July 2003 | Commentary | Checking In

Navigating by Gyroscope

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Sociologist David Reisman suggests that there are two types of
political people: gyroscopic—those having internal guidance on issues, and radar—those bouncing off and navigating their issue positions by interacting with others.

We find similar behavioral patterns in operation by those providing outsourced services in a stressed economy. Do they navigate their way to survivability and prosperity by bouncing off you—their customers—providing anything and trying everything to that purpose? Or do they stay true to their gyroscope, their core expertise, offering select solutions, seeking to outflank economic privation by out-niche'ing the competition and becoming a long-term trusted partner to their customers?

Gyroscopic 3PLs have advantages and disadvantages. If they bet on the industry segment or specialty that grows faster than the economy, they can win. But 3PL specialization puts all the eggs in one basket. For example, gyroscopic navigation around the cable communications industry hurt one 3PL, who is looking to diversify now that that segment is stressed by recent mergers and missteps.

The advantage to being a gyroscopic 3PL is a laser-like focus on a limited set of challenges or industries, developing tried-and- true solutions that are more likely to enhance performance for customers.

Radar 3PLs are generalists, insulating themselves from downticks in particular segments. But if the overall economy is down, then they track that trend very closely. A down economy predisposes all 3PLs to act in a radar fashion as they desperately try anything, from going back to warehousing or truck leasing to attempting solutions they are not yet expert at.

Mitigating this trend somewhat is the countercyclical nature of an uptick in outsourcing as more companies try to limit the risk of a down economy.

3PLs are predisposed to radar-like behavior for five main reasons:

  1. Evolving IT solutions.
  2. Scope creep.
  3. The fundamental cross-function and extra-enterprise nature of outsourcing logistics.
  4. The 3PL value proposition requires a very high level of flexibility.
  5. They want to sell you.

Radar, radar, radar, and radar. And radar.

It appears that radar navigation will be the way 3PLs behave. That affords customers certain benefits—primarily flexibility. But there are risks, too—dilution of the value proposition and over-extension leading to expectation gaps, failures, and even worse. Perhaps as the economy picks up 3PLs are more disposed to return to specialization.

Even if your 3PL is destined to navigate by radar in the short term, don't be tempted to do the same. Stay true to yourself, your business model, your mission. Go gyroscopic all the way and you can't go wrong. Even if once removed, your 3PL will follow your lead and internal compass as well.

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