Two and a half party logistics

Cological’s Peter Jones talks “2.5-party logistics” – and the benefits to be reaped from this innovative new business model.

Within the third party logistics (3PL) market, companies have traditionally helped businesses from the outside by providing shared infrastructure and resources. While it’s great at saving costs in theory, in practice it does requires businesses to invest in new IT structures and infrastructure they’ll never own. Furthermore, many companies do have their own warehouses they can use for their supply chain – often left idle following a move to 3PL.

This leaves small- to medium-sized businesses with two options – either invest heavily in upgrading their own warehouse skills or invest to integrate with a 3PL provider. 

There is, actually, a third option. Enter the 2.5PL model, offered by Cological in Australia. 

It’s a model where businesses can outsource supply chain services on site, without having to invest in new IT and infrastructure. Providers like Cological take over operations at the existing warehouse. Peter Jones, Founder of the Logical Group, says it’s a way for companies to improve their operations, while not having to fully outsource them. 

“Because we stay on site, the client remains engaged within their supply chain rather than having it handed across the fence,” he says. 

Peter notes sister company Prological’s oversight is fundamental in providing the required intelligent solutions, while helping improve the day-to-day operations. 

More and more companies are adopting the strategy across Europe and North America, but it remains uncommon in Australia’s small to medium sector. BMW and Mercedes are rare examples who do use supply chain experts on their Melbourne and Sydney facilities. 

Peter notes that a major advantage of this 2.5PL strategy is that it reduces the logistical and financial blow of changing a company’s range of systems and infrastructure. It’s effectively outsourcing through insourcing, he says, as IP and headcount is curated by the 2.5PL all from within the business’s own four walls. 

“We don’t carry the overheads of a traditional 3PL company. We don’t have IT systems and infrastructure and heavy insurance policies and everything that goes along with that,” Peter says. 

The rise of online consumer activity, Peter says, has presented significant opportunities for business-to-consumer (B2C) supply chains. Companies that deliver directly to the customer, like Amazon, have their operations set up for this interaction from the start. But what about businesses who have historically relied on business-to-business (B2B) sales trying to break into the consumer market?

Peter says many warehouses are designed for mass orders and aren’t equipped to handle the velocity of outbound products in a B2C transaction, which is a very different profile to wholesale purchases. Packing a pallet of 50 shoes is a very different process to 50 individual boxes purchased by online clicks. 

“Warehouses haven’t been able to transition their design anywhere near as quickly as the transition in consumer behaviour has occurred,” Peter says.

He emphasises that the size of the tasks and number of activities to fulfil for B2C sales can be difficult to fulfil in an environment designed for B2B. 

“We’ve been involved with a few firms recently who are looking to move their B2C to different sites so they can set them up new,” he says. “In doing that, they’re not compromising their B2B environment.” 

This is where Cological can come in and offer a staged approach to improving warehouse operations. The picking task in warehouses is ordinarily the most time consuming, and where the most resources are spent. 

Once picking becomes seamless, Peter says, velocity will increase – putting pressure on staging and outbound processes. One positive change can cause a chain reaction, so solutions have to transition activity development with each other to ensure the best possible efficiency. 

Cological prides itself on being passionate about manufacturing and supporting medium and small Australian businesses. Peter says using client strengths to foster growth needs to be a unified process between partners. He hopes this model of the 2.5PL might facilitate the next sector within the logistics marketplace. 

“We need our clients to be successful as well,” he says. “We have expertise – but we don’t know their industry, we don’t know their business. For us to succeed we must partner up together.” 

For more information on Cological Australia’s logistics solutions, click here.