No Place for Fear
There are concrete solutions to reduce logistics fuel costs
Monday, June 16, 2008
As I sit in front of my iMac writing this article my mind is racing with the latest data I read this afternoon on the price of diesel and jet fuel and the topic I was going to write about suddenly doesn't seem relevant enough to put down in words. Instead, I made a command decision (Marine-speak for 'I've just changed my mind') to write about a word and emotion that I am hearing uttered and seeing on the faces of logistics executives and managers more and more: fear. Most people don't like to admit or let others know they're afraid; executives and managers certainly don't want employees knowing that they're afraid for fear it will dampen morale and cause an exodus. However, my experiences in the military and in business have taught me that successful organizations and executives embrace, understand, and defeat fear; they don't sit around talking about it. Although today's logistics professionals are faced with many challenges, there is nothing to be afraid of as long as a person is willing to confront the challenges before them head-on and apply the proper strategies.
The topic of diesel fuel and the impact on transportation for example has many individuals scratching their heads and gnashing their teeth and everyday seems to bring forth a new prediction of doom regarding the price of oil. I have sat in meetings and chaired panels where logistics managers complained for hours about the price of fuel when they should have been discussing solutions to their problems. When I spoke to those I heard complaining it was apparent that the reason why they didn't talk about solutions was because they were afraid of saying the wrong words and they weren't sure what solutions or strategies were available to them. Sadly, there are far too many individuals working in logistics either promoted from within their company or hired from the outside without relevant and real-world logistics experience under their belts to do their company justice. Whenever I see a company with logistics-related issues a little investigative work reveals that the decision-makers were simply too inexperienced and there was far too little analytics and metrics taking place to adequately manage the business.
In regards to the price of diesel fuel and logistics-related costs there are concrete steps that companies can take to reduce their costs and skilled logistics professionals across the country and globe are applying solutions that work.
Among the most effective solutions at reducing logistics-related costs are:
- Utilizing transportation and supply chain network modeling tools to analyze the supply chain for the purpose of identifying opportunities to streamline transportation and distribution networks to reduce costs.
- Implementing TMS technology to automate manual processes related to transportation management and freight bill audit and payment as well as ensuring all shipments are optimized to eliminate costly shipping mistakes and reduce overall transportation spend.
- Applying quality principles such as Six Sigma and Lean to identify and eliminate complexity within the supply chain that is costing untold dollars and contributing to poor customer experience.
- Ensuring that every person with decision-making responsibility within the logistics department are trained and qualified. The days of promoting "Bob" from within the company to manage logistics because he "interviewed well" or because "he's been with the company for a long time" need to come to an end.
- Applying science to the procurement of transportation by utilizing on-line bidding tools with advanced analytic capability to identify optimal cost savings.
- Securing long-term partnerships with carriers and allowing the carriers to take part in logistics strategy meetings so they can provide insight and expertise.
- Visiting customers on-site and asking the question "What are we doing wrong and what can we do better?" to reap dividends in regards to identifying opportunities to reduce costs and strengthen the relationship with the customers.
- Doing business with carriers that are Smartway certified and that have established policies and strategies to reduce fuel consumption. Be willing to collaborate to identify opportunities to make company freight more attractive to the carrier.
- Utilizing logistics beams and air bags in trailers to secure freight that is fragile, electronic, or high-dollar to eliminate unnecessary in-transit damage.
- Collaborating with customers and packaging vendors to identify ways to eliminate unneeded packaging.
- Identify shippers that are willing to collaborate on warehousing, backhauls, and commingling freight for shipping in order to reduce mutual freight costs.
As the list clearly demonstrates, there are strategies that companies of any size can utilize to reduce their logistics-related costs. In one form or fashion I have implemented and used every strategy listed at companies ranging from Michaels Stores to Dell.
In 2001, Michaels Stores Ireplaced a 3PL, implemented a TMS, brought all transportation management and freight bill audit and payment in-house, created a core carrier program that gave Michaels the ability to utilize as many or as few carriers as necessary, etc., for both inbound and outbound transportation. The implementation took exactly nine months from start to finish and is considered one of the most efficient tier 1 TMS implementations on record.
The implementation of the TMS took Michaels Stores logistics capability to another level and contributed greatly to the overall success of the company. As the implementation was scheduled to take place during Michaels Stores peak season there was a lot of talk of fear among outside analysts who were concerned that such a large-scale implementation might jeopardize sales for the company. No one on the implementation team was afraid, however, for the simple fact that all were qualified for the job, conducted the proper analysis, chose an excellent partner, and took ownership of the project.
Regardless of the challenges now confronting those of us who work in logistics, there is no place for the word "fear.Ó True, there are many logistics challenges that lay in the road ahead but by being proactive and prepared today's logistics professionals can and must confront the coming challenges head-on.
Brittain Ladd is the Director of Logistics and Project Management for a private equity firm. Brittain has worked in logistics since 1991 and holds advanced degrees in logistics and is also a certified Master Black Belt in Six Sigma. Brittain can be reached at
transsixsigma@earthlink.net.
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