What will be the next big trend in the supply chain industry? I believe the watchwords will be “supply chain convergence.”

In the 1990s, convergence meant the fusion of warehousing, freight forwarding, and transportation management to produce lead logistics providers or 4PLs. Companies like Menlo, UPS, Kuehne & Nagel, and others developed integrated supply chain solutions and enabled customers to reduce logistics suppliers.

Today, companies are increasingly choosing to compete by combining services. For instance, PWC Logistics acquired GeoLogistics, Trans-Link, and Transoceanic in order to add freight forwarding, event logistics, and project logistics to their arsenal of contract warehousing-based capabilities.

In the current decade, we are beginning to see the emergence of the next big wave of convergence: the combination of outsourced logistics with other forms of outsourcing. For example, in a recent survey of logistics CEOs at the International Warehousing and Logistics Association (IWLA), we found that, out of five questions, the topic that generated the highest level of interest was: “Where logistics outsourcing converges with other outsourcing.”

Increasingly, as other outsourcing markets mature alongside logistics, we will see convergence.

Consequently, smart logistics executives are watching other outsourcing industries for new ideas. General Motors, for instance, has just reconfigured their outsourcing of IT. Historically, GM relied on a large number of outsourced IT providers, played a hands-off role, and signed long-term contracts. But today, its objectives are to reduce the set of IT outsourcing candidates to a top-6 group, manage the outsourcing contracts more actively, and shorten contracts from 10 years down to 5.

Logistics outsourcing contracts are likely to follow the same path as the IT outsourcing route and aggressive IT outsourcers are seeking logistics partners. Some are even pursuing mergers. Companies like EDS, Accenture, and other IT firms are looking at logistics acquisitions as a way to extend their outsourcing capabilities. Meanwhile, logistics companies like New Breed and Menlo are bolstering their IT capabilities in a bid to accomplish a similar goal.

Forward-thinking logistics companies are responding by combining new services to provide more integrated solutions. A prime example is Power Group, which sold to Exel in September 2002. Exel, a $7 billion global logistics company, transformed itself from value-added warehousing into full-blown supply chain solutions through a targeted acquisition and in 2002 expanded into contract manufacturing and packaging with the purchase of Power.

Why was this warehousing-packaging combination such a valuable deal? In short, it provided the ability to combine manufacturing, packaging and supply chain services into an integrated solution to create value for customers. It also enabled Exel to transfer Power Packaging’s core skills and expertise in dry food and beverage to other product categories. Finally, it enabled Exel to improve utilization of existing warehouse facilities, while also raising the revenue per square foot that the warehouse-based logistics giant could accomplish.

As outsourced supply chain services converge, the winners will be those that continue to evolve.