On the one hand the client often criticizes a lack of the promised innovative abilities on the part of the logistic service provider. The client expects much more engagement and proposals for optimization (see figure 1). On the other hand the service providers face the severe restrictions caused by the cost spiral. Logistic service providers experience the realisation of outsourcing projects more negative than clients. In their experience actual quantities and processes do not correspond to the expected scope. Furthermore the assessment of services and service results differ considerably. The study shows that this differing perception is the reason for frequent contract changes. Klaus-Peter Jung from Miebach Consulting:

 

 “Clients often show high (perhaps to high) service expectations, which the service provider is not able to cover because of strict budget restrictions”.

 

What are the reasons for these differing expectations? According to the respondents, important factors are changes in the market and the client’s economic situation. Clients are not willing to pay for additional services because of the continuously growing cost pressure. As a consequence, service providers have to adapt to the client’s price sensibility. Result: Meeting the demand for enlarged services and innovations is often not practicable. In any case, according to the outsourcing study cost and investment benefits are regarded as the main reason for outsourcing decisions, comparable to the slogan “cash is king”. In consequence, chances for service improvements by the service provider play a subordinate role. Dr. Jung advices against this “possible dead end”: Innovations and inventiveness are very decisive factors for service improvements. In case this trend doesn’t change there is a risk of worsening supply chain processes as a whole. The principle of “more cash – less service” also bears risks.

Further results of the Outsourcing Study: logistic service providers still focus on processes of transport, transfer of goods and warehouse operations. The minority of service providers considers detailed service level agreements and bonus-malus rules for contract agreements. The price structure of logistic service providers in 2009 can still mainly be characterized by diversity. A completely variable and performance-based compensation system, as favoured by clients, hasn’t prevailed yet.

 

 

 

 

Fig. 1: Dissatisfaction with innovative ability of service logistic providers

Closing conclusions of the authors:
It remains to be seen how the outsourcing relationship between logistic service providers and clients will develop. Adjustments of the price structure are highly desirable. This implies more flexibility for the service provider to force innovations and to extend service offerings.

 

 

 

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