DHL Extends Into Procurement BPO — But Will It Get Past Logistics to Become More Than a 3PL?

DHL, one of the worlds largest freight providers and 3PLs, just announced its intent to pursue the procurement BPO market by delivering solutions to both public and private sector companies. From the location and direction of the announcement, it appears that much of the new venture's focus will be on the UK market. According to the press release, DHL is launching "a procurement outsourcing service designed to help public and private sector organizations around the world achieve substantial cost-savings through transformational sourcing of products and services ... The new team, which will be based in the UK, will be headed by Roger West, former Procurement Director of NHS Supply Chain (NHSSC), a DHL business procurement unit created in 2006 under contract to the UK Department of Health tasked with delivering £1 billion of savings to the National Health Service." The unit, "called DHL Procurement Outsourcing, aims to work closely with both the public and private sectors to help drive down costs at a time when the economic background is particularly challenging."

What's interesting to me about this is not just that DHL is trying to build from a one-off procurement initiative in the UK market, where it's been at least moderately successful, but that a logistics provider and 3PL is targeting the BPO market. Ironically, DHL would not have been at the top of my shortlist of 3PLs to pursue this market -- Exel, Ryder, CH Robinson, UPS and FedEx would have all ranked higher. Yet I suspect it won't be long before these providers become more aggressive around procurement and supply chain BPO as well. After all, these organizations are one step closer to the movement and management of direct materials than the great majority of the procurement BPOs -- both onshore and off -- and are already targeting the largely indirect spend outsourcing market.

It's not too hard to see this cadre of 3PLs moving upstream into sourcing and procurement for both direct and indirect materials. Moreover, I think they'll collectively be in a better position than other services providers to get into supply chain auditing and management as a service on a massive scale, combining expert services, software and a worldwide network (think Achilles + Aravo on global steroids). So while DHL might be an early mover here, don't think for a minute that they'll be the last. I personally look forward to tracking their progress -- and that of others -- as the 3PL and procurement BPO market begins to take a step closer together. In many ways, DHL's entrance (and the future entrance of their 3PL competitors) into this space is far more exciting for what it may mean in terms of global procurement and supply chain management innovation than what traditional BPO onshore (e.g., IBM, Accenture, ICG Commerce) and offshore (Genpact, Infosys, Wipro, WNS, Mahindra, HCL, Aditya Birla Minacs, etc.) providers are positioning today in largely undifferentiated ways.

- Jason Busch

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