November/December 2018
B ULK D ISTRIBUTOR
Sector Focus: Chemicals
3
Do it yourself?
‘M
ake or buy?’ is a question managers in the chemical
industry have to answer time and again.
Which processes should the company carry out itself and which will
be assigned to external service providers? The aim is always to reduce
the total cost of ownership (TCO) of a product and develop
international competitiveness by optimising processes.
But this question also applies to logistics. For some time, Germany-
based Camelot Management Consultants has been observing
growing demand for the identification of the scope of service and
selection of fourth party logistics (4PL) and lead logistics providers
(LLP). As well as the traditional subjects of storage and transport (third
party logistics), companies are increasingly on the lookout for process
expertise and innovative IT solutions.
In order to tackle these current trends and offer companies
guidance, Camelot initiated a study together with the University of
Würzburg. The study combines basic academic information on the
subject, which has been compiled and expanded by Prof Dr Christian
Kille and his team, with an empirical survey of logistics experts carried
out by Camelot, focusing on the chemical industry.
As well as an overview of the current status quo of the outsourcing
of logistical processes in the chemical industry, the study also provides
a guideline to assist significantly with the selection of an appropriate
logistics partner.
The study was presented to the public for the first time at the BVL
Forum Chemical Logistics, held on 20-21 June in the Belgian port city
of Antwerp.
A random sample survey among logistics managers in the chemical
industry in Germany shows that around 80 percent of those surveyed
have a vague idea of the subject of 4PL services, while only around 15
percent say they have good or very good knowledge of the subject.
In the chemical industry, when outsourcing logistics services, the
focus is primarily on financial motives and the maintenance of a
sustained service. Human resources and strategic aspects only rarely
play a role.
As much as 82 percent of services in operational logistics are carried
out in-house – sometimes with the support of a 3PL or 4PL. However,
the proportion of in-house solutions for areas with a high risk for the
company is particularly high.
Both strategic and tactical logistics services are predominantly
carried out in-house, sometimes however with support from external
logistics service providers. Depending on the type of service, 19-39
percent of the companies surveyed subcontract strategic and tactical
tasks to 3PL service providers. Subcontracting to a 4PL is currently the
exception.
Eighty-five percent of the companies surveyed operate at least one
warehouse. Subcontracting to 4PL service providers is very rare. At 25
percent, inventory management has low significance for outsourcing,
while warehouse operation has a particularly high significance with
68 percent subcontracting to a 3PL.
Interestingly, medium-sized, family-run chemical companies
generally see logistics as a cost centre. These companies are quite
critical of the outsourcing of operational and particularly tactical and
strategic logistics tasks to a logistics service provider.
In contrast group companies often have many years of experience in
outsourcing operational logistics. Almost a third of companies can
imagine themselves subcontracting tactical and strategic management
tasks to logistics service providers in future.
Large, very specialist chemical companies see logistics as the first
steps in differentiation from the competition. These companies also
have experience in outsourcing operational logistics processes and can
in some cases foresee themselves subcontracting logistics
management tasks.
Seventy percent of those surveyed believe the optimum degree of
outsourcing of strategic and tactical logistics services has already been
reached, and whether outsourcing potential is always recognised
remains questionable.
If outsourcing has been identified as an area of activity, in 88
percent of cases the invitation of bids for services is expected to be
implemented in the next three years.
From a present-day perspective, the majority of those surveyed
would make the same outsourcing decision again, while a total of 40
percent of those surveyed are not completely convinced by the
decision.
While the risk of loss of quality is seen as all the more critical, the
more operational the task is, the relationship is exactly the opposite
when it comes to strategic alignment, loss of control, confidential
insights and loss of information.
Selection criteria
For those surveyed, the ability to achieve transparency regarding
processes and costs and to adapt individually to customers are the
most important criteria in selecting a 4PL partner.
Further important aspects include ensuring seamless integration, IT
system competence, expertise in the logistics market and the
geographical coverage of the services. The neutrality towards logistics
service providers is, on the other hand, rated as less important by as
many as 30 perecent of those surveyed. The shared service centre of
the 4PL appears to play a secondary role in the choice of 4PL.
Technology
In recent years numerous innovative technologies have been
developed, which offer new possibilities in terms of transparency,
automation and optimisation. At the same time, the selection of an
adequate technology becomes a competitive factor and therefore
requires a feasibility analysis, the development of a strategic vision
and an implementation plan – it thus also becomes a complex and
costly undertaking.
Many chemical companies still work with the outdated SAP LE-TRA
module and recognise that the existing and future IT requirements
can no longer be met with this. This major technological deficiency
Is a 4PL the answer?
for one thing leads to non-harmonised transport management
processes and at the same time involves the risk that in future LE-TRA
will no longer be supported.
Two trends can currently be observed: Many companies are now
investing in their own transport management system based on SAP
S/4HANA. Other companies are taking specialists on board in the
form of a 4PL service provider which already has a well-developed
transport management system and is very well connected with freight
forwarding companies.
In logistics a 4PL generally presents a good opportunity for