4
B ULK D ISTRIBUTOR
Sector Focus: Chemicals
November/December 2018
Medium-sized, chemical companies generally see logistics as a cost centre
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companies to use the latest technologies for
distribution, without having to invest in market
analysis and implementation themselves.
The report concludes with some guidelines for
chemical companies to follow when making ‘make
or buy’ decisions in logistics.
Providing clarity
In order to make the correct decision when
outsourcing logistics management tasks, chemical
companies must be clear about their own motives.
Is it about saving costs, transparency, increasing
flexibility or a new transport management system?
In addition, they should be aware of the role of
logistics in the company and their own corporate
culture. It is also necessary to examine the
complexity and the internal framework conditions,
before the specific contractual arrangement of the
co-operation with a logistics service provider can be
considered.
When 4PL, LLP and 3PL
make sense
The outsourcing of strategic or tactical logistics
management tasks to a 4PL provider or LLP is only
useful if logistics are particularly seen as a possible
opportunity to stand out from the competition.
4PL providers require a co-operative and process-
oriented corporate culture. Generally, LLPs are
able to cope with advanced hierarchical-functional
structures.
Chemical companies should favour carrying out
strategic and tactical logistics management tasks
themselves if there is a very hierarchical and
functional corporate culture. If chemical
companies see logistics purely as a cost centre or
function that generates downstream added-value
services, the outsourcing of operational logistics
tasks to a 3PL provider is to be recommended,
especially if there is a collaborative, process-
oriented corporate culture.
If there is a focus on the costs of the logistics, in
combination with a very hierarchical and
functional corporate culture, then a chemical
company should also take responsibility for
operational logistics with its own employees and
use freight forwarders, shipping companies and
warehousing companies selectively.
Reduce complexity
with LLP
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The high number of players and interfaces, as well
as the heterogeneous nature of these, leads to a
high level of complexity, particularly in the
management of distribution in chemical logistics. A
company in the chemical industry can reduce this
complexity by using 4PL services. The use of an LLP
often proves to be more advantageous than using
a 4PL provider, because the LLP can link the
bundling effects in its own transport network with
that of other partners to optimum effect.
In-house or 4PL/LLP?
One important component of 4PL services is the
informational integration of all relevant processes
in a customer’s supply chain, in order to achieve
cost optimisations and service improvements
through transparency. Open, flexible IT platforms
are required for this.
A company in the chemical industry can develop
and operate these itself. Providers of 4PL services
generally already have tried-and-tested IT
platforms, so the use of a 4PL provider or LLP can
be useful. Whether an in-house IT platform or a
4PL provider or LLP should be favoured depends on
the degree of coverage of the supply chain and the
performance of the platform.
Dynamic management in
the supply chain
Companies in the chemical industry have to
manage different dynamic incidents in their supply
chain. These include, on the one hand changes, to
production volumes, for example as a result of
price fluctuations, changing demand, legal changes
or new product launches.
On the other hand, supply chain management is
required due to fluctuating availability in the area
of warehouse and transport capacities.
A provider of 4PL services is sometimes better
able to balance out these fluctuations than a
company in the chemical industry itself. This is
possible both with a 4PL provider as well as an LLP.
What is crucial here is the actual option to access
transport and warehouse capacities, either through
a company’s own assets, pooling systems or market
power in certain logistics segments.
Readjustment of
the supply chain
If a tactical readjustment of the supply chain is
necessary for individual resources and logistics
partners, this can be undertaken effectively by
providers of 4PL services. Both an LLP and a 4PL
provider is suitable for this. Experience and
knowledge of the logistics markets and network
plans are essential.
Innovation skills
The future viability of a supply chain is determined
not least by its ability to innovate. This can be
significantly increased through the use of 4PL
service providers. Both 4PL providers and LLPs can
be the correct choice here. Chemical companies
should assess the innovation skills of their partner,
both based on innovative future concepts, as well
as actual solutions developed in the past.
Neutrality?
If strategic aspects such as regular changes to the
resources used and long-term logistics partners are
needed for 4PL services, then the use of a 4PL
provider is to be favoured, as it can make decisions
more independently of interests in in-house asset
utilisation. However, a neutral consultancy
company acts even more independently of any
self-interest in this case.
The subject of neutrality should be considered in
a differentiated way when selecting service
partners, ie, what type of neutrality is necessary at
what point in the co-operation and how can
decision-making in the interests of the client be
ensured through contractual agreements and
organisational measures?
A blanket statement that a certain 4PL provider is
generally more neutral than another is not useful.
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