From implementing contracts, monitoring procurement KPIs and offering procurement choices to track all costs across products and services, the new IBX Capture Spend Cloud streamlines the procurement process and allows organizations to capture the benefit of on-line spending, which is often wasted due to lack of compliance with procurement standards. This solution, that combines a consumer-like experience with scalability for global roll-outs, integrates with all major eProcurement systems and links contracts to operational processes to provide improved contract compliance. It will be available across all key markets including the United States, the UK, France, Germany, Netherlands and the Nordic countries.

At the same time, 65 percent of shippers reported an increase in the use of outsourced logistics services relative to total logistics services, suggesting that while outsourcing may have increased, expenditure on Third Party Logistics (3PL) services overall has decreased.

This is the result of the current study “Third Party Logistics” from Capgemini Consulting, the Georgiy Institute of Technology and the global logistics provider, Panalpina. 1,900 companies and logistics providers participated in the study. The 3PL study has been analysing the developments on the market for logistics services since 1995. This 15. issue focuses on the so-called “total landed cost” as well as on the industries Life Sciences and Fast Moving Consumer Goods (FMCG).

Challenge of Global Sourcing

One of the critical capabilities most highly valued by shippers in their 3PL provider is accurate reporting and analysis of total landed cost (TLC) – the sum of all costs associated with making and delivering products to the point where they produce revenue. The benefits of solid TLC calculations include more agility and confidence in decision making, better insight into the financial performance of products and partners and improved supply chain visibility. However, despite the relatively high number of shipper respondents reporting an extensive use of TLC (45 percent), the precision and level of detail of those calculations differ widely.

Calculating the TLC of materials and finished goods is not always an easy task. Difficulty in defining all the factors contributing to total cost, and then obtaining all the necessary data, can be challenging. Too often, businesses rely on only partial data or inaccurate estimates that can lead to incorrect results, with 58 percent of 3PLs reporting a hesitance from shippers to share information with them. That might be the reason why, despite the high value of TLC calculations, just 23 percent of 3PL respondents reported providing extensive TLC analysis to their customers.

Life Sciences Industry: 3PLs have to link

Within the Life Sciences industry, careful and expedient handling is often critical for product safety and because of this, control and visibility is essential. Logistics challenges here include product integrity and compliance requirements, an inherently complex trading partner ecosystem and demanding customer service and cost requirements. 54 percent of life sciences shippers surveyed felt the complexity of the supply chain model represents a significant challenge, but 87 percent felt 3PLs could add significant value here by linking together the various different parties involved. In addition, 62 percent of shippers within the Life Sciences industry cite ensuring product quality as a significant challenge and rank quality procedures highly (70 percent) as a service they want 3PLs to provide. Momentum is moving towards the use of “radio frequency identification” (RFID) tags here. Around half of shippers and 3PL respondents agree that there is a strong business case for RFID in Life Sciences.

Sustainable Logistics for Fast-Moving Consumer Goods (FMCG) Industry

Large volumes and low margins mean FMCG companies must respond quickly to deliver in-demand, on-trend products to increasingly demanding shippers. After cost reduction, FMCG companies’ biggest priorities for logistics include perfect order fulfillment (87 percent), rapidly sensing and responding to changes in consumer demand (83 percent) and shortening new product time-to-market and supply chain integration (81 percent).

Also, as sustainability grows in importance for consumers, shippers’ interest in strategies such as improving shipment density and load utilization has also increased. Shippers within the FMCG industry value the role 3PLs play here, as well as with reducing costs and dealing with supply chain disruption, although are less likely to see 3PLs playing a key role in shortening new product time-to-market and supply chain integration. FMCG shippers’ efforts to reduce logistics costs include warehouse and transportation sharing. Two-thirds of those engaging in these strategies have recognized cost savings but this has been limited, with 58 percent of respondents recognizing less than 5 percent cost savings.

The complete study for download free of charge: 2010 Third Party Logistics

“With its Remote Infrastructure Management capabilities and strong presence in Germany, Capgemini is the ideal partner for a cost optimised IT process management,” says Chief Process Officer Michael Staade of Grohe. Oliver Schwarz, Head of Outsourcing Services Capgemini in the region Germany, Austria and Switzerland, also underlines this aspect in establishing a solid basis for the future collaboration: “For Grohe, we will be able to leverage our global Infrastructure Transformation Services to sustainably optimise the company’s IT services processes. We look forward to taking over this assignment for our new client.”

Grohe AG has some 5,000 employees and generated annual revenues of about EUR 826m in 2009. Grohe maintains three production sites in Germany (Hemer, Lahr, Porta Westfalica) as well as in Canada, Portugal, and Thailand. The company is represented in more than 130 countries.

Present in more than 30 countries, Capgemini reported 2009 global revenues of EUR 8.4 billion and employs 95,000 people worldwide.

Capgemini Outsourcing Services (OS) draws on the expertise of more than 25,000 employees to manage, innovate and improve the IT systems and business processes of its clients. Capgemini OS offers services including Applications Outsourcing, Infrastructure Outsourcing, Business Process Outsourcing and Transformational Outsourcing.

Figure: Grohe Corporate Center in Duesseldorf (photo: Grohe AG)

Nevertheless they are still 2.2% under the level Q2 2008. The significant increase in demand for transport services is one of the main drivers for the price increase. The capacity index, an indicator of available transport capacity, decreased by 44% in Q2 compared with Q1 2010.

Based on these volatile price developments traditional long-term sourcing strategies may not lead to the expected financial benefits that logistics managers are striving for. Experts recommend to adjust existing strategies for realizing benefits in the current market dynamics. The economic outlook as well as the issue of sustainability will lead to new, innovative sourcing strategies in transport.

Erwin den Exter, Principal Consultant at Capgemini Consulting, said: “We have seen a significant price increase during the second quarter, especially during the first months. The increase slowed down in June, but we still see an increasing trend”.

Peter Förster, Managing Director of Transporean GmbH, added: “Taking into account today’s market dynamics, traditional sourcing strategies may not bring the expected financial benefits that logistics managers are aiming for. In 2006 we had a similar situation, many tried to fix the prices for a longer period as they had expected prices to increase even more in the following year. In 2007 they realised the opposite: they were stuck in high 2006 prices whereas the market prices had decreased significantly in the meantime.”

Further Details: Transport Market Monitor (August 2010)

From left to right: Johan Bygge, CFO, Investor AB Hans Swoltin, Group Legal Counsel, Finance, Insurance and M&A, LM Ericsson  Johan Wolf, Investment Manager, SEB Venture Capital José Gonzalo, Group Head of M&A operations, Capgemini

Having collaborated together since summer 2009, Capgemini and IBX decided to join forces in order to drive development of a new global procurement service offering and further expand the addressable market for IBX’s technology. According to them, the deal adds IBX’s strength in software-as-a-service purchasing technology to Capgemini’s global sourcing, business process outsourcing (BPO) and transformation expertise.

According to the consultants and analysts of AMR Research, outsourcing of supply management processes has grown in recent years: “The market grew 30 percent in one year, driven by procurement and strategic sourcing services being offshored to India in record numbers.” With a solid track record on the BPO procurement area, Capgemini is ready to tackle this new growth opportunity and will make use of its Rightshore delivery network including strong offshore operations in India, China, Brazil and Poland.

IBX, a recognised pioneer in the field of e-purchasing, is headquartered in Stockholm, with 240 employees located across Europe and in the US. The company is a strong cash-generating company with 30 million Euros of revenues and an EBITDA margin of 16 percent. IBX operates 2 million purchase orders per year – a purchasing volume of 12 billion Euros – for more than 200,000 end users. Its clients include some of the largest and most recognized corporations in the world including Ericsson, Kraft Foods, IKEA, Deutsche Post DHL, LEGO System, Skanska and Deutsche Lufthansa.

“Joining forces with Capgemini strengthens our global capabilities, paving the way for the next generation of a Procurement-as-a-Service provider. Collaboration with Capgemini started in late summer and has been very positive. Capgemini’s competence within outsourcing and procurement and global reach is very impressive. When combined with IBX’s software-as-a-service purchasing technology platform, global supplier network and sourcing and procurement expertise, we will be able to provide even better solutions for our customers”, said Leif Bohlin, CEO of IBX Group and newly appointed head of the new, combined procurement BPO service entity.

“Procurement platforms can provide immediate gains for companies looking to outsource processes. In addition, we enable clients to manage their sourcing strategy on a global basis, helping them manage their business better,” said Hubert Giraud, global leader of Capgemini BPO. “Now that our unique offering provides the end-to-end capabilities from transformation consulting to global sourcing, organizations need only seek a single partner for procurement outsourcing. Not only does the fully integrated approach achieve significant savings faster, the required investment to recognize and achieve the saving is also less.”

The new end-to-end BPO procurement solution will include, according to Capgemini, a full suite of products & services, including business process outsourcing, the software-as-a-service procurement platform, and an established global supplier network with more than 20,000 suppliers.

The transaction should be finalized by the end of February, subject to the approval of the relevant anti-trust authorities.

„Although the total number of SCM projects for 2009 has not decreased by the crisis, changes in the goal setting have become visible,” says Dr Martin Raab (photo), Head of SCM at Capgemini Consulting.

Since the beginning of the crisis, managers have focussed on projects involving fast cost cutting or better contract terms. The top ten of current SCM projects are led by steps aimed at warehouse optimization (48 percent), followed closely by strategic SCM projects (45 percent) and projects for long-term planning and forecasting (44 percent).

“The study makes clear however that, for managers, a short term success through warehouse optimization or contract renogatiations has priority over those SCM projects with a long-term effect,” states Dr Martin Raab. A loss of 14 percentage points shows that strategic SCM projects are the clear loser of the crisis. This does not really surprise Dr Martin Raab who points out a considerable risk involved: “Now is the time for cost cutting to be combined with innovation and process optimization. This is the only way to achieve a competitive edge that will be of use right after the recession.”

The complete study „Crisis dominates the supply chain agenda in 2009“ can be downloaded at Capgemini.