Innovation: The 3PL Connection/The Creativity Factor

Third-party logistics providers (3PLs) are often powerful enablers of logistics and supply chain innovation.

“Due to their exposure to ample transportation and fulfillment challenges, 3PLs have developed creative ways to get product to the shelf,” says Accenture’s Bill Read.

“3PLs have multiple customers with problems and opportunities across industry verticals, and can provide insight into myriad potential solutions,” notes John Langley of The Georgia Institute of Technology.

Shippers, however, may inadvertently limit their 3PL providers’ innovation potential by putting them into the proverbial box, according to Read. A company whose provider manages freight flow into the United States, for example, may think of its 3PL in that light only, instead of thinking of it as a global operator with broad expertise.

Not all companies look to their 3PLs for innovation. “Some providers are capable of bringing innovative ideas to the table, but the customers sometimes do not want ideas, they only want a contract provider for specific services,” Read explains.

Companies evaluating how well their logistics providers enable innovation should examine whether they define their 3PLs’ capabilities broadly or narrowly, and whether they are a tactical, operational buyer of logistics services, or a strategic buyer seeking innovative ideas from providers.

Free Thinking

Austin, Texas-based Freescale Semiconductor Inc., a global semiconductor manufacturer serving the telecommunications, automotive, and networking industries, recognizes the strategic role 3PLs can play. Freescale, which works closely with customers and suppliers to drive innovation, has a 30-year relationship with its 3PL, Exel.

“We started outsourcing to Exel slowly, using its transportation services first. We added warehousing and distribution to its responsibilities about seven years ago,” explains Kevin Rowan, global logistics manager for Freescale.

Exel offers international heavy airfreight and ocean freight management services and provides warehousing space in locations throughout the United States, Europe, and Asia Pacific.

When Freescale spun off recently from its parent company, the manufacturer expanded its relationship with Exel, and today treats the 3PL as a strategic partner. “We expect Exel to bring forth innovations,” Rowan says.

As Freescale’s warehousing and transportation provider, Exel is uniquely positioned to help the company develop innovations. “Exel has access to all our pertinent information, as well as the tools to take that information and turn it into action,” he explains.

The expanded partnership has garnered positive results for Freescale, particularly in collaborating with customers. Exel is working with Freescale and one of its primary automotive customers in Europe, for example, to streamline product flow.

With the expanded relationship in place, Freescale and Exel “work together at a deeper level,” Rowan says. Exel attends Freescale’s operational reviews and discussions, and both companies participated in each other’s strategic planning process this year.

“Sharing information deeply is not easy,” Rowan admits. Offering up sensitive information required Freescale to alter its culture somewhat, but the effort is paying off as the two parties work together to reduce logistics and supply chain costs.

An Open Book

Exel’s openness about incentive plans, bonus structures, and operations metrics helped Freescale understand the impact these factors have on the partnership.

“It’s in our best interest to ensure goals and incentive plans between Freescale and Exel are aligned,” Rowan says. As a result, Freescale has put into place gainsharing methodologies that reward Exel for its innovations.

The semiconductor manufacturer rewards its 3PLs and suppliers for innovation in other ways, too. Suppliers, for example, earn extra points for innovation on Freescale’s supplier report card. This year in fact, because of its commitment to innovation, Exel won the “Continuous Improvement Supplier Award” at Freescale’s annual supplier recognition banquet.

The Creativity Factor

Some logisticians are creative by nature. Others may need to jumpstart their imagination and ingenuity abilities to develop true innovations.

“Creativity is a learnable skill—the same as playing the violin or riding a bike,” says Jim Gilmore, co-author of The Experience Economy, and co-founder of business coaching firm Strategic Horizons Inc.

“It’s not enough to tell people to be creative; they need to know how, and what to create,” Gilmore says.

An innovative employee has a desire to seek new things, and a willingness to ask questions about the way a business operates. Innovators also look outside their own job and industry for creative ideas they can adopt, Gilmore says.

Techniques such as mindmapping—a non-linear way to capture ideas and organize information—help enhance creativity, notes Judith Anderson of consulting firm Anderson & Rust, Allendale, N.J.

“This technique requires both sides of your brain—analytical and creative,” Anderson says.

By employing analytic and creative thinking, companies in the logistics and transportation industry can cultivate unexpected ideas, such as the ones Gilmore developed for a fictional logistics company:

• Sell ads on the sides of trucks.
• Install streaming video on trucks travelling on the road. “Call it Truck Cam, and launch a web site where people can go to view the scenery, ask the driver questions, and see what’s happening as the miles roll by,” he suggests.
• Adopt the familiar plant tour concept and offer customers tours of the distribution center and crossdock operation.
• Venture into the birthday business. “The company could offer a birthday venue at its distribution center by designing a room with a glass wall looking out to the warehouse,” Gilmore says.

Innovation is Everywhere

Companies can use innovation to improve processes, strategies, and operations. Look for innovative methods to communicate with drivers, or display route maps, for example, Gilmore suggests.

“Opportunities for innovation are everywhere,” he says.