Managed Services: The “Stretch Armstrong” of Logistics

One of my favorite toys as a boy was Stretch Armstrong, a muscle-man action figure with a stretchable body. As the catalog picture below illustrates, you could pull its arms and legs up to four feet in length (although I never had the strength to pull them out that far). “Stretch him long, stretch him thin, watch him return to shape again” — over and over again, until he ultimately developed a tear, and the great mystery of what was inside (red gelled corn syrup) came oozing out. 

StretchArmstrong

As I look around, I see examples of Stretch Armstrong in the technology and logistics realms.

Cloud computing is a perfect example. It allows companies to scale their computing capacity, both up and down, as their computing requirements change. Instead of investing in servers and other infrastructure to cover peak demand situations, companies can align their investments to meet normal computing demand, and then use a cloud computing service like Amazon EC2 to “stretch out” their capabilities as required. When the extra demand goes away, their computing capabilities “shrink back” to normal size.

In the logistics realm, managed services is another example. It addresses a real need and challenge that many companies face today: how to effectively scale their logistics resources, technology, and processes in a rapidly changing environment.

How many people do we hire and train? What skills and knowledge must they have? Which technology applications should we invest in? Do we implement those applications in-house or use software-as-a-service solutions? Which processes do we keep in-house and which ones do we outsource?

The reality is that the factors that inform those decisions today, such as customer requirements and market conditions, will be different tomorrow. You might acquire another company, for example, or divest yourself of a business unit, which would transform your supply chain and transportation networks — and the challenges that go along with them. You might decide down the road, in response to e-commerce initiatives or competitive pressures, to shift more volume to parcel and rail, modes that you have very little knowledge about or experience with today — and that your current transportation management system doesn’t address well either. And the list goes on.

The question then becomes: Do you build your organization and capabilities to address all possible scenarios and situations — the equivalent of building your IT infrastructure around peak demand requirements — or do you build a core set of resources and capabilities and leverage external partners to scale and stretch your capabilities as needed?

It’s the latter approach that’s fueling demand for managed services — the supply chain and logistics equivalent of cloud computing — that enables companies to tap resources and technology as required to address their evolving needs. What we’re seeing, in effect, and what customers are demanding, is the convergence of business models, specifically the business models of logistics service providers, technology companies, and consulting firms.

Managed services can include a lot of different things: supply chain modelling and network design, transportation procurement engagements (both strategic and tactical), day-to-day planning and execution of shipments, business intelligence and analytics services, execution of continuous improvement projects, and so on. And these services can be ramped up or down as required, lasting a year or more in some cases, or just a few weeks or months in others.

What does this all mean for manufacturers and retailers looking for a solution provider?

The first step remains the same: you have to clearly define your desired outcomes. But when it comes to finding the right partner to help you get there, you need to take a fresh look at the market — beyond the traditional labels of 3PL, software vendor, and consultant. The reality is that manufacturers and retailers have a diversity of options today, and the right partner is the one that can provide the right mix of technology, services, and advice to help you achieve your desired outcomes. The right partner is the one that enables you to scale and stretch your logistics resources and capabilities — yes, just like Stretch Armstrong — in response to your ever-changing needs and requirements.

Note: This post was originally published as a guest commentary on LeanLogistics’ blog.

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