The managing director of a leading third party logistics services company has called for the introduction of an industry-wide ombudsman facility to monitor the working practices and pricing structures of those companies that supply IT services – such as warehouse management systems – to the supply chain sector.
“There seems to be a culture among some IT suppliers that leads them to focus on extracting as much revenue from their clients as they possibly can,” says Mark Elward, managing director of West Midlands-based DK Fulfilment.
“Of course, I completely recognise and accept that we live in a commercial world but some of the fees that suppliers try to charge for undertaking what appear to be the most straightforward tasks are, in my view, completely unreasonable.
“And from conversations I have had with colleagues in the industry, I am not the only who feels this way.
“The establishment of an impartial Ombudsman body to regulate the sector and resolve disputes would, I believe, be a positive step.”
Part of the problem, Mark Elward contends, is that some IT systems suppliers attempt to over-complicate the nature of the technology they deliver and create a ‘false mystique’ about it as a way of justifying their high fees.
“It’s almost like taking your car to the garage. If you don’t understand motor mechanics you are at the mercy of the garage and rely on them to diagnose your problem and carry out the work honestly and at a fair price.
“It seems that every time some minor modification has to be carried, logistics companies are told that the work will take at least three days and, of course, in most cases, the daily rate charged by an IT supplier is not insignificant!”
Mark Elward would like all IT suppliers to adopt more of a ‘true partnership’ approach when responding to their clients’ needs and feels that both parties would benefit from such an attitude.
“In an industry as price sensitive as logistics, the extra cost could be the difference between winning and losing the new business. If the 3PL doesn’t win the contract due to cost competitiveness, the IT supplier misses out on the chance to supply the new barcode scanners and pack stations that the 3PL would need to hire to run the account, so both parties ultimately lose out.”
To limit operating costs – and, ultimately, provide optimum value to their client companies – DK Fulfilment recommend that 3PL operators takes a robust approach to negotiating with their IT suppliers.
“In my experience, some account managers that represent IT suppliers are not particularly IT savvy. They are sales people first and foremost and will try to charge what they can. Query the amount of ‘development work’ that they claim is required the next time your IT needs to be worked upon. There are always savings to be made – which is good news for you and good news for your clients.”