A great example of this occurred in mid-November when Jaguar posted the highest score among all luxury brands in America in the J.D. Power and Associates 2010 Sales Satisfaction Index study.

Jaguar is also ranked first among luxury car brands for customer satisfaction—for the third straight year! Could it be that Jaguar’s vested alignment with Unipart Logistics has anything to do with this spectacular result? It’s not a coincidence: It has everything to do with it!

Earlier this year I wrote about a white paper written by ARC Advisory Group’s Adrian Gonzalez on behalf of Unipart Logistics. Gonzalez, an ARC analyst, also writes for ARC’s Logistics Viewpoints blog. The ARC paper, “Shared Destiny”: Key Lessons from Unipart’s Vested Outsourcing Journey with Jaguar and Vodafone is an excellent real-life case study of the Vested Outsourcing experience.

Gonzalez wrote about the realization that the Jaguar-Unipart relationship was not working very well, even though the companies had a long relationship with each other spanning more than 20 years. Meetings between top-level executives, including the CEOs for each company, led to the creation of a shared vision statement that continues to guide their business structure today. In essence they transformed the Jaguar and Unipart relationship into a vested partnership.

This underscores the need for buy-in, active involvement and trust at the CEO level in developing successful outsourcing relationships – a hallmark of Vested Outsourcing’s Five Rules. The ideas of true collaboration, trust and flexibility are embedded in the rules, especially Rule 5, Governance Structure Should Provide Insight, not Merely Oversight, and also Rule 2, Focus on Outcomes and Rule 3, Agree on Clearly Defined and Measurable Outcomes.

The J.D. Power study analyzes the new-vehicle purchase experience and is based on responses from 25,244 owners and lessees in the U.S. of new vehicles registered in May this year. Sale satisfaction is tracked based on four factors: the dealership facility; salesperson; working out the deal; and the delivery process.

With the #1 ranking I won’t be surprised if Jaguar passes their already strong sales numbers (Jaguar sales in the U.S. are up 16 percent year-to-year through October 2010 – that’s really something in this economy!).  While Jaguar gets the kudos for designing high quality cars people love, Unipart gets the kudo’s for making sure that their supply chain is delivering parts and keeping up the Jaguar image of high quality service after the sale which drives customer loyalty. I think it’s safe to say that Jaguar has overcome the image that people who drove a Jaguar needed two cars – one to drive and one sitting in the shop waiting for parts!

Jaguar is increasing U.S. sales by double-digit percentages and sales satisfaction now extends to new model lineups.  It’s a great accomplishment and one that in the long view Vested Outsourcing helped to achieve.

He talked about how a Fortune 500 company could have saved a stack of money in transportation costs by putting its freight out to bid. But the company (which must remain nameless) instead decided to honor its current rates with carriers when it could have easily squeezed them for lower rates.

The question then – and now for that matter – was why a company would willingly choose to risk its bottom line health in this manner? Gonzalez explained the company “knows that capacity will tighten again down the road, and when that day comes, it expects its carriers to maintain their commitments to them and not abandon them for other shippers offering a cent or two more per mile.”

In an update this week of this interesting situation – both from a business and a Vested Outsourcing perspective – Gonzalez notes: “Well, that day has arrived. Capacity is starting to get tight again in certain markets and rates are starting to rise. Did this shipper make the right decision?”

“The jury is still out on whether our strategy has worked or not,” the logistics executive at this company told Gonzalez. “We don’t know yet if we are going to have an advantage [relative to other shippers] or if carriers are going to decide that the temptation for quick outsized profits is just too hard to resist. How the carriers respond will ‘train’ the buyer for the next time this changes.”

What is known is that transportation rates across all logistics modes, but particularly on the part of ocean carriers, are rising dramatically just as the economy is struggling to get back on its feet and just as retailer and manufacturer inventories need to be replenished.

“It’s a struggle to get carriers to think long term,” the company executive told Gonzalez. “I’m willing to discuss different contracting terms and continuous improvement ideas with them, such as putting in price mechanisms that adjust over time and doing things at our end to turn their equipment faster, but when it gets to that second or third meeting, they just don’t know what to do.”

Gonzalez asks whether this means that many carriers lack the management know-how and sophistication to engage in more strategic and collaborative relationships with shippers. If you look at the history of shipper-carrier relations, the answer is yes. But many shippers are just as guilty of this lack of sophistication, a failure to recognize the beauty of a ‘What’s in it for We’ framework and of instead playing the strategic same old what’s-in-it-for-me muscular game.

“This experience illustrates once again how difficult it is to create vested outsourcing relationships,” Gonzalez writes. “As I’ve said before, vested outsourcing (aka performance-based outsourcing) requires a mind shift that will be difficult, if not impossible, for many 3PLs/carriers and customers.”

Difficult? Most definitely. Impossible? No. I believe the day is not too distant when shippers and carriers will realize they can prosper by getting away from treating transportation purely as a commodity (or transaction) and view it instead as part of a mutually beneficial outcome that’s based on collaboration.

One gutsy company is a great start.

More evidence of its growing buzz comes from a white paper written by ARC Advisory Group’s Adrian Gonzalez on behalf of Unipart Logistics. Gonzalez, an ARC analyst, also writes for ARC’s always interesting Logistics Viewpoints blog, including the “must-read” This Week in Logistics News, published each Friday.

Gonzalez’ ARC Brief is entitled “Shared Destiny”: Key Lessons from Unipart’s Vested Outsourcing Journey with Jaguar and Vodafone.

It’s an excellent real-life case study of the Vested Outsourcing experience, as well as a fine introduction to and description of Vested Outsourcing, which Gonzalez says is “attracting the attention of many manufacturers, retailers, third-party logistics providers (3PLs) and academics.”

The reason for the interest is simple, the 13-page paper continues: Vested Outsourcing “has the potential to transform the way 3PLs and their customers work together, resulting in greater sustained value and enhanced competitive differentiation for both parties.”

Of course those words are music to my ears and are what my book and this blog are all about: achieving mutually beneficial ‘win-win’ outcomes through collaboration at the contracting level.

Gonzalez rightly points out that while Vested Outsourcing is not a new concept – it has been used successfully by the Department of Defense and the aerospace industry, along with some examples in IT and facilities management outsourcing contracts – there are very few pure examples of it in the broader contract logistics market. This is why this study of the Unipart experience is of special interest.

ARC interviewed three senior executives at Unipart who spoke candidly about the company’s outsourcing relationships: With Jaguar in aftermarket parts fulfillment in the UK and with Vodaphone, in which Unipart managed the company’s warehousing and distribution operations in the UK. Unipart started working with Jaguar nearly 25 years ago, and it began working with Vodaphone in 1999.

In each case, neither relationship was initially based on Vested Outsourcing principles, and early on there were strains, including a lot of non-value-added activity and a lot of blame.

Eventually there came the realization that the Jaguar-Unipart relationship was not working very well. Subsequent meetings between top executives led to the creation of a shared vision statement that continues to guide their business structure today.

A similar transformation occurred with the Unipart-Vodaphone relationship, with Vodaphone deciding early in the relationship that logistics was not a core competency, leading eventually to a stronger relationship and a high degree of trust between the companies, also at the top level.

Gonzalez concludes that both cases underscore the need for buy-in, active involvement and trust at the CEO level in developing successful outsourcing relationships.

Yet an ARC survey last year of 100 logistics executives found that 62 percent of those responding said their CEO was “not involved at all in the 3PL evaluation and selection process.”

That’s a really important point because the key to a truly vested and collaborative outsourcing relationship should come straight from the top.

As the white paper states: “If the CEOs are missing from the relationship, the likelihood of it becoming more long-term and strategic is very low.”

ARC makes other valuable points about the importance of trusting each company’s expertise, having a clear “shared vision” statement with end customer focus, a contract structure that encourages independent action, flexibility and the need to “provide insight, not just oversight.”

The latter point addresses a common complaint about 3PLs – that they are not proactive enough in identifying continuous improvement opportunities. That problem is also identified in Vested Outsourcing’s 10 Ailments, including #6 – Sandbagging, and # 7 – The Zero-Sum Game. It’s addressed head-on in the Five Rules, especially Rule # 5 Governance Structure Should Provide Insight, not Merely Oversight, and also Rule # 2 – Focus on Outcomes, and Rule # 3 – Agree on Clearly Defined and Measurable Outcomes.

I also like the paper’s conclusion, which acknowledges that not all companies and customers are suited for a Vested Outsourcing relationship. CEO involvement is critical, and even then Vested Outsourcing is a long and often difficult journey. “But to borrow a phrase from the poet Robert Frost, Vested Outsourcing is ‘the road less traveled,’ and for Unipart, Jaguar and Vodaphone, that has made all the difference.”

Yes, it can all fit together; working together toward a shared destiny really can work.