Logistics Management senior editor Jeff Berman had an opportunity to speak with Pattullo about his new role as CEO of the fifth-largest 3PL (third-party logistics services provider), with slightly more than $7.8 billion in 2006 gross revenues, according to Armstrong & Associates, a supply chain consultancy, and roughly 50,000 employees, operating in more than 100 countries.

John Pattullo, former COO of the EMEA division of Exel Supply Chain and a 30-year veteran at Procter & Gamble in global marketing, logistics, and sales roles, recently began his new duties as CEO of CEVA Logistics, a provider of global supply chain and logistics services.

Pattullo succeeds Dave Kulik, who will now serve as vice chairman of the board of directors of CEVA Group Plc., a subsidiary of Apollo Management Ltd., CEVA’s parent company.

LM: What is your take on the current state of the global 3PL market?
JP: It is a very healthy market globally right now with seven to eight percent growth and with a lot of activity in some emerging economies, most notably in Eastern Europe. As an industry, we’ve got a very good track record of delivering cost savings to our customers. But there are a couple of areas where we need to do more.

LM: Which ones are those?
JP: First, there is product innovation. Our industry does not have a particularly strong record of breakthrough, innovative products [from a services and IT perspective]. It has to do with IT tools that provide customers with better control and visibility, and expanding to new product areas within the supply chain and coming up with products in areas that customers are looking for more practical help from in this industry.

Secondly, we are more and more trying to look at our most senior levels of customers’ end-to-end supply chain propositions. Things are happening in both areas; we just need to do more of it to supplement what I think is a good story on customer cost reduction.

LM: What about the ongoing trend of 3PL industry consolidation? It seems like the “new normal” in a way.
JP: One thing to remember is that this [3PL] market is pretty fragmented. As the market leader, DHL, for example, has a market share of six-to-seven percent. If you contrast that with many other markets, it is still relatively fragmented. That said, there is still a strong trend of consolidation occurring, and—to some extent—we are following our customers, because in the last 20 years there has been a trend of customers moving from operating on a country basis (and rarely above that) to a regional level and now more and more customers want to operate their supply chains on a global basis. And they expect the industry to follow and meet their global infrastructure requirements and global capabilities and that is a good thing for both parties.

LM: Are there any other factors that come into play regarding industry consolidation?
JP: The other consequence of consolidation is that it can allow for much stronger, faster leveraging and best practices. With CEVA, for example, there is a lot of know how on lean principles and that can now be rolled out globally to all of our sites relatively quickly. In the past, best practices tended to travel more slowly across more fragmented industries. It helps our customers to have them travel faster.

LM: With the recent news regarding CEVA’s acquisition of EGL, it was stated that the new company will be comprised of two groups: CEVA Contract Logistics and CEVA Freight Management. How are things going so far with the new entity?
JP: Things are off to good start. Having come from DHL/Exel, I have seen a fair amount of acquisitions and mergers, and it is very unusual to find a situation like the one we have with this, where both companies are so completely enthusiastic. Usually one party in the “marriage” feels like it is being dragged to the altar, but this is a situation where the senior employees in both companies are enthusiastic because they see it as a perfect fit—in terms of CEVA bringing contract logistics and EGL bringing freight forwarding. And CEVA is strong in automotive, EGL is strong in electronics, energy, and retail. CEVA is strong in Europe, and EGL in the U.S. and Asia, so things are very complimentary.

LM: What are the biggest challenges in this integration?
JP: Channeling all this enthusiasm into a homogenous culture that has its own character separate from TNT and EGL. The biggest challenge is going to be creating that. The other challenge is to be selective. There is such a good complementariness between the two companies that when you get half a dozen senior managers together, you are getting 50 good ideas. There is no way to implement so many, so we need to be selective about the business opportunities and the projects we focus on.

LM: In terms of shipper feedback. What are you hearing from them, regarding what their biggest obstacles are in day-to-day operations? In what ways are they most looking to 3PLs to help solve their problems?
JP: One is communication where a shipper says ‘look, we really want to have a senior account manager with whom we can work on both strategic opportunities and day-to-day problem solving.’ There is a lot of interest in more strategically-oriented structures, which allow a 3PL to have a senior leader responsible for an account, which contrasts with how things were many years ago, when a 3PL typically would have had somebody in every country handling that account. Now they want to have a senior person that they can communicate with. The other thing is consistency. Gone are the days when you spend a meeting talking about how “wonderful” the top 20 percent of the operations are. Our customers are now more interested in getting the bottom 20 percent up to the standard of the top and having much less performance unsteadiness. This is a result of customers becoming more regional and more global. They want to drive up the standards of the weaker operations. I think it is good for the industry but different from the dialogue that occurred a few years ago.

Source: Logistics Management

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