costs. Well, sharing space helps them do that.”
Final product configuration is another area companies are
exploring as a means to reduce costs. “Many manufacturers are
delaying that as long as they can. That means that some packaging
has to be delayed to the end of the distribution process, which
opens a huge opportunity for 3PLs to help and to add services.”
Admittedly, there is a lot of commonality in 3PLs, whether they
are centered largely around transportation, warehousing or freight
forwarding. Because they often bundle similar services, you need to
determine their financial stability when shopping for a provider.
And, Otto says, you must decide whether you prefer an asset-based
provider or one that isn’t. In his view, the former is better. “That
investment in plant and facilities should be an indicator of potential
services, and that that 3PL is deeply committed to this space.”
The near-term outlook in outsourced logistics services is very
good, Otto believes. “We find that 60 percent of those companies
outsourcing see no need to change that. We think that, and the level
of inquiries we get, says the outlook is very positive and attractive.”
Prize-Winning Economist’s Lessons
for the Supply Chain
She says the paper contains 10 top lessons from the economist,
but her personal favorite involves negotiating style. There are three
types: muscular, credible and benign.
The first, the muscular or the gorilla or pit-bull approach,
can have obvious drawbacks. You push to hard, the deal doesn’t work. The benign approach often leaves a poor impression
as well. The best method is to be what Williamson says is “
credible.” It calls for being fair and wise and fact-based when you
negotiate.
It’s also important for a contract to have a flexible framework,
Vitasek says. “Most contracts are too rigid. They paint the relation-
ship into a box. Business is dynamic and it changes, so we need
contracts that are flexible, not legal weapons. We want to be able to
embrace change when things go wrong.”
Vested outsourcing calls for that kind of flexibility
between customers and suppliers. “We want a relationship in
which we are vested in each other’s success. If I’m not suc-
cessful, you can’t be either. We’re working in each other’s
interest.”
She says that Williamson’s lessons apply to vested outsourcing
because of the nature of legal relationships. “How can I have a
real partnership if I can fire you at will in 30 or 90 days? It doesn’t
make sense.”
In negotiating, you can be self-deafeatingly muscular or
benign, says Kate Vitasek, on the faculty of the Center for
Challenges Facing
Transportation
Brokers
As new government regulations
intensify the transportation capacity crunch, non-asset-based brokers will be even more hard pressed
to find equipment for their customers, says Mike Williams, chief
operating officer at Sunteck Transport Group. That could weed out
fly-by-night operators that sometimes give the industry a bad rep.
Executive Education at the University of Tennessee. Or you
can be credible. That’s a lesson supply chain managers can
learn from Professor Oliver Williamson.
If you’re wondering how the Nobel Prize winner’s work in transaction cost economics is relevant to supply chain management,
Vitasek has the answer. She’s even got a white paper on the subject
at www.vestedoutsourcing.com.
“TCE is about the end-to-end cost of how we buy things,” Vitasek
says. “Williamson’s widely followed in academia, but few supply
chain practitioners know who he is. We felt they need to know his
work, to unpack Oliver, so executives could apply those lessons.”
The Comprehensive Safety Analysis
2010 is a Federal Motor Carrier Safety
Administration regulation designed to
make highways safer. What’s that
have to do with non-asset-based transportation brokers, since
they don’t own any vehicles? It means they will have to be
more attentive to how they select carriers to serve their cus-
tomers, Williams says.
