Let’s be Clear. Logistics Services and Logistics Technology Services Are NOT the Same!

And while the technology they use is important, the initial focus should be on the logistics services and whether the logistics services they offer are sufficient enough for the provider to even be under consideration.

Recently, I came across the headline that offered 5 Essential Technology Questions to Ask Any Logistics Service Provider and, as logistics services are not the same as logistics technology services, I assumed it would focus on judging the logistics provider’s general level of technical competence online and off, but the questions were entirely oriented around the technology solution used by the provider. While a good solution is good, because you need visibility, integration, etc., the first thing you need is to get your goods delivered. The second thing you need is sustainability. Then you need technology – and if the provider is deficient, there’s always the possibility that you can provide the technology. In other words, while the questions were good, I think they were off track. Here were the questions:

  1. What does visibility really mean to the provider?
  2. Can they customize their tools to meet your needs?
  3. What process integration options do they offer?
  4. How many current providers are integrated with their technology?
  5. How mature is their system availability process?

These are important, but I’d start with:

  1. What technology do they use to manage their fulfillment operations?
  2. How sophisticated is the schedule capability? Can it handle last-minute shipment changes?
  3. How much visibility can they give you into their schedules, capacity, and your shipments?
  4. Is the integration format standard and supported by your systems, or will you need some custom integration work?
  5. What is their ability to support their system, or yours if their system does not have the requisite visibility?

    Basically, you want to know that:

    1. They are using a fairly modern tool and have a firm, efficient grasp on their operations.
    2. They can handle dynamic schedules and expedited shipments when needed.
    3. You can get the visibility you need, even if someone has to do some development work.
    4. The integration can be accomplished efficiently and effectively.
    5. They, and you, are not dependent on a third party to manage, support, and query the system.

    A logistics services provider is not going to be an expert in software and systems. That’s not their core strength, so you shouldn’t be asking them questions like they are. That being said, you should make sure they are technologically literate and able to make use of appropriate technology. Find the balance, or you might end up eliminating some potentially great partners.

Looking for a Value Generation Opportunity?

Then consider starting out with the five C’s of opportunity identification (for would-be innovators), as outlined by Scott Anthony on the HBR blogs.

  • Circumstance
    The specific problems a stakeholder cares about and the way they assess solutions is very circumstance contingent. For example, when beginning a new advertising campaign, Marketing is clearly interested in who can create the campaign most likely to convince a customer to part with dollars and not how much the invoice for the materials will be. However, the marketing assistant charged with obtaining 10,000 flyers and 100 posters for an upcoming conference will likely be much more cost conscious as she will likely be questioned by the CFO otherwise.
  • Context
    Ask a stakeholder to report what they did in the past and you are likely to get something that bears only a loose resemblance to reality. Ask a stakeholder to describe what they will do in the future and you are going to get guesses that are less than accurate. Most people have no conscious memory of how they do routine tasks or any real idea of how they will accomplish a (new) task in the future. If you really want to understand how something is done, you need to watch as it is being done. And if you want to get a good feeling as to what kind of solution will please the stakeholder, watch as they try to solve the problem. Get some insight into how they think! How is Operations managing their temp labour contracts?
  • Contraints
    One of the time-tested paths to growth is to develop an innovative means around a barrier constraining consumption. If your e-Sourcing platform is not being used outside of your core buying team, then it is probably too cumbersome, too incomprehensible, or too demanding. As the author notes, understanding why a customer doesn’t consume is critical. Something new typically isn’t enough. And simply replacing Big Vendor Product X with Big Vendor Product Y isn’t guaranteed to solve the problem if Big Vendor Product Y is also missing critical path function Z.
  • Compensating Behaviours
    One of the biggest challenges facing the would-be innovator is determining whether a job is important enough to consider targeting. One clear sign is a stakeholder spending money trying to solve a problem. Another clear sign is they are trying to use a product in an unintended way to try and solve a problem. Unfortunately, if the tool is a spreadsheet (and they are misusing it horribly), it probably means they aren’t willing to spend money, at least in Supply Management – so don’t get your hopes up!
  • Criteria
    Stakeholders look at jobs through functional, emotional, and social lenses. Quality is a relative term; you can only determine if a solution is good by first understanding the criteria that matter to a particular stakeholder. If they care only about new market acquisition, a cost discussion is a losing battle. Only about innovation, a strategy to extend the longevity of the current product is a losing battle.

Will You Need to Ship Same Day?

Amazon is renting locker storage in physical storage locations across the country and dramatically broadening its DC footprint so that it can launch a same-day delivery service. Wal-mart Stores and e-Bay are testing same day delivery in multiple locations. And now the cash-strapped USPS is turning to same-day delivery. So are you going to have to ship same-day?

If you’re a retailer that makes money on impulse purchases, most likely (or lose a chunk of your market share). So what about if you’re a manufacturer that supplies a retailer that does same day delivery? Probably not, but it’s quite likely that you are going to have to ship more often and deal with less lead-times.

If a retailer is shipping same day, it is going to need to not only be updating its inventory daily, but it’s inventory turn-over projections daily, and (re)ordering as soon as it detects that waiting longer will risk a stock-out given the minimum lead-time required by the manufacturer. At some point, it’s going to be ordering too often, shipment volumes are going to be too low, and it’s going to need to re-adjust it’s ordering strategy to keep costs down. So it’s going to adjust it’s algorithms to calculate with respect to a specific, regular, order day, and then realize it needs to order early. Then it’s going to realize that inventory levels for some items will need to be relatively high due to long lead times. And it’s going to ask you to reduce your minimum lead times and distribution efficiency so that it can optimize it’s re-order times and respond to unplanned demand surges in the supply chain.

Net effect: you’re probably not going to have to ship same day as a manufacturer, but you’re going to be asked to reduce your lead times and increase your distribution efficiency.

Anyone disagree?

A Starter’s Guide to Zero Waste

A recent article (“if gm can do it: a starters guide to zero waste”) over on ThomasNet pointed out how General Motors, which has made a high-profile commitment to zero waste, has turned more than half of its manufacturing plants into landfill-free facilities. For a company as big as GM, manufacturing a wide-range of products, that’s impressive. (As is the fact that its zero-waste best practices have helped it turn its own waste byproducts into a 1 Billion per year revenue generator.)

If GM can do it, you can to. How? Start by following the 10 steps to zero-waste as outlined in A Starter’s Guide to Zero Waste. And pay particular attention to these steps:

  • Commit to the Triple Bottom Line
    In other words, adopt social, environmental, and economic performance standards and pursue them unwaveringly.
  • Adopt the Precautionary Principle
    Before committing to any product or service, audit the full life-cycle for the presence of anything that will be wasteful or toxic. If there is waste, figure out if it can be eliminated before the product or service is committed to. If there are toxic (by) products, they have to be eliminated (or substituted with non-toxic products), or the product (or service) is a no-go.
  • Manage Products and Packaging Responsibly
    You, your suppliers, and their suppliers need to take ‘financial or physical responsibility for all of the products and packaging’ produced and figure out how you reduce, reuse, or recycle at every step of the product and service life-cycle.
  • Use Economic Incentives
    Simply put, they work.

Andy, most importantly,

When Sourcing Goes Wrong Part II

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Jon Stewart said it all already:

The Employees Strike Back
(Video was only available in the U.S.)

(And it starts with a Jack in the Box ad that is pretty satirical in itself considering the US obesity rate.)

and continuing on…

The Employees Strike Back Part II
(Video was only available in the U.S.)

More seriously with respect to Hostess, management was unable to

    • build a “we’re all in this together” spirit in the company due to voting themselves high pay and
    • strategize beyond making chemical garbage and staying entirely in a declining market

Thanks, Dick. (Global Supply Training)