Tag Archives: Logistics

Advertising logistics services on television – when it might work

TNT tries to advertise itself out of trouble, tastefully
TNT tries to advertise itself out of trouble, tastefully

One does not see logistics advertising outside the trade press very often.  Logistics is mainly a business-to-business industry and a television audience is dominated by consumers, and it’s that audience for which one pays; that can’t be cost-effective, although perhaps specialist channels such as Bloomberg might make sense.

But I suppose in the express/parcels business it makes more sense because there is a much greater consumer component.

I thought of this after I saw what I think is a good advert for TNT.  The amusing part is at 0:26 when the TNT people run past a yellow lorry, stuck in traffic and with a less-than-svelte driver swigging his coffee and stunned at TNT’s performance.

Now who can this guy represent?
Now who can this guy represent?

Now who can that lorry represent?  The yellow is a little too pale, I suspect.  Hilarious.

I tried (but failed) to find an advert I saw in the US about ten years ago, which showed a van (Fedex or UPS, I can’t recall which) racing down a road only to be cut off at a level crossing by a long DHL cargo train.  But I did come across a different one.  The tag line?  There’s a new face in domestic shipping – DHL.  Well there was…

UPS of course had a campaign a few years ago (2011?) that actually mentioned the L-word.  That’s a little too twee for me.  I like the ones that have a pop at the opposition.  Much more interesting.

But all this advertising must be dwarfed by DHL’s sponsorship budget.  The mass of yellow-and-red at Formula 1 races is astonishing.

Is it possible that DHL sponsors Manchester United in some way?
Is it possible that DHL sponsors Manchester United in some way?

I am no marketing expert and I am sure DHL gets huge benefit, especially in Asia, from its sponsorship of Manchester United.  Moreover any publicity is good publicity, I understand, and I am sure that the saturated presence of the logo at matches outweighs any negative emotions that stir in supporters of other clubs, for many of whom ‘anyone but Man U’ is a veritable mantra.

4PL definitions

4PL box
What makes a good definition?  Take a look at a good dictionary and you’ll see plenty of examples.  Even complex ideas can be summarised succinctly.  This definition of relativity comes from the Oxford English Dictionary:

The dependence of various physical phenomena on relative motion of the observer and the observed objects, especially regarding the nature and behaviour of light, space, time, and gravity.

Now that’s not going to help you get a first in physics but it is a good general definition for the educated layman.  It is:

  • concise
  • simple
  • unambiguous
  • complete

So why does defining 4PL give so many such difficulty?  A quick trawl of the net produces the following examples (there are many more).

Accenture

Everybody seems to start with Accenture’s landmark 1996 version:

A 4PL is an Integrator that assembles the resources, capabilities and technology of its own organisation and other organisations to design, build and run comprehensive supply chain solutions.

As I have already said, I can’t find the original but this is the most often quoted version.  As far as it goes it’s fine, but I think the problem we logisticians have with it is the same as a physicist would have with the relativity definition above; it might be good enough for the layman but for the practitioner it just doesn’t go into enough detail.

I think there are a couple of problems with it, though.  First, it uses the word ‘integrator’.  Using the conventional definition of the term (a person or thing that combines things to make a whole – thanks again Oxford) that’s OK, but in logistics integrator has another connotation, the parcels carriers like UPS, Fedex and DHL.  It therefore potentially fails the ambiguity test.

Second, it doesn’t address what for me is a fundamental issue.  A 4PL doesn’t execute the physical storage or movement of product.  Were it to do so it would be a Lead Logistics Provider (‘LLP’) wouldn’t it?  This makes it difficult, but not impossible, for third-party logistics operators to run 4PLs and, I suspect, was in the minds of those at Accenture that came up with the concept.  They are not in the business of coming up with great ideas for which they don’t get paid.

Council of Supply Chain Management Professionals

This august body chooses not to define 4PL but to distinguish the concept from that of third-party logistics (3PL):

Differs from third party logistics in the following ways; 1) 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners; 2) 4PL organization acts as a single interface between the client and multiple logistics service providers; 3) All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and, 4) It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure.

Hmmm.  Let’s go through those one by one:

  1. .…often a separate entity … joint venture or long-term contract  it might be a JV and I’m not sure an entity can be a contract
  2. … single interface between the client and multiple logistics service providers.  Tick that one.
  3. All aspects (ideally) … of the client’s supply chain are managed … No, that doesn’t follow.  There are plenty of inbound 4PLs, or finished goods examples.
  4. … possible for a major 3PL to form a 4PL … Tick that one too, but it needs explanation.

Other contributions

The award for chutzpah goes to Concargo, who explain that they ‘conceptualised and envisioned this initiative as early as 1988’.  Shame they kept it to themselves.

And Logistics List only adds to the confusion with the statement: ‘That said a 4PL (also sometimes called a lead logistics provider) …’  Sorry guys but 4PL and LLP are very different things, as I hope to explore real soon.

Technical Distribution – with a helicopter

Mil-8 chopper on Technical Distribution duty in Prague
Mil-8 chopper on Technical Distribution duty in Prague

Technical Distribution often needs specialist equipment, but seldom a soviet-era helicopter.

I have been involved in some Technical Distribution activities over the years so I’m used to stair-crawlers, cranes and the like but a couple of weeks ago I saw something new.

Apologies for the poor quality of the picture above, but i was visiting a friend and didn’t have my camera with me.  I heard the sound of a chopper and when I looked up two odd thoughts occurred to me:

  1. ‘That’s an unusual helicopter flying over the rooftops’; and
  2. ‘What’s it doing with a large piece of equipment hanging underneath it?’

It flew into the middle of town, hovered for a while, lowered its load, then rose and flew back whence it came.  My local aerospace expert identified the aircraft as a Mil Mi-8.  That’s one hell of a specialist piece of kit.

Product mix of quoted logistics businesses

Journalists tend to lump logistics businesses together but these show a wide range of product mixes.  This note analyses the service offering mix of selected players by revenue from their latest interim statements.

We talk and write about logistics businesses in general but of course when we generalise we run the risk of obscuring details that distinguish between competitors.  One important trend over the last fifteen years or so has been consolidation of the industry (although it is still very fragmented) and the combination of what were separate contract logistics and freight forwarding businesses into conglomerates aiming to become soup-to-nuts supply chain service providers.  The structural models of the big players probably doesn’t help to bring these services together, but let’s look at that some other time.

In the chart below I compare the proportions of our chosen sample of companies’ turnover which are reported in certain segments.  A clear problem is that although international and national accounting standards require segmental information, interpretation is often up to the boards of the companies and they are inconsistent.  For example:

  • Kuehne + Nagel shows Air-freight, Sea-freight, Overland and Contract Logistics.
  • DP-DHL naturally enough shows Mail (or as it is now called Post-eCommerce-Parcel) and Express, with Global Forwarding, Freight as a division plus Supply Chain.  They are good enough to disclose Freight (European road transportation) separately.  Similarly Williams-Lea is in Supply Chain but disclosed.
  • Expeditors shows customs brokerage, which no other of our sample does.  I have included that revenue in forwarding.
  • Panalpina discloses Air-freight, Sea-freight and Logistics.
  • Wincanton distinguishes between contract logistics and specialist businesses.

So ensuring comparability isn’t straightforward but I have done my best.  The major adjustment I have made is to exclude Mail and Express from the DP-DHL numbers.  These constituted 50% of the group’s turnover and masked the story in which I am most interested: the balance between contract logistics and freight forwarding.

For all companies other than Wincanton I have used the first-half 2014 published results.  For Wincanton the full year results to 31st March 2014 were the latest available.  I have also, where possible, excluded non-margin earning revenue such as duties.

Turnover analysis by product or service for major logistics companies that disclose such information
Turnover analysis by product or service for major logistics companies that disclose such information

You can draw your own conclusions from this, but what it tells me is:

  • Expeditors is still essentially a pure forwarder; Panalpina isn’t far behind.
  • K+N’s contract logistics business is still quite small, although combine it with Overland and they represent some 39% of revenue.
  • Ceva and DP-DHL have a close to 50:50 split (for the latter, excluding Mail and Express and grouping Freight (road transportation) with forwarding).
  • Norbert Dentressangle has come from a transportation background but has built up its contract logistics business so that it is now of equivalent size; the forwarding business is minimal.
  • Wincanton is 85% contract logistics, 15% specialist business.

None of that will come as much of a surprise, but it does confirm that really only Ceva and DHL have built businesses of comparable size in forwarding and contract logistics.  The others all have a particular strength (forwarding or contract logistics) which dominates.

 

Women at the Top in logistics

Women are successful and valuable contributors to senior management in a wide range of industries but the logistics industry has a reputation of being led by men.  What is the level of participation to the leading teams in the industry?

More years ago than I care to remember (well ten to fifteen years ago) I was unlucky enough to get press-ganged into attending a couple of conferences on board ocean-going liners.  The first time was on the SS Canberra, the second the newly-commissioned MV Oriana.  They were strange times; three days on a comfortable (Oriana) or somewhat less comfortable (Canberra – some ten years earlier it had been in the Falklands) with days chock-full of 30-minute meetings with what were ostensibly prospective customers but in practice were mostly freeloaders who agreed to meet because they got  a free cruise.

But what I remember most are the formal dinners and what followed.  The dinners, bizarrely, were black-tie affairs.  The diners (there were hundreds of us) were predominantly (and by predominantly I mean over 95%) men.  I’ll ignore the ethnic or religious background of the participants (that’s another can of worms for a later date) but the gender mix of the participants reflected that of the industry at the time.  A medium-sized UK haulier was run by a woman.  ‘Bees round a honey pot’ sprang to mind to describe the attention she got after dinner.

The world has thankfully moved on a lot since those days, and that made me wonder whether things had changed much.  It’s clear to anyone that works in it that the industry is still male-dominated and it’s difficult to get meaningful data, but an unscientific review of the most readily available information – the published 2013 statements of quoted logistics companies – does give a certain flavour.

These statements are largely focused on financial information, naturally enough.  They might have some corporate jargon about their equal opportunities policies but there is little concrete measurement disclosed.  The one tangible piece of information on gender balance comes from the composition of their boards.  I have complemented the published information with that gleaned from company web sites

Most of my sample have similar structures; in the Anglo-Saxon world non-Executive directors (in continental terms a Supervisory Board) with the Management or Executive Board or team.  Ceva, perhaps unsurprisingly now the holding company is incorporated in the Marshall Islands, was the most opaque.  The first mention of the management team comes in note 7 to the statements on page 39, with a further mention of the management team in note 28 on page.  I have used the Ceva web site to get an up-to-date picture.  Deutsche Post DHL was probably the clearest and most accessible.

Representation of women on select boards and senior management teams
Representation of women on select boards and senior management teams

So the most impressive participation is in DP-DHL, where some 22% of the participants are women.  Before we get too carried away, mind, the bulk of these are employee representatives on the Supervisory Board, which rather confirms the stereotype of left-/right-wing attitudes to equality.  DP-DHL also deserves credit for having a woman executive, although I must confess to slight disappointment that she works in a stereotypical role – HR.

Expeditors had one woman on the board and two executive officers.  Pleasure at the presence of two women on the Norbert Dentressangle Supervisory Board is slightly muted by the surname of one of them – Dentressangle.  As for the rest, the table tells its own story.

Overall some 11% of these directors or management are women.  But take out DP-DHL and the proportion is a measly 6%.  I’m no demographer but I recall that the proportion of women in the general population is about 50%.  That’s one hell of a gap.  As an industry we should be ashamed of this.

The decline and fall of the UK logistics industry

Fifteen years ago, as the world partied because it was 1999, the average stock analyst following logistics companies on the London Stock Exchange (‘LSE’) had some choice.  In the Support Services, Shipping or Transportation sectors (or whatever they were at the time) there were at least the following players (in alphabetical order):

  • BOC (logistics business BOC Distribution Services became Gist in 2001)
  • Christian Salvesen
  • Hays (Hays Logistics)
  • NFC (including Exel Logistics)
  • Ocean Group (MSAS and McGregor Cory)
  • Tibbett and Britten
  • Transport Development Group
  • Unigate (Wincanton)

This collection of operators considered themselves to be amongst the global industry’s leaders.

Depending on ones definition of logistics, one could throw P&O and Bibby in the mix too.

The logistics industry has flourished on the globalisation phenomenon and this has surely contributed to the consolidation the industry has witnessed.  And that consolidation has affected the UK logistics industry more than most.

So what happened to the UK’s players?

Where are they now?

  • BOC    – acquired by Linde 2006
  • Christian Salvesen    – acquired in 2007 by Norbert Dentressangle
  • Hays (Hays Logistics)    – Hays Logistics spun off as ACR 2004 to Platinum Equity Group; acquired by Kuehne + Nagel 2005
  • NFC (including Exel Logistics)    – merged with Ocean Group 2000 to form Exel
  • Ocean Group (MSAS and McGregor Cory)  – merged with NFC to become Exel 2000; acquired by Deutsche Post 2005
  • Tibbett and Britten    – acquired by Exel 2004
  • Transport Development Group    – acquired by Laxey Investment Trust 2008; sold to Norbert Dentressangle 2010
  • Unigate (Wincanton)    – Wincanton spun off 2001; still independent

So of the eight businesses in our 1999 list (to some extent of course an arbitrary selection), four (BOC/Gist, NFC, Ocean Group and Tibbett and Britten) are now in German hands, two (Christian Salvesen and TDG) are French-owned and one (Hays Logistics/ACR) is Swiss, leaving a solitary remaining independent British player, Wincanton.

Of course the nationality of the ultimate holding company might not mean anything (witness how Jaguar Land Rover has thrived under Indian ownership), but a group does not need two head offices, so one suspects that Bracknell and Windlesham have suffered and when push comes to shove decisions are made in Bonn. Munich, Saint-Vallier or Schindellegi.  It probably does not reflect a diminution in British influence, but both the new DHL Supply Chain CEO and the post’s previous holder came from Exel in the US.

And who’s around now?

The Motor Transport Top 100 is a useful if flawed summary of the UK industry and that reveals the growth of parcels operators.  A significant new entrant to the quoted ranks is Royal Mail and Wincanton has been joined on the LSE by Eddie Stobart (in 2007) and Clipper Logistics (June 2014).

And that’s your lot.  A somewhat different picture to that at the end of the last century.

Local custom and practice

Screw local custom and practice, I know what works for me...
Screw local custom and practice, I know what works for me…

Few industries have been as affected by globalisation as has that of logistics, and the expansion of the European Union in 2004, 2007 and 2013 has led to movement of people, generally but not exclusively, from East to West.

Sometimes the visitors struggle to adapt to local custom and practice or, perhaps, just need familiar surroundings to ease their loneliness.

A fine example of this, the unfamiliarity of East European migrant labour with West European warehouse lavatorial standards, and the practical response of an enlightened employer can be found here.

4PL – what’s that smell?

Avro RJ100

Can there be a logistics topic that is surround by more confusion and contradictions than that of fourth-party logistics?  If you think there’s any clarity or consistency out there take a look at this hilarious discussion on LinkedIn.

Try finding some wheat in that chaff.  Of course the first description came from those nice people at Andersen Consulting (now Accenture) back in 1996.  It is often quoted as:

A 4PL is an Integrator that assembles the resources, capabilities and technology of its own organisation and other organisations to design, build and run comprehensive supply chain solutions.’

Now I can’t find the original Accenture document but in Gower Handbook of Supply Chain Management, Bedeman and Gattorna (both authors now ex-Accenture, by the way) extend the definition thus:

‘… and which have the cultural sensitivity, political and communication skills, and the commercial acumen, not only to find value, but to create motivating and sustainable deals that offer incentives to all the parties involved.’

I don’t know if that was included in the original Accenture characterisation but I suspect it was; it has the whiff of consultant-speak all over it and neatly sums up how Accenture seeks to differentiate itself from the competition.  That is not to deride the importance of the added terms; they are actually an essential part of what is needed to establish a 4PL in the first place and anyone that quotes the first part without the second (as most seem to do) is taking a very mechanistic view of the concept.  In fact, they’re almost entirely missing the point.

But even that extended definition isn’t adequate.  Bedeman and Gattorna go on to discuss other essential characteristics of a 4PL structure like IT, capabilities and again leap into consultant jargon: ‘… culture of innovation… extract value… world-class project management… extraordinary capabilities to construct value-sharing deals… value creation and sharing mechanisms…’ and so on.  Or, to put it another way, the only organisation that can do all this is a sophisticated change management and IT organisation, like Accenture!

One final point on Bedeman and Gattorna’s discussion.  the final attribute they mention is ‘relationships at or above supply chain director level.’  This is fundamental.  I have seen many 4PL (or LLP, but we’ll come back to that some other time) initiatives flounder because the people involved would be the proverbial turkeys voting for Christmas, and many of the real benefits of a 4PL solution come in areas like headcount and working capital reductions which are more appreciated by the CFO than the transport manager.

So who’s doing 4PL?

For all the hype it’s difficult to get to the bottom of what’s actually happening in the market place.  Other mainstream or IT consultancies leapt on the bandwagon (IBM is the example that first springs to mind) but did they actually implement much?

Well Badema and Gattorna (they were writing in 2002) identified a couple of early Accenture examples; New Holland (which doesn’t sound much like a 4PL) and Thames Water but it’s difficult to find out much about them.  A quick and quite unscientific trawl of Accenture’s web site revealed just one meaningful example – some work they have done with Unilever – and a mention of 4PL in a business process outsourcing paper.  That might be considered a little surprising; Accenture is not known for hiding its light under a bushel.

As for IBM, I can’t find a single example of its 4PL activities and searching its site only throws up systems for 4PL operators.  In fact they sold their supply chain operations to Geodis in 2008.  For a splendidly biting discussion of the success of their approach take a look at this commentary.

The reality is that the players that have built significant 4PL capabilities and operations are the third-party logistics operators, and it’s the monsters (DHL and Kuehne + Nagel) that have greatest scale.  Of course even within 3PLs there’s still a lot of conflict and confusion.  Quick clue for freight forwarders:  just because you have a control tower that doesn’t mean you’re a 4PL.