RESEARCH MEMOIR

RESEARCH THESIS

LOGISTICS OUTSOURCING

Specialized Master/3rd Cycle

Management of logistical activities

Elodie BROUDIC
Julien ORSAT
Lynda TANIO-CALVAIRE

Promotion 2006

ESC BRETAGNE BREST - 2, Avenue de Provence - CS 23812 - 29238 Brest Cedex 3 - France
+33 (0)2 98 34 44 44
[Link]- info@[Link]

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 Logistics outsourcing

THANKS

First of all, we thank V. Fernandes, Teacher Researcher at ESC Bretagne Brest,

for his availability, attentiveness, and valuable advice.
We also wish to thank the companies that welcomed us as part of our
field survey for their availability and the quality of their information:
M. Rousseau, logistics manager of constituent flows at PSA Peugeot Citroën
Rennes
M. Ronan Leray, director of Celtic Global Services;
M. Jean-Marie Charlier, logistics manager of SCARMOR.

These meetings have been very enriching. These professionals have shared with us both
their experience and feelings on the subject. This allowed us to enrich our reflection with
concrete and sometimes even surprising information.

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 Logistics outsourcing

RESUME

Logistics outsourcing is an increasingly common phenomenon nowadays. It involves

for an industrial or commercial company to delegate all or part of its activities
logistics to a Logistics Service Provider. Even though there are many reasons
to understand the origins of this movement, it seems interesting to know the real motivations of
companies that use it as well as the stakes. We also questioned ourselves about the
profitability conditions of logistics outsourcing. We will devote the last
part of our thesis to illustrate our development through a field survey conducted
with companies: PSA Peugeot Citroën, Celtic Global Services, and SCARMOR.

logistics outsourcing, delegate, Logistics Service Provider

real motivations, stakes, profitability conditions

summary

Nowadays, logistics outsourcing is a fast-growing phenomenon: the industrial or

A commercial company will delegate whole or part of its logistic activities to a third party.
Logistics. This movement has its origin in many reasons but it seems interesting to know the
real motivations of the companies which have recourse to it as well as their stakes. We also
wondered about the conditions of profitability of the logistic outsourcing. We will devote
the last part of our dissertation to illustrate our development by an investigation ground
realized near companies: PSA Peugeot Citroen, Celtic Total Services and SCARMOR.

Key words: logistic outsourcing, delegate, Third Party Logistics, real motivations, conditions of
profitability.

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 Logistics outsourcing

SUMMARY

ACKNOWLEDGMENTS................................................................................................................ 1

RESUME

SOMMAIRE ............................................................................................................................. 4

INTRODUCTIONN.6

PART 1: WHAT REASONS DRIVE AN ORGANIZATION TO

OUTSOURCING YOUR LOGISTICS?

A.A CHANGING ENVIRONMENT................................................................................... 8

Market realitiesé .8
2. A new type of business is emerging ............................................................... 12
[Link] ACTORS OF THE’LOGISTICS OUTSOURCING14
1. The industrialists ...................................................................................................... 15
2. The distributors................................................................................................... 18
[Link] PROVIDES LOGISTICS SERVICES? ............................................................. 21
1. Evolutions of carriers at PSL ................................................................. 21
2. Evolution of service offerings ...................................................................... 22
[Link] SERVICES................................................................................ 29
1. The transportt .......................................................................................................... 30

2. Distribution logistics excluding transportation............................................................. 31

3. Management logistics (stocks and associated IT tools) .......................... 34
4. Supply chain logisticst ........................................................... 35
5. Support and service logisticss.......................................................................... 37
6. Return logistics.......................................................................................... 38

PART II: IS LOGISTICS OUTSOURCING PROFITABLE? ... 40

[Link] ISSUES OF L’LOGISTICAL OUTSOURCING........................................................ 40

1. The advantagess ....................................................................................................... 40

2. The disadvantages ................................................................................................. 44

[Link] WHAT CONDITIONS L’LOGISTIC EXTERNALIZATION IS-SHE IS PROFITABLE? ..... 48

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 Logistics outsourcing

Factors impacting the efficiency of outsourcing the logistics functione.48

2. The profitability criteria chosen by the clients ........................... 51
3. The monitoring of service providers and services.......................................................... 54
4. The weight of providers...................................................................................... 57

PART III: CASE STUDIES........................................................................................... 61

[Link]............................................................................................................. 61
[Link] OF THE INTERVIEWED COMPANIESS ................................................................ 62
1. A car manufacturer: PSA Peugeot Citroën ........................................... 62
2. A logistics service provider: Celtic Global Services .......................... 64
3. A purchasing center of the LECLERC large distribution group: the
SCARMOR........................................................................................................................ 66
[Link] REALITIES ON THE GROUND............................................................................................. 68
1. The reasons for logistics outsourcing........................................................... 68
2. Is logistical outsourcing profitable?
3. The future of logistics outsourcinge ............................................................... 77

CONCLUSION

BIBLIOGRAPHYE ................................................................................................................. 81

ANNEXES 82

TABLE OF FIGURES

TABLE OF TABLES .................................................................................................. 102

TABLE OF CONTENTS ............................................................................................ 103

GLOSSARY......................................................................................................................... 107

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 Logistics outsourcing

INTRODUCTION

Since the late 1980s, against a backdrop of economic crisis, companies have outsourced.
peripheral activities. This approach was primarily motivated by reasons of
cost reduction, labor costs, and lack of internal capabilities.
Outsourcing then reached the company's functional services such as the
logistics. It was to enable the provision of resources for activities
mainly involves sharing risks with the service provider. Finally, outsourcing has
reaches the basic functions. The proximity of these functions to the core business explains
for a good part the changes in behaviors. The clients developed
a genuine strategic analysis to promote responsiveness and the assimilation of innovations
in their company. The service providers had to position themselves to provide more services.
more complete to improve outsourced processes.
Commonly, outsourcing is defined as the stable and lasting delegation of a
activity and its management, previously managed internally. This delegation can be
transfer of personnel and assets. In fact, the service provider takes charge of the
realization of a property on behalf of its client in a partnership approach.
Until the mid-1970s, in Europe, logistics was seen as the processing
physical flows of goods. It was about transporting, storing, and
handling. We were living the good days of pushed flows. However, gradually,
In production companies, logistics has tended to develop upstream.
chain, towards purchasing and scheduling. Likewise, it claimed to extend downstream, towards
commercial management. During this phase, it was referred to as 'scholarly' according to Y. Pimor1.
During the 1980s, she put the customer back at the center of sales concerns. She
refined the concepts of deadlines, customer service, and overall costs. It has prompted the examination
of value-added sharing throughout the supply chain. Since the 1990s,
Companies are organizing themselves to achieve 'logistical effectiveness'. As a result, the
Logistics has a strategic dimension.
Thus, logistics is a complex and transversal activity, of design,
of organization and management.
1
Logistics: Technique and Implementation

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 Logistics outsourcing

In our study, we will focus more specifically on logistics:

- supply (upstream of the chain);
- management (stocks and related IT tools);
distribution (transport, storage, packaging, handling, preparation of
command)
of support, after-sales service, and returns.
In Europe, the predominant reason for logistics outsourcing remains the desire to reduce
costs. However, the quest for this bottom line cannot be the only criterion. In this
context, how do we measure the benefit brought by logistics outsourcing? It us
It seems important for us to question the conditions that ensure that outsourcing
logistics should be profitable.
Today, the company no longer evolves alone, it acts within networks, in a system
which includes its suppliers, customers, service providers, and partners. It must therefore
integrate the management of supplier vendors, up to the clients of clients.
The interdependence of flows and the need for optimization leads to the interdependence of actors.
Gradually, the different protagonists build networks whose common thread remains
logistics.

We will first see the reasons that drive a company to

outsourcing its logistics while taking into account the environment and economic stakeholders.
In a second step, we will analyze the factors that make outsourcing...
profitable, the advantages that companies can gain from it but also its limits. In a
third time, we will confront our reflections with the realities on the ground in an approach
methodical.

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 Logistics outsourcing

PART 1: WHAT REASONS DRIVE A

ORGANIZATION HAS OUTSOURCED ITS
LOGISTICS?

Logistics outsourcing addresses a clear challenge of cost control but also

of process fluidity, optimization of logistics functions in order to implement
value throughout the chain. We will describe, in the first chapter, the environment
exsanguinated economy, external reason, which forces companies to outsource their logistics.
We will also propose a reflection on an internal reason, a new structure.
of companies, which leads to logistics outsourcing. We will complete the table on
logistics outsourcing in a second chapter through the portrayal of the client protagonists
and providers. Finally, we will take advantage of this description to summarize the
logistic functions panel of the field of our study.

A CHANGING ENVIRONMENT

Market realities

The need to redefine competitive strategies on a global scale is imposed on

companies regardless of their sector of activity. A new management approach is being built
about the idea of "Lean Managementwith a process-oriented approach. One must be able to
to face competition in a global market, to demonstrate responsiveness to a
continuous change, ensure reduced development or delivery times, control
its costs while meeting the demands of the customer-king. Logistics becomes one of the assets
What can companies assert to respond to this new style of management?
Consequently, logistics outsourcing is one of the available means.

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 Logistics outsourcing

a. Customer requirements

Today, logistics policy is a major concern for senior management.

the company. It seeks to constantly simplify and improve processes in order to
reduce costs and/or delivery time for the client. However, outsourcing does not
are not primarily motivated by customer demands. Since 1999, the barometer
outsourcing of Ernst&Young2provides identical figures. Outsourcing is primarily
an approach to optimizing operational efficiency. However, our intention must be
nuanced. On one hand, some functions of logistics, particularly downstream logistics, are
directly driven by customer requirements. Similarly, custom packaging
notably in the ready-to-wear sector should address seasonality, to the
volatility and the diversity of choices for customers. In this context, it is necessary to produce and sell in
coherence with these increased requirements. On the other hand, according to an article from the reading guides

ISO 9001 (2001) AFAQ3 the application of quality standards allows for repositioning the
explicit or implicit requirements of the client at the center of production reflection.

b. Hyper competition

The increase in competition can be associated with the rise in productivity in

the industry. By deploying the same capacity, it is now possible to flood more
easily the market. One of the natural causes of this increase is technological progress, more
stronger in industry than in most service activities. The end of protectionism
leads to an exacerbation of competition that drives the search for a reduction in
costs to regain competitiveness margins. The supply continues to increase. The customer has
so the choice of supplier. Many activities previously carried out in-house have been
progressively outsourced to remain competitive.

2
Ernst&Young, (2005), Outsourcing Barometer "Practices and trends in the outsourcing market in
France
3
Anonymous, (2001), 'Quality certification for the use of logistics companies' AFAQ reading guides
ISO 9001 version 2000.

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 Logistics outsourcing

c. Globalization of markets

First of all, the opening of foreign markets raises the question differently.
of resource allocation. Firms invest abroad to strengthen and structure
their production and marketing instrument while prioritizing
operations related to their core business. The first solution involves operations of
cross-border mergers/acquisitions. Another tends to abandon non-core activities in
compensating through outsourcing.
In fact, service providers find in the requests of large multinational corporations the
capabilities and the means to grow but also to develop internationally. The
Outsourcing movements, driven by large groups, have facilitated these
developments. Providers benefit from economies of scale by working for
several clients. Moreover, the internal units of multinational companies are also involved
in competition with the outside. These practices sometimes lead to an outsourcing by
a transfer to a supplier or a buyout according to Mr. Delpierre4 .

d. Performance improvement

In this demanding context, companies have a performance obligation.

Outsourcing increases the created value by providing access to a better
performance than that achieved by internal services. This performance can be obtained
thanks to the experience of the service providers. They provide a high level of expertise, the
development of best practices and the most qualified workforce at lower cost.
Outsourcing is an opportunity to master the latest technological capabilities,
another source of performance. Innovation, competitive advantage, is brought by the
partners of the company.
Few admit that the New Information and Communication Technologies have
upset the industrial world and the relations inside and outside the company. They
authorize data sharing among different actors. They contribute to improvement
from the supply chain by accelerating the flow of information.

4
International Production Networks

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 Logistics outsourcing

While for production, the just-in-time practice is becoming widespread in order to increase this
reactivity, logistics also takes on part of this requirement. The
the reactivity/flexibility of companies is thus favored by delayed differentiation of
products. Service providers are expanding their offerings to meet this new
need. They contribute to the increase in the productivity of businesses.

e. Cost reduction

The reduction of costs is cited as the main motivation for outsourcing.

the annual studies on outsourcing. This decrease is generated through several
levers. Initially, by working simultaneously for multiple clients, the
specialized providers have the ability to pool their resources. This results in
economies of scale that internal services of companies can hardly replicate.
The redeployment of support functions, which are heavy consumers, to service providers
capital, also ensures the reduction of associated costs. The relief of
Investments are often the goal sought after during outsourcing.
In the short term, the transfer of assets to an external provider can ensure cash flows.
consequences. Outsourcing also allows for significant savings of the
setting up and maintaining infrastructure, recruiting and training personnel
fixed costs). The company only pays for the service actually consumed (variable costs).
This type of argument is particularly important for activities that are constantly evolving.
Finally, outsourcing allows the cost of technological obsolescence to be borne by
provider.
Ultimately, cost reduction is achieved by converting a portion of the assets of
poorly profitable balance sheet in the form of expenses integrated into the income statement.

If cost reduction directly contributes to increasing value, it contributes to it.

also indirectly. Indeed, the financial resources it allows to be released can be
reinvested in the core business. Finally, outsourcing can be used to reallocate some
resources within the same activity. In the face of constant changes in the context
economic and social, companies are led to reduce their costs and to focus their
vibrant forces on their core business, both in the conquest of new market shares
that in their development need.

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 Logistics outsourcing

This demanding economic context directly influences the choice to outsource a function.
logistics within a company. However, other strategic motivations may
motivate this choice. We propose to demonstrate that a new type of relationship between
companies promote logistics outsourcing.

A new type of business is emerging

The purpose of this chapter is to demonstrate that the changing environment in which it is located
our economy has radically disrupted the structures and organizations of companies.
We have thus moved from a global and vertical mode of organization, called "integration
verticalto a complete rationalization of the management tool. The company is no longer
represented only by its hard core, which is thecore businessthe rest of the functions being
outsourced.
The evolution of demand, markets, and players has pushed companies to adapt.
transformer. It is true that the model that prevailed in the 19thththe century is today
obsolete. Indeed, at that time, the markets were not as developed and the firms were
faced with the weight of certain suppliers, who could have a monopoly situation
and thus imposed their price. To reduce thetransaction costs, the company then decided
to integrate into its organization all activities related to production or outside
production. But this model has reached its limits with the opening of markets and the
competition. This time, companies can source from various suppliers not
not just local but worldwide. This implies in the same sense as the
firms are therefore faced with the entry of new arrivals, potential competitors. The
Consumption patterns have also evolved. The rules in terms of safety of
the environment, people, and manufactured products have pushed organizations to put in place
in effect, in the 1970s, Total Quality Management. Continuous improvement of
The process has made companies aware that it will become increasingly difficult to do everything.
manage alone. It therefore becomes imperative for companies to surround themselves with service providers to

perform certain functions. This approach encourages companies to refocus on their

core business and to separate from activities that a provider will purchase (material means and
humans in particular). It will thus change the organization and business models because the

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 Logistics outsourcing

markets require flexibility and responsiveness from them, even anticipation.

The companies that will survive are those that can adapt quickly to
technological changes, to disloyal consumers and new competitors. The
companies through outsourcing have become 'network companies'. They
become centers that animate a network of subcontracting firms. As a result, their
borders are dissolving. We also now talk about 'virtual companies'. With the evolution
Shining with ICT, communication and information know no borders.
They are defined according to F. Frery.5like a network of independent firms putting in
share their resources and skills through information and technology.
communication." This organization allows for the benefit of resources that they do not
do not have.
Moreover, they no longer know geographical borders thanks to ICT and can
search for partners around the world. For example, NIKE does not manufacture any
internal shoes but outsources all of its production to Japan or Korea. These
lastly, for labor cost reasons, they in turn outsource to China,
Indonesia or Vietnam. A total of 100,000 people work for NIKE while...
employs only 23,000 employees.

This development has allowed us to understand the evolution that our models have undergone.
organizational and towards what future models tend. We could illustrate the company
as a micro-economic entity in the midst of a constellation of actors. The whole
represents a complex galaxy, allowing it to acquire many advantages
competitive advantages such as flexibility, profitability, integration of expertise. All these strengths
major ones are carried by logistics outsourcing.

After this first overview of the internal and external reasons that drive companies to
outsourcing their support function, we will describe the actors involved in
logistics outsourcing. Finally, we will illustrate their relationship in light of the functions.
outsourced.

5
Laborgistique: New Strategy for Management

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 Logistics outsourcing

B. THE ACTORS OF LOGISTIC OUTSOURCING

According to Aslog (2005)6nearly 90% of companies outsource one or two links in the
logistics chain and nearly 30% more than five links. An increasing number of them
entrust the entire chain to external providers.

According to a study by INSEE (2004)7 The level of logistics outsourcing is not the same.
according to the size of the company.

Table 1: Degree of logistics outsourcing by company size

Overall cost rate of the logistics function

Number of employees in the company
outsourced
0 to 29 33%
30 to 99 39%
100 to 149 54%
over 150 52%
Source: INSEE (April 2004), "Tertiary companies also outsource their services", No. 952

We can generally say that in small and medium-sized enterprises (SMEs) with fewer than 100 employees, 36%

the overall cost of the logistics function is outsourced. For SMEs with more than 100
Individuals and large companies, the average recourse rate reaches 53%.

We can identify two main types of actors who outsource their services.
logistics, on one hand the manufacturers and producers, on the other hand the distributors.

6
[Link], Aranal P (2003), "Logistics outsourcing, what types of service providers?"
7
INSEE (April 2004), "Service sector companies are also outsourcing their services", No. 952

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 Logistics outsourcing

The industrialists

The role of manufacturers within the supply chain is to provide the materials.
raw materials necessary to produce a good or service in order to make it available to the
market for a client (BtoB) or a final consumer (BtoC).
They are faced with constraints such as:
The rapid evolution of customer and consumer demand, which results in
reduction of the product lifecycle. Indeed, in certain sectors, notably
the one in telecommunications, products evolve very quickly. The industry player must therefore
manufacture new products with new technologies and thus adapt its
logistics.
The just-in-time operation which consists of producing according to market demand.
As stated earlier, companies were producing in push flow and
stocked in bulk their standard products. For about fifteen years, the
production is driven by demand. This mode of operation allows for
delayed product differentiation, that is to say, personalizing the product or packaging
according to the client's wishes. Thus, industrial companies manufacture
products in smaller batches.
The globalization of markets is one of the reasons already mentioned to explain the
resorting to outsourcing. This complicates, in particular, sourcing for the
Industrial. The company must today be able to purchase its raw materials.
in Asia, manufacturing its products in Europe and reshipping them to its markets
whole world. Logistics flows are becoming increasingly complex.
A modification of the organization of companies. They move from a mode of
moving from silo functioning to a much more transversal mode of operation
effective. Companies have become aware that all stakeholders contribute to the
The product's logistics chain is a source of value creation for the customer. It is
as well as the manufacturers have optimized their processes and are now conducting a
approachSupply Chainby integrating their suppliers and their distributors. The good
The management of this Supply Chain often relies on logistics providers.
According to the sectors of activity, supply chains are organized differently and thus
Is logistics outsourcing more or less advanced?
The automotive industry is the most advanced sector in terms of logistics outsourcing.

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 Logistics outsourcing

manufacturers are subject to numerous constraints. They must face the new
consumer attitudes, electronic sophistication, restructuring and
concentrations with foreign companies. Moreover, it is essential to reduce costs.
supply within an increasingly shorter time frame by relying on a network of
totally integrated distribution. The information from the entire chain has become
essential for progressing in this market. The car manufacturer that once designed
and manufactured its vehicles entirely, now only carries out the design and
assembly. It externalizes a large part of production, storage, transportation,
the supply, the packaging, the distribution. It involves the management of a chain
optimized logistics. The market is global in terms of sourcing as well as
the distribution. Indeed, according to Rodolphe Perez (2005)8 the sourcing of parts and components
automobiles in low-cost countries (China, India, Mercosur, Eastern Europe) is expected to grow
by 65% by 2010. This should lead to a complexity of flows and thus a
development of logistics outsourcing.

In the textile sector, the constraints are multiple: the strong seasonality, the numerous
collections and restocks, the flows of materials, supplies, and finished products increasingly
international and strong imperatives of commercial responsiveness. Logistics represents a
real 'nerve of war' for the production and distribution of textile products. The
the main objectives of textile companies are faster product turnover,
a reduction in the design and manufacturing times of items, as well as the times
supply and distribution in stores. To achieve these goals, various
means have been implemented by industrialists: short circuit distribution; working at
way; an efficient, flexible, and responsive logistics; an information system allowing
the calculation of sales forecasts article by article based on sales. These means and
objectives are at the heart of the downstream management strategy. The example that we
we can mention ZARA. This Spanish textile company is capable of putting in
new arrivals every week relying on logistics providers
performing.

8
Rodolphe Perez (2005), "Sourcing in Low-Cost Countries: From Dream to Reality", Les Echos, September
2005.

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 Logistics outsourcing

In the healthcare sector, logistics outsourcing is rapidly growing. This market

benefits from strong growth due to the increase in life expectancy, to innovations
therapeutics and the development of pharmaceutical product exports. The
mergers/acquisitions, alliances and agreements lead these industrialists to put
even faster in the market for innovative products. The prescription patterns and
Distribution methods are being challenged by the recent development of generic drugs.
and the arrival of biotechnologies. The regulatory framework is very strict: traceability and management
expiration dates. Thus, pharmaceutical industries entrust their
logistics to specialized providers who ensure supply, storage, the
transport and distribution of products and their traceability. According to a survey by the AFT
IFTIM (2006)9Approximately 75.9% of companies in the healthcare sector have outsourced
logistic functions in 2005.

For the agri-food sector, listening to customer expectations, ensuring compliance with
the cold chain and the seasonality of sales are constraints to which
industrials must respond.
In order to remain competitive in a competitive market, the agri-food industries are
required to improve their performance in the field of logistics. This involves
the effectiveness of their internal organization, from the purchase of raw materials to shipping
products, through production or inventory management. To achieve this, they need today
rationalize the entire supply chain and develop partnerships between manufacturers
and distributors. Indeed, companies are required to stay alert to any developments,
anticipate it every time it is possible and adapt quickly. This implies that the Supply
The chain is efficient. This state of affairs allows them to better distribute their products,
meet the needs of their customers, produce more efficiently and improve
the supply of their distribution network. According to the AFT-IFTIM survey (2006,
op. cit.), 76.1% of companies in the agri-food sector have outsourced certain activities
logistics.
Finally, the high-tech sector is in constant transformation. Technological developments are
constantly renewed because the creation of new products relies largely on

9
Castay V., Lasserre J.A. (2006), "Twelfth annual survey on employment and training needs in the
logistics, AFT-IFTIM.

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 Logistics outsourcing

the exploitation of new technologies. The improvement of manufacturing processes and

distribution is essential. It is a very competitive market, where sourcing and production
are carried out in emerging countries (China, Eastern Europe, and the Maghreb) for a
distribution of products on a global scale. The logistics patterns of the flows are
complexes. New regulations, particularly environmental ones, require them to
take charge of Reverse Logistics. For all these reasons, the use of service providers for this
is inevitable and regarded as an essential lever of flexibility, to the extent that it does not
there aren't many others left. Companies in the sector have reached a high level of maturity
in their approach to subcontracting, their industrial activities, and outsourcing
the logistical activities that they almost systematically highlight in the
overall performance of their chain.

Regardless of the sector of activity or the size of the company, logistics is a function
strategic. Thus, most companies prefer to outsource their logistics activities,
considering that their profession does not involve investing in warehouses, machinery
handling or other vehicles but rather in their production tool.
Outsourcing by manufacturers is a reality and tends to grow.

2. The distributors

The role of distributors is to procure finished products in order to supply them.

market and end consumer arrangement. The distributor's logistics system is designed for
Objective: the optimized organization of merchandise and information flows. The difficulty
essential consists of finding the right balance between the need to ensure the best service
possible for customers while limiting costs. Thus, distributors try to ensure the
management of their supply chain as early as possible.

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 Logistics outsourcing

The main constraints that a distributor must face are:

Warehouse management, whose four essential functions are: receiving the
supplier deliveries, manage reserves, prepare customer orders or
sales points, ensure deliveries.
The number and location of warehouses depend on certain constraints. We
We can cite the importance of the flow of goods (quantity, fragility, diversity of
references and suppliers), the number and location of retail outlets or
clients to satisfy as well as the size of the orders. Large retailers organize
the supply of their retail outlets from central, regional warehouses
and local. In order to achieve economies of scale, the distributor must massify its
flow of goods, that is to say centralize its purchases, and therefore necessarily
need for storage spaces.
Inventory management: distributors seek to optimize their inventory management,
tight flows, which implies more frequent deliveries calculated based on sales
performed and planned. It is obvious that such a method, if it allows to minimize
storage costs also increase the risk of stockouts. This is a serious factor.
of disorganization of the line and customer dissatisfaction. Under these conditions,
just-in-time inventory management requires a great ability to react to unforeseen events.
the demand, both from the point of sale and from its suppliers.
Order preparation optimization: reducing logistics costs
does not only involve the increase in the volumes processed. It concerns
also the reduction of transhipment and the minimization of routes
processes, both in terms of order preparation and in implementation
linear.
Geographical implantation: The choice of the number of logistics sites and their location
The implementation depends on the geographical coverage of the stores. The speed of
Restocking of sales points and therefore proximity are essential.
The catchment area of the warehouses must comply with proximity rules.
cost optimization of distribution themselves based on volumes.

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 Logistics outsourcing

The logistics strategy of distributors differs according to their type of organization. On one hand, the
independent groupings like Système U or Intermarché mainly retain
their internal logistics activities. They prefer to manage their logistics in-house.
Système U has launched a large-scale logistics reorganization process since 2003. The group has
a company to open new warehouses and centralize certain activities. According to a study
from Xerfi700 (2006)10the surface of their warehouses should thus increase by 40% to
exceed one million m2in 2010, representing an estimated investment of 200 million
euros. Système U has notably opened a warehouse in Les Herbiers in Vendée to
supply all of its stores with non-food products. This service was
previously ensured by three different warehouses.
On the other hand, integrated groups like Casino or Carrefour rely heavily on
outsourcing. According to an article from Usine Nouvelle (2001)11Carrefour appeals to a
a dozen service providers to manage dedicated warehouses. We can mention Norbert.
Dentressangle, FM Logistic, ID Logistics, Kuehne&Nagel, Mory and STEF-TFE. The latter
has just invested 22 million euros to build its most important multi-platform
products, multi-services, and tri-temperature in Los Olivos near Madrid. This site is 17,000 m².
manages 200,000 tons of fresh products and 75,000 tons of frozen goods in a just-in-time system
exclusively dedicated to Carrefour.
For its part, the Casino group created its logistics and transport subsidiary that manages for its
accounts for 875,000 m² of warehouses spread across 37 sites in France.

The increasing logistics outsourcing needs of industrial companies and

businesses have created the logistics service market. Thus, the profession of
Logistics Service Provider (LSP) has emerged.

10
Xerfi700 (2006), "Large food surfaces", January 2006
11
[Link]

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 Logistics outsourcing

WHO PROVIDES LOGISTIC SERVICES?

1. Evolutions of carriers at PSL

In the 1970s, we are at the peak of mass consumer society.

companies produce a limited number of products in large quantities and manage them
the same logistics. They have trucks, warehouses, equipment for
handling and personnel ensuring the management of logistics activity. The logistics function
is limited to ensuring the transportation of finished products to distributors. Indeed, at that time
we were not yet talking about logistics but about transport.
However, in the 80s, the company gradually began to abandon certain activities.
logistics to entrust them to specialized companies. The first activities
the services that companies outsource are transportation and storage. Various factors may
explain this delegation of functions:
Internal logistical management is very expensive and difficult to conduct. Indeed,
the company must bear the costs, investments, and management of warehouses,
transport vehicles, handling equipment while focusing on
the optimization of its production.
The evolution of consumer demand will also drive companies.
industries to customize their products and offerings and then to adapt their logistics.
Products are multiplying. Customers are demanding increasingly shorter deadlines.
The development of large and medium-sized stores. They are expanding their spaces.
for sale to make more and more products available to the consumer. They
have a growing need for the supply of goods and surface area
storage.

21
 Logistics outsourcing

This is how the logistics service provider profession emerged in the 1980s, in connection with
the beginning of the movement of outsourcing transportation, storage, and distribution activities.
In Europe, the phenomenon of outsourcing has undergone numerous developments.
packaging services such as contract packaging will be integrated into management
stocks. Then, manufacturers and distributors will be more concerned about
the optimization of the entire supply chain: from the purchase of raw materials to
transport and finished product to the final customer (Supply Chain Management).

In response to an increase in demand for logistics services, service providers

Logistics adapted gradually and expanded their offerings.

2. Evolution of service offers

The logistics service offering has evolved tremendously, providing the client with more and more
added value. We distinguish 5 types of logistics providers from least to most
complete
"1PL" (First Party Logistics Providers) refers to industrial companies and
commercials, who in the 70s managed their own logistics services in
more of their core business strategic activities. These services were limited to storage and
in the distribution of finished products.

The '2PL' (Second Party Logistics Providers) are the traditional logistics providers that
ensuring the execution of physical logistics operations (transport and warehousing). Their
management system is limited to monitoring on behalf of the client company. They represent
the first type of service providers that appeared in the 1980s. They focus mainly on the
development of the transport activity. The major providers of this time are Calberson,
Mory, Dubois and TFE.

3PL (Third Party Logistics Providers) emerged in the early 1990s. They take on
takes charge of a part of a company’s supply chain and does not just settle for
to execute the function. They also take charge of planning it and making the connection with the
other parts of the chain. If it belongs to a group, the 3PL can use its own means
or you can call on a contractor, thus dematerializing the links between the client and their function

22
 Logistics outsourcing

logistics. Thus they integrate into the offer of the traditional provider (2PL) a certain number of
services ranging from the handling of complex operations to management
administrative operations (billing, orders) and information management
tracking-tracing
According to a study by Cap Gemini (2004)12the rate of recourse to 3PL in Western Europe
approaches 80% and the services mainly provided by 3PLs worldwide
are:
downstream transportation (80%);
storage (70%);
upstream transport (67%);
customs formalities (56%) ;
customs clearance commissions (53%).

The '4PL' (Fourth Party Logistics Providers) emerged in the late 1990s. They are
logistics service integrators. They are characterized by the fact that they do not own
almost no clean physical means. Their specificity is to integrate the services of
different subcontracting companies (packaging, transport, storage,
customs clearance, value-added operations...) and ensure coherence and management by the
mastery of related information flows. The three main functions of a 4PL are the
advice, management and implementation of IT solutions. Unlike 3PL where
the client retains oversight on the management, the 4PL is fully responsible for the management of
the supply chain. He must be able to advise his client, to choose solutions
software adapted to each function of the chain. These services are sometimes purchased from
3PL. There are nearly twenty 4PLs in the French market, whose core business is
that of a 3PL: We can mention ABX Logistics, CAT, Danzas / DHL, Exel, FM Logistic,
Gefco, Giraud, Hays, Norbert Dentressangle, Schenker, STEF-TFE, TNT, Ziegler. Finally, it
either mono-client or mono-sector. "The most common type of 4PL is the one that is
mono-client and which is at the same time 3PL and 4PL," describes Norbert Cohen, in an article on
from journaldunet (2003, [Link].), executive vice president of Aslog and associate director of
PEA Consulting cabinet.
The '5PL' (Fifth Party Logistics Providers) have recently emerged in the logistics market.

12
Cap Gemini (2004), "Third-Party Logistics study, Results and Findings of the 2004 Ninth Annual Study"

23
 Logistics outsourcing

and support the development of new information technologies and

communication like the Internet.
The name 5PL is assigned to 3PLs that design, organize, and carry out on behalf of
from a client, logistical solutions, particularly in terms of system
of information and application software solutions. They mobilize the appropriate technologies.
to do this. For example, in the agri-food sector, it is mandatory to carry out a
traceability of products. 5PLs implement software solutions that enable this. They
they also integrate return logistics into their offering.

Figure 1: Levels of Logistics Outsourcing

Management of all parties of the

5 PL
supply chain in conjunction with
E-Business
e-business
4 PL Management of the whole
Supply Chain Management supply chain
3 PL
Forwarding / Contract Management of complex
logistics service chains
2 PL Traditional transport and
Asset-based Logistics
warehouse management
1 PL Own operating of logistics by
Producer the producer

Source: [Link]

According to a Eurostaf study (2001)13, the logistics service market represents nearly 35
billions of euros at the European level and is experiencing growth of more than 10% per year. We
attended numerous strategic alignments through mergers and acquisitions.

13
Nabati S., Dec. 2001, Eurostaf Study 'Logistics Providers in Europe';[Link]

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 Logistics outsourcing

f. Economic weight of service providers

• In the world and in Europe

The major trends in the global logistics market for 2004 are the rise in
power of major postal groups: DPWN (Deutsche Post World Net) which owns a
extensive network in Europe for the delivery of small parcels. They have acquired logistics operators.
capable of providing integrated and value-added services to businesses. Also, mergers and
Do the acquisitions of logistics integrators allow for the diversification of their offerings. These
latest cover all sectors and ensure the management of transport and logistics
integrated into large industrial groups. In addition, shipping companies are increasing their
business by expanding their freight lines.
Even though European economic growth is stagnating, providers continue their
progression. According to the magazine 'Logistics Strategy' (Dec. 2004-Jan. 2005)14the twenty
the first PSL represented a turnover of about 54 billion euros in 2004, which corresponds to
a growth of 8.7% compared to the previous year. The 5 leaders: Exel, TNT Logistics,
Wincanton, Thiel, and DHL Solutions share 40% of this market.
This market is increasingly concentrated. This is explained on one hand by the willingness of the PSL.

to expand their geographical coverage to meet the demands of 'door to door'.

14
Anonymous (2005), "Logistics Strategy", December 2004/January 2005, No. 72

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 Logistics outsourcing

Table 2: European Ranking of PSLs

CA Europe 2004
Rank Group Country
In Millions €
1 Excel United Kingdom 3600.8
2 TNT Logistics Netherlands 2994
3 Wincanton United Kingdom 2189
4 DHL Solutions Germany 1627.7
5 Fiege Germany 1503
6 Thiel Logistics Germany 1429
7 ACR Logistics USA 1320
8 Christian Salvesen United Kingdom 1208.25
9 Geodis France 774
10 TDG United Kingdom 737
Top hundred logistics providers

• In France

According to Logistiques Magazine (2005)15the logistics service market reaches 6

billions of euros in 2004 and represented 4.6 billion in 1999, an increase of 30%
in 5 years.
The French market is experiencing a phenomenon of increased concentration. In 2004, STEF-TFE,
Norbert Dentressangle and FM Logistic have made significant acquisitions.
Exel is acquired by the German postal service (DPWN, shareholder of DHL). Kühne&Nagel has
ACR Logistics has been acquired. Wincanton takes over the French activities of Premium Logistics.
TNT Logistics France sold part of its activities to Norbert Dentressangle. STEF-TFE has
acquis Cryologistic. These significant acquisition phenomena are the direct consequence of a
dynamics of concentration on a global scale.
According to 'Logistiques Magazine' (2005, op. cit.), foreign groups hold 24% of
French logistics market, but the penetration rate is much lower than in
the messaging and express where subsidiaries of foreign networks control nearly 45%.

15
Anonymous (2005), "Top one hundred logistics service providers", Logistics Magazine, December 2005, No. 103, pp
56.

26
 Logistics outsourcing

German groups lead. They hold 7.7% of the market followed by the groups
British with 6.8%.

Five leaders concentrate 35% of the market.

Figure 2: The five market leaders in the service sector

THE 5 LEADERS IN THE SERVICE MARKET

LOGISTICS

DHL + EXEL 6%

STEF-TFE 6%
NORBERT
DENTRESSANGLE
8%

ACR LOGISTICS OTHERS 65%

+
KHUNE&NAGEL7%

GEODIS 8%

Top hundred logistics providers

The top 10 PSLs represent 40% of the market.

27
 Logistic outsourcing

Table 3: French ranking of PSL

CA Logistics France 2004

Rank Group
In Millions €
1 Geodis 464
2 ACR Logistics 397
3 Norbert Dentressangle 347.9
4 Stef-Tfe 262
5 FM Logistics 244
6 Bolloré 235
7 DHL Solutions 197
8 CAT 194.5
9 Excel 158
10 Mory Logidis 132
Top one hundred logistics providers, Logistics Magazine, December 2005, No. 203
The PSLs are increasingly developing their offerings to adapt to the demands of companies.
industrial and commercial. The market is global and highly concentrated. In the future, only ...
that two types of companies. On one hand, large firms will specialize in
multi-functions, like integrators. On the other hand, smaller companies will operate on
niche markets. In the face of this increasingly extensive logistics offering, what are the
functions that the company outsources?

28
 Logistics outsourcing

D. THE OUTSOURCED SERVICES

Figure 3: outsourcing rate of logistics services in Europe

40
35
30
25
20
15
10
5
0

source: Datamonitor, European logistics, (2001) Logistics strategy

France appears to be well positioned in the outsourcing of logistics services in Europe.

This overall rate has very different realities depending on the markets. However, the trend is tending
to accredit the progress of logistics outsourcing practices.
In a study by the European Logistics Association16dating from 1997, supply chain management
physical translated into a significant cost of about 10% of revenue,
variable by sectors. It was broken down into storage costs for 2.3%, management
stocks for 2.9% and transport for 3.0%. In general, companies communicate
little on their figures and the calculation of these costs often varies from one company to another. From a
On one hand, the chosen methods result from internal logic. On the other hand, some hidden costs
are not taken into account due to a lack of reflection on the logistical reality of the company.

16
European Logistics Association (ELA) (1997), 'Logistics costs as a percentage of sales revenue'

29
 Logistics outsourcing

However, this representation provides a first framework for understanding the most
outsourced :
an isolated and historical entity, transport;
the distribution logistics outside of transport and the management logistics;
supply and support logistics.

Transportation

Freight, across all modes, was the first of the outsourced logistics functions with its
legal, judicial and customs implications. The conjunction of the application of the treaty of
Rome (1958) and the consequences of the two oil shocks (1974 and 1976) have profoundly
modified European transport logistics. Indeed, the former supported the liberation of a
previously regulated market. The seconds had a significant impact on the costs of
transport. Companies quickly and directly felt the rise in these costs.
due to the predominance of road transport in their logistics. Globalization
Economic, a corollary of this liberalization, has significantly complicated the transport market.
This results in an increased use of outsourcing to meet the imperatives:
demand for quality of service (timeliness and technicality) and cost reduction;
the necessity to conform to various distribution patterns;
obligation of international responses;
the necessity of specific skills to understand market data;
the necessity of a policy of unaffordable economies of scale for a company
alone.

17
According to a study by the Accenture consulting firm (2003) in Europe in 2003, 58% of transport is
totally outsourced for a total of 80% done on behalf of others. Germany
achieves the highest freight volume of goods with 282 billion ton-kilometers in
2003, according to the work of J.P Decure, A Delors and M. de Saboulin (2004)18To be complete,
these global figures should be related to a more detailed reality in a modal approach,

17
Accenture (2003), "Executive Insights into growing use of Procurement outsourcing"
18
Road Freight Transport in Europe in 2003

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 Logistics outsourcing

in volume and value. Likewise, a national, European, and geographical reading

international would be relevant.
However, globalization and the increasingly significant consideration of concerns
Environmental factors tend to favor the continued outsourcing of transport.

2. Distribution logistics outside of transport

Distribution logistics takes into account freight and all pre-activities.

routing or post-routing until delivery to the final customer. In fact, most
available statistical data combines them under the headings of transport and logistics or
transport and distribution.

a. Storage

Storage includes the operation of facilities or locations (warehouses, silos, hangars,

stores) in which goods are stored. One of the features of
storage is to join the usual trio, manufacturers/distributors/PSL, the designers and
investors. The latter invest their funds in the construction of structures
Logistics. These structures are identified in two main categories:
the storage warehouse in favor of industry or distribution;
the messaging warehouse.
Each type of service leads to a very different localization logic, of which the criterion is
the proximity to a production center, distribution center, or transport infrastructures
particular.

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 Logistics outsourcing

The use of a warehouse is motivated by economic constraints:

the acceleration of flows to respond to reduced cycles (decoupling stocks);
the reduction of stocks in the company while maintaining a high availability rate;
the globalization of markets while keeping transportation costs under control.
As a result, entrepreneurs and distributors prefer to outsource these structures.
for
reduce the costs of fixed assets (current and fixed assets);
- reduce the cost of increasingly technical and substantial infrastructures;
reduce the influence of the migration of economic flows that leads to displacement of
these infrastructures that companies cannot support.
In a survey conducted by Ernst&Young (2005, [Link].) in Europe and the USA,
warehousing is outsourced at a rate of 37% and at 31% in mainland France. In France, in this
domain, in addition to an advantageous geographical positioning for North/South traffic of
In Europe, several criteria work in favor of France:
a interesting quality/price ratio for the service;
a skilled workforce that is 15% to 40% cheaper than in Northern Europe;
proven productivity compared to Italy, Germany, Spain, and Great Britain;
the attractive land prices and the low establishment and construction costs;
high-quality technological infrastructure.
This logistical service can be considered mature. The developments are more focused on
on the technicality of physical and IT equipment rather than on a revision of the concept.

b. Conditioning

Packaging refers to the way of filling a container and grouping the packages.
view of their expedition. The increased competition in consumer markets leads to
increasingly aggressive marketing policies. To seduce the customer, the cycles of
the renewal of products and the choice of their packaging (materials, shape) continue to
accelerate. Nevertheless, industrialists can no longer afford to waste. These
packaging should also contribute to the overall profitability of the products. They are designed
to meet the constraints of packaging time, handling, transport.

32
 Logistics outsourcing

More generally, manufacturers integrate quality parameters, deadlines,

functionality, ecology, and price.
Specialists are able to enhance packaging. They provide solutions such as
that the multi rotation (reusable packaging). They provide equipment and
supporting installations for productivity. They will be brought in the future, for products
specific, to manage the flows of certain packaging from production to consumption for
for legal reasons. Thus, clients outsource to obtain:
better protection of products;
an increase in warehouse productivity;
the optimization of transport between the warehouse and the store;
an economy of hours worked in the store;
the elimination of packaging waste.

Packaging has become a genuine profession. It is evolving the very quality of...
products, focusing on hygiene and preservation conditions, particularly in the
sensitive sectors such as food, pharmaceuticals, and cosmetics.
According to the European contract packaging union (2003, [Link]), France was:
the leading European producer of paper for packaging and wrapping and the
world leader in luxury cardboard packaging,
the second largest European producer of corrugated cardboard and paper bags, for plastic and
the packaging glass.

c. Order preparation

Order preparation involves grouping the items that make up a

order before their shipment. It takes on various forms such as delayed differentiation,
theco-manufacturing; theco-packingor thecross-docking.
Cross-docking allows for order preparation without relying on
on a warehouse. It is therefore interesting in terms of responsiveness and costs but it assumes
a high level of technicality for the grouping of goods. Similarly, upstream transport.
must be perfectly mastered so that the physical flows converge towards the platform in
a reduced time.

33
 Logistics outsourcing

In Europe in 2005, the outsourcing of cross-docking, order preparation and

labeling reached 40%, 21% and 20% respectively19In 2002, a survey conducted by
T. Roques and M. Michrafy (2003, op. cit) on the provision of logistics services in France
highlights the differential between outsourcing offers and their use by companies.
Providers are trying to offer higher value-added services. It is certain that
their positioning will energize the market.

Figure 4: Scope of the supply and demand for operational logistics services
scope of the current offer and demand for operational logistics services

100
90
80
70 outsourced activities by the
60 industrial
50 activities offered by the service providers
40
30
20
10
0

T. Roques and M. Michrafy (2003), "Logistics service provision in France in 2002", Logistics and
Management vol 11 no 2 - 2003

3. Management logistics (inventory and related IT tools)

Inventory management includes all activities and techniques that establish the
references to keep in stock and the quantities of associated items. It includes the modes and the
restocking deadlines as well as stock valuation methods. In order
To accomplish this management, a number of computer tools are available.

19
Roques T. and Michrafy M. (2003), "Logistics service provision in France in 2002", Logistics and
Management vol.11n°2 – 2003

34
 Logistics outsourcing

They are intended to address:

the delivery slips, entry slips and the printing of related labels;
the manufacture of composite articles;
the valuation, the printing of movements, the status and the rotation of the stock;
the availability of items and restocking;
the entry of the inventory.
The true revolution comes from the new capabilities brought by computing in the
management of these databases and their processing by various software.
Companies have a variety of more or less integrated and global tools at their disposal.
- Enterprise Resource Planning(ERP), integrated management software;
- Warehouse Management Systems(WMS), warehouse management software;
- Advanced Provider Service(APS), decision support software
- Advanced Planning and Scheduling systems(ASP), Application Service Provider
The Benchmarking study of ASLOG (2004)20demonstrates that companies equipped with APS
achieved the best results in inventory turnover rates. This type of optimization succeeds
when a strong logistical expertise is conducted. All these steps that lead to
inventory optimization is carried out with the help of professionals to whom one delegates
Sometimes this function. In Europe, 17% of companies declare to outsource their management of
stocks according to the CNAM (2003)21It is still minimally outsourced, but it has one of the
stronger potential for progression in regard to the financial leverage it represents.

4. Supply Logistics

The implementation of upstream logistics involves a definition of management of

supplies, delivery times, and an efficient information system. It
induces a mode of transport and the establishment of an adequate network of suppliers. The role
supplies will then be provided based on available stock, to place some
orders to suppliers in order to avoid shortages while ensuring a minimum stock.

20
ASLOG (2003-2004), "Benchmark Study: The State of the Art of Global Logistics in Companies in France"
21
CNAM, UV logistics (2005-2006), "Outsourcing and supply chain"

35
 Logistics outsourcing

Purchases, for their part, must be made at the required quality level, in the quantities
desired, at the right time, at the lowest overall acquisition cost, in the best
service and safety conditions. The purchasing function does not directly include the aspects
short-term logistics. These aspects fall under the procurement function. It is
Why very often now, these two functions are linked.
In a survey conducted by Accenture (2003, [Link].) in the United States and primarily in
Europe, outsourcing of procurement accounted for only 22% of functions
outsourced logistics positioned in the antepenultimate place. Supply,
justified or not, is felt as a function mobilizing less capital than the
transport or distribution. In fact, its outsourcing does not appear to be an operation
that can massively generate capital. On the other hand, it seems that the offer
of outsourcing procurement should be limited. In the same survey, France
occupies the leading position in the outsourcing of the procurement function. A
study of SESSI (2004)22bring some answers. Restructurings, specialization
growing but also outsourcing are the reasons given to explain the
development of inter-company relationships.
Outsourcing the procurement function allows for the development of a strategy and
reduce transaction costs. In France, more simply, the new constraints of
markets involve partnership practices. Transaction based solely on price is no longer sufficient.
to meet production and competition standards. Today, the client specifies the
functional specificities of constantly renewed products.

22
SESSI (2004), 'Survey on inter-company relationships in 2003' No. 195 November 2004

36
 Logistics outsourcing

5. Support logistics and services

The activities of support logistics include:

the management, the controls including quality and diagnostics;
repairs and disassembly/reassembly;
the promotion logistics;
maintenance
handling
the after-sales service.
Data on support logistics outsourcing is scattered across frameworks.
more general. Indeed, these services are often linked to other major functions,
piloting with flow management, monitoring of operations with production functions. From
Indeed, it is difficult to obtain raw data on these practices. This reality is
symptomatic of the fact that companies have not yet really taken an interest in it. By
Elsewhere, the offer from providers being global does not promote awareness of
levers that the outsourcing of these functions can represent. Finally, a poor
adaptation of the offer, in terms of diversity, quality, or proximity, can hinder the appeal to
external services. However, it is undeniable that inventory management services and
Quality control will experience sustained growth in the coming years.

a. The maintenance

Already, some providers are positioning themselves for maintenance services. The survey conducted
by Intentia in 200423It highlights that maintenance is a real source of productivity.
It also highlights that few companies invest in this area while
the impact on financial results is direct. The conclusions of this study show that a
Inadequate maintenance strategy is costly for the company in terms of interruptions.
unexpected events of the productive apparatus, downtime and loss of customers. It increases the
unit costs and additional overheads.

23
France News (2005), 'Intentia publishes the results of the maintenance study'

37
 Logistics outsourcing

b. The handling

The outsourcing of the handling function is closely linked to warehouse management.

evolves rapidly. Handling jobs tend to facilitate operations within
from a warehouse, to optimize its management and to make the storage space profitable thanks to the

manutiqueThey accelerate workflows and secure the work. Today, the means
automate with driverless carts and material handling systems
isolated. Like warehouses, optimization involves investments that are sometimes too
Heavy. Outsourcing allows to take advantage of innovations in the field without necessarily
take your margin.

c. After Sales Service

The practice of outsourcing after-sales service varies according to the sectors of activity. It is
especially developed in computing and household appliances. Customer service can be a vector
of image, of loyalty, of profit, or even of positioning in a market, its
Outsourcing must be the subject of thorough reflection, particularly from a strategic standpoint.
Industrials tend to accept that the last link between the end customer and the producer is
a third. However, even if outsourcing your after-sales service is financially profitable,
Companies are still reluctant to delegate it. The service is available in the majority of
However, less than 5% of manufacturers were using service providers in 2002 according to T.
Rocks and Mr. Michrafy (2003, [Link].). In Europe, the phenomenon is so marginal that it appears
rarely in statistical data.

6. Returns logistics

Return logistics or reverse logistics deals with the management of logistical flows of
end-of-life products in the reverse sense, from the consumer to the source for a
recycling, recovery, and repair. It includes their enhancement. These products
are dismantled, received in processing centers where the operations are carried out
of recycling.

38
 Logistics outsourcing

No other logistics function involves as many different actors:

the consumer
the industrialist, who can take charge in accordance with the regulations
valorization and/or the recovery circuits of products;
the distributor who can also take care of the equipment return circuits
to establish a point for the collection of end-of-life products;
providers that offer processing services;
the companies that recover/process products, recipients of waste.

Different specialists position their offers.

French firms specialize in this discipline of global management consulting.
waste streams;
Logistics providers have developed specific subsidiaries.
the industrial players in the environmental sector are also taking their place in this market
reprocessing and recovery of waste.
Nowadays, the producer must anticipate the return process very early. For example, 60% of
The total cost of the product results from the logistical support required throughout its life and during
his withdrawal. Similarly, environmental laws and societal pressure impose on the manufacturer
to track their product. As a result, companies have largely turned to
the outsourcing of returns in order to comply with the new regulations in force,
notably for the treatment of waste from electrical and electronic equipment
(DEEE) according to Francetech (2003)24.

24
Francetech (2003), "The Strengths of France in Logistics" [Link]

39
 Logistics outsourcing

PART II: LOGISTICS OUTSOURCING IS

IS IT PROFITABLE?

This part leads us to reflect on the very meaning of logistics outsourcing and its
effectiveness across the entire Supply Chain: 'what does outsourcing really bring'
logistics? How will this organization be beneficial to the company? On what grounds
What criteria do the clients use to judge that logistics outsourcing is beneficial for them?
profitable?" As many questions to which we will try to provide an answer.
This section consists of an axis presenting the challenges of logistics outsourcing and then the
conditions necessary for its profitability.

A. THE CHALLENGES OF LOGISTICS OUTSOURCING

This chapter provides a representation of the idea or vision that companies have, which have or
have not outsourced their logistics, on the advantages and disadvantages that this provides.

The advantages

The advantages listed below are representative of all the surveys we conducted.
were able to study. They provide an idea of the feelings of the companies that
outsourcing, or who do not yet outsource, regarding the advantages provided by
logistics outsourcing.

40
 Logistics outsourcing

Figure 5: Advantages of outsourcing

Outsourcing Barometer Ernst&Young (2005)

a. Search for the best cost

With the opening of markets and the entry of newcomers from Eastern or Asian countries,
Among other things, companies in industrialized countries must face a significant decline.
market prices. The quality of products is becoming increasingly similar. One of the
solutions, in order to remain competitive, is to find competitive advantages to
to differentiate itself and respond to customer satisfaction. But well beyond a simple
improve its processes, the company must rethink its organizational system in order to
significantly reduce its costs and increase its efficiency. This was presented in
the first part concerning the evolution of business organizations. By shifting from a
heavy vertical integration model, where all activities were managed internally,
The company has taken the opportunity to benefit from market openings. It is leveraging competition.
in order to obtain more profitable prices from external providers. Throughout all of the
companies surveyed by the consulting firm Ernst&Young, 61% responded that
the advantage of outsourcing was related to the factor 'cost reduction'. This reduction is
translated by transforming fixed costs into variable costs.
Take the example of GEFCO, a logistics service provider for PSA. It manages the majority
part of the logistical activities, both upstream and downstream, of the automobile manufacturer (Management

41
 Logistics outsourcing

stocks, management of spare parts flow or CKD (Completely Knocked Down)Complete Knocked Down),

platform management, transportation management ...). This allows the manufacturer to keep the
mastery of its strategy while leveraging its service provider's network and therefore not to
having to invest in real estate, personnel or equipment. The provider has a
network or a know-how that allows it to produce at a more attractive cost. Thus, the
does the ordering party have control and mastery of direct costs because during a
contract with a PSL, the charges are defined in advance for a type of services provided.

b. Acquisition of more skills

Two companies with diverse activities can pool their skills together.
in order to benefit from each other's expertise. Outsourcing provides versatility to
ordering party through the acquisition of other professional skills. Indeed, beyond the simple
client-supplier relationship, the PSL provides comprehensive expertise that will benefit the
order giver. This is the case with GEODIS and IBM. More than just a simple service of
transport, GEODIS logistics integrator, offers various activities, such as management of the
Reverse logistics, customs management or traceability.
This range of services that a PSL can offer to its client gives the latter
a competitive advantage in the eyes of the end consumer. The customer benefits from an offer
complete thinking that it comes from the manufacturer or the distributor. He does not suspect.
the range of services provided by the PSL. The brand image of a company depends on
often the services provided by its provider.

c. Flexibility and simplicity

As we observed in the first part, to achieve flexibility and simplicity, the

companies streamline their organization by distancing themselves from non-core ancillary activities
Key Success FactorsIn contrast to vertically integrated companies for which a
radical overhaul of processes was often impossible, the new models propose
rationalized 'leading' organizations that only manage their strategy. We can then speak
of entity as companies seek to minimize their size to gain responsiveness. We
we can take Coca-Cola as an example, which retains only the management functions and

42
 Logistics outsourcing

of design. As a result, through the flexibility of its organization, it can allocate all its
resources to itsStrategic Business Areas.
The company defines the strategy to be followed to its service provider, and the latter is subject to a
obligation of result. It defines the results and objectives to be achieved. The PSL has the 'freedom of choice.'
methods to use. As a result, the client no longer manages the delegated activity to
his provider. This approach makes the organization more flexible due to the simplification and
an optimization of various processes. This is made possible thanks to the trust that exists
between the two parties.

d. Flexibility in human resource management

Outsourcing allows for reflection on the rationalization of the structure of

the company. It concerns all areas, particularly that of human resources.
The provider's personnel allocation allows us to match the workforce.
necessary at the activity level. In case of a cyclical decline in demand, the company does not
not to manage a crisis situation, such as a social plan. The provider thus plays the role of
buffer capacity

e. Best level of quality

An identical or even superior quality and a lower cost are often decisive factors.
justifying the choice of outsourcing. In certain sectors, such as high-tech, industrial
wishes to call on a service provider to carry out activities for which it does not have
not the necessary equipment, sufficient skills, or sufficiently qualified personnel. The
The service provider will gain experience through its contracts with different types of clients.
coming from various sectors. He will thus acquire better expertise and be able to offer to
his client an offer of optimal quality.

Even though logistics outsourcing brings many advantages, there are obstacles that
It is important to have knowledge.

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 Logistics outsourcing

2. The disadvantages

We will rank the disadvantages in order of importance according to the percentage of responses.
chargers in the CSC investigation (2006)25.

a. Loss of control and know-how.

The first fear of outsourcing cited by companies is the loss of control and
know-how of outsourced activity with 73% responses. This is also confirmed by the survey
on the outsourcing of Ernst&Young (2005, [Link].). When a company delegates one or
Several logistical activities at a PSL, it loses direct control. As a result, it cannot
manage in real time the risks or problems that may arise. Indeed, intermediaries
become more numerous. The PSL, even if it is a specialist in its field, can
to encounter difficulties in integrating certain specific features related to sectors of activity or
very specific types of products. Thus, the company that outsources no longer has control.
to intervene in case of problems and this can have harmful consequences on the relationship
with their clients, in the case where the PSL is the main contact for the end client. The image of
the company's brand may be affected.
The loss of know-how and skills frightens companies. From the moment the company
delegates one of its activities to a PSL, it is to stop doing it internally. If the partnership
the partnership with the provider is not conclusive, the companies fear they might not be able to one day

easily re-internalize the activity. Indeed, the profession and the technologies can have
evolved. These companies will no longer be able to ensure its execution, having dispersed their
resources. It is about the irreversibility of outsourcing.

25
Computer Sciences Corporation (CSC), (2006), Summary Note, "Outsourcing Strategy, perceptions"
reciprocal relationships between shippers and logistics providers

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 Logistics outsourcing

b. Cost of the outsourced activity too high

Even though the main reason for logistics outsourcing for a company is cost, it
sometimes it proves to be too high. 73% of shippers think that outsourcing
results in an increase in costs.
On one hand, for certain companies that do not have significant logistics activity, it is not
no need to resort to outsourcing. Indeed, due to a lack of volume, the cost of
services would remain high. It is important to compare its internal logistics cost and what it
could be by outsourcing functions. Many companies have difficulties in
assess the actual costs related to their logistics. In fact, the cost presented by the PSL can provide them

to appear exorbitant. It becomes a disqualifying criterion for logistics outsourcing.

On the other hand, if the chosen PSL does not effectively provide logistical services,
outsourcing will incur additional costs: human costs for monitoring the
provider and for the settlement of disputes, but also stock shortages and thus cessation of
Production. The choice of the PSL is very important and must be well thought out.

c. Poor quality of service

Another risk of logistics outsourcing is the underperformance of the service provider. 62%
of loaders they mention. The service rate is a performance indicator widely used by the
companies. It defines the number of orders delivered in full with the correct quantities and
the right products delivered on time out of the total number of orders during the period. This rate of
service, which validates a performance that must reach 95% to 100% depending on the sectors, is not
always respected by the PSL. This alters the quality of the service.
Quality is a very important criterion nowadays. It is a qualifying element to enter.
in a market.
When a company signs an outsourcing contract with a PSL, it specifies the level
of required quality for:
transport
the deadlines;
the verification of the supplied materials;
the packaging.

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 Logistics outsourcing

But the PSL does not always manage to reach the required level, due to uncertainties and problems.
organization, lack of rigor, lack of experience. This leads to issues of
deadlines and performance in the client's supply chain. According to the survey
d ’Ernst&Young (2005, [Link]) 15% of companies that outsource believe that the
the services offered are of poor quality.

d. Social problems

Social issues represent another risk, 64% of shippers believe that

Logistics outsourcing poses social problems. When a company takes
decision to outsource one or more logistics functions, it no longer needs to own
internal resources and will therefore part ways with staff. In this case, three solutions are
envisaged:
Some employees said to be "good elements" may be redirected to other positions;
Others will have the opportunity to work at PSL. Law L.122-12 imposes on the
contractor to take back the employees of the company if it decides to do so
transfer
for others, it will be economic dismissal.

It is necessary to assess the social impacts and consider solutions before making the decision.
decision to outsource.
This social risk is generally well anticipated by companies. To the question "Do you have
facing real difficulties on the social level during the implementation of
the outsourcing?" from the study by Ernst&Young (2005, [Link].) only 9% responded
positively.

e. Heavy implementation

The heavy implementation of logistics outsourcing is a hindrance, representing 64% of

responses. Outsourcing a function involves administrative management and monitoring.
heavier for the client whose invoice verification, credit requests,
the specific documentation to be provided.

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 Logistics outsourcing

f. The respect of confidentiality

The respect for confidentiality is also a barrier to logistics outsourcing, mentioned by

49% of the chargers. In order to build a strong and lasting relationship with its PSL, it is
necessary to share information. The major concern of manufacturers, especially in the
high technology or defense professions is the respect for this confidentiality. It is
It is evident that when a company entrusts sensitive data to a third party, the risks of leaks
are multiplied. However, this point should be qualified as companies have laws
to protect themselves. In addition, service providers can easily have access to figures.
concerning the company because let's remember that they manage all or part of their activity. But here
yet it is not in their interest to reveal any information to any
competitors. It seems that this is more of a cultural issue.

g. Dependency on the provider

The dependence on the service provider is also a risk mentioned. Because service providers can
be led to make investments for their clients, the durations of the contracts in
average, are on the order of 3 to 5 years. It is therefore necessary that the relationship between the two parties be

based on trust. Some companies may be hesitant because they commit to

duration, whether the results are positive or negative. Even in the case of a decision to terminate
In the contract, the company must be able to turn around and find another provider.

Logistics outsourcing, although it offers many advantages to the company, it

it nonetheless has its limits.
Thus it seems interesting to ask what the conditions for profitability are
logistics outsourcing?

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 Logistics outsourcing

UNDER WHAT CONDITIONS LOGISTICS OUTSOURCING

IS IT PROFITABLE?

Certain precautions should be taken into account regarding the decision to outsource logistics.
Several data should not be overlooked. That is why, initially, we
We will discuss certain factors that may impact the efficiency of outsourcing a function.
Then, we will draft an outline of the different conditions that make outsourcing
profitable logistics.

Factors impacting the efficiency of outsourcing the function

logistics

We have identified three factors that could call into question the profitability of
outsourcing. One may be of an economic nature. Another concerns the suitability between a
standardized offer and a personalized need. Finally, the last one comes from a problem of
corporate culture.

a. The risk of increased transportation costs

For many companies, the efficiency associated with outsourcing translates into a search for
cost reduction of their Supply Chain. At least, this is the decisive factor that drives a
industrial or a distributor to outsource, even surpassing the notion of service provided.
As previously stated, the increase in logistics costs can arise from the
rise in transport prices. Indeed, the various oil crises that have affected the
industrial world, led OPEC countries to significantly increase the price of
diesel barrel. These staggering increases in energy prices force the
service providers to increase the price of their offers, especially in transportation. In a logic
intracontinental, the road is the most used mode of transport. It is also the one that is the
more prone to enduring these increases. Generally, the contractual policy is established on a
base 100. The clients during contract reviews impose reductions starting from

48
 Logistics outsourcing

from this basis. They justify this request by the search for better productivity. Now,
Today, the carriers can no longer cope with these successive price decreases.
Indeed, they have to face an increase in the price of oil and an over-taxation for
the use of the European road network. For many analysts, the minimum threshold of cost
logistics seems to be reached. We are in a global market. That one-
it often imposes transshipment on goods, either through multimodal transport
or the passage through central platforms gathering all the flows of an area
defined. This is also a source of price increase even if the massification of flows
exercised by providers lightens the costs for shippers.

b. Between the personalization of the offering and the standardization of processes

The service provider is now forced to respond to the varied demands of clients by providing them
offering the maximum level of customization of the services provided. This effort of
customization of services can lead to specialization of providers. This
development cannot be done in all directions. At some point, the choice will arise between
provide a standard or customized offer. "3PL providers cannot do everything,
for everyone; they must clearly define their strategy in terms of satisfaction
client," declares C. John Langley Jr (Professor of Supply Chain Management and head
from the study at the Georgia Institute of Technology) in the annual study on providers
logistics, published by Capgemini and the Georgia Institute of Technology (2006)26,
The balance point lies in the ability of companies to combine this concern for
personalization and standardization of processes. For the first, it is a logic of
marketing and strategic point of view. It allows for customer loyalty. The second is
essential to ensure consistent levels of quality and achieve savings
of scale.
The issue of tension between standardization and customization of the service is more present.
at the international level. It is crucial in the strategic decisions of major operators.
global (UPS, TNT, DHL) who traditionally adopt a standardization strategy
the service offered on a global scale. However, they seem to overlook the variability of the
local request.
26
Cap Gemini & Institute of Georgia technology, SAP, DHL (2006), "Study of logistics providers"

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 Logistics outsourcing

However, the application of proven standards does not guarantee the success of these large ones.
operators. Their performances in Europe remain low despite the effort of homogenization of
the quality of the service offered. The reasons for such underperformance should be sought
in the lack of consideration of the specific characteristics of the demand in the
different countries.

c. How to incorporate logistics outsourcing into your strategy

There is often a misunderstanding or a lack of information during

the establishment of the specifications between the client and the service provider. It is not just about
to choose a provider, to entrust him with the management of its logistical activities and to observe
on the invoices the cost difference between the activity previously managed internally and that
now outsourced. The choice to outsource logistical functions must be a
strategic choice rather than tactical. It must in no case be merely part of a
logistics strategy but indeed within a long-term overall strategy. There exists a
Paradox between long-term strategy and limited-duration outsourcing contracts.
Clients want their service providers to be more aligned with them.
strategy. However, they feel a certain hesitance to establish long-term contracts.
and even more to completely outsource their logistics.
For example, in the healthcare sector, laboratories struggle to relinquish their power of
control. This situation can be explained because the market is not yet mature. The entry of
Generics has made a recent change to its distribution channels and organization. They
must now provide specific services at the level of security of
products, temperature, and traceability by service providers. These operations were
still little time managed internally.
Other sectors like the automotive industry also struggle to truly delegate management of
their logistics. By outsourcing only part of it, some manufacturers like to keep the
control not really involving their PSL. This protectionism is a hindrance to research
strategic supply chain optimization.
The high-tech sector seems to be truly ahead as its imperative is the
search for flexibility. Companies quickly understood the importance of linking
partnerships with trusted providers to carry out all related operations to

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 Logistics outsourcing

their core business. These operations, like thekittingare often high-value operations
added that involve service providers, investments, manufacturers, and guarantees.
A true partnership allows you to integrate your service provider into the company's strategy. It
it seems that depending on the sectors, the reality is very different. In high-value sectors
added or strong technicality, this notion of partnership seems more evident.
These three aspects clearly demonstrate the realities faced by the various actors.
and the necessary evolution of morals for a relationship that falls within a win-win relationship.
Having established these postulates, we will now focus on the criteria retained by the
clients to qualify their logistical outsourcing as profitable.

2. The profitability criteria retained by the clients

These criteria concern no more and no less than the expectations that clients have regarding
logistics outsourcing in terms of results. It seems crucial that outsourcing
be a facilitator and not a creator of problems.

a. An easier control of outsourced activity

Companies expect outsourcing to provide minimal and easy control over the service.
delegate. The client should no longer worry about the entire implementation leading to
in the final offer. This should represent a gain in time, money, and skill. From
Moreover, calling on a specialist in the field should ensure an increased quality of
service. Only a limited check stipulated in the specifications should suffice.
On the other hand, many companies are not completely satisfied with their
service providers and use a lot of energy for controlling the services provided.
The ordering party is often forced to allocate more personnel than planned for control of
PSL services. He cannot therefore manage his human resources optimally.
for his profession.

51
 Logistics outsourcing

b. Reliable and real-time feedback

One of the biggest black spots affecting the supply chain is the lack of information.
corrected or in real time. This feedback is an integral part of quality
service rendered. Reactivity and flexibility are imposed by the current market. To remain
Proactive and competitive, clients need real-time information. This
the situation is linked to the performance of ICT, which we have already mentioned. For the same
reasons, companies must anticipate the need. To do this, it is essential that
the information must be reliable. Otherwise, its negative effect will amplify throughout the
supply chainBullwhip effect.
Let's take a simple example: in the context of a transport, if the service provider does not inform his
Client that a problem occurred during the trip, thinking that it will be resolved shortly,
it risks putting the latter out of stock. Had the client been warned in time, they could have found
an alternative.
A good collaboration requires an adequate exchange of information. The technical tools
existent, we are particularly thinking of EDI. However, a long way still remains to be traveled.
so that this practice can be extended.

c. A more strategic offer to reduce their Supply Chain costs

A detailed study concerning the logistics service provider industry reveals the need for
the 3PL to revise their offers. They must propose a service that integrates more into the strategy
of their clients and more integrated solutions. Erik van Dort explains in the annual study
on logistics providers, published by Capgemini and the Georgia Institute of Technology
(2006, [Link]): "In the current 3PL sector, there is too much diversity when
we talk about processes and information systems. There are good reasons for this but with the
growing market consolidation, the obligation to have international coverage and the
pressure to sustain profitability, the transformation of stakeholders is inevitable and
essential. It is now that logistics providers must invest to streamline
their operations and reduce their overall operating costs to become more
competitive and in a more aggressive manner, in order to gain market share. Considering

52
 Logistics outsourcing

the current performance of a number of 3PLs, managing to be profitable and ensuring

A leadership position will require disruptive measures from management.
This study shows that price precedes value-added service. It is now the first.
selection criteria for a service provider. This reflects the pressure exerted on providers to
cost reductions in the field of Supply Chain.
For the first time in 10 years, at the same time, customers are requesting offers of a certain level.
strategic. This represents a real challenge for service providers in terms of
positioning, innovation, and organization.
Similarly, C. John Langley Jr states, "It is essential for 3PLs to focus on the
development of a comprehensive offer of essential services, at the right price, to be able to
then build a close relationship with the client and offer them higher-level services
strategic alignment with its constantly evolving business needs: this means
transform their offer portfolios to incorporate more advanced services
strategic management.
The survey confirms that the 3PL market continues to grow (more than 10% growth rate)
annual growth) and evolve. Not only the logistics providers and their expertise
are constantly changing, but the expectations of their clients are evolving. "In the short term, we

We believe that most 3PLs will follow this trend and offer a relationship model.
"global that combines both tactical and strategic elements," adds Alec Ang.
Director of Supply Chain Logistics at DHL Asia-Pacific Global Customer
Additionally, he concludes by saying: '3PLs must also move up the value chain.'
to provide expertise in supply chain management, beyond the traditional
skills oriented towards the management of the company's assets. These improvements will
allowing 3PLs to position themselves more effectively as LLPs (Limited Liability
Partnerships that help their clients reduce the complexity of managing their supply.
chain.

53
 Logistics outsourcing

d. An understanding of the costs associated with outsourcing

The industrialist will seek to convert fixed costs into variable costs by outsourcing.
some of its activities. The search for profitability goes through the control and knowledge
of these actual costs. In the outsourcing contract, the amounts for each service are
defines. However, many differences arise because special services are
added. For commercial reasons, some services are not always billed
at the real cost. This lack of transparency in the pricing policy leaves the customer to their own
initial situation when he was managing his activity himself with many hidden costs. By
for example, a service provider may face a problem related to the absenteeism of its
teams. He will then hire more temporary workers to maintain his productivity but will seek
to charge this additional cost to his client. The client does not understand this variation in cost. He is losing

so trust in your provider.

The idea of outsourcing often refers to the notion of partnership, but let us not forget the
the notion of transparency without which the partnership has little chance of functioning.

We have clearly observed that logistics outsourcing can bring in terms of

profitability to an organization provided that certain precautions are taken into account.
These often reside in the proper definition of needs; an essential basis for
establishing a clear relationship, setting the rules and frameworks to which each actor must adhere
to hold. Nevertheless, monitoring the service providers is a mandatory and necessary point. We are going to
describe the means and tools that companies put in place to carry out these controls.

3. Monitoring of service providers and services

When setting up outsourcing, it is necessary for the client

establish a follow-up, a control of the logistics services. This is to measure the
performance and non-performance of the service provider and to define areas for improvement.

54
 Logistics outsourcing

a. Establishment of a monitoring team or organization

Logistics outsourcing is the delegation of all or part of very logistics activities.

varied. It is essential to check that the service has been carried out correctly. It is
why the contracting authority must set up a monitoring team or organization
services.
This or these person(s) are part of the logistics department and may be assigned to:
the management of part of the supply chain (supply, packaging,
customer delivery;
a geographic area (North France, East, Europe or others);
a product name (Product family with the same characteristics);
a client when it represents a large part of the turnover.

The organization depends on the size of the company and the extent of its outsourcing.
The monitoring team sends orders to the service provider and remains in almost constant contact with them.

this one. It involves checking whether the orders and instructions have been followed and managing the
problems that may arise.
In addition to this operational monitoring, the establishment of performance indicators is essential.
to have an objective and quantified understanding of the logistical performance of its PSL.

b. Establishment of performance indicators

Previously, companies measured the performance of their logistics providers by

based on financial results. They did not care about the operational efficiency of
PSL. This one is essential.
The criteria must be decided jointly with the service provider to define
realistic performances. It is essential to involve the service provider in the evaluation of the
Supply Chain, because it also helps to improve it.

55
 Logistics outsourcing

What are the performance indicators to define?

We will focus on the indicators most commonly used by companies today. There are
reference indicators by business sector, on which the company can base itself.
the customer service rate;
the customer complaint rate;
the supplier service rate;
the rate of overall logistics costs as a percentage of revenue.

The implementation of performance indicators is inevitable in the context of

logistics outsourcing. But the most important thing is to drive these indicators. It is
It is necessary to understand the causes of non-performance. Dashboards by
indicators and over a given period must be used, and every problem encountered in
The supply chain must be listed and explained. This allows for good monitoring of services.
of the PSL and to check in with him regularly.

Before engaging with an PSL, objectives must be determined in a process.

of continuous improvement:
volume of business entrusted to the PSL;
level of collaboration;
visibility that both parties must provide to each other.

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 Logistics outsourcing

According to a Canadian magazine "Materials Management and Distribution" (2003)27we can

define three methods to set performance objectives:

Base your objectives on historical data. This involves redefining objectives every year.
based on the results obtained the previous year. Thus the performance is-
progressive. However, the limitation of this method is to arbitrarily set
objectives too high or too low.
The external benchmark. It is a good way to define the level of performance at
to achieve. It is about identifying the results of the best companies in the sector and ...
to create targets. However, for the comparison to be relevant, it is also necessary to
take into account criteria such as the industry sector, the size of the company,
amount of revenue, geographical location.
Define theoretical objectives. This is a new method that requires a
analysis of processes to determine areas for improving performance.
scenarios are imagined, hypotheses put forward, and objectives defined. This involves
to make the necessary operational changes for an improvement of
pre-existing process with the service provider.

The monitoring of logistics services is essential. It allows for the improvement of performance and
thus contributes to the overall optimization of the supply chain.
The relationships between the company and the PSL can be of two types: either they are based on
only on advice and execution, either on decision-making and trust.

4. The weight of the providers

It is up to each company to decide the weight it gives to its provider:

partial or total outsourcing. This choice will automatically have an impact on the
relationship between the client and its service provider.

27
Assessing your 3PL

57
 Logistics outsourcing

Partial outsourcing or total outsourcing

Partial outsourcing consists of the company delegating only a part of a

function to a PSL. As part of a partial outsourcing, the PSL has no
decision-making power. Its role often limits itself to an execution role at best
advice. It does not intervene in the strategy of the client. It is the most
current of outsourcing.
By partially outsourcing an activity, the client retains direct control and
total of a part of its flows. It is therefore less vulnerable towards its service provider and
of cyclical events. Furthermore, the company maintains expertise and resources
operational allowing him to have a critical view of the service offered. However,
this model imposes limits on the optimization of the Supply Chain, limits that are not induced
total outsourcing.
The latter is an advanced form of partnership. The company that decides to outsource must
to fully trust a service provider. The advantage lies in the fact that the control will be
easier, the simplified relationship, multiplied value creation, optimized organization. The
the notion of partnership then takes on its full meaning. This implies mutual transparency, the
sharing a common strategy and defining common objectives. TheProject Ownerif
rests entirely on hisStudy Masterand integrates it into his logic. He asks him
to bring real expertise to develop this strategy. This is the crucial point that
Today is the most requested by providers.
In total outsourcing, the internal resources, assets, and skills are completely
disappeared. The company must still have a person in charge of the relationship
partnership and contractual. This requires a different manager profile because there is no longer any
direct hierarchical price on the resources to be mobilized.
In Appendix I, we present a study by Eric Fimbel.28describing the 22 factors of
Success of partial or total outsourcing.

28
Fimbel E. (March 2002) Thesis, "Outsourcing: Discriminant and Success Factors"

58
 Logistics outsourcing

b. Single or multiple service providers

A company can call upon a single (mono) or multiple (multi) service providers to manage
the entire Supply Chain.
The advantages provided by using a single provider tend to simplify organization,
to accelerate the flows and improve the readability for management, particularly financial and administrative.

This structure also generates savings due to massified volumes.

A dual relationship favors the establishment of a partnership.
However, some pitfalls persist. We have highlighted that it is difficult for a
single provider to ensure an optimal level of quality for all services.
The use of a single point of contact creates dependence for the client. Indeed, this
dependence implies a risk. The notion of dependence overrides the notion of partnership and
becomes a source of fear What will happen if the provider leaves me? What solution
quickly available could I find to change provider?
In contrast, using multiple service providers leaves more room for maneuver.
important.
Samsung is an excellent example. The company decided to call on several
service providers, each specialized in a field. The fact of using several specialists
brings more added value to the outsourced function.
Indeed, it is always easier for a client to find another provider.
linked to an outsourced function rather than replacing a service provider managing the whole
chain. The necessary adjustment time would also be reduced.
This type of outsourcing allows for benefiting from the competitive environment and synergy of the
complementarity of offers.
In a parallel and completely similar manner, we can realize that the advantages
the disadvantages of multi-provider outsourcing are the disadvantages of single-provider outsourcing

service provider.

The success of outsourcing is not mechanically accessible but is determined in advance.

issues and even compromises. Successfully outsourcing requires making it successful.
together (MOA + MOE) in a collaborative and positive attitude. Each party must

59
 Logistics outsourcing

clearly identifies its mission, its areas of intervention and the nature of its
responsibilities, particularly social and organizational.
We have seen the different factors that drive an organization to outsource its
logistics and the results it could derive in terms of profitability. These lessons
drawn from various sources cannot suffice on their own. That is why we have
met professionals, clients, and service providers from various sectors
of activity, in order to support and compare what has been said previously. This will allow us
to bring an applied vision to our thesis topic and to better understand the expectations
from each of the parties on the subject of logistics outsourcing.

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 Logistics outsourcing

PART III: CONCRETE CASES

This section allows us to illustrate what has been previously described in our development.
theoretical. We conducted interviews with professionals from various
sectors: a logistics service provider (Celtic Global Services), an industrial company of
automotive sector (PSA) and a purchasing center for large distribution (SCARMOR).
In the first part, we will present the different companies interviewed and then we
we will note any discrepancies between what is said in books or the press
professional and the reality on the ground, the aim being to compare the perspective of the donors
of orders and service providers on their vision of logistics outsourcing.
We will follow the plan of our theoretical development. We will address the themes
Following: the reasons for logistics outsourcing, the profitability of outsourcing
logistics, the future of logistics outsourcing. To begin, we present to you the
methodology followed to successfully carry out our field survey.

[Link]

In order to successfully conduct our field surveys, we have developed targeted interview guides.
for each company in different sectors of activity. Only the interview guide of the
Industrials are presented in Appendix 2.
Unfortunately, we did not have the opportunity to meet both the client and his
own service provider. However, we will strive to keep you informed of their
impressions and their feelings regarding logistics outsourcing.

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 Logistics outsourcing

[Link] OF THE INTERVIEWED COMPANIES

In this section, we will present the different companies interviewed, the sectors
of activity and the people met.

1. An automobile manufacturer: PSA Peugeot Citroën

PSA Citroën is a French car manufacturer that outsources part of its flows.
logistics. We know that the automotive sector is relatively advanced in outsourcing
logistics. This is why we met Mr. Rousseau at the production site of the
Currently near Rennes, upstream logistics manager at PSA.
The production of vehicles at the Rennes site mainly includes the Citroën C5.
(sedan and station wagon) and the Peugeot 407 (sedan and SW). The site was chosen by the group to
produce the future Peugeot and Citroën models of the upper-middle and high segments
range.

62
 Logistics outsourcing

Figure 6: Modeling of the logistics scheme of PEUGEOT

Equipment supplier Production Site

rank 1 Peugeot
4
1

6'
4'

4'' 3 5
Dealers
6 Peugeot

Providers
Logistics

Personal elaboration: diagram of the functioning of PEUGEOT

Information flow
Physical fluxes

Legend:
1: Dealer orders
2: Order to the supplier
3: Order for removal, receipt, preparation, delivery of modules or components
4: Delivery in synchronous flow of modules or components
4': Removal, storage, order preparation
4'': Just-in-time delivery
5: Vehicle removal order
6 & 6': Vehicle removal and delivery

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 Logistics outsourcing

2. A logistics service provider: Celtic Global Services

We had the opportunity to meet Mr. Ronan Leray, director and manager of the company.
Celtic Global Services, a logistics service provider based in the commercial port at
Brest. Celtic Global Services (CGS) is a small company employing 9 people. It is
also a young company since it was established in 1999. CGS conducts its business of
transport agent at the business incubator in Landerneau until 2001, then
settles at the commercial port, where it has larger premises and an area of
1000 m² storage.
The objective of Ronan Leray is to offer exporting and importing companies,
mainly Breton, a global logistical solution. It takes care of a maximum of
services with 'quality service at an optimal price,' according to Mr. Leray
It is gradually developing by relying on its partners and shareholders. It is working
especially for industrial and scientific sectors.

CGS is established in other countries:

In Shanghai, China with a newly established subsidiary;
In Dubai, in the United Arab Emirates with a joint venture;
In Miami, USA with a joint venture;

CGS is part of an international network of independent companies: the WPG (World

Project Group). Its strategy consists of ensuring its internal development by relying on
on the skills of each of its partners. They share certain methods such as the
tracking and also some practices like marketing. In the interest of consistency,
A single contact person is designated for a country or geographical area. Arbitration is
carried out by a steering committee.
This organization allows each member to propose 'door to door' offers thanks to a
global network. Each brings contracts and each derives their own profit.

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 Logistics outsourcing

Figure 7: Modeling of the logistics scheme of Celtic Global Services

2 1

Suppliers 3 4 Clients
Carriers CELTIC GLOBAL SERVICES
companies 5 Industrial
6 PSL
maritime, air Scientists
Handlers
7

Personal elaboration: diagram of the operation of Celtic Global Services

Flow of information
Physical fluxes

Legend:

1: request for quote for service

2: request for quote to the supplier
3: supplier quotation
4: quotation for the client
5: customer order
6: order of service to the supplier
7: service delivery

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 Logistics outsourcing

A purchasing center of the LECLERC large distribution group:

the SCARMOR

Numbering 16, these cooperatives, called SCA (Central Societies)

Purchasing departments negotiate purchases at the regional level. They also ensure between
Other storage, distribution, and transport of goods in warehouses.
Located in the regions, they refine the purchasing policy by taking into account the
particularities and expectations of clients. The SCARMOR (Central Company
The Supply of the Armorique Region has two warehouses located in Relecq.
Kerhuon and in Landerneau. We met Mr. Charlier who is the person in charge.
logistics. Its mission is to lead the group's logistics strategy for
supply 38 stores. He manages and coordinates the logistics services provided in
internal and more finely those that are outsourced. It also manages the contracts.
of outsourcing.
SCARMOR consists of 200 employees, 130 of whom are dedicated to logistics.
It is interesting to note that in his presentation Mr. Charlier differentiates purchases from the rest.
of logistics, particularly for him, the distribution logistics. We translate this state
by the fact that the purchasing function is the main activity of the center. The function
purchasing/supply is therefore not perceived as a logistics function. We
Here is a concrete illustration of the difference in perception between the definition
theory of logistic functions and the reality it holds for a professional.
The flows are managed as follows:
- 50 % are managed directly between Leclerc stores and suppliers
- 50 % are managed by SCARMOR, knowing that:
50% are managed in-house
50% are outsourced to 7 providers according to the type of products

SCARMOR is financed by E. LECLERC stores and logistic costs have an impact.

directly on their accounting result. The management of the organization is therefore an element
sensible. Strategic decisions must be validated by the 38 stores. The management
General provides commercial guidelines that can influence logistics management.
However, the logistical decisions are initiated by Mr. Charlier.

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 Logistics outsourcing

Figure 8: Modeling of the logistics diagram of SCARMOR

Suppliers 2

2'
1

2 inches
4 SCARMOR

Service providers 5
Logistics

Personal elaboration: diagram of the SCARMOR operation

Information flow

Physical fluxes

Legend:
store order
2: supplier order
2': removal managed by SCARMOR
delivery guaranteed by SCARMOR
3: Order for pickup, reception, preparation, delivery
4: Provider pickup or supplier delivery
Store delivery

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 Logistics outsourcing

After the presentation of the companies we met, we will inform you

about their impressions and feelings regarding logistics outsourcing.
We will follow the plan of our theoretical development. We will address the themes
following: the reasons for logistics outsourcing and the profitability of outsourcing
logistics.

C. THE REALITIES OF THE FIELD

The reasons for logistics outsourcing

a. The motivations

Even though the reasons for outsourcing logistics are often common to
different sectors of activity, each experiencing it in a different way. During our
interviews with the different firms, all responded that the main reason that drives
A company that outsources its logistics is seeking profitability. PSA created GEFCO.
in order to ensure the supplies of the Sochaux production plant and
achieve economies of scale to offset its outlying position. Today,
logistics outsourcing seems to play a rather organizational role. We know that the
the automotive sector is extremely streamlined and optimized (implementation of just-in-time methods
on-time, synchronous flows). In order to be efficient in this type of organization, the firm
must be able to rely on other stakeholders to manage activities that are not part of
your core business. Beyond the purely economic aspect, it seems that outsourcing
Logistics truly plays a strategic role as it impacts the future of the company.
For SCARMOR, logistics outsourcing is primarily used in the flows
product physiques. It also allows him to create greater flexibility in
the management of its organization, sensitive to seasonality.
SCARMOR wants to ensure low prices for the stores in the network through costs
reduced. It must also meet a high customer service rate. The manager
logistics must justify its choices in light of its internal constraints while integrating

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 Logistics outsourcing

external constraints such as regulations, particularly the Galand law. The stakes for
the logistician's job is to reconcile opposing realities. Logistics outsourcing
brings some answers. As Mr. Charlier strongly stated, it allows for modification
The cost structure: "More than the cost itself is the flexibility of the cost structure
logistics that interests us." The use of a service provider will bring flexibility
that the company does not possess intrinsically.
We find the motivations expressed in the various studies where flexibility and
cost reduction is the main reason driving entrepreneurs' choices for
outsourcing a logistics function.

b. Outsourced services

To the question 'What logistics services do you provide?' or 'what services

Do you outsource logistics? Here are the responses.
Supply for CGS
Inventory management for CGS and PSA

Computer services □
related to a logistical service
Storage for CGS, PSA
Transport for CGS, PSA, SCARMOR
Conditioning for CGS, PSA, SCARMOR
Order preparation for CGS, PSA, SCARMOR
Distribution for CGS, PSA, SCARMOR
Maintenance for PSA
After-sales service
Return logistics for CGS, PSA, SCARMOR

We note that indeed the majority of logistical functions are outsourced.

or carried out by logistics providers. However, when we asked if these
functions were managed 100% by a service provider, the responses were negative, except for
for transportation. For example, SCARMOR still manages 50% of its flows in-house and
externalize the rest. In the case of PSA, storage is carried out partly by GEFCO especially

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 Logistics outsourcing

to respond to an increase in volumes.

No originality can be noted regarding the outsourced services. Transportation is the
top of the pavement quite normally. More than moving freight, it's about achieving flow
strained. Even if storage and order preparation are mentioned, the volumes
those concerned remain anecdotal. Outsourcing the first allows for responding to peak periods.
seasonality. The outsourcing of order preparation is more a result of the willingness
managerial of the directors of SCARMOR and MORY.
As we stated earlier, some services are too costly to handle in
Internal activities are outsourced under the influence of an increasingly prevalent regulatory framework.

Thus, taking into account return flows generates new jobs.

SCARMOR has already started processing plastic balls, cardboard, and pallets. The
The collected materials are then bought back by a specialist. A reflection is carried out to
polyester like the treatment of WEEE.
M. Leray specifies that certain services such as quality control performed for PSA
are quite expensive and only large groups can afford to outsource them.
CGS continues to develop its range of services. Indeed, the diversity of
services provided represent a differentiating factor. The provider will increase its
range according to the demand expressed by its customers. It is a guarantee of attention towards
of the client. Its small size allows for greater flexibility and responsiveness.

c. The logistics providers

The automotive manufacturer PSA works with six logistics providers. The main ones
are GEFCO for the logistics of components and parts, SAMETO for maintenance of
packaging, VEOLIA for packaging management.
GEFCO is the PSL of PSA. A historical link unites them. Indeed, PSA created its subsidiary in 1949.
Express Group of Franche Comté for the supply of components and the
distribution of its vehicles. Today, GEFCO is 50% owned by PSA.
The details of the services provided by GEFCO Rennes can be found in Annex III.
In order to meet the increasingly significant logistical needs of PSA, imposed by the
competition, consumer demand, and market globalization, GEFCO has

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developed its activities. This PSL also supports PSA in its development in
the international. It is now a logistics integrator.

CGS started as an international trade consulting firm and has become

naturally a PSL by following the opportunities offered by the market. The main axes
on which CGS has developed are the single point of contact and the concept of global logistics
sought after by its clients. This PSL has developed its offer as the demands of
client services. It particularly helps Breton SMEs to develop their approaches and
export and import sales. Similarly, the services provided by CGS are presented in
Annex IV

SCARMOR works with seven PSLs, each specialized in a field. These PSLs provide you
are presented in Appendix V.

The development of PSLs is a reality. GEFCO has developed its range of services. From
even, CGS, which started as an international trade consulting company, has become
PSL expands its services at the request of its clients. It provides very high-quality services.
specifics such as packaging, co-packing, and quality control. It assumes to
in addition to the coordination of the supply chain (quality control, packaging, pre-
shipping
logistics). He starts to offer software solutions to his clients. He plays a consulting role.
and piloting. Mr. Leray does not find the concepts of 3PL, 4PL, 5PL relevant. He thinks that
these notions allow for the establishment of standardization norms, but the reality is
much more complex. Given the services and our knowledge, we position it
the 3PL and 4PL. The PSLs have adapted their offers and will continue to integrate services
increasingly pushed in the supply chain. This is also transferable in the large
distribution. The needs expressed by SCARMOR are the same as those that are in
General described in the theory. Indeed, the increased needs for storage, warehousing,
order preparation has pushed providers, initially transporters, to broaden their
offers.
GEFCO has transitioned from a simple carrier to that of a global logistics integrator.
All these providers position themselves on a stable demand for a given product.

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 Logistics outsourcing

Large logistics groups ensure immediate profitability through their acquisitions.

On the other hand, CGS favors internal development. Indeed, it relies on the
human skills acquired to increase, with the client's expectation, their range of
services. He works à la carte. To meet various inventory management requirements
or EDI in particular, it uses off-the-shelf products. It sizes its
investments in relation to expressed needs.

Despite all the developments and changes that service providers are experiencing and
In terms of services, customers express their dissatisfaction.
Mr. Rousseau is awaiting his service providers, particularly GEFCO:
the guarantee of quality of the services that is essential;
the sustainability of costs: contracts with service providers are signed for 3 years with
tacit renewal. Prices are reviewed every year. This should ensure PSA a
reduction of costs each year, but providers are not seeking the
better productivity permanently and increase their costs;
more information and a real anticipation in case of problems.
The main requirements of its clients, according to CGS, are:
the cost of the service;
the fact of having a client in the prospect sector. This represents a guarantee of
skill (to possess the technical skills of a profession);
integrate the complexities of the profession, possess the means and know-how, the technicality
of a profession.

When we are on the client side or the service provider side, the perception is different. Only
the concept of cost is common. This is inherent in the fact that price is the primary criterion of
selection of a service provider. It seems to us that the perception of CGS is even more unique.
due to the relationship with its clients. We remind that it operates in niche markets.
Expectations in terms of offerings depend on the company and the profession.

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2. Is logistics outsourcing profitable?

a. The challenges

Cost reduction
In our theoretical section, the main advantage mentioned concerns cost reduction. However
during our interviews, the main advantage highlighted by the various stakeholders appears to be the
flexibility. For SCARMOR, outsourcing brings a flexibility that could not
bring management of internal distribution logistics. The providers have a
appreciable adaptability. This flexibility is essential for distributors.
Regarding cost reduction, Mr. Rousseau explained to us that for now the lack
the efficiency of certain service providers did not allow achieving the targeted objective. In principle,
they should benefit by increasing the volume to make savings
of scale.
More than the cost itself, it is the flexibility of the structure of logistics costs that we
"interests" refers to the logistics manager of SCARMOR. It is often a disadvantage.
evoked. Beyond the simple loss of control of the activity, it is the loss of visibility of
the outsourced activity that poses the most problems. For Mr. Rousseau, it is a real issue.
He can no longer clearly determine the cost of each service.

Quality of services
The quality of the services is another complaint raised by clients. Mr. Rousseau
admitted that despite the certification of some of its service providers, the clauses of the specifications
charges were not always respected. As a result, he had to manage some
malfunctions as varied as they are complex. No replacement can be, to this day,
envisaged in light of the existing offer on the market. Its only solution is to evolve its
service providers in quality. He confided to us that PSA had decided to re-internalize certain
synchronous flows. For service quality issues, some of them are
reintegrated by PSA. For Mr. Charlier, only strict control allows for a good
level of service. He uses purchasing negotiations to achieve this. Both, in
revenge, use a penalty system.

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 Logistics outsourcing

Loss of control of the activity

The loss of control over the activity is another disadvantage that Mr. Rousseau highlighted.
This fear is justified by the irreversibility of logistical outsourcing. This corroborates that
that we stated in the chapter on the challenges of outsourcing. This factor may be related
to the loss of know-how. For Mr. Charlier, the problem does not arise because he maintains a
part of its internal activity. We can note that the difference in technicality of these
two sectors partially explain these two points of view.
Finally, the professionals all mentioned the social issues related to outsourcing.
PSA has outsourced the management of its vehicle fleet. On this occasion, some employees have been
transferred to the service provider. Unfortunately, this transfer was a failure both for the
quality of the service only for the integration of the staff. PSA found itself forced on one hand to
reinternalize this service and on the other hand reintegrate these assets. SCARMOR has found
another solution to be able to avoid this type of difficulty. Outsourcing allows him
to adapt their resources to the activity. Moreover, it encourages drivers to get to their
account. Not being directly linked to the SCARMOR, a cyclical downturn
will not lead to their dismissal. The question regarding the logistics re-internalization does not
will not be mentioned in our memory because it is too marginal. We hold on to all of
even to share with you examples published in an article by 'Le Point' in Appendix VI.

b. The conditions of profitability

Provider control
One condition for outsourcing to be profitable is the control of the service provider. For Mr.
Charlier, even if the relationship between the two parties is going well, allows him to
maintain a certain pressure on your service provider. The goal is to keep a level of
constant quality. "Outsourcing is mandatory and necessary. We must give ourselves the means.
of its objectives" he explains. The monitoring, although constraining, guarantees the performance of the PSL.

For example, PSA had to rehire staff, especially for invoice control.
or the monitoring of performance indicators. It has a dedicated organization for monitoring
services: one person for billing and one person for external relations.
A weekly update on the performance of the period is carried out with the service provider.
Monthly and bi-monthly meetings are organized with the production management.

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At SCARMOR, a person is dedicated to the control of service providers. It is established according to two

criteria. One concerns the delivery time (an allowed range of 15 minutes) and the other
the quality (the number of correctly received packages). However, the few resources allocated to
monitoring, requires the company to implement a specific method. A physical control is
carried out occasionally by the staff of each store, at the request of Mr. Charlier.
There is no formal framework for evaluating CGS services. However, its
Proximity with its clients implies a tacit follow-up, particularly through a simple phone call.
According to the services, particularly order preparation and electronic integration, it
there are contractually defined indicators. Mr. Leray told us that 'the services
physiques are easily assessed by measuring defects and failures. The criteria are
induced by a quality approach." For logistics services directly related to a flow,
The performance is easily assessable. For others, the control proves to be more difficult.
Often without communicating it, the evaluation is carried out by the client who rates their service providers.

in terms of responsiveness, speed, and availability.

Definition of the need

All monitoring or control is part of procedures defined during the establishment of a
contract. The key to this success is a relationship based on the commitment of both parties, the
precise definition of the needs and expectations of the client. The contracts made with the clients
should always be based on specifications. The latter are rarely used by the
SMEs according to CGS. They could still represent an effective tool for comparing offers.
correctly. They would particularly enhance the offer of CGS, especially for Mr. Leray.
In terms of advice. Often, the cost vector becomes a constraint. SMEs do not
do not take into account the importance of defining their needs and therefore specificity
what their request imposes. On the contrary, specifications are predominantly used by
large companies and public markets.
The essence of outsourcing is based on these fundamentals. Any problems
the execution of services often results from a lack of definition of needs and of
follow-up. The relationship that SCARMOR has with TFE is an illustration of this since they
have been working together for 14 years.

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 Logistics outsourcing

Real-time feedback
M. Leray confirms that real-time feedback enables proper management of
supply chain. He states that as a provider, feedback is part of
service. This is one of the fundamentals of customer satisfaction. However, it currently represents
a constraint for optimizing outsourcing. Indeed, providers often
difficulties in accurately reporting the condition of products at a specific time. This point has
has often been mentioned during our interview with the logistics manager of PSA. If
the information, whatever it may be, was provided in real time, each party could
thinking about the solutions to implement. The client just needs to be informed because
after all, it is one of the main links in the Supply Chain. Everyone seems
to agree that it is a cultural issue.

Partnership relationship
Outsourcing must be part of a sustainable profit plan. Partners must
share a common strategic expertise. This is the case for CGS, which is aware that it
evolves within a network. It is the synergy of each element that allows for the contribution of
added value. The concept of partnership is pushed to the sharing of profits. This
attitude, he applies it as much to his suppliers as to his clients. Each new request
It is an opportunity for him for a partnership. Mr. Rousseau questions PSA's strategy.
regarding logistics outsourcing. Given the results obtained, he is not tempted to do
involve the provider in its strategy. However, perhaps a more in-depth integration
would further empower the PSL and would lead to better results. We have
was surprised by the relationship between PSA and GEFCO. We thought that the
automobile manufacturers delegated most of their logistics activities to logistics service providers and their

trusted the management of the chain. It seems that at PSA, logistics outsourcing does not
whether partial.
The vision of large-scale distribution is more radical. Mr. Charlier laments a mentality that is still
too individualistic to develop partnership relations. Theoretically, we do not have
stop praising the idea of partnership. In reality, we are really far from this
perfect agreement. It is more of a promotional tool used for marketing purposes.

Single or multi-provider

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Of the two actors we met, neither externalizes its logistics in the same way.
service provider. Indeed, PSA manages its main logistics activities (transport, storage,
distribution) with GEFCO. On the other hand, part of the packaging or maintenance management
The packaging is entrusted to other service providers. Similarly, CGS is not the only PSL.
of its clients. SCARMOR believes that it is impossible to rely on a single provider.
because there is no PSL that is effective in all areas. That is why it
calls on seven different PSLs. Mr. Rousseau adds that he would like to be able to compare the
offers. Despite the shared desire of GEFCO and PSA to develop the portfolio of this
first, PSA still ensures a volume of requests to its historical provider. It
it seems dangerous for a company to practice 'single sourcing', as it does not
play the competition and cannot take advantage of the best market price.

To answer the question "is outsourcing profitable?", we could revisit

Mr. Charlier's words: 'Logistics outsourcing is more than profitable, it is
indispensable.

3. The future of logistics outsourcing

a. From logistical service to logistical industrialization

PSA believes that its relationships with its Suppliers will tend towards increased partnership in the future.

with a greater delegation of responsibilities. This on the condition that the cost, the quality of
services and the mastery of skills are also evolving.
The same goes for CGS. The cost and quality of service are, for him, factors
essentials to retain customers.
SCARMOR, on the other hand, is not entrusted with more responsibilities to its PSL.
Charlier insists that SCARMOR will retain control over its logistical flows.
PSL will take on an execution role. He does not think he will ever outsource 100% of his
logistics. Indeed, the purchasing center manages more than 3 million products, with formats and
very varied specifics. It must ensure deliveries on many products

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Daily, a product shortage in stores means a significant financial loss and

perhaps the loss of a client. They cannot delegate this management of complex flows to their
PSL.

We believe that the relationships between shippers and PSLs will evolve into a true partnership. A
"win-win" rapport is necessary in the optimization of a Supply Chain, this
which illustrates CGS. The PSLs should expand their offerings, improve their quality, and increase
their professional skills. Some sectors are evolving faster than others.

PSA believes that it is possible to outsource a large part of the activities such as
the administration, logistics, part of production, "but to each their own job" according to
M. Rousseau. Seeing PSLs become car manufacturers seems unrealistic to him. For him,
A PSL may know how to build a car. He may master the processes of
fabrication and related logistics flows, but design and styling, that is not its
profession.
M Leray believes that logistics outsourcing will continue to grow and that the offers
will be increasingly integrated. The PSL will provide more and more value-added services.
added and industrial services. It is difficult for Mr. Leray to dissociate the services
logistics of industrial services. Even if logistics outsourcing is increasingly
more advanced, the PSLs will remain logistics providers and will not want to become industrialists or
distributors.

We thought that the PSL, which emphasize their specializations so much, could themselves
to become industrialists since they master both the logistical chain and the processes
industrial. After this study, we have the feeling that indeed the service providers
would have no interest in substituting industrialists. Economically, this orientation does not
wouldn't hold up. On the other hand, even more obviously, logistics is such a field of
development and opportunities, it would be incongruous to go astray in such a project.

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CONCLUSION

Nowadays, competition is no longer between companies, but between supply chains.

Companies are increasingly favoring the search for solid and sustainable partnerships.
amount of their activities with their suppliers and downstream with their customers. This practice is
favored by the notion of collaborative logistics. It allows for communication between the
different business sites involved in a real-time supply chain. It is not enough
more to understand the global environment in which the company operates. It is fundamental
to meet the expectations of an impatient, demanding, and savvy client. Reactivity, flexibility, and 'Lean'
Management
In this context, logistics outsourcing becomes a remarkable and essential facilitator.
It allows the integration of information and processes as well as visibility with the
strategic partners of the supply chain. Logistics service as a true
the profession supports the concept of collaborative logistics. This collaborative logistics inaugurates
new win-win partnerships and a new dimension. The providers
logistics continue their industrial strengthening.
Indeed, to provide added value to their clients, they integrate into their offer some
increasingly industrial services. These PSLs specialize and master in
measurement of superior technical and tactical skills compared to those of their client. Of simple
5PL carrier, the PSL has become an essential player in managing supply chains.
logistics, real extended networks. This inevitable progression will be limited only
through economic relevance and the changing realities of the market.
We conclude our study with the conviction that any logistics function can be delegated.
sustainably. This choice, more than economical, must be part of a strategic approach.
for the company. The difficulty lies for the management in distinguishing the core of
occupation and support functions. It naturally depends on the sector of activity, of
national or international development and also the maturity of reflection on the
challenges of logistics. Given the diversity of the functions involved, the multitude of
modes they can adopt and the numerous parameters affecting them, a
Successful outsourcing cannot ignore this reflection.
Mastering these fundamentals ensures profitability for the client in their outsourcing.
logistics. He will be able to engage with his provider in a partnership based on a

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clear contract and to avoid pitfalls related to control difficulties. The synergy resulting from the
sharing of technological resources and expertise, supported by will
Shared optimization of the supply chain becomes the best guarantee of success. In fact, we
have overcome the hesitations regarding the choice of a partial or total outsourcing led by
one or more service providers. However, we are aware that in practice these
interrogations remain relevant. It is essential that mindsets change.
The focalization of actors on their own interests and constraints does not promote the success of the project.
At a time when companies are focusing on their core business, logistical processes are
increasingly outsourced. The use of partners has increased the number
of involved actors and the complexity of operations. Chapel protectionism must be
Welcome to the extensive and enlightened partnership.

Logistics outsourcing is not only profitable, it is essential for

respond to market realities. On a macroscopic scale, the volume of physical flows and
information and the transfers made require clients to support their activity
the use of logistics services. At the local level, the fabric of SMEs and SMIs will make
always calling for a logistics offer to benefit from developments that are too expensive
acquire. We also see new models of virtual businesses emerging.
leading to the creation of logistical industrial networks. The most companies
Will high-performing companies opt for a horizontal organization of their supply chain?
Thus, can we imagine a new model of organization where a virtual company
as a managerial entity will be equipped with a logistics industrial network supporting
all activities related to his profession: production, distribution, sales, support logistics?

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BIBLIOGRAPHY

Academic sources

Road freight transport in Europe in 2003

International Production Networks
Fimbel E. (March 2002) Thesis, "Outsourcing: Discriminant and Success Factors"
Roques T. and Michrafy M. (2002), "Logistics service delivery in France in 2002", Logistics and
Management vol.11n°2 – 2003
Roux D. and Wenthworth J.R (2004), "Logistics: new strategy for management", Economica
Pimor Y. (2001), "Logistics: Technique and Implementation", L’usine nouvelle, Dunod.

Professional sources

Accenture (2003), "Executive Insights into growing use of Procurement outsourcing"

Anonymous (2004), "Assessing your 3PL, Materials Management and Distribution", Vol 47, No. 1, pp.S10
Anonymous (2001), "Quality certification for the use of logistics companies" AFAQ reading guides
ISO 9001 version 2000
Anonymous (2004-2005), Logistics Strategy, December 2004/January 2005, No. 72
Anonymous (2005), "Top one hundred logistics providers", Logistiques Magazine, December 2005, No. 103, pp 56
ASLOG (2003-2004), "Benchmarking Study: the state of the art of global logistics of companies in France"
Brillet F. and Jarrige A-S (2004), "Externalization: Beware of Danger", Le Point, 09/09/04 - No. 1669 - pp 84
Cap Gemini & Institute of Georgia technology, SAP, DHL (2006), 'Study of logistics providers'
Cap Gemini, 2004, "Third-Party Logistics study, Results and Findings of the 2004 Ninth Annual Study"
CNAM, UV logistics (2005-2006), 'Outsourcing and supply chain'
Computer Sciences Corporation (CSC), (2006), Summary Note, "Outsourcing Strategy, Perceptions"
reciprocal relationships between shippers and logistics providers
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European Logistics Association (ELA) (1997), 'Logistics costs as a percentage of revenue'
INSEE (April 2004), "Tertiary businesses are also outsourcing their services", No. 952
Rodolphe Perez (2005), "Sourcing in Low-Cost Countries: From Dream to Reality", Les Echos, September
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[Link], Nabati S., Dec. 2001, Eurostaf Study 'Logistics Service Providers in Europe'
[Link], Francetech (2003), "The strengths of France in logistics"
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ANNEXES

I. The 22 factors for the success of partial or total outsourcinge ............. 83

II. Example Maintenance Guiden ..................................................................... 88
III. Services insured by GEFCO RENNES. 96
IV. Services insured by CGS. 97
V. Services insured by the SCARMO service providersR ......................... 98
VI. The logistics re-internalizatione ................................................................... 100

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I. The 22 success factors of partial outsourcing or

total

This study presents the 22 success factors retained from a partial or total outsourcing.
on a panel of 94 successful outsourcing. The following list presents the 22 factors of
success
01-The understanding of the motivations and objectives of the project owner (M.O.A) by the project management (M.O.E)

02-The understanding of the economic environment (context, sector, ...) of the M.O.A by
the M.O.E
03-The explicit definition of the scope and content of outsourcing by the M.O.A beforehand
contracting with the project management

04-The quality of the legal formalism of the contract

05-The exhaustiveness of the contract (all cases of conflicts are provided for, ...)

06-The use of a maximum of so-called "standard" technological components

07-The realism of the objectives of the M.O.A
08-The previous mastery, through internal skills, of the newly defined scope
outsourced
09-The anticipation of social phenomena related to outsourcing
10- The management of the project management by the project owner (coordination, control...)

The adoption of services resulting from outsourcing by the target audience

12-The efficiency of project management (= implementation and transition)
13-The links (interfaces) between the outsourced perimeter and the 'retained internalized'
14-The technical skills of the project management team

15-The organizational competence of the M.O.A

16-The technological avant-gardism of the solutions implemented
17-The proven reliability of the technologies used in the implemented solutions
18-The pressure produced by external phenomena on unavoidable deadlines (such as
that the euro, ...

19-The financial stability of the M.O.E

20-The previous references of the M.O.E
21 - Maintaining high-level technical skills within the M.O.A.

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22-A cooperative attitude from the M.O.A and M.O.E rather than a strict one.
client / supplier relation

Figure 9: distribution of the 22 factors

We can draw a first lesson from this representation:

Only the factors 1, 22, and 16 are completely insensitive to the discriminant 'partial/total'
On one hand, they are located on the absolute insensitivity axis, and on the other hand, they obtain
the extreme scores among the 22 proposed. This reinforces the credibility of two results
essentials :
factors 1 and 22 represent the partnership capabilities and attitudes of the two
parties and represent the key factors for the operational success of any
externalization.
The use of modern technologies employed by the service provider does not
contributes nothing to success

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Figure 10: 15 out of 22 factors are little or not sensitive to the discriminant.
partial/total

Here is what the author takes away from this representation:

The anticipation of social factors (f9) is a success factor, even if its importance
is even more pronounced in total outsourcing than in partial outsourcing.

Among these low-importance factors, we can highlight two factors 4 and 5 on

the completeness of the contract and adherence to legal formalism. We note a
overturning of morals since the characteristic proper to the contract seems to have taken a back seat

plan in the contribution to success related to outsourcing. Thus leaving room for
evolutionary and dynamic nature of outsourcing. Indeed, beyond the character
contractual whose main role is to organize the conditions for the parties' exit in case of
divorce, it would be preferable to see outsourcing as a success and to put everything into it
work to make it so, thus allowing to save a deployment based on
on suspicion.
Factors 8, 19, 20, and 21 resume the history of the partners and only compete with each other.
secondarily to success.

Here is what we can analyze about the factors that truly represent success in one
or the other form of outsourcing.

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Figure 11: factors representing success in partial or total outsourcing

Factors:
- essentials in Ext. TOTAL
- secondary in Ext. PARTIAL

Factors:
- strong in Ext. TOTAL
- weak in Ext. PARTIAL

the essential factors in total outsourcing consolidate the stated ideas

previously on the concept of partnership (factors 1 and 22) and must be completed
by the strong skills of each
the realism of objectives (f7)
hello organizational skills of the project owner (f15)
Hello shared competence in project management (f12)
Hello mastery of the technical means of the MOE (f14)
the essential factors in partial outsourcing and secondary in total outsourcing
shows the same specificities as before because for the mixture between
the internal/external operation to be efficient, the interfaces require a
very controlled synchronization (f13) and the associated technical means must be

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proven and equipped with a verified minimum relative compatibility (f17).

The conclusion that this study carries suggests that success is based on a combination
of behavioral, economic, and social factors that are neither technical nor legal
specific to the field or the outsourced function. Therefore, for those who decide to
externalization
under the sole pressure of external constraints
hoping for success through technological opportunities
by focusing on the contractual phase of the relationship and thus defining itself as
supplier/client

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II. Example of Interview Guide

OUTSOURCING
LOGISTICS :
MAINTENANCE GUIDE

SUMMARY

INTRODUCTION

What does our approach consist of?

As part of our Specialized Master's training in Activity Management
Logistics, we have the mission to write a research thesis on
logistics outsourcing.

Approach
Thus, we have drafted this interview guide on the topic of logistics outsourcing.
address all the themes that we would like to discuss with you.
We are sending you this interview guide so that you can take it into account.
knowledge before our meeting. It is not necessary for you to answer all of these
questions in advance.
Naturally, this guide is not restrictive. We will be interested in your approach and everything.
Another aspect that seems important to you on the theme of logistics outsourcing.

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THE COMPANY

Company name:

[Link] of business:

Large company PMI SME

[Link] company's activity:

[Link] of creation of the company:

[Link] of employees in the company:

[Link] of employees assigned to logistics:

[Link] installations at level:

National International
If International, in which countries?

[Link] is your "logistics service" organized, what are its functions?

Company logistics?

[Link] makes the decisions regarding logistics?

[Link] you familiar with the concept of Supply Chain management?

Yes Non □

[Link], do you practice a supply chain approach in your company?

Another remark (?)

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THE REASONS FOR OUTSOURCING

[Link] one (or more) logistics function(s) outsourced?

Yes Non
If yes, which ones?
Supply □
Inventory management □
Transport □
Conditioning □
Distribution □
IT services □
linked to a logistic function
Warehousing □
Order preparation □
Maintenance □
After-Sales Service □
Return logistics □
Others: ………………………

[Link] what rate, in percentage, is the logistic function outsourced in

your company?

[Link] are the main criteria that have led, or could lead,

Does the company outsource a logistics function?

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[Link] you had to prioritize the reasons that motivate a company to outsource

a logistic function, which would you choose?

Scale of 1 to 7: 1 being the most likely reason and 7 the least likely

Customer requirements
The competition
Refocusing on the core business
The necessity of integrating innovation
The necessity of profitability
Responding to the European environment
The search for flexibility
Others
Remarks: ..........................

[Link] you know the logistics costs in your company?

Yes, precisely yes, a little not really no, not of the

everything

How are they calculated?

[Link] yes, what is this cost as a percentage of revenue?

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THE LOGISTICS PROVIDER

[Link] the company use or has it used one (or several) service provider(s)?

logistics?

Yes No
If not, why?
If not, do you plan to hire a service provider?
In the 5 years □Never□ Other
If yes, who is it or who are they?
Does he provide a service (in relation to your activity):
Unique Partial □ Total

METHODOLOGY FOR CHOOSING A LOGISTICS PROVIDER

[Link] logistics outsourcing changed the following functions?

→0 = not at all, 1 = yes a little, 2 = yes a lot?

Purchase
Supplies
Maintenance
RH
R&D
Marketing & sales
Production
Administrative
Distribution logistics
Property management
Others
Remarks: …………………….

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[Link] your logistics provider(s) act as an interface with your

other providers?
Yes Non
If yes, what is (are) its (their) role(s)?
[Link] your logistics provider(s) act as an interface with your

other partners?

Yes No
If yes, what is (are) their role(s)?

[Link] criteria allowed you to choose your logistics providers?

Cost of the service

Quality of the service
Name and scope of services
Grandeur of the service provider

Proximity and geographical criterion

Skills and potential offered
Others: ..................

[Link] you ensure follow-up with your logistics provider?

With a dedicated team With indicators □

Others: ...................

[Link] is your provider's power over the outsourced function?

Decision-making □
Only advice □
None □
Others □

[Link] steps did you take to choose your provider(s)?

logistics?

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[Link] your provider supporting you in your national or international development?

Yes Non
If yes, do you impose it on him/her?

Oui □Non□
[Link] you have expectations in terms of services that your provider(s) do not

cannot (cannot) yet achieve?

IS LOGISTICS OUTSOURCING PROFITABLE?

[Link] are (would be) the advantages of your outsourcing?

Scale of 1 to 6: 1 being the most important advantage and 6 the least important
Increased flexibility and responsiveness
Cost reduction
The external acquisition of additional skills
The simplification of the organization's structure
The use of assets for the core business
The mastery of your Supply Chain
Others
Remarks: ………………………
[Link] are (would be) the disadvantages of your logistics outsourcing?

Scale of 1 to 5: 1 being the most significant disadvantage and 5 the least significant
The loss of skill
The loss of control of the function
The quality of the service is insufficient
The human cost
The financial costs of the service
Others
Remarks: ……………………..

[Link] has outsourcing been beneficial for you?

Predictable results unpredictable results

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[Link] your outsourcing, what surprised you the most?

THE FUTURE OF LOGISTICS

[Link] do you see the evolution of your relationship with your service provider?

Without change □
Enhanced partnership □
Stop □
Others : ……………………

[Link] are the factors that could change your relationship with your

logistics provider?

The cost □
The mastery of skill
The quality of service □
Others: …………………….

[Link] you be required to reintegrate some of your functions?

outsourced?

Yes Non
If yes, why?
If yes, which functions?
If not, could you be led to completely outsource your logistics?
Yes No
If yes, why?

[Link] is your feeling regarding the outsourcing of logistics in your

sector and how your outsourcing choice can benefit you by

in relation to your competitors?

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III. Services provided by GEFCO RENNES

Gefco currently provides the following services for PSA:

Transport and storage of parts and components. Gefco is responsible for the transport of flows.
supply (parts and components) from PSA suppliers up to
its premises for storage or directly at PSA.

Order preparation and supply of production lines. Gefco

Prepares the PSA orders and delivers them to the factory. He also manages the synchronous flows.
This is an accelerated supply of parts packaged in small parcels in order to
to put them at the operator's feet, to free up space at his workstation.
Gefco stores these small packages in its own premises opposite the PSA factory. A time
a maximum of 1 hour and 30 minutes is required between the scheduling order given by PSA and the

assembly on the line. This requires great responsiveness.

Finished vehicle storage. Gefco ensures the storage of finished vehicles. This is when
The storage areas of PSA are saturated, especially for productions abroad.

The distribution of finished vehicles. Gefco transports finished vehicles from the zones
storage to dealers.

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IV. Services provided by CGS

CGS provides the following services:

Supply. For example, for Nestlé Purina France, it ensures

the supply of raw materials from Asia

Quality control. For PSA, this PSL ensures the quality control of parts coming from the
Brazil.

Order preparation. For this same client, he packages, labels, and transports.
the materials up to the production factory.

Stock management. He provides this service for different clients, notably SDMO.
(generator manufacturer) in France and the Middle East.

Packaging. It offers packaging services that particularly comply with the

transport standards.

Transport. It offers services of all modes (maritime, air, road, inland waterway,
railway) at the global level.

- Customs. It ensures all types of customs regimes: export and import

definitive, temporary, passive improvement.

Reverse Logistics. For the group "L'Oréal", CGS manages the return flows of
sunscreens.

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V. Services provided by SCARMOR providers

SCARMOR calls on the following service providers:

¾ GELT of the STEF-TFE group, based in 22-Yffiniac, for frozen products. It is a PSL.
recognized in the refrigeration sector in France and Europe. It ensures the supply,
storage and distribution of frozen goods to stores in Brittany. This involves 500,000 packages.
contracts throughout the year on a just-in-time basis with store deliveries twice a week. This makes
14 years that they have been working together.

¾ STGE, a subsidiary of the Even group, located at 29-Ploudaniel. This PSL manages ultra-
cost. It ensures the reception, preparation, and distribution of products. The annual volume
the loan is 17,000 tons, in just-in-time and with delivery to the stores five times a
week.

¾ TFE Meledo, a subsidiary of the STEF-TFE group, located at 56-Vannes for fruits and vegetables. It
handles the removal, receipt, preparation, and distribution to the stores
from the Brittany region. This represents an annual volume of 30 tons, in just-in-time flow with
store supplies five times a week.

¾ STG, 35-Noyal-sur-Vilaine, for liquids (mainly water and beer). This PSL
handles 70,000 pallets over the year. It provides reception and storage services,
order preparation and distribution. He delivers to the stores twice a week. The
liquids are subject to variations in demand that are sometimes unpredictable, which is why STG
manages stock, in case of urgent need from stores, the products are available.

¾ LAHAYE based in 35-Vern-sur-Seiche for common products (grocery) and regulated

(stakes). He receives the products, prepares the orders, and distributes them to the stores.
[Link]. This represents 500,000 packages annually, with just-in-time deliveries.
twice a week.

¾ MORY, 29-Le Relecq-Kerhuon for the bazaar. The collaboration with MORY results from the

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will of the two CEOs of MORY and SCARMOR, one wanting to develop in the
region, the other looking for a provider for its 'bazar' products. These are goods
quite restrictive due to their very distinct formats and their seasonality. As a result, the
SCARMOR participated in the search for warehouses and negotiations for MORY for its
implantation in Relecq Kerhuon. This agency in Relecq Kerhuon generates 80% of its revenue
business by transporting goods on behalf of SCARMOR. This is a
management of 600,000 packages per year in just-in-time flow. The delivery rhythm is irregular, this
depends on the operations.

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VI. The logistical re-internalization

In recent years, behaviors of reinternalization have been observed (in parallel

of a trend towards outsourcing). This evolution could be attributed to;
from an effect of experience gained by industrial and commercial enterprises;
of concentration phenomena that offer the ordering parties volumes to process
able to make their own logistics tools profitable;
of a low economy;
the development of quality rental real estate limiting the effects of
previously mentioned prior investments.

Even though it is currently difficult for us to give examples of reinternalizations of

logistic functions, as they are still too marginal, this situation exists nonetheless. Here is
some examples taken from an article in the newspaper 'Le Point'29.
A bad joke. That's what the employees of the company L. first thought.
north of France, when they received, on a Monday in August, their pay slip. Instead of
their salary... a zero. Management is the first to be surprised. Like one in four companies.
in Europe, it has just entrusted the management of its payroll to an external company. And said company,
victim of a computer bug, did not check what she had sent. Mundane illustration
issues that businesses may face in the context of a
poorly managed outsourcing.
For about ten years, companies have been looking to reduce their costs and refocus.
on their core business, to entrust to others what does not directly relate to theirs
skill and therefore absorbs their margins: the cleaning of premises, the maintenance of the park
computer science, accounting, even human resource management. According to a study of
Forrester Research (2005, op cit) states that 6% of European companies would today dedicate
more than 30% of their budget on outsourcing their activities (see table). A
percentage that could double by 2008.
Outsourcing is not a given. "It's not just about ordering 10,000 parts.
Blue of such a size for the following Monday, insists Xavier Tedeschi, deputy general director.
of the management consulting firm IDRH. Outsourcing involves a sharing of risks

29
Brillet F. and Jarrige A-S, Le Point, "outsourcing: caution danger" 09/09/04 - No. 1669 - pp 84

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and know-how that can lead to a cessation of activity." A risky bet if the heart of
The profession is evolving. The cement company Lafarge has realized this after outsourcing its
logistics, that its value resided less in the production of cement than in its ability to
convey bulk materials in record time. Hence the decision to reintegrate its activity of
transport !
Scared by a number of unfortunate experiences, companies have become
more cautious. 'Too many companies have blindly handed the keys to their external providers
and they regretted it, testifies Eric Estrier, managing director of the consulting company
Unilog Management. Delegating a costly ancillary activity is fine. But, for the
stay, attention.
Many risks, therefore, for a return on investment that is not always satisfactory.
notably in terms of quality. According to a study by the consulting firm Gartner, half of the contracts
IT maintenance contracts signed by European companies do not reach
Their objectives. "59% of French companies complain about the passivity of the provider.
incapable of being a source of proposals over time," notes Laurent Hartmann from the firm
OC and C. As a result, firms are taking more and more precautions. They appoint
supplier account managers (Key Account Managers) responsible for managing contracts
outsourcing, or are finally conducting more in-depth feasibility studies before...
undoing of an activity. We are even witnessing this in the United States and, recently, in Europe.

movement of re-internalization. IBM has thus repatriated software development. Some

car manufacturers are already worried about not knowing how to make door seals or
electric beams. What would happen if the Indian or Chinese providers who
held the knowledge decided not to want to work with them anymore? Whirpool, installed
so far in Italy, has just emigrated to Romania with its Italian suppliers to whom the firm has
paid for the move. A sign that the bond is now very strong. Too strong?

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TABLE OF FIGURES

FFIGURELLEVELS OFLLOGISTICSOUTSOURCING....................................................................... 24
FFIGURE3 : RATE OF'OUTSOURCING OF LOGISTICS SERVICES INEUROPE .................. 29
FFIGURE4 : PERIMETER OF L'OFFER AND FROM THE REQUEST FOR LOGISTICAL SERVICES
OPERATIONALE .............................................................................................................. 34

FFIGURE5 : A ADVANTAGES OF L'EXTERNALIZATION....................................................................... 41

FFIGURE6 : M OPTIMIZATION OF THE LOGISTICS SCHEME OFPEUGEOTT......................................... 63
FFIGURE7 : M OPTIMIZATION OF THE LOGISTIC SCHEME OFCELTICGLOBALSSERVICES................. 65
FFIGURE8 : M OPTIMIZATION OF THE LOGISTIC SCHEME OF THESCARMOR................................... 67
FFigure9 : DISTRIBUTION OF22FACTORS............................................................................... 84
FFIGURE10:15FACTORS ON THE22ARE LITTLE OR NOT SENSITIVE TO THE DISCRIMINANT"
PARTIAL/TOTAL......................................................................................................... 85

FFIGURE11:THE FACTORS REPRESENTING SUCCESS IN PARTIAL OUTSOURCING OR

TOTAL.............................................................................................................................. 86

TABLE OF TABLES

TABLEAU1 : DEXIT D’LOGISTIC EXTERNALIZATION BY SIZE D’COMPANY................. 14

TABLEAU2 : CEUROPEAN LASSITUDE OF THEPSL...................................................... 26
TABLEAU3 : CFRENCH LASSITUDE OFPSL 28

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TABLE OF CONTENTS

ACKNOWLEDGMENTS............................................................................................... 1

RESUME

SOMMAIRE ............................................................................................................................. 4

INTRODUCTIONN.................................................................................................................... 6

PART 1: WHAT REASONS DRIVE AN ORGANIZATION TO

OUTSOURCING YOUR LOGISTICS ?

A.A CHANGING ENVIRONMENT................................................................................... 8

1. Market realitiesé ................................................................................................. 8
a. Requirements of clients.............................................................................................. 9
b. Hyper concurrence
c. Globalization markets
d. Improvement of the performance........................................................................... 10
e. Reduction costs.............................................................................................. 11
2. A new type of business is emerging ............................................................... 12
[Link] ACTORS OF THE’LOGISTICS OUTSOURCING....................................................... 14
1. The industrialists ...................................................................................................... 15
2. Distributors................................................................................................... 18
[Link] PROVIDES LOGISTICS SERVICES? ............................................................. 21
1. Evolution of carriers at PSL ................................................................. 21
2. Evolution of service offers ...................................................................... 22
f. Weight economic of service providers....................................................................... 25
[Link] SERVICES................................................................................ 29
1. The transportt .......................................................................................................... 30

2. Distribution logistics outside of transport............................................................. 31

a. Storagee .......................................................................................................... 31
b. Conditioning 32
c. Preparation of order .................................................................................... 33
3. Management logistics (stock and related IT tools) .......................... 34

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4. Supply Chain Logisticst .

5. Support and service logisticss.......................................................................... 37
the maintenance
b. The handling..................................................................................................... 38

c. The After Sales Service........................................................................................ 38

6. Return logisticss .......................................................................................... 38

PART II: IS LOGISTICS OUTSOURCING PROFITABLE? ... 40

[Link] ISSUES OF L’LOGISTICS OUTSOURCING........................................................ 40

1. The advantagess ....................................................................................................... 40

a. Research of the best cost.................................................................................. 41

b. Obtaining more skillss ....................................................................... 42
c. Flexibility and simplicity ......................................................................................... 42

d. Flexibility in human resource management ............................................ 43

e. Better quality level.................................................................................... 43
2. The disadvantages ................................................................................................. 44
a. Loss of control and know-how....................................................................... 44
b. Cost of outsourced activity too highé ............................................................. 45
c. Bad quality of the servicen ......................................................................... 45
d. Problems social ................................................................................................ 46
e. Mass heavy worke.46
the respect for confidentiality
g. The dependence on the provider ............................................................................... 47

[Link] WHAT CONDITIONS L’LOGISTICS OUTSOURCING IS-SHE IS PROFITABLE? ..... 48

1. Factors impacting the efficiency of outsourcing the logistics functione.... 48
the risk of increase in transportation cost .................................................... 48
b. Between personalization of the offer and standardization of processes .......................... 49
c. Comment include logistics outsourcing in its strategy........................... 50
2. The profitability criteria adopted by the clients ........................... 51
a. One control of outsourced activity facilitated ....................................................... 51

b. A reliable and real-time feedback.................................................... 52

c. A one more strategic offer to reduce their Supply Chain costs.............. 52
d. One knowledge of the costs related to outsourcing.............................................. 54

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3. The monitoring of service providers and services.......................................................... 54

a. Setting instead of a monitoring team or organization ................................ 55
b. Setting on performance indicators........................................................ 55
4. The weight of service providers...................................................................................... 57
a. Externalization partial or total outsourcinge ................................................ 58
b. Mono or multiple service providers................................................................................... 59

PART III: CONCRETE CASES

[Link]............................................................................................................. 61
[Link] OF THE INTERVIEWED COMPANIESS ................................................................ 62
1. An automobile manufacturer: PSA Peugeot Citroën ................................. 62
2. A logistics service provider: Celtic Global Service.......................... 64
3. A purchasing center of the LECLERC large distribution group: the
SCARMOR........................................................................................................................ 66
[Link] REALITIES ON THE GROUND............................................................................................. 68
1. The reasons for logistics outsourcing........................................................... 68
the motivations .................................................................................................... 68
b. The outsourced services.69
c. The logistics service providers................................................................................... 70
2. Is logistics outsourcing profitable? .................................................. 73
the issues ............................................................................................................ 73
b. The profitability conditions.............................................................................. 74
3. The future of logistics outsourcinge .
from logistics service to logistics industrializatione ................................... 77

CONCLUSION

BIBLIOGRAPHYE ................................................................................................................. 81

ANNEXES............................................................................................................................... 82

I. The 22 success factors of partial or total outsourcinge .............. 83

II. Example Maintenance Guiden ..................................................................... 88
III. Services insured by GEFCO RENNES. 96
IV. Services insured by CGS. 97

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V. Benefits ensured by the SCARMO providersR ......................... 98

VI. The logistics re-internalizatione ................................................................... 100

102

TABLE OF TABLES .................................................................................................. 102

TABLE OF CONTENTS ................................................................................................... 103

GLOSSARY......................................................................................................................... 107

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GLOSSARY

Advanced Planning and Scheduling SystemsAdvanced Planning and Scheduling) category

software intended for supply chain resource planning, to different
time horizons. Planning systems for all business flows (materials,
information and financials) that synchronize and optimize activities and their interfaces, from
in a global and collaborative manner, based on customer service level and margin objectives
on activities.

Advanced Provider Servicea mode that sells usage time for certain applications
through telecommunication links. These applications require technical means
and important financial aspects during the purchase, commissioning, or simply operation. The ASP
thus allows you to pay only for usage.

Co-manufacturing assembly of several references at the storage location in order to

establish a new reference. This technique helps reduce inventory by limiting the
number of references as only the basic references are stored

Completely knocked downoperation that involves transporting components or parts

detached in containers.

Co-packingaction of grouping products into lots for promotional operations. By

Example of sealing a package of manual razors with a shaving cream aerosol.

Core Businesscore business

Transaction costcost related to the use of the price mechanism. According to R.H. Coase,
Information on prices has a cost, the cost of negotiating contracts in the markets. It
affirms an operational cost of a market in 'The Nature of the Firm' (1937) in Review
of the French economy 1987, vol II,1).

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Cross-dockingan approach aimed at reducing inventory in the supply chain while preserving
the availability of the product on the shelf, based on consumer need. There is the pre-
allocation by the manufacturer or allocated order and the allocation by the distributor or
breaking on platform is the action of passing goods from the arrival point to
starting point, without going through stock.

Strategic Business Areaterm used in strategic analysis to refer to a

homogeneous field of activity, particularly in terms of key success factors

Bullwhip effect(whiplash effect) distortion of information when it rises

supply chain

Enterprise Resource Planningintegrated management software flow management software

logistics and finance of the company. Information systems where the different processes
(transactions and execution) and classic functions of a company are integrated around a
unique data and process reference.

Key Success Factorskill to master in order to succeed in the considered segment

Vertical integrationoperation by which a company absorbs another located at a

different level of the considered stream

KittingActivity that consists of carrying out the final assembly of a product. Outsourced to a
logistics service provider, it involves the management of the stock of components, their
Picking and assembly according to the orders issued by the client.

Lean Management ensembleset of practices to eradicate the causes of bad

operational performances.

Manutiquephysical storage operations, handling coupled with processing

real-time information

MOAThe Project Owner is the individual or legal entity that orders the execution.

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of a work and ensures its financing. In summary, it is the client.

MOEThe project manager is the individual or legal entity, representative of the project owner.
and responsible for the execution of the work. In summary, it is the service provider

Supply Chainsupply chain

Warehouse Management SystemInformation system for preparation, monitoring and

execution of transactional activities in the warehouse.

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