There is a lot of blurring of traditional lines of business these days. Web designers are advertising content, SEO, and more; tech companies are selling themselves as eCommerce experts; marketing companies are claiming to be tech companies. In this environment, it is natural to ask: Does one look for vendors who offer a comprehensive set of services? Or do you assemble a team of specialists who are best-in-class in their niche?
This very issue came up while meeting with a winery prospect not too long ago. They were looking for new ways to grow their business to ensure they were keeping pace with industry growth, and considering the merits of a “one-stop-shop” solution that included not only 3PL services but eCommerce support as well (including web design, server maintenance, marketing—the whole nine yards).
So let’s tackle the question: If you are growing a business, should you turn to a logistics specialist for logistics, an eCommerce specialist for eCommerce, and so on? Or do you go with a firm that provides a comprehensive set of solutions all under one roof? Let’s look at the pros and cons of the “comprehensive” approach versus the “team-of-specialists” approach.
The Comprehensive Approach
There are a number of services that might seem like a natural “fit” with logistics and fulfillment services: eCommerce, channel management, website design, marketing, and so on. Some companies are catching on and offering the whole suite of services as a way to differentiate themselves.
- Researching and contacting the vendor takes less time (the process need be done only once)
- Integration might be less of an issue
- Only have to deal with one company
- No one is an expert in everything; additional services may be subcontracted or outsourced from time to time
- Although the company might be best-in-class for one service, it might not be so for others
- Siloed departments could still face communication and integration problems
- Less freedom to shop around if one portion of the solution doesn’t work
The Team-of-Specialists Approach
Vendors who specialize in a narrow set of services within their core competency are much more likely to be best-in-class providers. Service tends to be better, prices more competitive, and technology used in ways that streamline processes. But given the narrow approach of these specialized vendors, several of them will need to be brought on board. Integration can be a challenge.
- Freedom: You are free to choose the solution that fits your organization for each need
- Able to choose best-in-class solutions for each need (fulfillment, marketing, eCommerce, etc.)
- No subcontractors and no “middle man” means less markup, more savings
- Because each vendor specializes, it is easier for them to grow a book of business and achieve economies of scale
- Shopping around the various vendors can take time and effort
- Management will have to ensure that vendors can work together
- If data need to be passed from vendor to vendor, the relevant IT systems will have to be successfully integrated
How To Tell A Vendor is ‘Offering You the Moon’
At the end of the day, most companies are not worried about vendors using one approach or another. They want to find the simplest, easiest way to get their business done.
Vendors are trying to get the most business they can, naturally. There is nothing wrong with that in principle. But sometimes, in a rush to get new business, a vendor will dabble in services well outside their areas of expertise. You know what happens next: They over-promise, under-deliver.
So what are some red flags that should warn you that a vendor is offering too much?
- There’s no discovery process. A good vendor asks questions and tries to get a feel for your business. That lets the vendor figure out what, exactly, they can do for you. If a vendor just offers a price or a package before getting clear on the details, they are selling a service, not a solution.
- They can’t say, succinctly, what their specialty is. Let’s face it, when you say “My company specializes in…” it also means there are things it doesn’t do. And that scares some people because they think it means lost business. But the opposite is true: If they can’t say what their specialty is, they either don’t have one, or they are trying to subcontract out a lot of what they do.
- They can’t say who a good “fit” is. Same principle as above. Not every market is a good fit for a vendor. If they say “We serve everyone…” that’s a bad sign.
- There’s no plan for visibility. Will your vendor let you see your data? How often do they report to you? Are processes mostly transparent? If the answers are “No, not very often, and no,” you are headed for problems later on. Having distinct processes in place to provide visibility, on the other hand, is a good sign.
As the wine industry’s’ DTC space continues to evolve, so does the role of fulfillment centers. If you would like to see a good illustration of a vendor that specializes, but that can also work as part of a team of specialists because they know the space, we offer ourselves as an example. Check out our capabilities page or contact us. We’d love to help.