Single Sourcing of Multiple Modes of Transport

[ShaunScott]

Met with a client recently who has been tasked with putting together a single sourcing strategy for transport. The company makes significant use of road and rail service providers in the transport of bulk and breakbulk commodities. Rail constitutes however over 60% of their transport spend. Any live examples out there where single sourcing of multiple modes, particularly road and rail, has really worked.
ShaunScott, Joburg

[emekomabennett]

In my country the rail means of transportation is undergoing some rehabilitation process and have not been effective for some time now to encourage intermodalism between rail transport and road but for intermodalism between air and road in my country, that you can find if not 60% or more percent. That is to say that for only road transport to record 60% spend in any establishment in my country, is not obtainable here, may find in any part of the world where there is an effective rail and road transportation

[emekomabennett]

moreover putting ones eye in one basket is not ideal and does not encourage competition in any way. it ia advisable to use a source for a while because of the dynamic nature of our environment cum technology. Using mixed strategy will give a buyer a combination of quality and cost savigs.

[ShaunScott]

Many thanks Bennet,
I agree with your comments. In my client's case, there many road/rail issues. One for example is that there is often a shortage of rail capacity (wagons and/or locos) and they have to then source road transport (either through the rail company or directly). That brings about many additional issues. So my client's thinking is to try and establish a contract with an asset-independent integrator who will do the sourcing and management for them. The client's core business is not logistics and they are trying to get a specialist logistics company to do this for them. This is sometimes called Fourth Party Logistics (4PL). There are a few examples I know of 4PL's in the literature and through my associations, but very few that have a large rail transport component.
Thanks again and please keep the ideas and comments flowing.
Best regards
ShaunScott, Joburg

[David]

Hi ShaunScott

I am not sure how active these guys still are, but try and talk to a company called e-Freight, based in Woodmead. They had strong links to Transnet.

Regards
David

[ShaunScott]

Hi David,
Thanks. Yes, unfortunately eFreight closed their doors January 2007.
I've got a couple of other irons in the fire on this one.
Take care
ShaunScott, Joburg

[mariusb2]

Hi Shaun

(if you still need the info) The question has more bearing on the clients logistics strategy, as this will determine the Sourcing stsrategy.

Single sourcing of multiple modes is only appropriate if the client intends fullfilling the 4PL or leading Logistics role themselves. The alternative would be to find a Leading logistics provider ( 4PL) who will then fins, appoint and manage the 3PLs.

[Nivarde]

Hello Shaun,

Your Logistics strategy, are you concentrating on inbound and outbound?
What is you average lead-time (inbound and outbound)?
What are you currently using and what are the main reasons for wanting to move to another single source?

[ShaunScott]

Thanks MariusB2 and Nivarde,
Good points.
The client does not currently have a logistics strategy. They are an asset-intensive organisation that mainly focuses on inbound logistics (O&M goods). The procurement team was asked to put the single sourcing strategy together and it will have a major influence on the eventual logistics strategy outcome. One of the drivers for considering single sourcing is that the rail service provider often subcontracts to road hauliers. This is done by the rail company and hence happens outside the bounds of existing road contracts - sub-optimal.
Any examples where this really works?
Regards
Shaun

[mariusb2]

Hi Shaun

No I have no examples of multi-mode in SA (or anywhere else) run by a 4PL or LL. The big corporates like SASOL and Ispat runs multi mode, but do the Lead Logistics bit themselves.

Multi-mode is a bit scarce as rail is regulated (or have regulated lagacy) in most countries. What is common though is multi service road - freight, parcel and bulk within one diversified logistics company. I assume Barloworld would be one in SA, as Toll is in Australia and Schenker is in Europe.

My advice would be to build the Logistics strategy (and hence sourcing strategy) around the concept of a Lead logistics provider responsible for planning & coordination.

In terms of sourcing the nature of mixed freight (not just bulk or parcels on fixed routes) is such that sourcing can only put a cost framework in place for every eventuality, whilst the actual commitments will be made on a daily basis as the true requirements for the next period (usually 24hrs) become clear.

I am currently doing this for a major telco and am having heaps of fun trying to force potential suppliers into providing cost ito a cost structure that will allow for on the spot decision making.