Archives for July 2013

Lessons from a Logistics Turnaround Artist

By Chris Jones | 07/19/2013 | 1:01 PM

Recently, I had a conversation with Foster Finley, Managing Director at AlixPartners, about his firm’s approach to delivering value through logistics transformation efforts. AlixPartners has a little different angle than most consulting firms as their compensation is usually based on hard results actually delivered, not just “hours worked.” The company has a long history of working with companies that recognize the need to change and do it quickly. Here are some of thoughts that came from our conversation on transformation and getting results fast.

Does senior management recognize that their operational performance needs to be much better? Notice that I didn’t cite the titles: head of transportation, head of logistics or even head of supply chain. We are talking CEO, President, COO or EVP with P&L responsibility. If you are going to change, you need the folks most empowered to do it and as you will find out later, logistics can impact the revenue line [as well as the cost line], so making changes there needs to come from the revenue owners (see Game Changing Supply Chain Strategies Involve the Revenue Guys). The counterpoint to this argument is that without a passion for change improvement will not happen quickly and the entrenched guys will find 1,000 reasons for not changing. If you really want to be in a hurry, the folks with the mandate and impatience for change need to buy-in and do it deeply.

It’s all about speed.
Time-to-value is paramount. Rather than take the traditional “hockey stick” approach, AlixPartners focus on delivering results quickly, building momentum and minimizing risk (see What is the Half-Life of Your Logistics Technology Investments?). If you are trying to make real change, you have to convert the “unbelievers” quickly and not let new priorities cloud the focus or results. AlixPartners prefer to get projects completed and results delivered in less than six months. They have a saying “Projects that go long, go wrong.” This also means that any technology used to sustain the changes must be able to go equally as quickly. Here the focus is on “good enough” solutions and “time-to-operational.”

There are lots of levers to drive benefits
Alix Partners targets five areas. Cost is important, but there are many others.

  1. Cost-cutting through better “blocking and tackling” on the expense line. Simply put, how are the company’s transportation and 3PL contracts structured, and the client’s organization, carriers and 3PLs complying with them? You don’t have to change infrastructure here – organization or technology -- to quickly produce results.
  2. Trimming the balance sheet. A lot of organizations have too much capital tied up in their assets. Do they really need all of the trucks, warehouses, containers, etc. to run their operations? After all, when it comes to a company’s investors, financial performance is as much measured by the company’s return on invested capital (ROIC) as it is by the P&L.
  3. Customer service impacting financial performance. Better customer service saves money. Overs, shorts, damaged goods and returns all have big impacts on costs. Among other things, they usually result in excess or obsolescence inventory – a huge balance-sheet liability.
  4. Revenue generation through logistics. A lot of companies have simplified delivery charges that leave “money on the table.” They need to get away from simple cost-to-deliver assumptions and transportation pricing for customer delivery. In fact, there may be more P&L impact here than anything you can do in the cost-savings department. This is all the more reason for having managers who own P&Ls involved, as the sales folks will want to “give money away” and the logistics folks are not empowered to change it.
  5. Mitigating risk. Your drivers and carriers are both an asset and liability. Unfortunately, many companies don’t recognize the latter until an unfortunate accident costs them millions. If you have a fleet, how are you measuring and managing driver performance? For commercial carriers, how are you tracking their performance? Negligence is front and center in our legal system and the goal is to not get there.

Create a compelling business case quickly.
It’s all about the data, but it can’t be a multi-year study. If you are talking about significant changes to business performance, you are going to have some level of disruption and dissention in the rank and file. But, data trumps opinion. Equally important, you need to act quickly. There is no need to analyze the whole business in detail. Look at the macro data and get a slice of the micro level data. For instance, what are the trends in COGS or various supply chain costs as a percentage of revenue, and inventory and assets on the balance sheet? In addition, take representative parts of the organization and model the impact of changes to their business to size the opportunity or measure even simple things such as how many vehicles are idle over a month. Everyone claims his/her part of the business is different and unique. It may be, but probably not as much as believed – nor should it be all that unique.

The lessons learned here are: 1) Decisive change starts at the top. 2) Results quickly delivered build momentum and mitigate risk. 3) There are a lot of areas to quickly explore to improve both top- and bottom-line performance, and performance on the balance sheet. 4) Don’t let the organization get bogged down in the details. Before you decide to spend the next two to three years on some supply chain wide transformation program, consider what compelling things you can do quickly to put your organization on the right performance track.

How is your company moving decisively and quickly to transform itself - or not? Let me know.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Chris Jones

Chris Jones

Chris Jones is Executive Vice President of Marketing and Services at Descartes Systems. Jones has spent more than 30 years working with manufacturers, retailers, distributors, and logistics providers to improve their supply chain operations. One of his primary missions is to identify and leverage new and counter intuitive activities that make a difference in the business. Jones has held senior positions at Kraft Foods, Descartes, and Gartner. He has a B.S. degree in Electrical Engineering from Lehigh University.


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