2 weeks — The Vacuum Cleaner
Now, 2 weeks in San Francisco are complete. This basically means that; yes, apartment found (taxis here know where they are going..), cellphone fixed (well not really but Sofia got hers), food store located, I have even learned how to operate the vacuum cleaner, I’ll get back to that later.
San Francisco has become a city of dreams, through the rise of the region by actual manufacturing of “computer stuff” using silicone, it is now all about new businesses, mainly operating in the forefront of trends and also sometimes in terms of technology. I can recommend Roger Moore’s last Bond film “A View to a Kill” to understand the Start of Silicone Valley in the 80s. Not the best of Bond films, but the best bond song ever by Duran Duran.
Anyway, I am here on an assignment by LOTS, a new Scania venture focusing on taking a role in the new logistics landscape. To understand the logistic landscape one must follow the development of the industry, which is a complete result of two trends which relate to one another; globalization for one, and out-sourcing for two. Like most corporations, globalization was coped with through outsourcing of non-core competencies. For many corporations a non-core competence was logistics.
Now, the logistic world is becoming increasingly complex, and the market is massive, it represents about 10% of the global GDP — roughly 4 trillion USD, out of which about half is on road logistics. The increased complexity mainly comes from the trends of the regular supply chain becoming a supply network, but also from aspects like security, environment and communication, which are now increasingly integrated in logistics.
The industry has through the ongoing trends, past and present, developed in a direction where logistic providers seek to offer more value added services to guard their margins. Simply providing a standard solution is not good enough, however tempting it might be from an operational perspective. They seek to specialize in industry verticals, providing specific know-how towards each customer segment. Of course, these offerings are well bundled service packages for a completely designed supply chain.
The development of the logistics business is illustrated below:
1 PL — First Party Logistics provider is the most simple type of logistics, where a manufacturer or a retailer owns and operates vehicles to deliver their own product to their customers.
2 PL — Second Party logistics provider is basically a transporter, road, sea or air operating by the request of the manufacturer or the retailer.
3 PL — Third.. you get the abbreviation now right? 3PL marks the outsourcing done in the 70s of logistic capabilities to manage mostly globalisation. These are asset based companies that integrate and bundle services of: transporting, warehousing cross-docking, inventory management, packaging and freight forwarding.
4 PL — is a provider of logistics services focusing on the strategy and design of the supply chain. Often also referred to as LLP (Lead Logistics providers). Here the aim is to have a more permanent impact on the management of logistics, not just settling for the one time asset reduction from the outsourcing. In short 4PLs act as an integrator of services, systems, management and knowledge in the supply chain.
5 PL — Here is where it gets a bit tricky, especially if you do not want to confuse it with 4PL. The 5PL providers mark the shift from supply chain to supply networks. Moreover, since actually most 3PL providers turned into 4PL providers, the 5PLs are needed as a source of neutrality in optimizing logistics. Some 5PL companies aim to disrupt the regular logistic chain by generating platforms to reduce idle time and improve consolidation, think UBER, but for transports. However, it is not solely about being connected, rather it is about challenging current work methods and organizations, and redesigning, reengineering and optimizing the client’s current business processes and internal dynamics of the organization to improve the overall logistic approach. The business model is often based on a sharing of risk and rewards to ensure neutrality, willingness and trust.
So, the industry is moving in a direction where they become more customer integrated in order to have a decent value proposition, nothing entirely special about this since basically all industries are thinking along similar trajectories. However, the move from a supply chain to a supply network has a potential of changing the manner in which we’ll see logistics tomorrow. If the perspective on logistics shifts to entail the value network, rather than what is now defined as the supply chain, the view on how logistics should be dealt with could change drastically, whilst saving the planet and cutting costs at the same time. I believe there is a definition for that… hmm, Sustainability?
Oh yeah, the vacuum cleaner is a metaphor for my first two weeks, I have literally been vacuuming all sources possible to get started. But, it is also my least favorite thing in the US, so far. Clearly not everything is innovation and front end; below is a picture of the vacuum cleaner in our apartment, completely useless, unless you would like to use it as a Star Destroyer or to land on the moon.
Best,
Måns
