PL and retail. Portland Group aims to make their clients successful by increasing their efficiency and profitability through sustainable supply chain and procurement improvement. They have assisted clients across the Asia-Pacific region to achieve step changes in their profitability and working capital performance and their clients include many leading regional and global organisations. Please send any comments or questions you have in relation to this article to: firstname.lastname@example.org