fastlane
What goes around comes around
RICK BLASGEN OF THE COUNCIL OF SUPPLY CHAIN
Management Professionals recently floated the idea of assembling
some of the group’s more senior members to talk about the profession and how it progressed to where it is today. Personally, I think
it’s a wonderful idea. It’s not just that a look back at the industry’s
history would be interesting; it would also be educational. Better
yet, it would provide an opportunity to clear up a few myths and
misconceptions.
For instance, there seems to be widespread confusion about the
origins of outsourcing. A newly published white paper stated that
While outsourcing has gained renewed
emphasis in the last 20 years, the practice can be
traced back almost as far as one would care to
research it. I think it’s important to set the story
straight.
In his book Warehousing Profitably, Ken
Ackerman suggests that one of the first business
logistics arrangements is described in the Bible
(Genesis, Chapter 41). The passage he cites is an
account of how the people of Egypt prepared for
the predicted seven years of famine by stockpiling crops in public
storehouses for distribution during the lean times. In Europe, a
number of logistics service providers (LSPs) can trace their origins
back to the Middle Ages. The first commercial warehouse operations were established in Venice, Italy, in the 19th century and
served as collection and distribution points for merchants from all
across Europe. In a nutshell, any person or firm that has ever subcontracted an activity has outsourced.
As for more recent history, the 1950s and 1960s saw an upsurge
in the outsourcing of warehousing and transportation. The relationships, for the most part, were short term, but a few companies—like DuPont and Quaker Oats—engaged in long-term outsourcing agreements. During the 1970s, manufacturers placed
heavy emphasis on cost reduction and improved productivity.
Longer-term relationships became more common, particularly in
the warehousing area. Single-tenant facilities were built and operated by warehouse companies in major markets across the United
States.
The 1980s brought a wave of mergers and
acquisitions, and in many cases, firms found
themselves saddled with more DCs than they
could possibly need. Consolidation became a
necessity, and many of the new facilities were
outsourced. By 1990, corporations were showing
increased interest in contracting out any activities that weren’t directly related to the company’s
core business. More and more companies came
to realize that the real competitive edge was to be
found in enhanced customer service and relationships, and many turned to outsourcing as an
effective method of accomplishing this.
The end of the decade saw
a flurry of mergers and consolidations among LSPs, and
users of these services found
themselves dealing with different companies and individuals, as well as different
cultures. Mergers introduced larger, and in many
cases, foreign entities into
the outsourcing equation.
Many of these alliances were a response to the
increasing global needs of outsourcing firms.
The first decade of the 2000s brought us a
bigger and better industry with more sophisticated providers and expanded services, particularly in the technology area. Today, the industry continues to expand, and concepts such as
vested outsourcing are beginning to take hold.
But let’s not forget our roots. In the words of
philosopher and essayist George Santayana,
“Those who cannot remember the past are
condemned to repeat it.” ;
Clifford F. Lynch is principal of C.F. Lynch & Associates, a
provider of logistics management advisory services, and author
of Logistics Outsourcing – A Management Guide and co-author of
The Role of Transportation in the Supply Chain. He can be reached
at cliff@cflynch.com.
