August 2009 | Commentary | 3PL Line

Learning to Play by New Rules: Managing Logistics Through the Recession

Tags: 3PL

Managing a global business today is brutal. The collective business wisdom is being tested, and our organizations' hard work on strategy, lean management, and disciplined forecasting and operations planning can't wipe away current economic woes.

The global supply chain isn't broken, but we're dealing with a game-changing scenario. As the economy plays havoc with volume, trade patterns, and economies of scale, industry executives are realizing the old ways of doing business may not get us to the future. Put bluntly, survival is at stake.

THE STRATEGIC VIEW

Restructuring is not simply cutting costs or consolidating organizations; we need a fundamental shift in how we leverage our strengths. For companies with extended global supply chains, logistics management is usually viewed as strategic—or at least proprietary. Despite massive enterprise resource planning (ERP) advances over the past decade—or maybe as a consequence of ERP implementations—logistics management largely remains a tactically driven, data-overloaded, but strategically starved operation.

Information is the key to making the shift to strategic logistics management. Industry managers at all levels need a platform to capture, connect, communicate, and control network operations data. It's the intelligence needed to operate strategically—and the opportunity to spend less time chasing down problem resolution. Following are some strategies to consider.

  • Invest in data intelligence. From simple visibility to comprehensive data integration, global business managers must have access to actionable information at their fingertips. Shipment data—real-time and active history—is powerful information for revenue-focused managers.
  • Share your network. Multi-enterprise networks offer businesses the efficiency benefits that only the largest enterprises typically capture, with little downside risk. Collaboration, even if limited to "overflow" freight volume, will drive cost reduction, innovation, and benchmark insight.
  • Outsource what isn't essential. Payroll processing was once considered a core business function—but not anymore. Specialized logistics functions, such as freight forwarding, have traditionally been outsourced. Candidates for successful outsourcing are the data-driven, rules-based processes that impact multiple functions. Ironically, it's sometimes easier to manage continuous improvement when an outside influence keeps everyone honest.

Every company in every industry should look at these strategies with a fresh eye. Companies closer to the end user were first to embrace managed logistics alternatives. Now, out of necessity, those at the far end of the value chain need to as well.

WHO MAKES THE DECISION?

Selecting the partner to manage the logistics business process is a critical step. True strategic partners are chosen based on a thorough and honest assessment of your organization's culture, capabilities, and customers. All logistics outsourcing should be a C-level or senior management strategic decision.

Complexity should not be a barrier to these business process management alternatives. From a CEO's perspective, the key questions are these:

  • Does my outsourced provider match my commitment to operational excellence?
  • Does it understand how my business succeeds?
  • Can it help me attain a level of performance that I can't otherwise afford or manage as efficiently?

Companies often achieve greater control over the business logistics process—at lower total cost—after turning over day-to-day management and responsibility to a third-party logistics provider. And those that set up their ERP as the system of record have direct access to comprehensive supply chain information—whether they're in logistics, pricing, sales, or any other role—because transaction management data flows seamlessly from the outsourced logistics provider's platform into their system. It is actionable information at their fingertips.

Global companies realize the value of investing in enhancing core technology capabilities to capture and intelligently manipulate data that is used to optimize execution across multiple modes and enterprises.

To stay on top of this complexity, freight specialist teams—experts in mode management and product handling—need to manage clients' entire transportation operation using a sophisticated technology platform and business process.

Service providers know how to push the limits to find more systematic efficiencies, without sacrificing quality. Sometimes they even discover and plug safety gaps in client operations, significantly reducing their risk profile. Logistics providers know how to help carriers increase asset utilization—and understand how to increase shipment quality performance. The combination reduces cost at the front end and gives outsourcers the information they need to manage in very dynamic market conditions.

STRENGTHENING THE CORE

It comes down to business leaders realizing that they need to focus intently on what they do best and remove all distractions. In the end, companies will increase their profitability by concentrating on their core competencies, knowing that their logistics will be well-managed and continually monitored to uncover savings and trim costs.

In an economy where companies seem to be fighting a losing battle with keeping logistics costs in line, a managed service provider could offer a solution to keeping products moving while saving time, money, and overhead.