Graham Allen, Program Manager, BPS Supply Chain Secretariat, Ontario Ministry of FinanceDavid J. Closs, PhD, LQ Executive Editor, &Professor, Michigan State UniversityJohn Cutler, General Counsel, NASSTRAC,Principal, McCarthy, Sweeney & Harkaway, P.C.Bruce Danielson, Executive CommunicationsManager, UPSJim Davidson, CEO, Wheels GroupDavid Faoro, Director of Supply Chain,The International Group, Inc.Bill Graves, President and Chief Executive Officer,American Trucking AssociationsKenneth Johnson, President & CEO, Shippers WarehouseDerek J. Leathers, Chief Operating Officer, WernerEnterprises, President, Werner Global LogisticsClifford F. Lynch, Executive Vice-President, CTSIRobert Martichenko, President, LeanCor LLCChris Norek, PhD, Founder and Senior Partner, Chain Connectors, Inc.Jeff Russell, Chief Information Officer, Majestic Steel USAWarren Sarafinchan, CITT,Supply Chain Director, Mars Canada Inc.Thomas Sanderson, President & CEO,TransplaceNicholas Seiersen, BSc (Hons.), MBA, PLog, LQExecutive Editor, Senior Manager, KPMGOliver Silver, Director Marketing, Ryder CanadaEllen Voie, President, Women in Trucking, Inc.
LogisticsQuarterly.com LogisticsQuarterly.com
Strategies for Success and Moving Upward in a DownturnAn Executive Interview withDerek J. Leathers,Chief Operating Officer, Werner Enterprises,President, Werner Global Logistics
Defining Leadership in Logistics andTransportation in North America:Strategies for Success and MovingUpward in a Downturn
EXECUTIVE INTERVIEWS:9 Derek J. Leathers, Chief Operating Officer, Werner Enterprises, President, Werner Global Logistics
20 Thomas K. Sanderson, President & CEO, Transplace
11WQ Review - Warehousing Quarterly ReviewSupplement (www.WQreview.com)12 Executive Interview: Ken Johnson, President,Shippers Warehouse Co., Inc.
16 Leading Practices in Managing YourDistribution CenterIn today’s economic downturn investing in people, processes and technology in distribution centers is essential to ensurebreakthrough performance.
17 Creating the Lean Warehouse It’s an evolution, not a revolution.
22 NASSTRAC: Update From Washington onInfrastructure InvestmentsDespite widespread support in Washington for increased infrastructure investment, which should be good for the trucking industryand its customers, there are also threats to
truckers and truck shippers.
24 Technology Toolbox: SMB Technology Options in a Difficult Economy Now might just be the time for SMBs to invest in supply chain technology while theeconomy is down—large and quick returns are available if pursued.
26 How Can Supply Chain Managers Help theHealthcare Industry?While it is certainly important that healthcaresupply chain professionals maintain theirfocus on ensuring that supplies are availablewhen necessary, the increasing interest in
services supply chains opens up opportunities for supplychain management to contribute more broadly to healthcare.
28 Finding Green Initiatives in the Supply ChainWhere will you start the greening of your supply chain? Often the challenge is to untangle a complex inbound and outboundtransportation network, contain and reducerising costs and, in tandem with these steps,
reduce the carbon footprint of the supply chain.
31 Executive Insight: In Favor of a Personal Touch In this 15 Anniversary Edition of LQ, ourContributing Editor reflects on trends in business in recent years and, specifically,what aspects of our business have changed or stayed the same.
32Women in SCM & Transportation: Does YourCulture Encourage Women?If your executive staff is predominantly male, it will be more difficult to show that you encourage diversity within your leadership ranks.
33 ATA: Times are Tough, But Trucking is Up for the ChallengeStatistics now show that trucking is the safest it has been since the U.S. Departmentof Transportation began keeping those numbers in 1975. Even in today’s economic
downturn, the trucking industry continues to constantly seekways to improve our efficiency and safety through new programs and technologies.
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For more information on LQ’s ExecutiveExchange, held twice annually, we inviteyou to visit: www.LQSummit.com
For more information on LQ’s readershipvisit: www.LQreader.com
Volume 15 Issue 1
Join us and celebrate LQ’s 15th Anniversary
Graham Allen, Program Manager of BPS Supply Chain Secretariat, Ontario Ministry of FinanceFred Berkenheimer,Vice President, Logistics, Unilever (USA)Jim Butts,Vice President, Transportation, C.H. Robinson Worldwide, Inc.David J. Closs, PhDDepartment of Marketing and Supply Chain Management,Michigan State UniversityExecutive Editor, LQJim DavidsonCEO,Wheels GroupBruce DanielsonExecutive Communications Manager, UPS Russ DixonDirector, Corporate Marketing and Communications,Sunteck Transport GroupRuss J. DoakDirector, Supply Chain Logistics, Heli-OneDavid FaoroDirector, Supply Chain, The International Group, Inc.Sue Gadsby, C.P.P., C.P.M.Director, Procurement, Apotex Inc.Joe GallickSenior Vice President – Sales Penske LogisticsThomas J. Goldsby, PhDAssociate Professor,University of KentuckyMelissa GraceyPresident, DTA Services Ltd.Joe GrubicSenior Manager, Alliance/Network Management, Nortel Networks Global LogisticsEd KearnsPresident, Kearns Transportation ServicesContributing Maritime Editor, LQArun KumarDirector of Americas Logistics, Dell Inc.John C. Langley Jr., PhDDirector of Supply Chain Executive Programs,The Logistics Institute (TLI), Georgia Institute of Technology
Derek J. Leathers Chief Operating Officer, Werner Enterprisesand President,Werner Global LogisticsClifford F. LynchExecutive Vice President,CTSIRobert MartichenkoPresident, LeanCorJames MahoneyVice President of the Supply Chain Excellent Practice,Auxis, Inc.Brian McDonaldPresident, Montship Inc.Diane Mollenkopf, PhDAssistant Professor, University of TennesseeJeff MooreManaging Director,Lakeside Logistics Inc.Tom NightingaleVP Communications and Chief Marketing Officer,Con-way Inc.Christopher Norek, PhDSenior Partner, Chain Connectors, Inc.NASSTRAC Contributing EditorRobert Novack, PhDAssociate Professor,Business Logistics,Penn StateSusan PromaneDirector, Supply Chain,Whirlpool CanadaPeruvemba S. Ravi, PhDAssociate Professor,Wilfrid Laurier UniversityKurt M. RitceyPartner, Deloitte ConsultingMichael RubinfeldDirector, Supply Chain Excellence, Ryder Nicholas SeiersenSenior Manager, KPMGExecutive Editor, LQAllan SmithPresident & CEO, BCG Logistics GroupDonald Tham, PhD, PEngRyerson UniversityDale ThomsonLeader of Global TransportationManagement, Nortel Networks Walter Zinn, PhDProfessor,Ohio State University
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Today’s economy has produced someof the most challenging business conditions faced by the supply chain profession in recent history. Some companies are not just reacting to conditions—they are taking bold steps to position themselves for futuresuccess. They are investing in their businesses and employees and willreap signifi cant benefi ts in perfor-mance and market share. These are the people you will meet and hear from at our conference.
Hear great insights and take valuable real world solutions back to your
organization. Success requires new ideas and the right tools to produce the results needed today and in the future. I urge you to attend this year’s conference and receive all three. Visit cscmp.org to register.
Sincerely,
Rick BlasgenPresident & CEO, CSCMP
The World’s Leading Source for the Supply Chain Profession.™
Keynote Speaker: Gary Maxwell, Senior Vice President of International Supply
Chain for Wal-Mart Stores, Inc.
Ideas. Tools. Results.At CSCMP’s Annual Global
Conference you’ll get all three through multiple learning and
networking opportunities.
VOLUME 15, ISSUE 1, CONTRIBUTORS
LQ’s mandate to provide “Ideas for Leadership in Logistics” is clearly evidenced in thisissue, with articles written by professionals and logisticiansfrom America and Canada who are leading and transforming
business by creating new roadmaps and definitions for leadership in this exciting field.
OUR CONTRIBUTORS
GRAHAM ALLEN is a Program Managerwith the Ontario Ministry of Finance,BPS Supply Chain Secretariat. Prior tojoining the Ministry of Finance Mr. Allenwas the Corporate Manager LandTransportation for Falconbridge Limit-ed. In addition to his Falconbridgeresponsibilities he was Chair of theCanadian Industrial TransportationAssociation (CITA) and prior to thatChair of the Canadian Shippers Council.He is a recipient of the Supply ChainExecutive of the Year award for his team’sregulatory re-write of the ShippingConferences Exemption Act, which par-tially deregulated the Canadian oceanshipping container market.
DAVID J. CLOSS, PhD, LQ ExecutiveEditor, is John H. McConnell ChairProfessor at the Eli Broad College ofBusiness, Michigan State University. Hehas consulted with more than 100Fortune 500 corporations on logisticsstrategies and systems and is an activemember of the Council of Supply ChainManagement Professionals.
JOHN CUTLER, General Counsel ofNASSTRAC, has over 30 years’ experienceas a transportation lawyer representingshippers of freight. He is a principal with the Washington, D.C., law firmMcCarthy, Sweeney & Harkaway, P.C.
BRUCE DANIELSON, Executive Com-munications Manager, UPS. Mr.Danielson is responsible for developingstrategic messages and event opportu-nities for UPS senior executives thatsupport UPS’s growth, brand/reputa-tion, thought leadership, employee
relations and policy goals. He graduat-ed from the University of FloridaCollege of Journalism and Communica-tions with a degree in Public Relations.He has spent his 26-year professionalcareer in the f ield of corporate commu-nications, specializing in executive com-munications.
JIM DAVIDSON, CEO, Wheels Group,began his career in logistics at the FordMotor Company in 1963, working in allaspects of logistics for 17 years. Mr.Davidson joined TNT in 1983 and heldvarious management roles, includingroles in operations, staff, administra-tion and general management for anumber of different divisions. He alsoserved as the TNT board member repre-senting North America at their Euro-pean-based board meetings. He hasserved on the executive of the CanadianGeneral Motors Supplier Council andas Executive Vice President of the ATACouncil of Logistics located in Alexan-dria, Virginia.
DAVID FAORO is Director of SupplyChain for The International Group, Inc.,
a $400-million manufacturer of waxesand wax-based industrial products. Inthis role, he is responsible for customerservice, purchasing, logistics and inven-tory management. For over 20 years,David has worked in the chemical, foodand beverage, off ice products andwholesale distribution sectors in allaspects of supply chain management. Heholds an MBA from the Ivey School ofBusiness and a Bachelor of Commerce(Logistics) from the University of BritishColumbia. A Past-President of theToronto chapter of the Council of Supply Chain Management Professionals(CSCMP) and a member of the AdvisoryBoard of Logistics Quarterly, David ismarried with two children and lives inAurora, Ontario.
BILL GRAVES, who served as governorof Kansas for eight years, is Presidentand Chief Executive Off icer of theAmerican Trucking Associations, thelargest national trade association forthe trucking industry. Through a feder-ation of other trucking groups, indus-try-related conferences and its 50 aff il-iated state trucking associations, ATA
represents more than 37,000 memberscovering every type of motor carrier inthe United States.
KENNETH JOHNSON is the Presidentand CEO of Shippers Warehouse, Inc., aDallas based provider of supply chainsolutions. Shippers Warehouse is thelargest and oldest independently ownedasset-based 3PL in the southwest UnitedStates, with 11 facilities comprising over4,500,000 square ft. in Texas and500,000 square ft. in Georgia.
DEREK J. LEATHERS is Chief OperatingOff icer of Werner Enterprises andPresident of Werner Global Logistics.Derek has worked in the internationallogistics industry for nearly 20 years andwas an integral part of many facets ofthe transportation portions of theNAFTA implementation process through-out the past two decades. Mr. Leathershas served as an advisor for two USambassadors to Mexico as well as serv-ing on the American Trucking Associa-tion's Cross-Border Advisory Committeefor North America. Mr. Leathers was oneof the first foreign members of Mexico'strucking association (CANACAR) andhas successfully led the launch of multi-ple new logistics products in low-costcountries. Prior to joining Werner in1999, Mr. Leathers was Vice President ofSchneider National's Mexico operation,and was based out of Mexico City forseveral years. Most recently, he helpedguide Werner’s expansion into Asia. Mr.Leathers is a native of Texas, and holdsan Economics degree from PrincetonUniversity. Mr. Leathers serves as VicePresident to the not-for-profit organiza-tion, ‘PlaySmart’.
CLIFFORD F. LYNCH, Executive Vice-Pres-ident, CTSI has provided managementadvisory services in logistics since 1993.During the previous thirty-five years, hewas Vice President– Logistics for theQuaker Oats Company and President ofTrammell Crow Distribution Corpora-tion. He attended public schools inMemphis, received his under- graduatedegree from the University of Tennessee,and an MBA from the University ofChicago. He is a Certified Member of theAmerican Society of Transportation andLogistics. Mr. Lynch is a member and past
president of the Council of Supply ChainManagement Professionals and hasreceived numerous awards in the field oflogistics. He is an adjunct at the Universityof Memphis and a frequent lecturer atother colleges and universities.
ROBERT MARTICHENKO is President ofLeanCor LLC. LeanCor delivers Leantraining, consulting, third party logisticsand supply chain services. Robert hasyears of supply chain, logistics and Leanimplementation experience. This experi-ence includes multiple Lean SupplyChain implementations supporting suc-cessful organizations including ToyotaMotor Manufacturing. Robert comple-ments his professional experience with aBachelor Degree in Mathematics fromthe University of Windsor, an MBA inFinance from Baker College and is atrained Six Sigma Black Belt.
CHRIS NOREK, PhD, has 15 years of expe-rience in supply chain and logistics-relat-ed consulting for companies such asComputer Sciences Corporation andAccenture. He spent three years as a pro-fessor of logistics and transportation, andhas worked for Kimberly-ClarkCorporation, Apple Computer and OfficeDepot as well as independent consultingfor amazon.com, Aramark UniformServices, The Sports Authority andAccenture/Andersen Consulting.
JEFF RUSSELL, Chief Information Officer,Majestic Steel USA., has more than 15years’ experience in the InformationTechnology working as a consultant andexecutive, in the Manufacturing, Distribu-tion, Healthcare and Retail industries. Mr.Russell has a BS in Computer InformationSystem from California State LA,Certified Security+ Specialist.
WARREN SARAFINCHAN, CITT, has over15 years of experience managing supplychain operations with a focus in the con-sumer packaged food and beverageindustry. He is currently the Supply ChainDirector for Mars Canada Inc., located inBolton Ontario. He obtained his profes-sional designation from the CITT in 1995,and is already in his fourth year as a mem-ber of the national Board of Directors.Additionally, Mr. Sarafinchan is the Chairof the Advisory Committee for the Supply
Chain Management program at GrantMacEwan College in Edmonton.
TOM SANDERSON is President andCEO of Transplace, a leading providerof logistics technology and transporta-tion management services. Since 2003,Mr. Sanderson has led Transplace tosubstantial success and continuedgrowth. Headquartered in the Dallasarea, the company serves a large andrapidly growing customer base of morethan 500 manufacturers, retailers andfood & beverage companies. He has amaster’s in business from Indiana Uni-versity and is the co-author of numer-ous articles and a book – CreatingProf itability: The Sales and MarketingChallenge – as well as a frequent speak-er at industry events.
NICHOLAS SEIERSEN, BSc (Hons),
M.B.A., P.Log., LQ Executive Editor, is theCanadian Service Line lead for opera-tions cost management at KPMG. Hespecializes in supply chain consulting,with particular attention to strategicsourcing and supply chain planning andoperations. Mr. Seiersen teaches execu-tive development courses at top universi-ties in Europe and North America. He isthe past president of the TorontoRoundtable of the Council of LogisticsManagement (now CSCMP).
OLIVER SILVER, Director Marketing,Ryder Canada, began his transportationand logistics career with Hertz and Ryderin the U.K. in progressively senior sales,operations and general managementroles. In 1981, he moved to Canada, andwas Ryder Canada’s General Manager inQuebec, Western Canada, and Toronto,prior to national roles in marketing,sales, pricing, asset management andcustomer retention. Mr. Silver, a BScfrom Leeds University, and a P.Log mem-ber, is a frequently published writer.
ELLEN VOIE is President, Women inTrucking. Previously, she was Manager ofRetention and Recruiting at SchneiderNational, North America's largest truck-load carrier. She has been Director ofTrucker Buddy international, has writtenextensively about trucking and familyissues, and published a book entitledMarriage in the Long Run.
LQ: Will belt-tightening due to difficulteconomic times in 2009 compel moresupply chain managers to cut costs bydedicating more resources to supplychain management software, or the ITexpertise of 3PLs?Derek Leathers: I believe in tightened eco-nomic times like we’re going through rightnow, people will have further difficult justi-fication for purchasing outside software. Ithink what you’ll see is a furthering of thetrend toward 3PL companies and the exist-ing software they’ve already developed, asit represents a much lower-cost alternative.The 3PL is simply better positioned,because its systems are being developedon an ongoing basis for revenue purposes,versus an IT, which is usually the last toreceive corporate resources.
LQ: Will the economy create a greater trend for morecompanies to focus on deriving even greater value fromtheir existing outsourcing relationships? Will they likelyuse this circumstance as a lever to renegotiate existingagreements regarding pricing, service levels and otherkey terms?Derek Leathers: The answer is really both. The tighteningeconomic circumstances that we are all under force cus-tomers to work with their suppliers and really demand cus-tomized and greater savings on a go-forward basis. I alsothink certain customers are taking advantage of an oppor-tunistic time to pursue price renegotiation with their 3PLs.The best approach is for both companies to collaborate tosave money and find efficiencies versus simply redividing orredistributing the money, whereby the 3PL takes less and thecustomer keeps more, because that’s not a long-term sustain-able approach.
LQ: Some providers aren’t positioned properly for today’seconomy. Others will thrive. Can you identify the charac-teristics of those companies most likely to prosper?Derek Leathers: I think here the characteristics are reallyunchanged from previous years, only they’re much moreimportant than ever before. For instance, being properlycapitalized is critically important in this environment; 3PLsin financial difficulty represent a danger to their customersby putting their supply chain at risk. I think being financial-
ly strong is critically important. I think3PLs that will survive and prosper arethose that bring assets to the table, tech-nology solutions, and are involved in mul-tiple facets of the supply chain. Beinginvolved in just one link of the supplychain can put you at risk in this environ-ment, as more clients are consolidatingand rationalizing their supplier base toleverage their spending. Well-balanced3PLs that are funded well and doing realwork are the ones that work and are bestpositioned in this downturn.
LQ: Will more companies find they mustoutsource to survive in 2009?Derek Leathers: I don’t know that outsourc-ing your supply chain by itself is going toensure your survival; however, I do believethat companies are looking to cut fixed
costs wherever possible, and more and more companies arerealizing that the implied cost of trying to manage logistics in-house is often much greater than the cost of outsourcingthose operations, with the direct and indirect internal costs. Ithink as companies are faced with thinning margins they’rereally having the type of healthy friction needed in evaluatingtheir transportation and distribution programs.
LQ: In today’s context, whereby contract margins dimin-ish and customers call for greater performance on thepart of their 3PLs, will this likely result in frictionbetween 3PLs and their clients?Derek Leathers: I certainly think today’s context creates thepotential for additional friction between 3PLs and theirclients; however, more often than not, we have found it hasresulted in better communication. I think it takes tough timeslike this for all of us to really dig deep and work together tofind opportunities where the customer truly saves measura-ble dollars on an ongoing basis. In these times, many ideasthat may have been previously dismissed can be revisited, putinto implementation and internal obstacles overcome.
LQ: Data security issues are of growing importance tologisticians and 3PLs alike. Please reflect on the effectthese elements may have on outsourcing in 2009.Derek Leathers: Data is always important. Security in generalis important, and is a growing concern around the globe.
A Conversation with Derek J.Leathers,Chief Operating Officer, Werner Enterprises,
President,Werner Global LogisticsQuestions for this Executive Interview have been prepared by LQ’s Executive Editors.
L Q ’ S E X E C U T I V E I N T E R V I E W S E R I E S :DEFINING LEADERSHIP IN LOGISTICS AND TRANSPORTATION IN NORTH AMERICA
Today the need for savings and efficiency weighs much heav-ier in the decision-making process. Past concerns about datasecurity that prevented programs from being implementedare being revisited. I think today’s systems and security tech-nology are advanced enough to ensure data security withoutbecoming an obstacle to doing business.
LQ: Will outsourcing provide an opportunity for compa-nies emerging from the current economic downturn tofind solutions that need less capital, and instead place apremium on the importance of working with others whohave the right people and processes?Derek Leathers: I absolutely think that the current downturnis leading people to look for more outsourcing. To developand invest in systems internally often requires millions of dol-lars of capital expense, and a significant tax on humanresources and the limited IT staff at most organizations. Byworking with a 3PL, you can defer the cost of the capitalexpense altogether and work on a more variable cost basis. Akey advantage to a 3PL is the expertise and experience tocombine customers’ needs and requirements with the needsof literally hundreds, if not thousands, of customers’ requestsover the years. The end result is you get a “best in class” sys-tem, versus a “best in the building” system.
LQ: How can 3PLs help their customers squeeze morecash out of their supply chains? Does this mean cost-cut-ting will be more difficult?Derek Leathers: Fundamentally, 3PLs still have a long way togo to do everything they can to lower overall inventory carry-ing costs for their customers. It is still remarkable how manycustomers, for a variety of reasons, will build inventory cush-ions within their supply chains. As 3PLs bring increasinglybetter visibility, it allows buyers and customers to makeadjustments to favorably impact inventory levels. Reliabilityand consistency of transit times and visibility are the keys tosuccess.
LQ: What can 3PLs do to buttress their balance sheets inthese times, where shippers are increasingly concernedwith the viability of their critical suppliers?Derek Leathers: My first answer is, if they’ve waited until nowto focus on the importance of their balance sheet, it is proba-bly too late. We at Werner Enterprises have focused for yearsand years to carry a debt-free balance sheet, because westrongly believe that our financial strength is one of ourstrongest assets. I think other 3PLs have done similar or exe-cuted similar strategies, but we are certainly the minority inthat area. Often expansion, acquisition and other motiveshave driven people to the point of excess at a corporate level,just as it has at a personal level, and they found themselvesvery over-leveraged as their credit agreements come up forrenewal and the ability to renew at current restructure nolonger exists. I think the pinch that’s going to be put on 3PLs—and frankly, for that matter, many shippers—is beginning tobecome apparent, and in the next year to two years, we willsee a considerable amount of fallout as people are unable torenew previously advantageous credit agreements and beable to carry them forward. I think that again, if a company
only now begins to focus on the importance of being finan-cially strong, financially stable and conservatively managed,it’s a little too late.
LQ: What can 3PLs do to improve their track record—andcapability of delivering on-time start-ups, and savings-oriented projects?Derek Leathers: This is really as basic as having an extremelyspecific and agreed-upon and documented scope of workagreement. At Werner Enterprises, we focus heavily on tryingto define our logistics scope of work, both at an executivelevel and then throughout all of the functional areas on bothteams. So we have a communication tree that starts at theoperations manager and ends at the CEO, whereby at eachcorresponding level, at both organizations, everybody under-stands what their role is, what they signed up for and to whatdegree they have ownership of delivering a specific result. Ifyou do that and you have that agreement on the front end, itmakes for an on-time start-up, and ultimate savings deliver-ables are much easier to perform. The second piece, honestly,is making sure there is something in it for both parties. Ibelieve heavily in performance bonus and performance met-rics for the 3PL that allow the 3PL and the shipper to share insavings, initiatives and successful on-time start-ups. We oftengrossly underestimate the cost of delays and as such, thereare not sufficient penalties or rewards for missing specificmilestone dates or events by months and in some cases, asmuch as a year, when in fact both parties, the shipper and the3PL, should hold their feet much closer to the fire.
LQ: What are the special challenges brought by theheightened security requirements (10+2, FAST, containerscanning, denied-parties screening) for 3PLs?Derek Leathers: 3PLs involved in international shipping playan integral role in the implementation of the current andpending security measures and compliance programs com-ing in 2009. The immediate challenges are educating not onlythe shipper community on the requirements of each pro-gram, but also gaining the cooperation of the overseas ven-dors, consolidators and other logistics partners who play arole in the shipping and documentation processes. As aninternational 3PL, Werner Global Logistics is frequentlyengaged by our customers to consult on the specific stepsthey must take to gain and maintain compliance and toimpose new requirements into their supply chain. Systemsmust be updated to not only execute the compliance require-ments, but also maintain the appropriate records.
LQ: What changes will the new administration and theeconomic stimulation packages have on the 3PL businessand the relationships they have with their shippers?Derek Leathers: Honestly, at this point I think it’s still a littletoo early to tell. The most obvious impact, I think, to our indus-try is the heavy focus in the new stimulus package on infra-structure. I think all would agree that the infrastructure in theU.S. is lacking and is falling behind from a global perspective,and I think the focus of the new administration to direct a sig-nificant amount of funds towards specific highway, bridge, railand other infrastructure projects is of great importance.
WAREHOUSING QUARTERLY IS A SUPPLEMENT TO LQ, OFFERING IDEAS FOR LEADERSHIP IN WAREHOUSING & DISTRIBUTION PRACTICES
A Conversation with Ken JohnsonPresident, ShippersWarehouse Co., Inc.
Leading Practices in Managing Your Distribution CenterBy Warren Sarafinchan, CITTMars Canada
Creating the Lean WarehouseBy Robert MartichenkoLeanCor LLC
Questions for LQ’s Executive Interview Series have been prepared by members of LQ’s Board: Graham Allen, Program Manager of BPS,Supply Chain Secretariat, Ontario Ministry of Finance; David Closs, PhD, Michigan State, LQ Executive Editor; Bruce Danielson, ExecutiveCommunications Manager, UPS; David Faoro, Director, Supply Chain, The International Group; Cliff Lynch, Executive Vice-President, CTSI
SHIPPERS WAREHOUSE CO., INC. is a Texas-based provider of third-party logistics services,custom packaging and supply chain manage-ment. From its corporate headquarters in Dallas,Texas, Shippers Warehouse manages a networkcomprised of 10 facilities and exceeding5,000,000 square ft., with operations in theDallas/Ft. Worth metropolitan area and Atlanta,Georgia. Established in 1901, the company is pri-vately owned and operated. Customers includeconsumer-packaged grocery, confectionary, auto-motive, health and personal care, consumer elec-tronics, major appliance, gaming, cosmetic, vet-erinary, building supplies, physical fitness, chem-ical, furniture and industrial concerns. Shippers Warehouse man-ages the largest-volume LTL grocery consolidation program in thesouthwestern United States, and provides its customers the very lat-est capabilities in EDI transmission, RFID labeling, Web-based visi-bility, RF-enabled warehouses, serialized inventory control, andautomated small shipment fulfillment services.
LQ:What are some of the initiatives you are taking to bemore environmentally friendly? (Graham Allen)Ken Johnson: At Shippers Warehouse, we have gone out ofour way to contribute in every way we can to an improvedenvironment and a greener planet for our children andour grandchildren. Energy-saving initiatives such as theuse of reflective roofing material, the capture and collec-tion of rainwater runoff for landscape irrigation, energy-saving lighting, and the use of energy-saving constructionmaterials are employed in all new facilities. Older build-ings have been retrofitted with energy-saving lighting, andwe use only biodegradable scrubber detergents in ourcleaning equipment. Aluminum, paper and corrugate arerecycled, and we strive in our supplies procurementprocess to purchase as many goods made of recycledmaterial as possible. The interesting thing about “going
green” is that it is a sound business deci-sion. Shippers Warehouse has realizedsignificant reductions in the cost of ener-gy, landscape irrigation, supplies, etc.,and the dollars we receive for bundlingand selling our corrugate often pay ourmonthly expense for trash removal. It isan absolute “win/win” situation.
LQ: How will warehousing continue todeliver value given the drive by compa-nies to increase supply chain velocity andto reduce operating capital? (Graham Allen)Ken Johnson: We continue to deliver value
by being innovative in our efforts to provide our customerbase with an array of services that they can purchase on avariable basis as needed, freeing up capital that was previ-ously required to support these initiatives. As goods flowthrough the supply chain, they often require some sort ofmodification prior to arriving at their final destination.Special packaging, labeling, display construction, qualityauditing, etc., are some examples of changes to finishedgoods that have historically been handled by departmentswithin the customer’s organization. By providing theseservices to our customers on a variable (per-unit) basis,we allow them to remove the expense for those depart-ments from their cost structure. In other instances, we areable to free up capital for our clients by taking over supplychain management functions such as transportation man-agement, call center administration, reverse logistics plan-ning, etc. We strive to put our customers in a positionwhere they only need to invest their effort and capital inproducing/importing/purchasing their goods; we can han-dle the total supply chain effort from that point forward.
LQ: How do you effectively communicate with cus-tomers, given the range of IT systems and the difficulty
A Conversation with Ken Johnson,President, Shippers Warehouse Co., Inc.
LQ ’ S E X E C U T I V E I N T E R V I E W S E R I E S :B E S T WA R E H O U S I N G A N D D C P R A C T I C E S
Shippers WarehouseProviding supply chain solutions since 1901
Shippers Warehouse ships in excess of 72,000,000 pounds of freight per monthfrom eight different locations in the Dallas/Fort Worth area. The economies of scaleand flexibility we deliver to our customers allows them to be more competitive in
the marketplace. For more information contact us at: 214 381-5050
they have communicating with each other? (Graham Allen)
Ken Johnson: With the incredibly diverse customer basethat we have, Shippers Warehouse has invested a tremen-dous amount of time and money addressing this issue.Our clients communicate with us via EDI transaction sets,the exchange of flat files, custom interfaces, and a numberof less sophisticated methods. Custom programming ofsome sort has become a given with the startup of any newclient relationship. The IT environment adjusts andupgrades continually, and will require investment andinnovative answers to new questions from now on.
LQ: How will the current economic environment impactthe 3PL industry? Would you expect to see further con-solidation or will everyone just “hunker down” and tryto make it through? (David Closs)Ken Johnson: I believe that the current economic environ-ment will not affect all 3PLs in the same manner. The cus-tomer base, markets that a 3PL operates in, real estateobligations, asset vs. non-asset, legislation, and the rele-vant labor environment are all factors that will impacteach 3PL entity in a manner consistent with each individ-ual firm’s circumstances relevant to those issues.Companies whose customer base is dominated by con-sumer electronics, apparel, luggage, decorative items, orother such non-essential consumer goods are going to bemore severely distressed than those dealing with cus-tomers whose goods are more essential. Firms with largebuilding lease obligations that were put in place to serv-ice customers in these markets could be severely at risk.Non-asset-based 3PL providers could be in a less per-ilous position, but could also be severely compromisedby the failures of their customers’ businesses if a largepercentage of their clientele deals in the sale of thesenon-essential goods.
It is reasonable to assume that some consolidation willtake place during the dire economic times that are predict-ed for the very near future. Smaller firms with strong bal-ance sheets could use this time as an opportunity toincrease their market share by purchasing the business ofa struggling competitor, or venturing into a geographicmarket in which they had not previously participated.Larger firms will most assuredly be presented with oppor-tunities for acquisition, but could be constrained by cor-porate mandates that force them to pass on such opportu-nities due to the uncertainties of the economy. Publiclyowned 3PLs can be expected to “hunker down.”
LQ: What role does transportation play in expanding/optimizing your DC network? (Bruce Danielson)Ken Johnson: Since the transportation dollars spent to get
a product to market are typically a multiple of four to sixtimes that of the warehousing dollars spent on that sameitem, the role of transportation figures into every supplychain decision. An analysis must be undertaken for ourcustomers that includes the manufacturing source of theirgoods, discerning what the most timely and cost-effectivemode of transportation to get those goods into their DCnetwork is, where their client bases are concentrated, andwhat is the most efficient way to service that requirement.Once those determinations are made, we coordinateinbound customer volumes with our LTL consolidationprogram to maximize transportation opportunities. Thisconsolidation program is so extensive that many of ourcustomers pay their warehouse bill with the savings theyrealize from the inclusion of their shipments in it.
It is the transportation component of the overall supplychain strategy that compels us to have a presence in thefive primary domestic distribution markets (midwest,northeast, southeast, southwest, west). ShippersWarehouse currently addresses this need with its ownfacilities in the southeast and southwest, and with the useof a network consisting of industry partners and “4PL”relationships elsewhere. This flexibility allows our cus-tomers a wide range of options and assures that virtuallyany challenge can be successfully overcome.
LQ: How do you balance the needs of serving middle-mar-ket customers with those of serving strategic customers?(Bruce Danielson)
Ken Johnson: In our lexicon, every client is a strategic cus-tomer. Our management and supervisory staff are trainedto treat every client as though it was the only one we have,and that mindset is passed on from them to the customerservice staff, the warehouse associates, the cleaning crew,etc. This is a legacy ingrained in the organization by DarbyStrickland, Chairman Emeritus of Shippers Warehouse. Heled by example, and would treat a phone call from a cus-tomer with a few pallets in inventory exactly the same asone from a Fortune 500 customer with 80,000 pallets. Thismindset is beneficial for all customers, regardless of theirsize and requirements.
LQ: How do you manage for growth and ensure optimalspace utilization? (Bruce Danielson)Ken Johnson: In our industry, the “build it and they willcome” approach has a considerable financial riskattached to it. As space represents a huge fixed cost, welearned a long time ago that unneeded space caused byoverly enthusiastic sales projections can seriouslydetract from profitability and drain cash reserves.Shippers Warehouse has historically kept a real estate
portfolio that includes owned property, leased property,short-term leases, long-term leases, temporary leases,large buildings (200,000 square ft. and up), smaller build-ings (less than 200,000 square ft.), and various lease ter-mination dates. This has allowed us the luxury of beingable to adjust to changing business conditions. We havealways made certain that any vacant space in the systemcould be consolidated into one facility within a geo-graphic region, and fit our primary market niche (foodgrade, high ceilings, etc.). Addressing this particularissue this way has resulted in steady, constant growthfueled by dependable profitability.
LQ:Do you feel there has been too much emphasis of lateon the adoption of new technology and systems com-pared to a focus on the fundamentals of warehousingand distribution? (David Faoro)Ken Johnson: Certainly, new technology has greatlyenhanced all of the parts of the supply chain process.When I started in this business, inventory was kept ona manual “cardex” system. We’ve come a long waysince that time.
The danger that I see regarding this question is the“technology for the sake of technology” issue. A pick tolight warehouse provides a highly productive environ-ment with tremendous inventory accuracy, but does itscapital investment allow the 3PL provider to be price-competitive? The answer to this question woulddepend upon the gross sales dollars, margins and activ-ity associated with the commodity to be stored/distrib-uted. This is a question that must always be asked whenmaking an assessment regarding the purchase andimplementation of new technology.
LQ:What steps have you taken to reduce your warehous-ing costs? (Cliff Lynch)Ken Johnson: While the current state of the economy pres-ents substantial challenges, it also offers tremendousopportunity. Because of the downturn in the commercial/industrial real estate market, we have been able to renego-tiate existing lease obligations to obtain substantiallyreduced building costs. Other vendors (propane, tempo-rary labor, supplies) have also offered reduced pricing inreturn for extended terms.
On the labor side, we constantly measure productivi-ty and margins with a series of metrics designed to max-imize the return on our labor dollar expense. Thesemetrics are shared with everyone within the organiza-tion, and our workforce is financially incented to keepthese ratios within a pre-determined target range—butnever at the cost of service.
CONSIDERING THAT MANY distributioncenters control multi-million dollarbudgets and inventory as well as manag-ing large workforces, these operationsare a vital link in an efficient, integratedsupply chain. In today’s economic envi-ronment, all functions in an organiza-tion need to deliver against target levelsin order to ensure sustainability. Distribu-tion centers are no exception. This arti-cle will outline strategies organizationscan use to operate their distributioncenters to meet increasingly challeng-ing expectations. The focus will be onpeople, processes and technology.
Create a High Performance WorkEnvironmentTeam members in the distribution cen-ter play a crucial role in the delivery ofan organization’s objectives. Engagingthe hearts and minds of all team mem-bers in the DC will result in improvedresults measured by exceptional healthand safety results, meeting customerservice expectations and achievingfinancial targets. The following are important people-
centric considerations when operatinga distribution center.Create a Safe, Productive EnvironmentThe physical environment associates
are working in is directly correlated tothe facility results. Facilities that are safetypically experience a lower number ofworkplace injuries, increased labor pro-ductivity and a reduced number oforder selection errors, to name a few.Although there are many elements tocreating a safe workplace, active leader-ship by facility management andemployees through a highly functionalJoint Occupational Health and Safety
Committee is the underpinning of aneffective program. Invest in Training and DevelopmentThe operation of a safe and efficient
distribution center requires a well-designed training and development pro-gram for all team members in the facili-ty. Typically, this plan encompasses tech-nical training such as WHIMIS, producthandling and the operation of materialhandling equipment, to name a few.Recognizing the important role dis-
tribution centers play in the supplychain, many organizations are placinghigh-potential candidates in key leader-ship roles in the centers. Training invest-ments are being made in these individ-uals to arm them with the skill setsrequired to deliver benefits in the shortterm while developing long-term talent.This includes a combination of techni-cal training in supply chain manage-ment and broad-based business train-ing, as well as leadership. Professionaldesignations such as CITT are increas-
ingly becoming the standard for leader-ship roles in supply chain management.Create an Engaged WorkforceAssociates from all levels in your dis-
tribution center should be encouragedto present any ideas they have to driveimprovements to the operation. Thereare many examples where ideas directlyfrom the floor have created significantbusiness value to an operation. It is criti-cal not to undervalue ideas and inputfrom associates directly doing the work.Beyond the traditional methods of
obtaining input, consider utilizing thefollowing approaches to increaseemployee engagement in your distribu-tion center.• Start a program of employee roundta-bles facilitated by senior leadership inthe organization.• Engage the entire team in the busi-ness planning and managementprocesses. • Develop self-funding goal-sharing pro-grams designed to share savings with allassociates when ideas are implementedand targets are achieved.
Invest in Leading PracticesSurprisingly, there are organizations thathave limited process control in the day-to-day management of their distributioncenter facilities. Best-in-class organiza-tions operate their distribution centersby utilizing many of the same processesthat are found in manufacturing facili-ties. For example, Six Sigma is a provenmethodology used widely in organiza-tions to drive increased process controlthat has resulted in significant improve-ments in cost performance, customerservice and product quality. Utilizing the
By Warren Sarafinchan, CITT
Leading Practices in Managing Your Distribution CenterIn today’s economic downturn, the value of investing in people, processes and technology in distribution centers is essential to ensure breakthrough performance.
CREATING A LEAN WAREHOUSE (ordistribution center) is not somethingyou accomplish overnight. It takesvision, planning, strategy, tools and tac-tics. Relative to people, you need todevelop team members into problemsolvers and then provide a leadershipinfrastructure to support their efforts.Identifying and solving problems mayseem basic; however, experience wouldsuggest it can prove elusive in applica-tion. The results achieved through yourlean efforts can be quantum in nature.Improved customer fill rates, decreasedinventory levels, decreased inventorycarrying costs, improved inventory accu-racy, and increased asset and team mem-ber utilization are all benefits of LeanWarehousing.When Toyota Motor Manufacturing
developed and shared its Lean manufac-turing strategy (known as the ToyotaProduction System), many realized it hadimplication as an overall business systemand not just a manufacturing system. Theprinciples of Lean are now being applieduniversally, including inside the ware-house. Some of these principles includeteam member training and develop-ment, standardization, visibility, quality atthe source, continuous improvement,waste elimination, visual management,and problem solving thorough the Plan,Do, Check, Act Cycle.Starting with team member training
and development, we understand that itis people who can identify problemsand create sustainable solutions. One ofthe lean tools that we can give our ware-housing people is Value StreamMapping. This allows us to map out cur-rent processes on the floor and identifywaste and see where we can take non-
value added activities out of the ValueStream. The Value Stream is simplydefined as the flow of activities that addvalue to the customer. The premise isthat we should only be doing thosethings that add value. All other activitiesare considered waste and should beeliminated.The concept of standardization is
also a key Lean principle for the ware-house. Creating standardization ofprocesses is to create tasks that are easi-ly repeatable with planned zero waste.The creation of standard work allowsyour team to understand processes from
the point of view of inputs, procedures,timing and outputs. However, creatingstandard work is not about turningpeople into robots! It is about creat-ing a baseline from which we canimprove. Many warehouse opera-tions are a series of manual process-es. The unfortunate aspect to this isthat people will do the same processin different ways. While this may lead tothe same result, it is impossible toimprove upon the process in theabsence of a standard. Consequently, theLean thinker believes in standard workas it produces the baseline from whichwe will improve.Visibility of material flow, inbound
logistics, internal warehouse flow, andoutbound logistics are critical to theLean warehouse. We need to understandthe flow of material and be able to deter-mine if we are supporting the “perfectorder”: the right quantity, at the rightplace, at the right time, in the right quali-ty. The Lean concept of “visual manage-ment” allows us to understand the scoreof the game (operation) so we can makedecisions in real time that impact theoverall flow of material to the customer.
WQ REVIEW
By Chris Luery and Robert Martichenko
Creating the Lean Warehouse It’s an evolution, not a revolution.
Continued on page 18
www.lakesidelogistics.com
Load and route optimizing plusour Vision Green™ program meanscarriers reduce miles, fuel usage,CO2 emissions and costs.
Six Sigma DMAIC methodology (Define,Measure, Analyze, Improve, Control),coupled with a wide variety of inves-tigative tools, issues will be identifiedproactively with root cause isolated.Appropriate actions can then be takento drive sustainable go-forward results.Figure 1 above provides an outline ofthe DMAIC methodology.
Invest in Technology to EnableProcess ImprovementInvesting in the right technology in yourdistribution center is a strategic deci-sion in the drive to increase service lev-els, improve cost performance and
tighten quality control. Technologyinvestments in a distribution center canrange from a warehouse managementsystem (WMS), voice and light directedwork instructions to automated pickingsystems, conveyors and gantries. It iscritical to consider that the implemen-tation of technology in and of itself willnot deliver savings. There needs to beequal effort invested to implement sup-porting process changes, coupled withtraining and development for all teammembers in the facility.
ConclusionMany have heard the phrase that “youare only as strong as your weakest link.”
This thinking can appropriately beapplied to supply chain management.All links of the supply chain must havehigh levels of performance in order toachieve overall service and cost per-formance. Distribution center operationsare a part of this chain and must be man-aged with the same level of sophistica-tion as any other part of your organiza-tion. Industry-leading organizations areinvesting in the people, processes andtechnology in their distribution centersto deliver breakthrough performance.Given the current economic conditionsworldwide, it is important for organiza-tions to maximize the returns from theirdistribution center operations.
This is counterintuitive to many ware-housing operations where the operationsimply reacts to what trucks (or orders)show up at the facility on any given day. Building on the fact that many ware-
houses have manual processes, we needunderstand the Lean principle of “quali-ty at the source”. To create quality at thesource, we need to identify and isolatethe key failure modes or areas of defects.Then we need to implement Poke Yokes(error-proofing ideas) to eliminate theproblems. Further, we need to create aQuality Dashboard to ensure that we cantrack our improvement in establishingquality at the source and be sure to con-tinue to improve upon the past results.Focusing on quality at the source in awarehouse environment can be veryenlightening. For example, one organiza-tion realized they needed to do some-thing about serious errors in picking per-
formance. Once the root cause analysiswas completed in the picking area, theteam was surprised at the actual rootcause. While they initially believed it wasa training issue, they learned the realissue to be that of picker interruptions.They learned that picking errors werebeing made because pickers were beinginterrupted by other members in themiddle of their pick wave. This interrup-tion made the picker lose track of wherethey were. The solution was that pickerswould wear a green colored vest whilepicking and others were not allowed tointerrupt them while they have the greenvest on.Material flow within our facility is
often overlooked. Do we have waste ofconveyance taking place because wehave not correctly designed the floor lay-out? Experience has shown in Leanwarehousing that simply putting yourperceived fast runners (A items) will not
necessarily provide the optimal ware-house lay out. We need to consider mate-rial flow based on stability as opposed togross volume. In other words, what itemsdo we pick frequently even though theymay not be in large volumes? How havewe designed the warehouse to facilitatethis flow of stable material?The Lean warehouse is about Contin-
uous Improvement. Tools such as thePDCA cycle (Plan, Do, Check, Act) helpus to identify and eliminate waste. Whatis the plan today? At the end of the dayhow do we measure our actual perform-ance to plan? What do we need to adjustto be better tomorrow? Answering thesequestions is the essence of the Leanwarehouse. The goal is create a ware-house where problems are visible andwhere we fix problems at the root causeevery day. Accomplishing this will in factcreate the Lean warehouse and drivequantum business results.
Continued from page 17
Continued from page 16
FIGURE 1
We go the Distance
1 . 8 0 0 . 2 6 5 . 6 3 5 8www.challenger.com
It’s time to truly discover Challenger!
Grateful...We would like to extend our sincere appreciation to our hard working team of professionals. They make our continued growth and quest for quality a reality. To be awarded Platinum Status for a second consecutive year is recognition of their unyielding dedication and commitment.
Green...We have put measures in place to significantly reduce our footprint on the environment. As a result we have been awarded the highest ranking from the SmartwaySM Transport Partnership and have been chosen to run Canadian environmental pilot programs to assist our industry to “go green” on a macro level.
Growing...To better serve our customers, we have developed programs to complement our core truckload abilities with additional domestic, transborder and international offerings. Solutions-teams are in place to “go the distance” with a myriad of customized service options geared to specific customer requirements.
LQ: Will belt-tightening due to difficult eco-nomic times in 2009 compel more supplychain managers to cut costs by dedicatingmore resources to supply chain manage-ment software, or the I.T. expertise of 3PLs?Thomas K. Sanderson: The answer dependson the severity of the downturn. In the past, I’veseen shippers use tough economic circum-stances as a catalyst to get capital appropria-tion approved for supply chain software—tying the investment to the business case sur-rounding the application. During this particu-lar challenge, however, we are seeing height-ened interest from the shipper community fora 3PL-provided IT solution. In today’s market,not only are capital budgets thin or frozen, but organizationalbudgets are tight, with many shippers actually reducing head-count rather than adding or maintaining headcount. Supplychain applications create value, but they—by definition—alsorequire talented personnel to make proper use of the tools.With the 3PL-delivered approach, shippers realize the potentialthat supply chain applications offer, with two key considera-tions for today’s realities. First, the technology costs are fundedout of operational budgets rather than capital budgets; and sec-ond, the 3PL solution affords supplemental staffing for the solu-tion design. The provision of both the people and the technol-ogy to improve the business process has made the 3PL offervery compelling in this market.
LQ: Will the economy create a greater trend for more compa-nies to focus on deriving even greater value from their exist-ing outsourcing relationships? Will they likely use this as alever to renegotiate existing agreements regarding pricing,service levels and other key terms?Thomas K. Sanderson: From our perspective, Transplace seesour existing customer base now looking to expand the scopeof business processes where we can help support their goals.For example, where perhaps in the past our customers had astaff to focus on some portions of the supply chain operationinternally, and to rely upon Transplace for other areas, now, weare in discussions to expand the boundaries whereTransplace is “on point.” While it is true that the economy isslowing down, the supply chain business processes are still inmotion—and there is heightened attention paid to all operat-ing costs associated with it. Where it makes sense, our cus-tomers are shifting additional areas of scope to Transplace inorder to free up limited time and resources on their side ofthe relationship. This addresses the heightened attention andfocus that supply chain costs are now receiving from C-level
leadership. In terms of shippers using thecurrent economic climate as a lever for rene-gotiating agreements, we have not seen thisin our business. Our customers look toTransplace as a strategic partner, and as such,we are always looking for mutually benefi-cial ways to streamline and enhance ourbusiness relationship. The one thing we dosee is that our primary contacts proactivelyseek us out to brainstorm about collabora-tive ways to create new sources of value inthe supply chain. So for us, this downturn hasserved as an opportunity to become evencloser to our most important customers.
LQ: Will outsourcing provide an opportunity for compa-nies emerging from the current economic downturn tofind solutions that need less capital, and instead place apremium on the importance of working with others whohave the right people and processes?Thomas K. Sanderson: In the logistics arena, the focus isalways on process-based outcomes. The key question we typ-ically see is a shipper thinking through the trade-offs of aninternally pursued outcome, or an outcome that relies uponboth internal personnel and external partners. For manyfirms that have historically had corporate cultures that valueinternal process controls and accountability, this translatedto capital investments in buildings, software, and a payroll-based staffing model. This economic downturn, however, hasserved as a catalyst for those types of firms to consider alter-native approaches out of necessity. The absence of capitalbudgets and the freezing of corporate hiring have led manyof those firms to revisit the outsourcing option. For thosecompanies, Transplace believes that, yes, they will find solu-tions that are less reliant on capital budgets. What they willdiscover after outsourcing a supply chain business process isthat the same process-driven outcomes can be achievedthrough partners, with the overall costs becoming opera-tional costs—turning a total cost equation from one withhigher fixed-costs proportions into cost equations where farmore of the cost is now variable. Ultimately, the goal is effi-cient execution of the business process. Whether thatprocess is performed by internal people (using owned assetsand tools) or by external people, the true measure of successis the same: the fully loaded cost to serve a customer base ata targeted service level. Shippers that select the right exter-nal partners today will find that the total cost to serve theirown customers can be brought down while also streamlin-ing their corporate balance sheets.
A Conversation With Thomas K. Sanderson,President & CEO, Transplace
Questions for this Executive Interview have been prepared by LQ’s Executive Editors.
L Q ’ S E X E C U T I V E I N T E R V I E W S E R I E S :DEFINING LEADERSHIP IN LOGISTICS AND TRANSPORTATION IN NORTH AMERICA
Businesses are challenged to stay a step ahead of this ever-changing marketplace. When adjusting to transportation budgets, adapting to new technology, or re-assessing your supply-chain, you are introducing change and affecting behavior. Transplace is your right hand, ensuring the challenge and changes are efficient, necessary and meet your goals. We are passionate about your rising success, and love what we do. The results show in our work, our customer loyalty and countless success stories. By driving forward our customers with rich logistics technology, Transplace goes the distance every time, propelling your business to the peak of growth and prosperity.
PRESIDENT OBAMA has now beeninaugurated, and the new Administra-tion is promoting a stimulus package inhopes of slowing, if not reversing, thedecline of economic activity. For sup-ply chain professionals, the parts of thestimulus package dealing withincreased funding for transportationinfrastructure projects, and particularlyfor highway construction and mainte-nance, are most important.The American Recovery and Re-
investment Act of 2009 was passed bythe U.S. House of Representatives (asH.R.1) on January 28, 2009, and by theSenate on February 10 (as S.350).However, the two bills are not identical,necessitating a House-Senate confer-ence to develop a bill acceptable to theCongress as a whole. The final bill, withstimulus funding totaling $790 billion,was approved on February 13, 2009, andsigned into law February 17.The legislation was controversial. The
Senate version attracted support fromonly three Republicans, and the Houseversion got no Republican votes.However, the most controversial aspectsof these bills appear not to have involvedfunding for infrastructure. Thanks to awidely publicized report by the NationSurface Transportation Policy andRevenue Study Commission, set up byCongress in the 2005 Highway Bill, andthanks to efforts by shipper groupsincluding NASSTRAC, the U.S. Chamberof Commerce, the American TruckingAssociations, and the NationalAssociation of Manufacturers, govern-ment officials recognize the need foradditional investment in the U.S. trans-portation infrastructure.The stimulus package includes almost
$30 billion for highways,of which at least 50 per-cent must be obligated,i.e., approved by theFederal Highway Admin-istration, within 120 days.There are additionalamounts for transit and airtransportation.It is important to recog-
nize that $30 billion forhighways and bridgesapproved in the stimuluspackage represents onlythe first installment inhighway infrastructurespending. The currentHighway Bill, known asSAFETEA-LU, expires Sept-ember 30, 2009, and a newHighway Bill will be need-ed.SAFETEA-LU included
roughly $286 billion ininfrastructure spendingover several years, but thatamount was plainly inade-quate. In fact, Congressneeded to approve $8 bil-lion in additional fundingin 2008 to avoid insolven-cy in the Highway TrustFund. Current estimatesare that the next Highway Bill mayinclude $400 billion or more for the nextfive or six years, and that freight trans-portation will have a high priority. If thelast Highway Bill is any guide, Congressmay not be able to have new legislationready by the end of September, and mayextend existing funding levels while newlegislation is finalized. The 2005Highway Bill’s predecessor expired in
2003 but was extended several times.Unlike stimulus package spending,
which will come from general fund rev-enues, Highway Bill funding has tradi-tionally come from fuel taxes. However,falling fuel prices, more fuel-efficientautomobiles, and reduced driving due tothe recession have severely reduced therevenues available from fuel taxes.Accordingly, there has been serious
NASSTRAC CORNER
By John Cutler
Update From Washington on Infrastructure Investments Despite widespread support in Washington for increased infrastructure investment, which should be good for the trucking industry and its customers, there are also threats to truckers and truck shippers.
consideration of an increase in fueltaxes, which have not been increasedsince 1993. The Policy and RevenueStudy Commission’s 2008 Final Reportincluded among its recommendationsan increase of five to eight cents per gal-lon for each of the next few years, fol-lowed by transition to highway use taxesbased on vehicle miles traveled (VMT).Another study commission establishedby SAFETEA-LU, the National SurfaceTransportation Infrastructure FinancingCommission, is reportedly consideringrecommending an increase of 10 centsper gallon in federal gasoline taxes, and12 to 15 cents per gallon in diesel taxes,with the states being asked to implementincreases in their fuel taxes.Significantly increasing fuel taxes
would have been a non-starter onCapitol Hill when gas cost $4 a gallon,but such an increase when the price ishalf that amount is more acceptable.Any tax increase remains a long shot,particularly during a severe recession,but pitching higher fuel taxes as neces-sary to reduce congestion withoutimposing new or higher tolls throughout
the national highway system might makesome headway.Despite widespread support in
Washington for increased infrastructureinvestment, which should be good forthe trucking industry and its customers,there are also threats to truckers andtruck shippers.Two bills that were not passed in the
last session of Congress but are beingreintroduced in the new session are theSafe Highways and InfrastructurePreservation Act (“SHIPA”) and the Trustin Reliable Understanding of ConsumerCosts Act (“TRUCC” Act). The formerwould undermine efforts to increasehighway capacity. Not only would itblock any increase in truck sizes orweights, but it would expand the current“freeze” from interstate highways to allnational highways in the U.S. Numeroustrucking and shipper groups are seekingrelief from the freeze and permission touse 97,000 GVW trucks with an addition-al axle.The TRUCC Act would force disclo-
sure of fuel surcharge agreements andrevenues, and would require payment to
drivers of all amounts collected. Lowerfuel costs may help opponents of thislegislation prevail.Finally, the decision of the Federal
Motor Carrier Safety Administration toretain current driver Hours of Servicerules (which was supported byNASSTRAC) continues to draw fire fromsafety advocates, despite falling accidentand fatality rates under those rules.Public Citizen and other groups arereportedly considering lobbyingCongress to overturn FMCSA’s decision,and they have just filed another courtchallenge. These efforts, if successful,will also add to highway congestion byreducing trucking industry productivity.NASSTRAC will intervene in the case insupport of the FMCSA decision main-taining the current rules.Virtually all supply chain and logistics
professionals stand to be affected bythese developments, some of which willprofoundly affect the U.S. transportationinfrastructure, freight transportation pric-ing and available capacity. LQ readersshould stay current on these issues, andlet your voices be heard.
AS SMALL AND MEDIUM-SIZED compa-nies (SMBs or mid-market firms) tightentheir belts in 2009 due to difficult eco-nomic times, how will this tighteningimpact their spending on supply chaintechnology? There is a “chicken andegg” scenario here—you need money toinvest in technology, and money is defi-nitely tight right now; however, if invest-ments can result in return “multiples” toincrease profits in down times, will theinvestments be made? This all depends;the ROI on this type of technology invest-ment should supply the answer. The keysto this will include cost, resource require-ments and how quickly you can makethe return happen.Will the current economic environ-
ment compel more supply chain man-agers to cut costs by dedicating moreresources to supply chain managementsoftware and expertise? Or will compa-nies totally retrench and shut downspending regardless of potential pay-back and savings? In down times, invest-ments can provide even bigger returns.The opportunity to realize significantbenefits from supply chain softwaresolutions is real and includes paybacksin ranges as short as three to fourmonths. Additionally, the future benefitsof these systems will help prepare youfor growth and may help to provide yourbusiness with a market advantage duringthese times and as we come out of thedownturn.One way to keep supply chain IT
spending down is to rely more heavilyon the IT systems of partners like suppli-ers, carriers or third-party logisticsproviders—using the investments ofyour supply chain partners rather thanmaking your own. However, the issuewith this is that surveys show that 3PLsaren’t seen as leaders in providing tech-
nology solutions. However, it mightmake sense to check and see what your3PL or other partners’ system functional-ity might be leveraged to gain efficiencywith little or no investment, particularly ifyou don’t currently have the money toinvest in your own company’s systems. As mentioned in earlier Technology
Toolbox columsn, another way to reducesupply chain IT spending is through theuse of Software as a Service (SaaS) solu-tions, which allow payment on a usagebasis rather than a full license purchase.The advantage of SaaS solutions is theability to implement quickly with loweror no implementation costs, dependingon the type and complexity of the solu-tion. These solutions also allow for SMBsto take advantage of technology capabil-ities that previously have been too costly.The key is to find a system that you canhave up and running quickly, with clearvisible benefits and value that meet yourcompany’s requirements. If you are notsure what these systems can provide, oneway to get educated quickly is to set uponline demonstrations. It is better if asoftware provider can populate theirdemos with data from your company. Inaddition, try to get the providers to letyou or someone else from your compa-ny “drive” the demonstration. This way,you can try different data input areas tosee if they are all in working order. Insome solutions that aren’t fully devel-oped, the software company can cover alack of developed functionality by onlyusing the onscreen entry fields that arecurrently enabled. Overall, demonstra-tions are a great way to view the featuresand capabilities of all these types of sup-ply chain software solutions. It would seem today’s economy may
highlight the value of the supply chain asan area to improve efficiencies and ded-
icate more resources to I.T. to enablegreater efficiencies. To best leverage anyinvestment, several steps should be fol-lowed.
Steps to follow in deciding on a software investment• Determine capital availability (if nocapital is available, Software as a Service(SaaS) is the only software purchaseoption)• Understand potential benefit providedby the implementation of a softwaresolution—create a range of savings (e.g.,5–10% of transportation cost for a TMSsolution)• Estimate implementation costs• Determine the time and resourceinvestment needed to get the system upand running• Understand what is required to trainusers to maximize the capabilities of thesystem• Don’t underestimate the need for yourpeople to make the change to the newtechnology (get them involved early)
SummaryIn this type of economy, investments
can usually be justified in terms ofexpected benefits. It is a mindset issuewhere management has to understandthat investments in down markets showhigher payback than those in bettereconomies. Now is a great time to nego-tiate better rates/costs for potential soft-ware and services; make sure you ask thevendors to sharpen their pencils whenthey come to the table. For SMBs choos-ing to invest in quick payback technolo-gy investments, significant competitivegains can be made on much larger com-petitors who are likely to be freezing orcutting their technology investments atthis time.
SMB Technology Options in a Difficult Economy Now might just be the time for SMBs to invest in supply chain technology while the economy isdown—large and quick returns are available if pursued..
by Chris Norek, PhD, Senior Partner, Chain Connectors, Inc.and Jeff Russell, Chief Information Officer, Majestic Steel USA
YOU NAME IT
We’ll Customize A Supply Chain Solution For ItWhatever you manufacture or wherever you store and distribute your products, Ryder’s end-to-end supply
chain solutions are designed to fit perfectly with your company’s unique needs. Unmatched experience,
flexibility and innovative thinking. This is what we offer to hundreds of companies around the world, from
electronics and car makers to consumer product and aircraft manufacturers. We can do the same for you.
Call 1-888-88-RYDER or visit www.ryder.com.
S U P P L Y C H A I N , W A R E H O U S I N G & T R A N S P O R T A T I O N S O L U T I O N S
OVER THE PAST SEVERAL YEARS, Ihave had the opportunity to introducemedical professionals to the basics ofsupply chain management. This hasincluded medical administrators aswell as very specialized doctors, nursesand technical staff. Early during theclass, the question that often comes upis “What relevance does this have forme?” My typical response has been thatsupply chain management (purchasingand supply operations, in their terms)insures that they have the material onhand to serve, medicate and completeprocedures for their patients. The healthcare industry has dramati-
cally enhanced its focus on supply anddistribution management, and theresults are beginning to show. To pro-vide some perspective, supply chainexpenses account for 35 to 45 percentof hospital total budget expense.According to a 2008 HealthcareExecutive Survey on Supply ChainManagement, both hospital executivesand materials management identifiedclinical performance and outcomes/patient safety as the number-one chal-lenge faced by hospitals, while thenumber-two challenge was overalloperating costs1. The survey furtherindicated that 70 to 80 percent of hos-pital CEOs and CFOs believe that sup-ply chain management has impactedkey healthcare provider issues includ-ing profitability, patient service andsafety, physician relations, patient satis-faction and nurse satisfaction.According to hospital CEOs and CFOs,healthcare supply chain professionals
have contributed to reduced hospitaloperating expenses by (in decreasingorder of priority): 1) increasing productstandardization; 2) improved pricingand terms of purchasing contracts; 3)reductions in product price; 4)improved supply chain process effi-ciency; 5) engaging physicians in prod-uct selection and management; and 6) reduced cost/procedure throughimproved supply utilization. It is appar-ent that hospital executives have begunto take supply chain management seri-ously and have used supply chain pro-fessionals to lead many cross-disciplineinitiatives (with medical procedures,patient care and laboratories). While there have been tremendous
gains, my discussions with supply chainprofessionals and my students workingin the medical field have suggestedeven greater opportunities. When youthink about the last time that you had asurgery or medical procedure, the last
thing that you were probably con-cerned about was the potential of nothaving the necessary supplies. The pri-mary concern was undoubtedly thatyou would get through the proceduresafely and that it would accomplish itsdesired objective. The secondary con-cern was probably that you could havethe procedure completed in a timelymanner with minimal waiting for facili-ties and medical personnel. Availabilityof supplies was probably last on the listof concerns.While it is certainly important that
healthcare supply chain professionalsmaintain their focus on ensuring thesupplies are available when necessary,the increasing interest in services sup-ply chains opens up opportunities forsupply chain management to con-tribute more broadly to health care.The term “services supply chains” refersto the application of supply chain prin-ciples to processes in organizationsthat don’t traditionally think of them-selves as handling goods, such as finan-cial, medical, educational and govern-ment institutions. While the traditionalsupply chain focus has been to delivergoods to the consumer, the broadercharge today is to solve the consumer’sproduct needs, whether that be forfood, clothing, entertainment or healthcare. In the traditional supply chain set-ting, for example, video entertaining isnot simply getting the television to thehome; it also requires that it be con-nected to the cable and audio systemsand programmed to work with a singleremote control. My experience is that itis much easier to purchase the large-screen television at the store than toschedule the delivery and setup.
How Can Supply Chain Managers Help the Healthcare Industry? While it is certainly important that healthcare supply chain professionals maintain their focus on ensuring that supplies are available when necessary, the increasing interest in services supply chainsopens up opportunities for supply chain management to contribute more broadly to healthcare.
by David J. Closs
LogisticsQuarterly.com
1.“Supply Chain Costs of Goods Grab Executive’sAttention.” Materials Management in HealthCare, (December 2008), Pg. 34.
Similarly for a medical procedure, it ismuch easier to have the supplies avail-able than to have the medical facilitiesand professionals available unlessexpensive excess capacity is main-tained. When discussing this situationwith supply chain professionals andstudents, it has become apparent thathealthcare supply chain managementexpertise can be applied much morebroadly than just for goods. The samesupply chain principles can be appliedto managing other types of resources,including medical facilities andexpertise. Supply chain managers canextend their skills beyond the process-es involving just goods to those situa-tions involving expertise and othertypes of resources.Building on this perspective, I would
like to suggest four supply chain princi-ples that can be extended to improvehealthcare industry performance. First,the demand management principlecan be applied to better match servicedemand with resource availability. Ihave had a number of medical person-nel in my classes who have cited thatthey have little control over customerdemand even for rather routine servic-es. Specifically, they cite the case wheredoctors refer patients for tests or proce-dures with minimal lead time, thuscausing patient delays or underutilizedstaff. Following a review of demandmanagement principles, they began toprovide physicians and patients whorequested reservations one or two daysahead with time guarantees andreduced fees. Once these demand man-agement practices were implemented,the medical personnel found thatscheduling became a little less randomand requestors were willing to providemore realistic scheduling times. This isnot suggesting that it should be desir-able to have a reservation to visit theemergency room. However, it may beuseful to implement demand manage-ment for laboratory procedures.Second, as indicated above, supply
chain professionals have begun toimplement the principle of simplicityto hospital operating environments.Just as has occurred in industry, hospi-tal purchasing agents have focused onsupply base rationalization by reducingthe number of suppliers. While suchrationalization was an obvious oppor-
tunity, more recent initiatives havefocused on working with physiciansand other medical professionals toreduce the variation in supplies, proce-dure kits and other consumables.Historically, medical professionals haveoften elected to use the consumablesand equipment that they were trainedwith, resulting in medical facilities hav-ing to maintain multiple variations ofsimilar items. For example, each physi-cian performing the same proceduremight use a slightly different set ofequipment. While it is not the job ofsupply chain professionals to makeprocedural and technical decisions forphysicians, medical materials profes-sionals have begun initiatives to identi-fy situations where such similaritiesexist, quantify the benefits of reducedcomplexity, present the data to medicalpersonnel and request input regardingwhether it makes sense to standardize.Third, just as industry supply chain
professionals have focused on integrat-ed inventory management throughoutthe supply chain, healthcare materialsprofessionals have begun to evaluatetheir integrated supply chain to deter-mine how to best manage total health-care supply chain inventory. In theindustrial sector, supply chain profes-sionals evaluate on a regular basiswhere inventory should be stocked inthe supply chain (manufacturer, distrib-utor or retailer) and who should havefinancial and decision-making respon-sibility. In the case of the healthcare sup-ply chain, there are often multipleinventory caches even within a singlefacility. Through the use of distributorsand third-party logistics firms, health-care material professionals are startingto evaluate who has the best expertiseand capability to maintain and manageintegrated healthcare supply chain
inventories. In many cases, healthcaresupply chain professionals have out-sourced inventory managementresponsibility, resulting in a more inte-grated perspective.Finally, healthcare supply chain pro-
fessionals can start to take an integratedresource management perspective. Tomove products through a supply chain,it takes a combination of equipment,expertise and products. Similarly, tosolve a patient’s health problem, it usu-ally requires a combination of facilities,expertise and supplies. In the health-care case, the expertise involves a com-bination of doctors, nurses, techniciansand caregivers. While there are clearlydifferences, industry supply chain pro-fessionals manage expertise as well inthe form of engineers, production per-sonnel, warehouse operators and driv-ers. Today’s supply chain professionalsuse their resource management skills tocoordinate the combination ofresources through combinations of out-sourcing, flexible scheduling and train-ing. Healthcare supply chain profession-als can employ the same set of skillsand principles to better utilizeresources in the healthcare context.Specifically, there may be opportunitiesto employ different labor and resourcesourcing and pricing to motivate betterresource utilization.In summary, the traditional focus of
the healthcare supply chain profession-al has been on setting negotiating withsuppliers, setting target inventory levels,and operating storage facilities. Whilehealthcare supply chain professionalshave demonstrated substantial costreduction improvements through tradi-tional supply chain actions, there arebroader opportunities that can beachieved by extending the principlesdiscussed above.
www.lakesidelogistics.com
Lakeside’s unique collaborativeculture creates a platform for efficientwork processes and development oflean, green solutions.
SUPPLY CHAIN ORGANIZATIONS andpractitioners can have a considerablepositive impact on the environment.Firms providing transportation and sup-ply chain solutions can offer the benefitsof their environmental expertise, prac-tices and infrastructure to customerswho might not otherwise have access tothese resource levels.Business environmental commit-
ments go beyond laws and regulations.In the supply chain vocation, we have theopportunity to demonstrate environmen-tal leadership through our efforts toreduce waste, recycle, use non-toxicmaterials, conserve energy and manageemissions. Due to the nature of our busi-ness, environmental programs can beintegrated into our operations and theservices we offer customers, who canthen benefit from programs like preven-tative fleet maintenance, waste reductionand recycling, storage tank management,emergency spill response and extensivefacility audits.There is a growing consensus among
corporate leaders that taking action toreduce climate change is a businessresponsibility. Influencing present publicperceptions and meeting the pendingregulatory constraints involves severalkey strategic elements, including a“roadmap” of steps to reduce carbonemissions while also boosting productiv-ity and profit. The energy savings canactually help business reduce costs. One approach is to use an external
utility specialist to track energy use andmeasure greenhouse gas (GHG) emis-sions from owned/operated stationarysources in the U.S. and Canada. Firms canimprove energy efficiency when pur-chasing new equipment and designingor renovating facilities. As a U.S. example,
buildings designed and constructed tomeet the ENERGY STAR energy efficien-cy ratings save money. ENERGY STAR, aperformance rating tool established bythe Environmental Protection Agency(EPA) and the U.S. Department of Energy,estimates that an average office buildingwithout efficiency improvements is rated50. The minimum target score to obtainan ENERGY STAR certification is 75, andsome buildings can be designed toachieve a target rating of 85. For a 150,000-square-foot, three-storey
office building, an ENERGY STAR ratingwill result in the following annualizedreductions:• Consume 6.7 million fewer kBTUs peryear for heating and cooling;• Cost $139,800 less to operate; and• Result in 1,450 fewer tons of CO2 whencompared to an average unimprovedoffice building.Another large impact on greening the
supply chain involves both onsite andoffsite recycle and reuse technologies.Wastes in the supply chain are numer-ous, and each requires different treat-ment and management. For example,packaging, cardboard, paper and prod-uct wrapping is often associated withproduction and inventory. For transporta-
tion and distribution, wastes associatedwith vehicle maintenance and fuelinginclude used oils, batteries, automotivefilters, engine and vehicle parts andcoolants. All represent opportunities toreduce and recycle. Vendor partnerships,and the implementation of technologiesdesigned to better manage and maintainvehicles, can reduce waste generationfrom the start. Greening includes the reduction of
vehicle and facility spills and releases. Asan example, Ryder has emergencyresponse procedures and uses an emer-gency spill response center operating 24hours a day to expedite the dispatch ofemergency response teams to spill sites.Ryder has also developed a Vehicle SpillKit that is placed onboard Ryder trucks.This kit contains everything a driverneeds for fast, effective spill response—and has become so popular and effec-tive that specialized kits are now madeavailable for customer needs. In additionto mobile spills and releases, Ryder per-forms remote 24-hour-a-day monitoringof over 400 locations and compliancemanagement for over 1,800 fuel storagetanks, through a wholly owned sub-sidiary, Ryder Fuel Compliance Services. Firms are emphasizing compliance to
standards, and some, like Ryder, alreadyhave a dedicated Environmental Servic-es program that includes designatedcoordinators at every field location withenvironmental oversight, and a field-based environmental awareness trainingprogram to make sure they have theresources necessary to perform.The supply chain industry can further
enhance its greening direction by adopt-ing government initiatives. In the U.S., theEPA has a SmartWay® Vehicle programpromoting GHG reductions through
Finding Green Initiatives in the Supply Chain Where will you start the greening of your supply chain? Often the challenge is to untangle a complex inbound and outbound transportation network, contain and reduce rising costs and, in tandem with these steps, reduce the carbon footprint of the supply chain.
selection and operation of energy-effi-cient vehicles. Shippers, for-hire carriers,and private fleet firms that operate truckscan become SmartWay® LogisticsPartners, under which the partner firmscan access technical assistance and car-rier strategies. Canada also has severalfuel efficiency programs in place:SmartDriver, which supports training fordrivers and workshops, and ecoFreight, aFreight Technology Demonstration Fund,with freight technology incentives.Also worth considering are the stan-
dards for ISO 19001 and 14001Certification. ISO offers the supply chainindustry the opportunity to qualify forCertified Quality Management Systemsand Certified Environmental Manage-ment Systems. Often, it will take the sup-ply chain provider and the customer toagree on certification, which can thenprovide a measurable benefit.Air quality has improved as fuels
become greener—the use of Ultra LowSulfur Diesel for transportation usersallows for cleaner-burning engines withfewer exhaust pollutants, as a further stepin the trend to lower emissions. Bio-diesel fuel is more available, further sup-porting the greening trend. For the 2010 model year, new diesel
engine emissions will need to bereduced further. Even before then, opera-tors and manufacturers have cooperatedin re-engineering their vehicle designsand specifications to further limit emis-sions and conserve fuel. As one of its cor-porate initiatives, Ryder introduced itsRydeGreen™ vehicles, a line of tractorsand trailers designed to reduce fuel con-sumption and GHG emissions. The trac-tors are built to meet the demands oflong-haul trucking and come equippedwith special features that have earnedthem the EPA’s SmartWay® designation.Re-engineered trailer packages can alsooffer aerodynamic features and weight-saving options to enhance fuel efficien-cy. Some customers are also now testinghybrid vehicles. So where will you start and continue
the greening of the supply chain? Oftenthe challenge is to untangle a complexinbound and outbound transportationnetwork, contain and reduce spiralingcosts and reduce the carbon footprint of
the supply chain. Solutions can be foundthroughout that are sensitive to the firm’ssustainability mission and supply chaingrowth plans. Working with one cus-tomer, Ryder was able to improve cus-tomer service, create a 40 percent dropin the supply chain carbon footprint, andachieve an eight-percent reduction intransportation cost. At the November 2008 Logistics
Quarterly Symposium, Guy Toksoy,Ryder’s vice-president of supply chainoperations, provided some insight intothe practical steps available to green theoperation. The following is a synopsis ofthe initiatives, which are based on threedimensions: Corporate Initiatives andPartnerships (mentioned previously),Internal Change, and Resources forCustomers.
Internal Change to green the busi-ness goes beyond laws and regulationsto emphasize proactive reductions inwaste, increase recycling, use non-toxicmaterials, conserve energy and reduceemissions, all of which provide meas-urable results. Some initiatives includeCarbon Disclosure, Energy Conserva-tion Management, Emission ReductionStrategy, Lighting Upgrades, FuelManagement, Solid Waste Manage-ment, Vehicle-Related Waste, andElectronics Recycling. Ryder saw anannual GHG reduction, just from recy-cling, of 2,828 tons.Since more than 27 percent of all GHG
emissions in Canada are producedthrough highway transportation, withheavy-duty vehicles accounting for 19percent, one obvious opportunity isreduced fuel consumption. To addressthat opportunity, in August 2008 Ryder ini-tiated a Driver Fuel Efficiency incentiveprogram. The goal was to achieve a five-percent improvement in fuel efficiencyand GHG decrease across the fleet. Theplan measures driving performance andfuel usage of each driver or group of driv-ers, and compares results to a targetbenchmark. The drivers were trained toachieve the goals and rewarded with afinancial incentive for fuel-efficient driv-ing. Preparation time before programlaunch was four months. The Ryder Fuel Efficiency Challenge
program was implemented on a pilot
basis with 234 trucks, over 280 drivers,and 37 customers across Canada. Phase1 focused on driver training and docu-mentation, since more efficient vehicleoperation has a larger payback thanequipment modifications and technicalimprovements. This is supported by TheMaintenance Council, which considersthat the most skillful drivers can use upto 35 percent less fuel than the leastskilled, by:► Controlling speed – Every 1 mphabove 55 mph increases fuel usage bytwo percent► Minimizing idling – One gallon offuel per hour of idling► Shifting progressively – Max 1700 /2100 rpm for tractors / straight trucks► Proper tire inflation – One-percentchange in mpg per 20 percent changein psi► Managing the road ahead – Avoidinghard braking and accelerationTechnologies and tracking captured
accurate data, with the ability to minedata and look for trends, and enabledobjective measurement. Results werecaptured in a Driver Fuel Usage Score-card, covering Speed, RPM, and Idletime.The program launched with town hall
meetings and mailers, the incentive pro-gram presentation, monthly metricreporting, quarterly payouts, ongoingtraining and focus, and the goal of savingfive percent in fuel usage across the fleet.The initial program results are very
encouraging. In the first two months,after traveling 7.9 million kilometers,the fuel reduction was 6,139 litres forthe short-haul fleets and 17,730 litresfor the long-haul fleets, with a totalreduction in greenhouse gas emis-sions of 64 metric tons. Many firms can now see greening
their supply chains as both a corporateresponsibility and an economic advan-tage, rather than a forbidding chal-lenge. The business efficiency improve-ment opportunities are incentives forfirms to identify goals for reduced fuelconsumption and lower GHG emis-sions, and then to develop action plansto achieve specific measurable goals,and report progress. The executive chal-lenge is to start now.
WHEN YOU CONSIDER theimpact of technology and howit drives our day-to-day opera-tions, then absolutely everything haschanged. Forever. Think back over the past decade, and
you quickly realize how dependentwe’ve become on the Internet andwireless communications devices. Canyou imagine tracking shipments withoutthe Internet? Or getting through the daywithout your Blackberry? Neither can I.Given that technological advancementshave forever altered every aspect of busi-ness, is there anything that remains rela-tively constant?Look beyond what we see on the sur-
face of business transactions to thehuman factor and what makes for suc-cess versus failure. Successful peoplepossess certain qualities that withstandthe test of time: So much of successdepends upon having a positive attitude,being honest and—by far the mostimportant—the ability to build lastingrelationships. These are the aspects ofdoing business that remain fundamen-tally the same. Regrettably, they appear tobe losing significance.In today’s high communications
environment, too many people tend tolose sight of the value of relationships.Consider the bidding process that hasincreasingly become a live, onlineevent for obtaining new business andrenewing contracts. Most peopleassume that the lowest bid alwayswins. Not so. It has been my experiencethat more business is awarded to thecompany that has a competitive priceas well as an established relationshipwith the customer. Developing rapport
and having a favorable history with asupplier allows the customer to say tothem, “You can have this business forthis amount of money.” I see this hap-pening in our company all the time.Sticking with what goes on in my own
office, I have become somewhat famousfor my “walking around” style of manage-ment. Given a choice between sendingan email to an office colleague, or walk-ing down the hall to speak with them inperson, I’ll take the walk. There is pro-found value in seeing the other personand having the other person see me.While walking around, I see things, I seepeople and I get a clearer picture ofwhat’s really going on; personally, I placevalue on being able to see, hear, feelwhat’s going on, as opposed to relying onone-dimensional communications toolslike email. Email gets the informationacross, but the personal touch that is socritical to business success is lost. Wedon’t place enough value on individualrelationships.This became abundantly clear when I
recently accepted an invitation from amajor supplier (representing an annualWheels Group expenditure of roughly$25 million) to watch an NHL game from
their corporate suite in Toronto’s AirCanada Centre. I purposely went inorder to meet my counterparts inwhat amounts to a significant busi-ness arrangement, but for which
there was no corresponding signifi-cant relationship. “What kind of cus-tomer are we to you?” I asked the exec-
utive from out of town. “You are veryimportant,” he replied. “Very strategic.” Butsadly, he couldn’t name our company’srepresentative. As a result, I insisted onboth sides making an effort to build abetter relationship, in which we bothwould have the knowledge and trust ofwho to call in times of need. Yet, to thisday, we have yet to establish such a rela-tionship with this company. And it’s notfor lack of trying on our part.What makes for a good relationship?
It’s more than just knowing names andhaving the corresponding numbersentered into speed-dial. It’s whatever ittakes for two parties to have an implicittrust and understanding of one anotherand one another’s business. Certainly itwill vary from person to person. It does-n’t always require a personal visit—justcommunicating to the extent that bothsides are comfortable with one another.Take the time and make the effort tobuild such relationships, and there willnever be any question about getting andkeeping business. Perhaps what I favour is decidedly
old-fashioned, but I highly recommendwhenever possible, and for the benefitof everyone, that we communicate faceto face. People have been doing it forcenturies. You’ll be amazed at the dif-ference it can make to your businesssuccess.
In Favour of a Personal TouchMaking this contribution to the 15th anniversary commemorative issue ofLQ leads me to reflect on business activity in recent years and, specifically, what aspects of our business have changed or stayed the same.
THE SIGHT OF A WOMAN behind thewheel of a big rig is no longer startling,but it is still an infrequent occurrence.The odds are twenty to one that thedriver is male, and about seven to onethat his manager is the same gender. Asthe need for capacity grows in thecoming years, carriers are turning tounderrepresented groups to increasetheir workforce, both inside and out-side of the truck.If your company is actively
recruiting women, be sure thatyour culture aligns with yourgoal. You might think that allyou need to do to hire morewomen is to change your ads,but you’re wrong. Every depart-ment must ensure that they are wel-coming and encourage the womenwho apply as well as those who arealready employed.From your recruiting department
to training, operations and safety, yourmessage should be clear and consis-tent if you want to increase the ratioof women employees. Your effortsmay be wasted if your culture is unre-ceptive or even hostile to femaleworkers. Start with your recruiting ads and
consider whether they target women. Ifyou are a carrier and your “We’ll get youhome” ad shows a mom and kids infront of a house, you’ve excludedwomen, as well as singles, grandparentsand anyone without children. Whatabout your booth exhibit? If youemploy young women in short shorts toattract drivers, you’ve disregarded
females (and male drivers with wives orgirlfriends in tow.) Your training group is especially cru-
cial to your culture for women drivers. Ifyou have women trainers available forthose female students who prefer thisoption, you will have an advantage overyour competitors. Reviewing your train-ing materials to ensure gender-neutrallanguage will also show that your com-pany values diversity. Since women are typically smaller
and often have less physical power thanmen, the more technology you have toreduce the need for strength, the moreyou will accommodate women (andmen). Truck stops and maintenance
facilities that adopt labor-saving devicesearly will not only attract women, butcan reduce injuries and strains for allemployees.
Your facility, whether it’s a shop,a terminal or a dealership floor,can also be discouraging if thewomen’s restrooms are limited or
non-existent. Many terminals stillhave showers in the men’s area, andnone for female drivers. If the walls inthe driver’s lounge include posterswith women hawking tools, then yourenvironment is not female-friendly. Does your culture promote
women into management positions?If your executive staff is predomi-
nantly men, it will be difficultto show that you encouragediversity within your leader-
ship ranks. If the only women in thecorporate office share a last name withthe CEO, you’re sending the wrongmessage to your organization. If you are truly receptive to encourag-
ing more women to work for your com-pany, ask your female employees if theyfeel that your corporate culture reflectsyour goal. Look for ways to enable andsupport women in the trucking industryso that the sight of a woman in the office,the shop or behind the wheel of a big rigis no longer an infrequent occurrence.Consider supporting the Women In
Trucking association, a nonprofit organi-zation established to encourage theemployment of women in the truckingindustry, promote their accomplish-ments and minimize obstacles. Visitwww.WomenInTrucking.org.
Does Your Culture Encourage Women?If your executive staff is predominantly male, it will be more difficult to show that you encourage diversity within your leadership ranks.
THE TRUCKING INDUSTRY has neverbeen safer. Diesel trucks have neverbeen cleaner. Despite the progressive approach the
trucking industry has taken to achievethese favorable results, the truth is thatthe industry today faces awfully toughtimes. While record-high fuel priceseased after devastating the industry lastyear, the economic slowdown continuesto drastically reduce freight volumes,and instability on Wall Street severelyaffects the credit markets that truckingcompanies, operators rely on for the cap-ital to run their businesses.I’m not confident anyone knows if
we’ve bottomed out, or how long it willtake for an economic recovery to occur.We in the trucking industry work
every day to ensure that people inevery city and the farthest corners ofthe continent have the food, medicine,clothing and fuel that they need to live,and the consumer goods that maketheir lives comfortable. Trucking isessential for supporting the quality oflife we enjoy in North America—a qual-ity of life that makes us the envy of oth-ers around the globe.Our industry is one that demands that
we continually evolve. We’re constantlyseeking ways to improve our efficiencyand safety through new programs andtechnologies, like speed governors, elec-tronic on-board recorders and a nation-al clearinghouse for alcohol and druginformation. It’s almost impossible toappreciate the changes that haveoccurred since my father and my grand-father started Graves Truck Line in 1935.The technological, safety and opera-tional advances that have been made in
the last 25 years alone have given theindustry an entirely new face. Our indus-try would be virtually unrecognizable topioneers of the trucking industry.Statistics now show that trucking is
the safest it has been since the U.S.Department of Transportation begankeeping those numbers in 1975. We viewthe vast improvements in safety as agreat victory, but know that even greaterstrides must be taken. While the industryhas experienced a 58 percent reductionin fatal accidents over the past 33 years,
the trucking industry’s commitment toall highway users recently prompted anew highway safety agenda to furtherenhance the safety of all of those whoshare the roads. The 18-point plan created by ATA’s
Safety Task Force will improve highwaysafety for auto drivers and passengersby addressing three key areas: creatingsafer vehicles, making motor carriercompanies safer and improving driverperformance. With a growing concern for our envi-
Times are Tough, But Trucking is up for the ChallengeStatistics now show that trucking is the safest it has been since the U.S. Department of Transportationbegan keeping those numbers in 1975. Even in today’s economic downturn, the trucking industry continues to constantly seek ways to improve our efficiency and safety through new programs and technologies.
By Bill Graves
www.lakesidelogistics.com
Our proprietary real-time Dashboardgives instant visibility of metricsincluding delivered cost per caseby customer and carbon footprint.
ronment, ATA has also taken an activeapproach to address these issues. OurSustainability Task Force unveiled rec-ommendations in early May that willreduce fuel consumption by 86 billiongallons and CO2 emissions by 900 mil-lion tons for all vehicles over the next 10years. The program’s initial goal of reduc-ing the industry’s carbon footprint wasdovetailed onto our economic need toreduce fuel consumption. Those recommendations are to enact
a national speed limit of 65 mph andgovern new truck speeds to no morethan 65 mph; to pursue a federal solutionto reduce both non-discretionary anddiscretionary idling through incentivesfor new technology; to encourage partic-ipation in the EPA SmartWay program; toadvocate for initiatives to improve high-way infrastructure and reduce conges-tion; to advance policies and positionsthat will allow the use of more produc-tive trucks; and to oppose the applica-tion of a cap-and-trade regulatoryapproach for mobile sources.The message that we consistently
deliver on Capitol Hill is our belief in adomestic energy solution that includes
“all of the above.” We need more domes-tic energy production and exploration ofalternative fuels. We encourage ourindustry to continue working together tosolve this challenge. Truck and enginemanufactures have made this challengetheir number-one priority, and their hardwork and innovation is laying the foun-dation for positive and unprecedentedchange in how freight will be moved bytruck throughout America.Today, on-road diesel engines con-
tribute just one percent of the nation’stotal emissions of volatile organic com-pounds, carbon monoxide and sulfurdioxide, and less than 1.5 percent of thenation’s total emissions of fine particu-late matter.In aligning with the great measures
our industry is taking to reduce emis-sions of pollutants as well as carbon, theAmerican Trucking Associations firmlysupports the requirement for newer,cleaner trucks at the Ports of LosAngeles and Long Beach. Our criticismof the program is aimed only at unnec-essary regulations that have nothing todo with clean air. ATA also supports the goal of clean
air far beyond the ports, and believesthe most effective way to reduce thecontribution heavy-duty trucks maketoward air pollution is to set newengine emission standards in a man-ner that allows for, and encourages,improvements in productivity and fuelefficiency.As a result of the more stringent
engine and diesel fuel standards thathave been established by both CARBand the U.S. Environmental ProtectionAgency, nationwide particulate matterand oxides of nitrogen emissions fromheavy-duty trucks will be reduced bymore than 40 percent by 2010 and bymore than 70 percent by 2020, whencompared to 2002 levels. There’s no denying the long road we
have ahead of us as we strive to contin-ue meeting the challenges that redefineour industry. Eighty percent of commu-nities throughout our nation dependsolely on trucks to deliver the goodsthey rely on. The trucking industry has atremendous commitment to the peopleof North America, and I have full confi-dence that we’ll emerge from eachchallenge better able to serve.
May 14th LQ’s Executive Exchange of Ideas for Leadership
• Fred Berkheimer, Vice President, Logistics, Unilever USA• Jill Broschard, Integrated Business Management, The Hershey Company
• David J. Closs, Ph.D., LQ Executive Editor,The John H. McConnell Chaired Professor of the Eli Broad College of Business,Michigan State University
• Lieutenant-Colonel John Conrad, DND (Canada)
• Jim Davidson, CEO, Wheels Group• Claude Germain, EVP and COO, Schenker of Canada• Lucas Kuehner, Managing Director, Panalpina USA• Derek Leathers, Chief Operating Officer, Werner Enterprises, President,Werner Global Logistics
• David Mills, Associate Director of Global Business Planning, Procter & Gamble
• Jeff Moore, Managing Director, Lakeside Logistics
• Kate Vitasek, Lead Researcher and Facultyfor University of Tennessee’s Performance-Based Outsourcing program and Founder & CEO of Supply Chain Visions
THREE KEY SESSIONS ON THE AGENDA: • Picking the Right Strategy to Transform Your Supply Chain• Achieving Leadership Through Technology-Enabled Supply Chain Efficiencies and S&OP Innovation• Leadership’s Role in Transforming Your Supply Chain
Join us Thursday May 14, 2009 at The Toronto Country Club20 Lloyd Street, Woodbridge, Ontario L4L 2B9 (An estimated 15-minutes from Toronto Pearson International Airport – YYZ)
We invite you to register – visit LQ online at: www.LQsummit09.com or Call Toll Free: 1-800-843-1687
Speakers presenting at LQ's Executive Exchange include:
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Save by Improving Transportation Processes – It can be a small, low risk investment.
