Bill Stankiewicz Copy Of 11 5 2010 Lq16 2 Final

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Logistics Quarterly 2010 copy.

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Bill Stankiewicz
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Shippers Warehouse of Georgia
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Bill Stankiewicz Copy Of 11 5 2010 Lq16 2 Final

  1. 1. PM40032602 IDEAS FOR LEADERSHIP IN LOGISTICS AND TRANSPORTATION© Volume 16, Issue 2, 2010 LogisticsQuarterly.comLogisticsQuarterly.com Geoffrey Bennett, President and Co-founder, Kelron Logistics Jim Butts, Senior Vice President, Transportation, C.H. Robinson Worldwide, Inc. Craig Callahan, Vice President, Logistics and Corporate Sales, Werner Enterprises David J. Closs, PhD, LQ Executive Editor, and the John H. McConnell Chaired Professor of the Eli Broad College of Business, Department of Marketing and Supply Chain Management, Michigan State University John Cutler, General Counsel, NASSTRAC Alicia Duval, Vice President, Healthcare, GS1 Canada Jim Eckler, President, Eckler Associates and former President and CEO, SCI Group Inc. David Faoro, Director of Supply Chain, The International Group, Inc. Kevin Fletcher, Executive Vice President, Logistics Services, Landstar Transportation Logistics, Inc. Thomas Goldsby, PhD, Associate Professor, Supply Chain Management, University of Kentucky Melissa Gracey, President, DTA Services Bill Graves, President and CEO, American Trucking Associations Ajay Gupta, CITT, Director of International Supply Chain Logistics & Operations, Sterling Agility Jim Handoush, Co-Chief Operating Officer, Landstar System, Inc. Cameron Joyce, President, Accuristix John Langley, PhD, Professor of Supply Chain Management and Director of Supply Chain Executive Programs, Georgia Tech Mike Ledyard, Co-founder, Supply Chain Visions Clifford F. Lynch, President, C.F. Lynch & Associates Valerie McSween, CITT, Vice President, Eastern Region, Mactrans Logistics Inc. Chris Norek, PhD, Senior Partner, Chain Connectors, Inc. Andrew Paxton, CITT, Vice Chair, Development, CITT Board Nicholas Seiersen, B.Sc. (Hons.), MBA, P. Log., LQ Executive Editor Reuben Slone, Executive Vice President, Supply Chain, OfficeMax Ginnie Venslovaitis, CITT, Director, Transportation Operations, Hudson’s Bay Company Kate Vitasek, Lead Researcher and Faculty Member, for the University of Tennessee’s Center for Executive Education and Founder, Supply Chain Visions Geoffrey Bennett, President and Co-founder, Kelron Logistics Jim Butts, Senior Vice President, Transportation, C.H. Robinson Worldwide, Inc. Craig Callahan, Vice President, Logistics and Corporate Sales, Werner Enterprises David J. Closs, PhD, LQ Executive Editor, and the John H. McConnell Chaired Professor of the Eli Broad College of Business, Department of Marketing and Supply Chain Management, Michigan State University John Cutler, General Counsel, NASSTRAC Alicia Duval, Vice President, Healthcare, GS1 Canada Jim Eckler, President, Eckler Associates and former President and CEO, SCI Group Inc. David Faoro, Director of Supply Chain, The International Group, Inc. Kevin Fletcher, Executive Vice President, Logistics Services, Landstar Transportation Logistics, Inc. Thomas Goldsby, PhD, Associate Professor, Supply Chain Management, University of Kentucky Melissa Gracey, President, DTA Services Bill Graves, President and CEO, American Trucking Associations Ajay Gupta, CITT, Director of International Supply Chain Logistics & Operations, Sterling Agility Jim Handoush, Co-Chief Operating Officer, Landstar System, Inc. Cameron Joyce, President, Accuristix John Langley, PhD, Professor of Supply Chain Management and Director of Supply Chain Executive Programs, Georgia Tech Mike Ledyard, Co-founder, Supply Chain Visions Clifford F. Lynch, President, C.F. Lynch & Associates Valerie McSween, CITT, Vice President, Eastern Region, Mactrans Logistics Inc. Chris Norek, PhD, Senior Partner, Chain Connectors, Inc. Andrew Paxton, CITT, Vice Chair, Development, CITT Board Nicholas Seiersen, B.Sc. (Hons.), MBA, P. Log., LQ Executive Editor Reuben Slone, Executive Vice President, Supply Chain, OfficeMax Ginnie Venslovaitis, CITT, Director, Transportation Operations, Hudson’s Bay Company Kate Vitasek, Lead Researcher and Faculty Member, for the University of Tennessee’s Center for Executive Education and Founder, Supply Chain Visions
  2. 2. YOU NAME IT We’ll Customize A Supply Chain Solution For It Whatever 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 ©2008 Ryder System, Inc. All rights reserved.
  3. 3. 3LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com 6 Contributors LQ’s Executive Interview Series: Insights from leaders in logistics and supply chain management Today’s marketplace has made it more challenging than ever before to implement breakthrough ideas. An unpredictable economic landscape has called on companies to find new ways to create value, and not surprisingly many are looking at their supply chain to create profit and ultimately, shareholder value. How can logisticians translate their efforts into mean- ingful and compelling cases to be included on the agenda in the boardroom suite of an organization? This LQ executive interview series examines this question by focusing on new ways to reinvent business. 8 Craig Callahan, Vice President, Logistics & Corporate Sales, Werner Enterprises 10 Jim Butts, Senior Vice President, Transportation, C.H. Robinson Worldwide, Inc. 12 Geoff Bennett, President & Co-founder, Kelron Logistics 15 Jim Eckler, President, Eckler Associates and former President and CEO, SCI Group Inc. 16 Jim Handoush, Co-Chief Operating Officer, Landstar System, Inc. and Kevin Fletcher, Executive Vice President, Logistics Services, Landstar Transportation Logistics, Inc. 19 Reuben Slone, Executive Vice President, Supply Chain, OfficeMax 22CITT Column: How Do You Mitigate Risk and Invest in Outsourcing Your Transportation Requirements? You’re meeting with the CEO of one of your stellar carriers. The CEO has some troubling news to share; it’s crunch time and they need to renegotiate their contract with your firm. What’s your best course of action? 24 NASSTRAC Column: Fall Elections Promise Worse Gridlock Virtually all U.S. elections in “off years” (i.e., when votes are cast for Members of Congress but not for president), lead to gains by the party not in power. In 2010, several factors appear likely to increase losses by Democrats. These factors include a weak economic recovery, concerns about federal deficits and the bank, auto industry and AIG bailouts that contributed to them, the rise of the Tea Party movement, dramatic increases in campaign ads supporting Republican candidates, and gridlock in Congress. 25 LQ’s Recommended Reading: The New Supply Chain Agenda: The 5 Steps That Drive Real Value, by Reuben E. Slone, J. Paul Dittmann, and John T. Mentzer 27ATA Column: Taking a Look at the Road Ahead As we race toward the mid-term elections, there are a plethora of issues at the forefront of voters’ minds — not the least of which is the economy. Everyone wants to know what will be done about job creation and economic growth. 28The Latest System for the Toolkit The increasing volume of international supply chain transactions, along with a combination of agreements to both motivate trade and impose restrictions on what can be traded, has height- ened the value of technology capability to monitor and track these transactions. These regulations, restrictions and constraints have dramatically increased supply chain management opportunities and risks. 30GS1 Column: Global Standards Proposed for Canada’s Healthcare Supply Chain The Canadian Healthcare Supply Chain Standards Survey is a national poll conducted for GS1 Canada by the Innovative Research Group Inc. (INNOVATIVE) as part of the Canadian Healthcare Supply Chain Standards Project. The survey polled 294 Canadian healthcare sector stakeholders representing a blend of healthcare institutions, Shared Service Organizations and product suppliers. Here is an overview of the results. 32Technology Toolbox: The IT Gap Faced by Third-Party Logistics Providers There is a noticeable and significant gap between what shippers perceive 3PL providers need to offer in the information technology arena and whether shippers are satisfied with the IT capabilities offered by third-party logistics providers. 33Playing to Win How do the best companies win at the game of outsourcing their supply chain? Here is an overview of how to build stronger relationships and gain greater value from your outsourcing relationships, based on the book Vested Outsourcing: Five Rules that will Transform Outsourcing. CONTENTSLQ™
  4. 4. LogisticsQuarterly.com4 LQ™ Volume 16, Issue 2, 2010 EDITOR & PUBLISHER Fred Moody fmoody@LogisticsQuarterly.com LQ EXECUTIVE EDITORS David Closs,PhD Nicholas Seiersen Thomas Goldsby, PhD CREATIVE DIRECTOR Craig Allen callen@LogisticsQuarterly.com ASSISTANT EDITOR Lisa Wood lwood@LogisticsQuarterly.com COPY EDITORS Martha Uniacke Breen mubreen@LogisticsQuarterly.com Ramak Jaberizadeh ramak@LogisticsQuarterly.com CIRCULATION MANAGER Bill McCarvell bmccarvell@LogisticsQuarterly.com ADVERTISING SALES North American Sales, 800-843-1684 sales@LogisticsQuarterly.com Fred Moody Editor & Publisher, 416-461-8355 fmoody@LogisticsQuarterly.com WHAT’S AHEAD: LQ’s January 13, 2011 Symposium To register, visit: www.LQsummit.com Contact Fred Moody fmoody@LogisticsQuarterly.com for more information. LQ™ Inc. 33 Hazelton Avenue, Suite 74, Toronto, Ontario M5R 2E3 Phone: (416) 461-8355 Toll Free: 1-800-843-1687 Fax: (416) 465-7832 Email: fmoody@LogisticsQuarterly.com Logistics Quarterly (LQ™) (ISSN 1488-3309) is published six times annually by LQ™ Inc. LQ™ is written for professionals in logistics. Subscription Services at: www.LogisticsQuarterly.com Canada Post Publications Mail Sales Agreement Number: 40032602. CANADIAN POSTMASTER: send subscription orders, address change notices and undeliverable copies to LQ™, 33 Hazelton Avenue, Suite 74, Toronto, Ontario, Canada M5R 2E3 EDITORIAL POLICY The opinions expressed in this publication do not necessarily reflect the policy of LQ™ Inc. The editors reserve the right to select and edit material submitted for publication and are not responsible for unsolicited material. LQ™ Inc. is a Toronto- based corporation and publisher. All rights reserved © by LQ™ Inc. 2010. Reproduction without written permission of the publisher is forbidden. LQ™ welcomes your comments, letters to the editor, or written submissions for consideration. (LQ™ is available on-line at: www.LogisticsQuarterly.com) LQ MAGAZINE’S STATEMENT OF OWNERSHIP The trademark LQ™, LQ Magazine (ISSN 1488-3309), LQ Newsletters and the LQ Conference, including the “Executive Exchange,” its trade marks and published material are wholly owned by LQ Inc., privately-owned and operated corporation. For more information on LQ’s Executive Exchange, held twice annually, we invite you to visit: www.LQSummit.com For more information on LQ’s readership visit: www.LQreader.com Volume 16 Issue 2 Graham Allen Senior Program Manager of BPS Supply Chain Secretariat, Ontario Ministry of Finance Christopher Barry Senior Director, Infrastructure Planning, Research In Motion (RIM) Fred Berkheimer Consultant and Former Vice President, Logistics, Unilever (USA) Jim Butts Senior Vice President, Transportation, C.H. Robinson Worldwide, Inc. David J. Closs, PhD Department of Marketing and Supply Chain Management, Michigan State University Executive Editor, LQ Jim Davidson President, Performance Logistics Russ Dixon Director, Corporate Marketing and Communications, Sunteck Transport Group Russ J. Doak Director, Supply Chain Management, Washington Marine Group (WMG) David Faoro Director, Supply Chain, The International Group, Inc. Sarah Friesen President, Friesen Concepts Inc. Susan Gadsby, P.Log. Director, Procurement, Shared Services West Joe Gallick Senior Vice President, Sales, Penske Logistics Thomas J. Goldsby, PhD Associate Professor, Supply Chain Management,University of Kentucky Melissa Gracey President, DTA Services Ltd. Victor Groot Supply Chain Director, Day4Energy Scott Hooper Director, Supply Chain Excellence, Ryder Ed Kearns President, Kearns Transportation Services Contributing Maritime Editor, LQ Lucas Kuehner Managing Director, Panalpina USA Arun Kumar Consultant John C. Langley Jr., PhD Director of Supply Chain Executive Programs, The Logistics Institute (TLI), Georgia Institute of Technology Derek J. Leathers Chief Operating Officer, Werner Enterprises and President, Werner Global Logistics Clifford F. Lynch President, C.F. Lynch & Associates James Mahoney Vice President, Global Accounts, Agility Robert Martichenko President, LeanCor Brian McDonald President, Montship Inc. David Mills Vice President of Global Manufacturing and MCE, McCain Foods Diane Mollenkopf, PhD Assistant Professor, University of Tennessee Jeff Moore Managing Director, Lakeside Logistics Inc. Tom Nightingale Vice President, Communications and Chief Marketing Officer, Con-way Inc. Christopher Norek, PhD Senior Partner, Chain Connectors, Inc. and Contributing Editor, LQ Robert Novack, PhD Associate Professor, Business Logistics, Penn State Susan Promane Director, Supply Chain, Whirlpool Canada Peruvemba S. Ravi, PhD Associate Professor, Wilfrid Laurier University Kurt M. Ritcey Partner, Deloitte Consulting Nicholas Seiersen Senior Manager, KPMG and Executive Editor, LQ Reuben Slone Executive Vice President, Supply Chain, OfficeMax Allan Smith President and CEO, BCG Logistics Group Donald Tham, PhD, PEng Professor & Industrial Internship Program Coordinator, Dept. of Mechanical & Industrial Engineering, Ryerson University Ray Tribe Director Operations, Lynden International Logistics Walter Zinn, PhD Professor, Ohio State University LQ™ ADVISORY BOARD LQ:IdeasforLeadershipinLogisticsbyAmericanandCanadianExecutives To view LQ’s online freight index, which covers all modes of transportation each month, across 32 U.S. states, visit: www.LQindex.com.
  5. 5. Visit a Bell store • 1 877 637-4001 • bell.ca/myES400 It’s new and only from Bell – the semi-rugged Motorola ES400. Get it on Canada’s best network1 and get down to business in the field. • Data capture with a 3.2 MP camera with Symbol™ bar code scanning technology • Enhanced security features like a fingerprint reader and secure password entry • Real-time enterprise applications that provide access to critical business information like ordering and inventory levels Talk.Email.Scan. (1) Based on comparison of national networks: (a) fastest network, according to tests of average upload and download speeds in large urban centres across Canada, (b) largest network, based on total square kms of coverage, and (c) fewest call failures based on tests including network access failures, blocked calls and dropped calls in large urban centres across Canada; all on the shared HSPA+ network available from Bell, vs. Rogers HSPA/HSPA+ network. Excludes roaming partners’ HSPA and GSM/Edge coverage in certain parts of Manitoba and Saskatchewan. Speed may vary due to topography, environmental conditions, device type and other factors. HSPA+ not available in all areas. Bell.ca/network
  6. 6. LogisticsQuarterly.com6 LQ™ Volume 16, Issue 2, 2010 VOLUME 16, ISSUE 2, CONTRIBUTORS LQ’s mandate to provide “Ideas for Leadership in Logistics” is clearly evidenced in this issue, with articles written by professionals and logisticians from America and Canada who are leading and transforming business by creating new roadmaps and definitions for leadership in this exciting field. OUR CONTRIBUTORS GEOFFREY (GEOFF) BENNETT is President and co-founder of the Kelron Logistics family of com- panies, one of Canada’s largest third-party transportation logistics companies, headquar- tered in Mississauga, Ont. Prior to founding Kelron, Bennett held senior level positions in var- ious major Canadian companies, including Director of Operations at Gelco Same Day (now Dynamex Express) and Sketchley Cleaners. JIM BUTTS, Senior Vice President of Trans- portation for C.H. Robinson Worldwide, Inc., has been with the company since 1978, and joined the executive team in 2002. Butts is responsible for the relationships with several key customers in the retail, consumer products, paper, manufacturing and agriculture indus- tries, aiding them in logistics and supply chain systems design, including the use of third-party logistics services in supply chain planning and execution. He is also responsible for C.H. Robinson’s transportation corporate sales and marketing activities. CRAIG CALLAHAN, Vice President of Logistics and Corporate Sales for Werner Enterprises, began his career at Werner in 1995 as a man- agement trainee. Callahan has held various leadership positions in customer service, oper- ations, and sales. In his current role, he is responsible for leading Werner’s business development efforts with their strategic account base, which comprises a large portion of their domestic truckload business and rep- resents the foundation of the company. Callahan is also responsible for driving growth in the logistics area of Werner’s business in both the United States and Mexico, a key cor- nerstone to Werner’s future. Callahan serves on the board of directors for College World Series of Omaha, Inc. and on the planning committee for the Food Shippers of America Association. DAVID J. CLOSS, PhD, is an LQ executive editor and the John H. McConnell Chaired Professor of the Eli Broad College of Business, Department of Marketing and Supply Chain Management, Michigan State University. He has consulted with more than 100 of the world’s Fortune 500 corporations regarding logistics strategies and systems. Closs is an active member of the Council of Supply Chain Management Professionals (CSCMP). JOHN CUTLER, General Counsel of NASSTRAC, has over 30 years of experience as a transportation lawyer representing shippers of freight. He is a principal with the Washington, D.C. law firm McCarthy, Sweeney & Harkaway, P.C. ALICIA DUVAL, Vice President of Healthcare at GS1 Canada, spearheads activities to introduce global standards and supply chain practices to the Canadian healthcare and pharmacy sectors. She is also responsible for the development and implementation of strategies to increase public, government and stakeholder awareness of GS1 Canada’s mandate, and for advancing GS1 Canada’s standing as an important supply chain partner and stakeholder. Alicia is GS1 Canada’s lead representative on the global GS1 healthcare initiative, an effort to lead the healthcare indus- try to the effective utilization and development of global standards, with the primary focus on improving patient safety. JIM ECKLER is President of Eckler Associates and former President and CEO of SCI Group Inc. SCI is the parent of three leading Canadian supply chain management service providers: Progistix-Solutions Inc., SCI Logistics Ltd. (including Assured Logistics & AMG Logistics), and First Team Transport Inc. Eckler’s back- ground includes over 30 years of experience in the supply chain management field. His busi- ness focuses on developing and operating high performing supply chain outsourcing services for companies that demand complex, high value services. Eckler is a past chairman of the Supply Chain and Logistics Association of Canada and a frequent speaker on a wide range of supply chain topics. He is also a founding member and a director of the Centre for Outsourcing Research and Education (CORE). DAVID FAORO is the Director of Supply Chain for The International Group, Inc., a $400-mil- lion manufacturer of waxes and wax-based industrial products. He is responsible for cus- tomer service, purchasing, logistics and invento- ry management. Faoro has worked in the supply chain field for over 20 years in the chemical, food and beverage, office products and whole- sale distribution sectors in all aspects of supply chain management. He has his MBA from the Ivey School of Business and his B.Comm. (Logistics) from the University of British Columbia. Faoro is a past president of the Toronto chapter of CSCMP and is a member of the LQ Advisory Board. KEVIN FLETCHER, Executive Vice President of Logistics Services for Landstar Transportation Logistics, Inc., joined the company in 2005. His focus is the development, implementation and ongoing improvements of logistics solutions that deliver greater supply chain efficiency and cost-effectiveness to Landstar’s customer base. Fletcher is responsible for third-party trans- portation and warehousing services, freight under management, logistics engineering, and logistics technology services. Prior to Landstar, Fletcher was Director of Transportation for Menlo Worldwide Logistics where he was responsible for transportation procurement and operations. He has also held management positions for carriers in the LTL, small package, and global air cargo arenas. Fletcher earned his B.Sc. in Transportation and Physical Distribution from Auburn University. THOMAS GOLDSBY, PhD, is Associate Profes- sor of Supply Chain Management at the Univer- sity of Kentucky. He has held previous faculty appointments at the Ohio State University and Iowa State University. Goldsby holds a B.Sc. in Business Administration from the University of Evansville, an MBA from the University of Kentucky, and a PhD in Marketing and Logistics from Michigan State University. Prior to entering academe, Goldsby was a logistics analyst for the Valvoline Company. He previously worked for the Transportation Research Board of the National Academy of Sciences in Washington, D.C. and as a research fellow at the University of Kentucky Transportation Research Center. MELISSA GRACEY, President of DTA Services, learned about the logistics and transportation industry from her father, who bought the com- pany after acting as general manager of the National Traffic League and part founder of CITT. She is now full owner. Melissa studied at McGill before entering the investment business and joining her family business. BILL GRAVES is President and CEO of the American Trucking Associations in Arlington, Va. Prior to joining ATA, Graves was a two-term governor of Kansas. AJAY GUPTA, CITT, the Director of Interna- tional Supply Chain Logistics and Operations for Sterling Agility, is an international opera- tions and supply chain professional with over 25 years of experience in marketing, sales, warehousing and inventory management, customer order processing and fulfillment operations, customer service, export controls and compliance, and global logistics, in multi-national and multi-cultural settings. He has worked in India, the United States, and
  7. 7. 7LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com Canada, and handled short-term assign- ments in West Asia and Europe. Gupta holds an MBA in Marketing and Finance, as well as IATA/UFTAA, CITT, and P.Log. designations. He is a member of Supply Chain & Logistics Association Canada (SCL), Electronic Commerce Council of Canada (ECCC, now GS1), the Council of Industrial Advisors (Gerson Lehrman Group), and a national director on the board of CITT, amongst other affiliations. In 2007 Gupta co- founded Sterling Agility, a boutique consulting firm based in Toronto, Ont. JIM HANDOUSH serves as Co-Chief Operat- ing Officer for Landstar System, Inc. He is responsible for Landstar’s supply chain trans- portation integration companies — National Logistics Management (NLM) and A3 Integration LLC (A3i) — Landstar’s warehous- ing, intermodal and international service offerings, as well as national and internation- al account development. Handoush joined Landstar in 1996 with more than 10 years of experience in the trans- portation and logistics industry in the areas of finance, administration and operations. He has held several positions at Landstar since being named Landstar Logistics Vice President of Finance in 1996, including Landstar Global Logistics Executive Vice President of Finance and Administration and President of Landstar Global Logistics. Handoush holds a B.Sc. degree in Accounting from San José State University in California. CAMERON JOYCE, President of Accuristix (for- merly McKesson Logistics Solutions), leads the company at an exciting time as it begins oper- ating under its new name and with a renewed focus on client-centric innovation. As presi- dent, Joyce and his team are dedicated to advancing healthcare logistics. Joyce is currently on the board of directors of the International Warehouse Logistics Asso- ciation (IWLA) and is Co-chair of the Canadian Council of the IWLA. JOHN LANGLEY, PhD, is the Supply Chain & Logistics Institute (SCL) Professor of Supply Chain Management and Director of Supply Chain Executive Programs. Langley serves as SCL’s principal liaison with the logistics and supply chain business communities, teaches executive education programs, including the Executive Masters in International Logistics program, and serves as Faculty Director of the Georgia Tech Supply Chain Executive Forum. Langley received B.Sc., MBA, and PhD degrees at Penn State University in mathemat- ics, finance and business logistics. He joined the faculty at the University of Tennessee in 1973 where he served for 28 years, most recent- ly as the John H. “Red” Dove Distinguished Professor of Logistics. Among his awards and honors, Langley served as president of the Council of Logistics Management (CLM), and was the recipient of the CLM Distinguished Service Award and the Outstanding Alumnus Award in Penn State's Business Logistics Program. He also co-founded the Center for Logistics Research, Supply Chain Forum, and Office of Corporate Partnerships at the University of Tennessee. He has co-authored three major texts in the areas of business logistics and supply chain management and has authored numer- ous logistics-related articles, technical reports and presentations. He is an active member of several professional associations and serves on the boards of directors of Averitt Express, Inc., Forward Air Corporation, and UTi Worldwide, Inc., and participates as an advi- sory board member to numerous firms in the supply chain technology business. He is active- ly involved with business and executive devel- opment and has extensively consulted in both the public and private sectors. Langley is rec- ognized world-wide for his expertise in logis- tics and has addressed countless conferences, forums, universities, groups, and industries. MIKE LEDYARD is a veteran of international sourcing, manufacture and importation of product and tooling, especially from China and Eastern Asia. He is an author and frequent speaker on process measurement and improvement, and was selected as one of the Top 20 Logistics & Supply Chain Executives of 2001–2002. Ledyard is also a co-founder of Supply Chain Visions. CLIFFORD F. LYNCH, President of C.F. Lynch & Associates, has provided management advi- sory services in logistics since 1993. During the previous 35 years, he was Vice President of Logistics for the Quaker Oats Company and President of Trammell Crow Distribution Corp. Lynch holds an undergraduate degree from the University of Tennessee and an MBA from the University of Chicago. He is a certi- fied member of the American Society of Transportation and Logistics and is a member the editorial review boards of the Journal of Business Logistics, the International Journal of Physical Distribution and Logistics Management, and Supply Chain Management Review. He is also a member of the Warehousing Education and Research Council and the Advisory Council to the Dean, College of Business Administration, University of Tennessee. Lynch is a member and past president of the Council of Logistics Management and has received numerous awards in the logistics field. He is an adjunct professor at the University of Memphis, a fre- quent lecturer at other colleges and universi- ties, an author of numerous articles on the subject of logistics and has written two books on logistics outsourcing. VALERIE MCSWEEN is Vice President, Eastern Region, for Mactrans Logistics Inc., a third-party logistics provider specialized in North American freight transportation. She began her career 15 years ago with Speedy Transport where she was introduced to all aspects of the LTL transporta- tion. She also worked at Day & Ross as an account manager. McSween earned her CITT certification in 2004, and completed an MBA in Transportation and Logistics in 2008 at the Université du Québec. She has held her current position with Mactrans Logistics for the past three years and is the Montreal CITT Council Chair and a Director-at-Large with the CITT National Board of Directors. CHRIS NOREK, PhD, Senior Partner with Chain Connectors, Inc., has over 20 years of experience in supply chain and logistics in a unique combination of consulting, industry and academia. He has consulted for Accenture and CSC and worked for Apple Computer, Kimberly-Clark and Office Depot. In addition, he has held tenure track faculty positions at both Auburn University and the University of Tennessee. ANDREW PAXTON, CITT, has over 20 years of experience in the transportation and logistics industry. He has worked for third-party logis- tics providers and transportation users with product ranging from consumer electronics to insulation. He currently works in the food industry. Paxton has been involved with the CITT Toronto Area Council since he graduat- ed in 1994 and served as the Chair. He has been on the CITT Board of Directors since 2004 and currently holds the position of Vice Chair of Development. NICHOLAS SEIERSEN, B.Sc. (Hons.), MBA, P. Log., is an LQ Executive Editor who specializes in supply chain consulting, particularly strate- gic sourcing and supply chain planning and operations, and teaches executive development at universities in Europe and North America. REUBEN SLONE, Executive Vice President of Supply Chain for OfficeMax, joined the com- pany in November 2004 as Executive Vice President of Supply Chain. He is responsible for inventory management, supply chain oper- ations, real estate, store development, facili- ties, and indirect procurement for the compa- ny. Prior to joining OfficeMax, Slone held var- ious executive positions with Whirlpool, General Motors, Federal-Mogul, EDS, and Ernst & Young. Harvard Business Review pub- lished two of his articles: “Leading a Supply Chain Turnaround” and “Are You the Weakest Link in Your Supply Chain?” Slone is co- authoring a book based on the latter article entitled Driving Value through the Supply Chain: Shaping the Agenda, to be published by Harvard Business School Press. GINNIE VENSLOVAITIS, Director, Transporta- tion Operations, Hudson’s Bay Company, started her career in the U.S. Customs Clear- ance industry. She holds her U.S. Customs bro- ker’s license and spent many years qualifying goods for free trade in private industry. After moving to Canada, Venslovaitis worked in the food industry managing the domestic and cross border transactions for Borden Catelli. Since that time, she has had numerous opportunities and experiences on SAP project implementa- tions and gained a great understanding of the total business enterprise. In 2010 she joined the Hudson’s Bay Company. Venslovaitis is Vice Chair of Finance for the CITT, Chair of CITA, and a member of the SCL. She holds both CITT and P.Log. designations. KATE VITASEK is a thought-leader in the area of supply chain management and is a well-rec- ognized authority on performance manage- ment and performance-based approaches for business. She is the lead researcher and facul- ty member for the University of Tennessee's Center for Executive Education, working in the area of outsourcing and performance-based approaches. She is also the founder of Supply Chain Visions, a Top 10 supply chain manage- ment boutique consulting firm.
  8. 8. LogisticsQuarterly.com8 LQ™ Volume 16, Issue 2, 2010 Reinvention in Supply Chain Practices LQ: Tell us what you’re most proud of last year and what’s carrying you over for 2010. Craig Callahan: In 2009, one of the significant accomplishments of our organization was to come out of the recession healthier than we went in. We are a company that is very proud of that, because there aren’t very many companies in this position. We went into the economic recession in a strong financial position with no debt; we came out of the economic recession with a leaner, meaner organization and debt-free with cash flow, putting us in a position to expand where needed and necessary in 2010. LQ: What’s your position on the cost of fuel? Is that worry- ing you? Craig Callahan: For a company like us, where over 80 percent of our revenue is generated in the trucking busi- ness, the cost of fuel in the trucking business is the largest operating cost. For us, both the price and the volatility bring significant concerns. The volatility can be extremely difficult to manage. Our customers require us, to the extent that we can, to try to limit the volatility so that they in turn can limit the volatility on the shelf price. Because we are a large company, we leverage our size and our procurement model to get the lowest per gallon cost that we can with our suppliers. More importantly, there are the improvements we’ve made on the efficiencies that we have gained from miles per gallon. Everything we do with our equipment and with the training of our drivers revolves around two important items: fuel consumption and safety. The advantages and the performance that we’ve been able to achieve in the last two years have helped us save millions of dollars. We in turn, are able to put ourselves in a position to be more competi- tive in the market. LQ: Have you seen a change in the importance of the sup- ply chain in your organization in the current economic context? Craig Callahan: We make our living at solving problems in supply chain. Supply chain has gained more importance and more exposure in most companies around the world. As you think of all the inputs associated with the supply chain, specifically, the cost associated with fuel, as well as the inventory and carrying costs, those have leant more exposure to supply chain as a whole. This has helped our firm to expand our horizons around the prob- lems we solve. It’s no longer just a point A to point B solution our customers ask for. Our customers are asking us to help them provide visibility to their goods from the factory in China to the store in the U.S. You can only do that if an organ- ization commits itself to technology sys- tems and talent. LQ: Can you give us an example of an organization you are doing that for and some of the impact that’s had? Craig Callahan: I think one example that we can look to from an import solu- tion environment, is a major big box retailer. This particu- lar retailer is importing thousands of containers a year from Asia to the United States. Their current model calls for a consolidation method to happen overseas in Asia (from a factory to a port in Asia where it is consolidated into con- tainers and shipped to the United States). It is then decon- solidated in the United States and rebundled into store-spe- cific containers or shipping boxes and shipped directly to distribution centers. That’s a more traditional model. Our position on that was, rather than bring all of the goods into a deconsolida- tion model in the United States where all of your input costs are going to be higher, why not look at a deconsolidation method overseas? This particular big box retailer is buying enough goods to have one or two or three containers built specifically for their store. Those containers leave Asia already designed and built to land at their store in the United States. It saves them the associated costs with hav- ing to reconsolidate and rebuild the containers in the U.S. LQ: What impact has that had for the customer? Craig Callahan: In this particular model, when you look at it from that perspective, it actually saves both costs asso- ciated with labor and it actually saves costs associated with how many containers that you need. In both cases, costs savings are in excess of 15 percent on one major project. LQ: In the drive to reduce assets that are committed to the supply chain, more of the players are trying to push the warehouses, the trucks, the ships, and even inventory and A Conversation with Craig Callahan, Vice President Logistics & Corporate Sales, Werner Enterprises Interviewed by LQ’s Executive Editor, Nicholas Seierson 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 Continued on page 20
  9. 9. Freight Management is Simple Once You Know the Right Moves We Are WERNER. The Leader in Freight Transportation Innovation. 800.228.2240 www.werner.com Simplify Complexity 2010 NASSTRAC Carrier of the Year in the National Truckload Category! 02 Ca CASTRSA0 N10 earier of the YYeararrCa earier of the YYeararr in the National kload Category!rucTTruc erAeW .RENREW T psnarTthgierFniredaeLehT 240.282.2008 moc.rnerew.www .noitavonnInoitatrop
  10. 10. LogisticsQuarterly.com10 LQ™ Volume 16, Issue 2, 2010 Reinvention in Supply Chain Practices LQ: How does your firm set about becom- ing the best customer for your clients? Jim Butts: We would look at it as an opportunity to be the best transportation provider or supply chain partner, depend- ing on our role. There are a lot of things that we have to take into consideration when we enter into any customer rela- tionship. One of the first things is that C.H. Robinson is non-asset based. When you don’t own the assets then everything looks like a resource. The question becomes: What is our value-add to any customer as we are doing business with them? Frequently, it’s our people. If the strength of our organization is our peo- ple, then the way that becomes real to our customers, who we define as both carriers and shippers, is through account management. That’s the daily care of the customers — finding out what their needs are, their expec- tations — and fulfilling them from an execution standpoint. LQ: Your assets are your relationships. How do you manage those relationships? Jim Butts: It is based on a combination of our people hav- ing a great understanding of the customer, their needs and expectations, and the nuances of their business. They have a great understanding of the customer’s industry, or some- times a competitive position within that industry. We take our knowledge of what we assimilate through surveying 35,000 shippers and 47,000 asset owners, in terms of carri- ers, whether they’re truckload carriers, LTL carriers, steamship lines, or airlines. We take that knowledge and blend it in such a way that we provide some pretty unique solutions for our customers. LQ: The new competitive arena is innovation. What are you doing? Jim Butts: It’s a challenge, and we understand that all of our customers have to have, in some way, a competitive advan- tage or seek to establish a competitive advantage through supply chain practices. We talked about our people being our assets. The other asset that we bring to the table is our tech- nology. When you take the knowledge of our people, their understanding of the customer through account manage- ment, and our special application of technology (depending upon the customer situation), we feel that innovation is the true value-add. As a service-based compa- ny, what we’re attempting to do within the industry is develop intellectual property. What we bring to the table is not the phys- ical asset to move their equipment, although we do that through the relation- ships that we have. The actual value-add we have is the knowledge of the customer, and what we understand of the industry, and applying practical ideas. It’s ideas and practical input that we can give to a cus- tomer so that they can make meaningful changes within their supply chain, and develop a competitive advantage. One of the things we’ve noticed is that a leader can continuously improve and remain competitive. But many of the cus- tomers out there don’t feel that they are in a leadership position; they either feel that they are in the middle of the pack, or some of them feel that they’re a laggard. If you are a laggard or if you are in the middle of the pack and you want to estab- lish a competitive advantage, you’ve got to do that through innovation. That takes sharing of information, and a true partnership approach, and a situation where I, as a trans- portation service provider, need to have a good understand- ing that the ideas and the innovation that I collaboratively produce with you as a customer, is something that is going to be valued by you, not only today, but tomorrow. My role is fairly secure going forward, based upon my own perform- ance. But I have to have an adequate reason to bring to you the best practices that I have an understanding of. As we talk about innovation and how we enter that process with a customer, we must have a good understand- ing of where the customer is; are they seeking tactical or strategic solutions? Innovation is a challenging responsi- bility. We’re asked frequently: “Come to us with your inno- vative ideas.” The best way we’ve been able to do that with customers is through a rhythm of review where perhaps every quarter during a typical business review we’ll come up with three or four ideas on things that we see would really make improvements within their supply chain. If our role is just to be a plug and play transactional provider, it’s difficult for us to do that. For one thing, we may not have a good understanding of the ins and outs, and the true oper- ational scope of their supply chain. Also we look at our ideas as something that we provide as great value to the industry. To a certain degree we’ve got to be selective about A Conversation with Jim Butts, Senior Vice President, Transportation, C.H. Robinson Worldwide, Inc. Interviewed by LQ’s Executive Editor, Nicholas Seierson 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 Continued on page 21
  11. 11. LogisticsQuarterly.com12 LQ™ Volume 16, Issue 2, 2010 Reinvention in Supply Chain Practices LQ: Your firm provides a number of domestic and cross-border transporta- tion services from Canada. How have you had to reinvent your business in the last year or so? Geoff Bennett: Like most Canadian companies, we’ve had to adapt to the dol- lar, which would certainly have been the major change driver. From our perspec- tive, we’re a seller of services. We found the Canadian dollar has changed our pricing model and our expectations in terms of both the cost of buying Canadian transportation in the U.S. market and, to a great extent, our busi- ness model, which at points in the past, was largely a labor play on selling servic- es to a significant percentage of our customers, who are U.S. customers, and selling them our labor from Canada. LQ: How have the recent changes with security and border crossings impacted you? How do you deal with them? Geoff Bennett: As a third party, we’re in a challenging posi- tion. The carriers have very challenging requirements in order to comply with the border crossing requirements. We’re forced into managing remotely the type of provider we’re going to bring to our customers, specifically customers who might have signed on as North American or international businesses, to provide either C-TPAT or the Canadian version – the PIP Security system – and to become partners in those programs. We, as a Canadian-based company and a non-asset- based company, aren’t yet eligible for participation in the C- TPAT program, though that will happen soon, but we are members of the PIP program, which is accepted by the U.S. as equivalent. For our customers, the requirement for them to work with Kelron involves having us check the carriers, make sure that they are appropriately secure and that their process- es and their people meet the required tests. In a lot of cases, where there might not be an absolute requirement to use a certified carrier, we’re still providing a level of assurance that we’ve done the required vetting and a contractualization process with the carrier that most customers themselves don’t have the time or the people to conduct. LQ: You’re in a somewhat unique position as a non-asset-based provider. You still have to compete with a lot of the full-service providers in several aspects. How do you accomplish that? Geoff Bennett: We have three separate streams of business that all run relative- ly seamlessly together. We have a very transactional business that meets the requirement of somebody who’s gotten caught short. Potentially they had a reg- ular carrier on who can’t handle the surge in volume, or it’s a sporadic move where a non-asset-carrier might view that as being a preferential lane where they’d want to commit to having avail- ability all the time. We have a business where we act very much like a carrier to the customer — in many cases these might be Fortune 1000 organizations with a very predictable requirement to move product between production and warehouse or warehouse and customer, on a very predictable time- line. We would provide the same or bet- ter service and meet or beat the carrier cost in order to be awarded those lanes. Then we have engagements where we’re a transportation management organization where we handle all of the freight requirements for that customer for a particular entity or for the whole organization. LQ: How do you deal with capacity constraints? Obviously there has been an ebb and flow of over and under capacity at various times, depending on what the U.S. economy is doing. Geoff Bennett: Clearly, we need to understand what is actually driving the operator of the equipment. As the mar- ket is changing a lot right now, that’s much more of a real- time process. In the last five years, up until what we thought was a capacity surge four years ago, generally I could get a good read on what the carrier was trying to accomplish. Generally that would be relatively consistent. It would last a while — it wouldn’t be a month-to-month change. Right now, because of the draw down on inventory that we had over the last year and a half, we’re seeing a big stretch in terms of everybody building inventory back up. Nobody wants to get caught short when the customer goes to the store and they don’t want to be caught without product. We’re getting surges that are very unpredictable. The carri- ers who haven’t really kept all of their equipment running, or let some of the older stuff go and haven’t replaced it yet, are finding that challenging. They’re adapting by deciding what lanes make the most sense for them — where can they get the least amount of empty miles, where can they get the A Conversation with Geoff Bennett, President, Co-Founder, Kelron Logistics Interviewed by Cameron Joyce, President, Accuristix 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 Continued on page 21
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  14. 14. 15LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com Reinvention in Business Executive Exchange LQ: Jim, you’ve been in the industry for quite a long time. I hear there are some changes for you. Could you tell me about them? Jim Eckler: It’s been just about 15 years that I’ve been CEO of SCI Group. We’ve had a great track record and a great run. But it’s also time for me to pass the torch and to move on. So I’m shortly going to be moving from being CEO to being non-executive vice chair. I’m looking forward to seeing some fresh blood, but at the same time for me, I’m going to be looking back at my years as CEO of a logistics company and start to move into an advisory role for other firms in the area of logistics and outsourcing — which also gives me an opportunity to take a look at the industry and perhaps comment on it. LQ: We’ve been talking a lot about innovation. What is the state of the logistics industry today? Jim Eckler: To begin with, I’m concerned about the logistics services industry. If I take a close look at the published industry data in detail, I see a year-over-year decline in the annual growth rate for the industry, which says that the 3PL industry has reached a mature state. In the life cycle of an industry, when maturity occurs, you have to reinvent it. Otherwise the business will die. Without reinvention, this is a real possibility. We have to take a look at why that’s happening. I think that one of the big issues for the industry is insufficient innova- tion in the industry. LQ: What’s the state of innovation in the logistics servic- es today? Jim Eckler: Unfortunately, it’s not nearly as good as it could be or should be. There’s a big gap here. There are some challenges. If I take a look at true innovation in the logistics industry, there haven’t been a lot of fundamental innovations that the 3PL organizations have created them- selves. While there have been many innovations in the sup- ply chain field and new IT, new capital equipment, continu- ous improvements in quality initiatives — these are initia- tives and innovations that the clients could create as well as the 3PL. So you have to look at what the true value-add that the 3PL will bring — what’s its unique differentiator? I’m not seeing enough of that. It is concerning. There have been a few innovations, but not anywhere near where it should be. When a company chooses to outsource its logistics activi- ties to a 3PL, what in fact they’re doing is asking that 3PL to take up the mandate of innovation on behalf of the client organization. If that’s the case, then they need to really be pushing and developing a lot of new and innovative things that the organization itself couldn’t have done on its own. LQ: What, in your view, is restricting the innovation in these 3PLs? Jim Eckler: There are some real structural constraints to that innova- tion, and that’s concerning. One of the biggest structural constraints is the conflicted motivation that exists in a typical logistics service relationship with its client. A logistics provider, if on its own, goes out and introduces an innovation that’s going to improve productivity. If they’re successful with it, guess what’s going to happen? Their revenue is going to go down. As their revenues go down, their mar- gins go down. Shareholders of these logistics companies don’t want to see that. So the motivation of a logistics company to actually innovate, and thus reduce its rev- enue and reduce its margins, is not there. These are called perverse incentives and we need to find a way to overcome that. Another constraint that we’ve seen is the fact that most of these contracts are long-term. Sometimes the compla- cency factor sets in. It certainly shouldn’t, but it does. There’s a third issue that comes in as well. It’s the lack of willingness to take risks. The logistics industry is not a high-margin business — it’s very low margin, and the industry stats prove that. In a low-margin business, there’s not a lot of latitude to take risks because it means that you’re perhaps going to fail sometimes. You need to have that ability to take risks. Most companies have not been very innovative because of an aversion to risks. We need to find a way to change that. (This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.) A Conversation with Jim Eckler, President, Eckler Associates and former President and CEO, SCI Group Inc. Interviewed by Melissa Gracey, President, DTA Services, and LQ Board Member 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
  15. 15. LogisticsQuarterly.com16 LQ™ Volume 16, Issue 2, 2010 LQ: What initiatives does your firm use to develop talent with a combination of supply chain management (SCM) and information technology (IT) knowledge? Do you expect the appropriate talent to be developed through universities or is your firm using unique career paths to devel- op the appropriate combination of skills? (David Closs, PhD) Jim Handoush: Landstar has experi- enced positive results with recent grad- uates of logistics and supply chain man- agement programs. Due to the increas- ingly critical role that technology plays in SCM, universities recognized this gap and made changes to their core logis- tics/supply chain curriculum. While some schools relied on more traditional methods of study, others employed vari- ous technology applications to provide students with a hands-on approach to supply chain design and optimization. Overall, I feel that students coming out of logistics/supply chain programs today are much more proficient in supply chain technologies from a practical as well technical standpoint than their predecessors. LQ: A combination of retiring baby boomers and recession‐induced layoffs has caused the collective knowledge of these employees to escape from their respective organizations. Is there a fear among ship- pers that outsourcing supply chain IT serv- ices will create a further loss of supply chain knowledge? (David Faoro) Kevin Fletcher: I don’t necessarily feel there is a fear among shippers, but rather a situation where shippers are ration- alizing what makes the most sense for their respective firms. Some may feel that supply chain technology is a core competency and competitive advantage they want to keep in-house. Others do not see this as a competency and in some cases even see it as a weakness. These firms recognize value in shed- ding the costs and responsibilities associated with keeping it in-house and outsourcing these services to a 3PL such as Landstar or a technology provider that affords them attractive and cost-effective solutions. LQ: Given the majority of shippers use internal supply chain applica- tions, do you think one of the reasons could be a perceived lack of flexibility and customization in 3PL IT service offerings? If so, how do you change this perception or is this perception a reality? (David Faoro) Jim Handoush: While I think this perception may have had more legiti- macy in years past, leading 3PLs have acknowledged this gap and either have or are in the process of develop- ing solutions that are more flexible and scalable. Concerning the cus- tomization aspect, it typically comes down to a cost-benefit decision on the part of the shipper in evaluating the “nice to haves” versus the “must haves” since extensive customization can quickly drive up cost. What may start out as a very long list of desired system functionality is sometimes A Conversation with Jim Handoush, Co-Chief Operating Officer, Landstar System, Inc. and Kevin Fletcher, Executive Vice President, Logistics Services, Landstar Transportation Logistics, Inc. LQ’s questions for its Executive Interview Series on 3PL Excellence in Supply ChainTechnology have been prepared by members of LQ’s Board: David Closs, PhD, Michigan State University and LQ Executive Editor; David Faoro, Director of Supply Chain,The International Group; Clifford F. Lynch, President, C. F. Lynch & Associates; John Langley, PhD, Professor of Supply Chain Management, Georgia Institute ofTechnology; Nicholas Seiersen, LQ Executive Editor. 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 Jim Handoush Kevin Fletcher
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  17. 17. LogisticsQuarterly.com18 LQ™ Volume 16, Issue 2, 2010 scaled down to essentials when the amount of time and money required for mass customization is determined. At Landstar, we promote the flexibility and scalability of our robust transportation management system (TMS) solutions as a market differentiator. LQ: How can a 3PL ensure that as customer needs change, their offerings change and adapt to meet customer require- ments? I can think of examples where shippers have asked for enhancements and were rebuffed due to cost or a lack of resources on the 3PL’s part. (David Faoro) Kevin Fletcher: One area to look at is what type of rela- tionship exists between the customer and the 3PL. Is the 3PL viewed as a strategic partner and included in the cus- tomer’s business and logistics planning processes? If so, then the 3PL should be well aware of the customer’s chang- ing needs and would have had multiple opportunities to dis- cuss these requirements with them. If it is more of an arms- length transactional relationship, then the changing need is probably handed to the 3PL with little warning and in some cases almost as a directive. As long as the customer and 3PL organizations are aligned and lines of communica- tion kept open, then the changing needs should come as no surprise and potential resource and cost requirements have at least been initially discussed. When very little notice is given and a short timeline has been established by the cus- tomer, 3PLs sometimes have no choice but to weigh other scheduled projects in the pipeline that can impact resource availability and cost. LQ: I can think of a situation where a shipper contracted with a 3PL to provide IT tools to manage a part of its sup- ply chain. As the shipper grew through an acquisition, the solution no longer met its needs. How would you handle this type of situation? Would you ever tell a customer your application can no longer meet their needs? (David Faoro) Jim Handoush: Landstar consistently solicits feedback and evaluates ways to deliver greater value to our cus- tomers through enhanced technologies. It is for that exact reason we acquired two technology-based companies in mid-2009. These acquisitions allow us to now provide cus- tomers supply chain transportation integration solutions in a Software-as-a-Service (SaaS) environment. After evaluat- ing and exhausting all possible options to meet the technol- ogy needs of a customer, the 3PL should discuss the gaps in their solution with the customer and determine the direc- tion moving forward. A “smoke and mirrors” approach will not go unnoticed for long and do more damage to the 3PL’s reputation in the long run. LQ: Do you believe that state-of-the-art IT capability should be simply a cost of doing business for a 3PL? (Clifford F. Lynch) Kevin Fletcher: I would not necessarily say it should be simply a cost of business for a 3PL, but rather a strategic business decision. While there are some 3PLs that feel their business model and strategy demand significant investment in state-of-the-art IT capabilities, others do not place as great an emphasis and choose to rely on more manual processes. In addition, a 3PL may hesitate to make a significant investment into the special technology needs of a customer without first getting a longer term commit- ment to the relationship. Situations also arise where there is a very visible disconnect between what a customer expects to receive at no cost versus what the 3PL is willing to offer. Landstar strives to provide our customers with leading-edge technology solutions that are flexible and scalable, deliver improved visibility, offer greater efficien- cy through automation and drive supply chain savings, all in a cost-effective manner. LQ: What are some of the “keys” to successful relationships between 3PLs and their customers in relation to IT needs? What are some of the reasons that may be responsible for the lack of success in some instances? (John Langley, PhD) Jim Handoush: As the key component to supply chain planning and execution, IT can be viewed as the major con- tributor to the overall success or failure of the relationship between a 3PL and a customer. Both organizations must be closely aligned, share common goals, maintain an open flow of communication and be willing to collaborate. If there is a lack of trust or flexibility on the part of either party, progress will be greatly diminished. Customers look to 3PLs as their “experts” in this field, and as such, expect 3PLs to be forward thinkers and innovators when it comes to IT enhancements and value creation. Relationships become strained when a customer feels that their 3PL is not meet- ing their expectation as it relates to bringing forward new ideas and solutions to drive supply chain efficiencies. Also, integration, access to data and the cleanliness of that data is paramount to develop meaningful and timely key per- formance indicators (KPIs) and performance reporting to effectively manage the business. LQ: What steps are you taking as a 3PL to better respond to your customers’ IT needs? (John Langley, PhD) Kevin Fletcher: First and foremost, we place great emphasis on our customers’ input. Listening to and being attentive to customer feedback gives us insight to not only their short-term needs, but longer-term strategic direc- tion. Our 2009 acquisitions allow us to provide web-based IT solutions that are highly configurable and easily imple- mented, from basic transportation to very complex enter- prise level supply chain order management. These solu- tions reduce total supply chain cost and improve business processes through optimization and automation in a real- time operating environment for shippers while also afford- ing greater visibility, business intelligence, and KPI/per- formance reporting. Customers can choose to purchase only the technology on a subscription basis or elect to have Landstar also perform the execution. Our customers have come to expect us to bring new solutions and technologies that allow them to operate their supply chains more effi- ciently and cost-effectively which ultimately makes them more competitive in their particular market. LQ: Looking ahead into the next three to five years, what do you feel will be your customers’ top priorities in terms of IT needs where 3PL involvement will be helpful? (John Langley, PhD) Jim Handoush: In general, I would say that customers will place greater emphasis on web-based technology that allows them to reduce total supply chain costs and improve overall business processes through optimization and Continued on page 20
  18. 18. 19LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com The New Supply Chain Agenda: The Five Steps that Drive Real Value LQ: The recession has been a really tough time. Tell us how you’re working to become the customer of choice for your suppliers. Reuben Slone: OfficeMax has been in a turn-around mode since April 2006. We completed our turnaround in March 2010. We have been very reliant on our suppli- ers to help us fix our business. The reces- sion allowed us to put that cooperation on “steroids.” The economic pressures became all that greater — our suppliers felt those pressures, as did we. There was a mutual understanding that if we worked together we would both survive the storm; if we worked in a confrontational way, we would both suffer, or perhaps one of us could disappear. LQ: This sounds like common sense. Why isn’t everybody like that? Reuben Slone: I think it’s a problem of perspective. You have to have a view of the longer term, and you have to have trust. If the trust hasn’t developed or doesn’t have reason to exist between the customer and supplier, then it is impossible to collaborate. When that trust is gone, the parties have to dis- solve the relationship. Or, if it’s been attacked, but not com- pletely gone, then you have to figure out how to rehabilitate it. LQ: Could you give us an example of what might have been a home run? Reuben Slone: Let me give you a customer example with Boeing. We are one of approximately 14,000 suppliers to Boeing. We won their Supplier of the Year Award in 2009 in in-direct. They spend billions on in-direct procurement and a tiny fraction of that they spend with OfficeMax. OfficeMax and our predecessor company, Boise Office Solutions, has been a supplier to Boeing for over 45 years. We won this award because we collaborated with Boeing using lean tools to both reduce costs and improve the sustainability profile of Boeing. We implemented a returnable totes program as well as a managed delivery program that reduces the number of truck deliveries to Boeing, thereby reducing their carbon footprint without deteriorating product availability. LQ: It sounds like you are putting a lot more into those relationships. How are you finding the resources to do that? Reuben Slone: From a business perspective, you need to find out who are your best and less desirable customers. Basically, the customers where the sup- plier creates the greatest value for both parties are the supplier’s best cus- tomer. A good way to determine this is to calculate the economic profit of each of your largest customers. Once you know this, it is simple to determine where to invest the people into which customer relationships. LQ: You mentioned a number of times the financial sustainability risk — it could also be commodity price risk, or supply risk on commodities in short supply. How does your firm mitigate risk in the supply chain? Reuben Slone: Supply volatility is a risk that we must manage as a customer. We usually manage this through a form of redundancy. For example, we have identi- fied critical SKUs to our business. A plausible event that might occur is a typhoon that paralyzes the Pearl River Basin. We have identified key SKUs where we have dual sourcing that spans different continents where those SKUs are primarily imported from China out of the Pearl River Basin. In the case of a tornado or a hurricane in the U.S., we have redundancy between our customer fulfillment centers. With regard to Katrina and New Orleans, we were able to leverage our fulfillment centers in Atlanta and Orlando to support Louisianna. We have some of the largest property insurance companies in the United States as customers. We were able to very effectively support them in the hurricane- ravaged areas so they could quickly set up claims locations for their customers. LQ: We have talked about work with the best customers, making room for innovation in the relationship, managing risk and who owns what risk and how to deal with this. What are your final thoughts to share on value of the relationship in businesses? Reuben Slone: I would say the most important thing to build a truly collaborative relationship is how you build trust and establish a system for managing the relationship. It goes back to understanding that relationships between companies are relationships between people. The rules about how you build or destroy a relationship between one person and another are often similar to the relationships between companies. (This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.) A Conversation with Reuben Slone, Executive Vice President, Supply Chain, OfficeMax Interviewed by LQ’s Executive Editor, Nicholas Seierson 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
  19. 19. LogisticsQuarterly.com20 LQ™ Volume 16, Issue 2, 2010 automation. These solutions will include multiple segments of the overall supply chain in a real-time operating environ- ment. Key facets of these solutions will include material order management, dynamically optimized network plans, execution of transportation orders, payment to service providers, and reporting of critical business intelligence in a multi-lingual, multi-currency environment. I also antici- pate an increased dependence upon integration as integra- tion platforms become more and more flexible. I expect a broader acceptance of IT on a subscription or on-demand basis for a number of reasons that are making it more attractive and cost-effective. Customers will continue to place significant value on a 3PL’s ability to provide real-time supply chain visibility, deliver innovative and scalable solu- tions that are also flexible, and afford timely and accurate KPI/performance reporting to better manage the business. Ultimately, a 3PL’s involvement will only be helpful if the business and IT communities of the customer and 3PL are strongly aligned. LQ: In the future, do you see 3PLs developing more of their own software and IT, or do you see them relying more so on the commercial sector? (John Langley, PhD) Kevin Fletcher: I see it being a combination of both. Some 3PLs see this as a core competency and are very comfortable developing their own IT solutions in-house and keeping the resources needed to enhance and main- tain their systems. Others may not feel as strongly about their internal capabilities and choose to rely more on the commercial sector for their expertise. I’ve also seen some cases where the commercial sector was used instead of the 3PL’s existing in-house IT department specifically to support a speed-to-market strategy. In general, it boils down to a build versus buy decision based upon the 3PL’s cost-benefit analysis. LQ: To what extent are contemporary technologies such as “cloud computing” relevant to your current and/or future IT plans? (John Langley, PhD) Jim Handoush: Contemporary technologies such as “cloud computing” are very relevant to Landstar’s current and future IT plans as evidenced by our 2009 acquisitions. These solutions have a cost, speed, and ease of implemen- tation advantage over traditional software that must be pur- chased, installed and maintained. Contemporary technolo- gies must be viewed as viable solutions given the trends of expanded broadband capabilities, global IT hosting centers, new and more powerful server technology and software, worldwide acceptance and usage of the Internet, and the availability of inexpensive PC hardware. payment terms off to third parties. Is there anyone who is going to want to own those assets and how are they going to make that work? Craig Callahan: We’re certainly a part of that strategy. When we look at our asset networks, our number of trucks has decreased from a high of 9,100 to a current number of 7,300. So we’ve gone through a significant right-sizing of our own fleet. From a capacity perspective, although we don’t have that capacity to offer on our own assets, we cer- tainly try and gauge outside trucking companies through our brokerage model to bring in that buffer capacity to offer to our customers. So to answer the question — we have 7,300 of those assets and that’s because we want to. We don’t want to own any more than that. Recent history has indicated that that’s a losing proposition because you find yourself oversized and underleveraged. LQ: Isn’t that just pushing the problem one arm away? Craig Callahan: I don’t think so. The way we see it, we’ve got very good relationships with many of our third- party carriers. We’re a big, well-known organization that does business with many of the Fortune 100 companies. Some of the smaller carriers would never have that oppor- tunity to engage with customers of that size — they can through us. We are truly taking these Fortune 100 compa- nies’ capacity that they otherwise wouldn’t have exposure to or wouldn’t want to. LQ: Do you see the same thing happening with risk on the supply chain, pushing it off to third parties? Craig Callahan: When we think about third party, we think about the work we do in outsource contract logistics. In many cases, what our client may see as risk, we see as reward. That’s how we make our living. We would certainly want to have a conversation with our customers on how they would want to insulate themselves from that risk. If you think about the business that we’re in, in transporta- tion, and if you think about the liability cost associated with running a large fleet, a fatal accident, for example, is a real- ity that we live in. Most of those events are going to come with five-, six-, seven-million-dollar price tags. If you are a retailer or a manufacturer running a private fleet, do you really want to expose yourself to that type of liability? If you are a carrier, and that’s how you make your living and you are the experts in that specific area, then you are best posi- tioned to insulate yourself from that risk and take that responsibility and risk away from your customer. LQ: We’ve just seen one of the worst years in the memory of today’s leaders. Are there any lessons that we can take to try and bust the old business cycle and try and keep supply chain improvement on a path of continuous improvement? Craig Callahan: I think if there’s anything that can be learned, as a country in general, we’re guilty of overspend- ing. From Werner Enterprises’ perspective, it has certainly helped crystallize the business plan that we have always held. As I mentioned, we’re a debt-free organization. Being fiscally responsible has been priority one in this organiza- tion since the founder started it back in 1956. We’ve always held the position that we will take calculated risk, but at the same time, we don’t want to put ourselves in a situation where we no longer have leverage. In going forward, we plan to even use a more conservative strategy so that we can remain financially sound and debt-free and to continue to be in existence for the next 50 years. (This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.) Continued from page 8 Continued from page 18
  20. 20. 21LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com where we bring that information and how is it used within our customer portfolio. LQ: Can you give us an example of something you’re really proud of? Jim Butts: There are numerous case examples, for instance, a blending of transportation modes, expedited stack train service, having steamships skip ports using fruit boats. It’s always a blend of what that customer is looking for, what the specific requirements are, and what the relation- ships are that we are able to plug into effectively to make an improvement within their supply chain. LQ: It has been suggested by one pundit at today’s sympo- sium that 3PLs are not always innovative leaders. What would you say to that? Jim Butts: I think it depends on who you ask. If you ask people who are looking at the industry as a whole, then you’re going to have trouble finding examples, because it is difficult, based upon the differences within each customer’s supply chain to have what you would call an aggregate inno- vative solution. However, if you look at specific industries, there are examples, particularly specific customers, which is what we focus upon. How can we help this customer through innovation, through creativity, through the application of practical ideas and our technology; how can we help that cus- tomer establish a competitive advantage? Frankly, it wouldn’t be our role within the industry to take credit for an innova- tion solution, because we believe in a collaborative perspec- tive. You want the customer and the people within the organ- ization that had to take responsibility to usher the ideas in and to get all the credit for the results. LQ: Have you succeeded at bringing external ideas in? What are the challenges and some successes you’ve had? Jim Butts: When we talk to customers about innovation and setting the stage within their organization so that innovation is welcome, we often learn that there are only very specific areas where innovation is going to be welcome. Sometimes it’s a trust issue, sometimes it’s a pride issue, which reflects in the “not invented here” perspective. What we find, in order to be innovative, is you’ve got to have somebody within their organization that’s going to be responsible for the results — usually somebody from senior management that’s paving the path for the innovation — and a process by which the innova- tion is implemented, tracked, and measured going forward. LQ: What are your closing thoughts? Jim Butts: I think innovation is going to be the key value- add of transportation providers going forward. I think, as no employer can tell any one employee everything that needs to be done, no organization can tell its transportation or supply chain partners everything that needs to be done in order to achieve their supply chain goals. So it’s the setting of expec- tations, clear communication, and empowering your supply chain partners to make decisions on your behalf, that leads to a beneficial outcome for you. I like to compare it to a neighborhood watch program, where your supply chain part- ners work in such a way that they prevent bad things from happening in your neighborhood supply chain. (This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.) highest efficiency out of their equipment, or the greatest return on the miles that they run. For us, we have a large carrier base that we must under- stand beyond the larger carriers. You’re often filling an order with somebody who’s got 20 trucks. I need to know what’s going to motivate him and be able to bring him to the table quickly, in the case of a demand that might not have been there a month ago. An example for us of something that is ongoing in terms of capacity is a club store that we do a lot of business for as a transportation capacity provider. We pick up all the lanes that aren’t regular and repetitive. When you walk into that club store and you walk down the middle aisles, they always have a change in product line. They buy whatever they spot buy and that’s it. When that’s sold, they don’t have any more of it. From a carrier point of view, I’m not going to move my network around to go get that product for two months, and then not have it again because you don’t have another vendor in that particular location that I could count on getting other freight from. From my perspective, typically we know a year in advance what is going to happen. And then a month in advance, if we don’t have a sufficient carrier base in that neighborhood, we will work diligently to build up our knowledge of which car- riers are most likely, and then we dump that back into our TMS and get ready to go. In our world, there’s no shortage of solution providers. We’re competing with the asset and the non-asset-based groups, from the global 3PLs down to the 3PL on the corner. I think we’re positioning ourselves as a broad-based niche transportation provider in that while we’re providing domestic transportation within North America, we’re doing it on three different levels. And, we’re technologically enabled beyond what most providers that offer the whole gamut of services would be. The large guys would all have some sort of transportation management offer- ing, and could potentially offer some solutions in a dedicated capacity. Most of those people have a hard time getting into the spot market. In most cases, whether it would be through my firm or other competitor’s firm on the spot market side, they would farm out their customer’s requirement for the spot mar- ket requirement. A vital element in our world is agility in business. We have the technology interface, the key performance Indicator (KPI) definition process, the requirements on less-than-truckload (LTL) capacity, to have a point of delivery 99 percent on time at retail locations within a half hour window. We’ve adapted very effectively in that environment and I think those are some unique attributes we provide. It is a challenge for any 3PL to consider how to build a model that allows you to move seam- lessly between each one of those hats with agility to meet the needs of each customer but I feel that we do a great job of it. (This interview is an abridged and edited edition of LQ’s Executive Insight Interview Series, held on June 10, 2010, at the Toronto Board of Trade’s Country Club.) Continued from page 10 Continued from page 12
  21. 21. LogisticsQuarterly.com22 LQ™ Volume 16, Issue 2, 2010 How Do You Mitigate Risk and Invest in Outsourcing Your Transportation Requirements? F ollowing one of the most challenging years in busi- ness, the CEO of a long-time carrier invites you to meet with him. When the pleasantries are over, he gets down to business.The last few months have been particularly tough on his company, and it’s possible the future of his firm is in peril if current business trends continue. You have been putting pressure on keeping his rates down, as has everyone else,and it’s now known that the CEO’s trans- portation company has been compelled, in at least a few cases,to take on business that does not cover their costs. Like thousands of other companies in the field,they require a substantial rate increase across the board to keep their com- pany afloat. How do you respond? Do you quickly end the meeting and redirect your freight to other carriers,thereby pre- cipitating their failure, but ensuring none of your freight gets sequestered in bankruptcy proceedings? Do you discuss what it will take to keep them afloat,and compute what it will cost or require your firm to invest in their services? What conces- sions will you try to get,and how will you sell the new deal to your management? Do you refocus your freight with them on lanes that have excellent economics so that they can quickly pull out of their slump? How do you deal with the other lanes? Do you maintain the status quo but diversify and use more transportation providers as a result, or do you invest more in this carrier and develop a deeper business relationship to mit- igate risk and realize new value? Advice from Practitioners in the Field Ginnie Venslovaitis, CITT, Director, Transportation Operations, Hudson’s Bay Company If this carrier is a true partner,has been a stellar carrier for my business and provides great service, the opportunity to keep his business afloat is definitely an important goal.Keeping car- riers in business is good for competition and providing service and alternatives to shippers. Depending on the size and scope of his volume and lanes to my overall transportation budget I would consider the following process. The initial discussion would likely involve a review of how the carrier found himself in this sit- uation; could it be attributed to the economy, union con- tracts,another customer’s bankruptcy,etc.? In other words,it was not a result of the company’s mismanagement or poor decisions that led to this crisis. Once we have established a general cause, let’s look at the CEO’s turn-around plan.I would want to see that there is more in the turn-around plan than just asking everyone for rate increases.What has the company done to reduce their internal operating costs? Is the fleet the right size,have assets been sold off or leases terminated? Have all these issues been brought forward to the managers and even the employees and drivers to allow them an opportunity to understand and appreciate the situation and examine ways to reduce operating costs? If this has been done and there is an action plan in place, and rate increases are a part of the plan to close the gap,I feel this carrier is likely worth supporting. Next, I would look at what lanes can be supported with a rate increase. Are these lanes undervalued and therefore a rate increase is in order,or are the rates requested substantial- ly over market value, based on benchmarking? Is there an opportunity for me to change my business processes,delay in loading, or time-of-day shipping to be more efficient for the carrier and thereby reduce additional costs for his opera- tions? What collaboration can we find to reduce his costs without increasing mine? Once a rate increase is determined to be appropriate, I would calculate the financial impact to my overall transporta- tion budget based on the proposed volume and the new rate. Could this increase be offset by other cost savings initiatives that I have in place and is my total budget still intact? If so, I have no obligation to senior management to discuss a specific lane rate increase. Another avenue to explore is the aging of invoices. If my payment terms were 30 days, would shortening payment terms to 15 days change any cash flow or bank obligations for the carrier? I would expect to have monthly reviews with the CEO via a quick phone call meeting to assess his current situation. I would ask my company’s receivables group to monitor the Dun and Bradstreet reviews on a monthly basis. In the fullness of disclosure,I would also advise that this sit- uation is under high scrutiny and I will be looking for a You’re meeting with the CEO of one of your stellar carriers. The CEO has some troubling news to share; it’s crunch time and they need to renegotiate their contract with your firm. What’s your best course of action? CASE STUDY
  22. 22. 23LQ™ Volume 16, Issue 2, 2010LogisticsQuarterly.com back-up carrier to be in place in the event of a complete failure. Potentially, I am putting my company at risk and I want to be assured there is full visibility for both parties. Andrew Paxton, CITT, Vice Chair, Development, CITT Board I would want to begin by knowing what it would take to keep them going and ask about the root of their financial problems. Why are they in financial trouble? Is it mainly due to cus- tomers paying below market value or are there other factors? I would also ask the CEO where we rank as a customer and who his key customers are. I would ask for a financial guarantee. I would then explain that I need to review with our manage- ment team and will set a future meeting date after our manage- ment team’s review of the circumstances. The CEO has likely been upfront with me in this situation, but I need to verify the facts by talking to some of the other key customers and performing a credit check on the carrier. I would review my carrier base and verify if the carrier is being paid below market value. If this is true, then there is a strong case to grant a rate increase.If I am a smaller client I need to know if other clients are going to do the same, otherwise the impact of my increase will be negligible. If I have established that we are a major client of the carrier, we can likely grant an increase (but not overpay), and if the CEO will put up a bond I would probably present to the man- agement team — and make a compelling case as to why we should continue to do business with this carrier and work to establish a stronger business relationship. Ajay Gupta, CITT, Director of International Supply Chain Logistics and Operations, Sterling Agility This is a tough business situation to be in.First,I would want to develop a deeper understanding of where the carrier CEO is coming from,including whether the situation is close to being salvageable or near bankruptcy.This is important in order to assess my business risks. My primary inclination is to assess what is needed to keep them afloat and proceed to work with them as a true partner. So, I would consider a rate increase — a negotiated one — while being mindful of a pricing arrangement that is sustain- able in the market.If this carrier cannot make a living at the rate I pay them,chances are neither can any other carrier. Any rate increase agreed to would be time limited, with a clear understanding of re-visiting the pricing to current and/or more competitive levels. In return, I would ask as to what the carrier would do to work with us in order to streamline processes and reduce costs and improve efficiencies for both of us, thereby lowering the costs for both parties — in the short-to-medium term. Splitting the loads/lanes should be the last option;it is not an optimal solution for either the carrier or our firm,in my opinion. In parallel, with these steps, I would likely create a mon- itoring mechanism; a team consisting of Finance, Opera- tions, and Procurement (and, possibly, Customer Service) would be charged with keeping a close watch on the car- rier’s performance, reporting regularly and raising any red flags in short order. Also, I would initiate, in parallel, the process of assessing alternatives and coming up with a focused risk-mitigation strategy. Valerie McSween, CITT, Vice President, Eastern Region, Mactrans Logistics Inc. Every carrier has developed core lanes for which they seek to balance the inbound and outbound flows with the objective to reduce empty mileage.With excess capacity consequent of the recent economic downturn, carriers may have been tempted to take on any business opportunity, outsourcing the volumes that they could not handle to other carriers afterwards. As a first step,we should go through each lane with the car- rier to determine which movements are profitable for them.A benchmark comparison should be completed for the lanes requiring a rate increase to determine if they are undervalued or well above the market rates,which would initiate a diversifi- cation of our volumes amongst other transportation service providers.In removing some of our volumes from their trucks, we should also consider our carrier’s key lanes to determine if we have other movements, currently handled by other trans- portation suppliers,that we could allocate to their operations. Measuring each carrier’s core competencies can be a diffi- cult and tedious task.Before spending an important amount of time meeting with several other transportation firms,we should consider outsourcing the transportation selection function to an expert in the field. An experienced third-party logistics provider will know precisely the strengths and weaknesses of transportation providers and have carrier profiles for those who specifically meet our needs. If we are dealing with LTL shipments,in addition to knowing precisely which lanes each carrier seeks to increase freight vol- umes on, a third-party logistics provider will also have the knowledge and expertise required to determine which trans- portation firm specializes in smaller and/or larger LTL orders, for each of our lanes.For freight that cannot be cross-docked, they will also offer reduced pricing by combining with other clients’ freight, thereby offering volume economies on direct drive services without the costly truckload pricing. Outsourcing our transportation function to a strong 3PL, whose core business is transportation, will enable us to profit from the strength of each individual carrier.It will also allow us to benefit from a volume economy,a single invoicing process, superior customer service and the flexibility that comes with not being restricted to a specific fleet of equipment. A professional 3PL will encourage us to pursue business with our current carriers, if it makes business sense to do so. Our carriers will also profit from the third-party operations who will work with them to increase freight volumes on lanes required to obtain a balance and reduce empty mileage. This CITT column has been prepared with insights from members of CITT’s Board: Ginnie Venslovaitis, Director, Transportation Operations, Hudson’s Bay Company; Andrew Paxton, Vice Chair Development, CITT Board, Ajay Gupta, Director of International Supply Chain Logistics and Operations, Sterling Agility; Valerie McSween, Vice President, Eastern Region, Mactrans Logistics Inc., and LQ’s Executive Editor, Nicholas Seiersen.
  23. 23. LogisticsQuarterly.com24 LQ™ Volume 16, Issue 2, 2010 NASSTRAC CORNER ADMITTEDLY,GOOD NEWS seems to be in short supply. Unfortunately, change for the better seems unlikely even after the elections. If Republicans take con- trol of the House, the Senate, or both, they are unlikely to be more successful with their agenda than Democrats were when they were in the majority. The main problem lies with the need, rarely seen in the past but com- mon today, for 60 votes to enact bills in the Senate. This requirement, based on increased threats of filibusters, is bad enough, but the problem is compound- ed by the ability of a single senator to block action through an anonymous “Hold.”Time after time, bills enacted in the House have died in the Senate. If legislative gridlock operated only to kill pet projects from the extreme left and right, opening the way for centrist legislation with bipartisan support, the situation might be tolerable. Unfortu- nately,centrist politicians are an endan- gered species. Too many Republicans refuse to consider tax increases,even if only applied to millionaires. Too many Democrats refuse to consider cuts in services or programs whose effective- ness is questionable, or which clearly deserve elimination. What does all this mean for trans- portation, logistics and supply chain professionals? Needed legislation is likely to be postponed indefinitely. Exhibit A is a new highway bill, replacing SAFETEA-LU, which expired September 30, 2009. The need for infra- structure investment is undisputed, and the pile of supporting studies continues to grow. On September 23, 2010, the U.S. Chamber of Commerce issued its Transportation Infrastructure Index, showing the lack of investment to be a “major drag on economic growth.” On October 4,a report by the NationalTrans- portation Policy Conference, headed by two former DOT secretaries, called for increased funding for the deteriorating transportation infrastructure. However, Governor Bill Graves, presi- dent of the American Trucking Associa- tions (ATA), and Senator Max Baucus, chairman of the Senate Finance Committee,have both predicted that we are likely to see extensions of SAFETEA- LU through 2013, and no new highway bill till 2014 at the earliest.Highway bills traditionally enjoy bipartisan support, and economic conditions in three or four years may (or may not) permit res- olution of funding issues that are intractable now. Federal Aviation Administration and Surface Transportation Board reautho- rization are in limbo now, and will almost certainly not be enacted prior to the elections this November. After that, action during the “lame duck” session, when Members of Congress can vote without the threat of imminent defeat at the polls, may be possible. However, there is little reason to expect 2011 to be better than 2010 on Capitol Hill. Neither party is likely to have the votes to impose its will on the other,and there is no reason to expect the survivors of a bruising,polarizing campaign to be in a mood to reach across the aisle to com- promise with political foes. And if Republicans are able to pass legislation, presidential vetoes may prevent the bills from becoming laws. In 2011,the 111th Congress will begin its first session. For reasons set forth above, legislation that requires funding may face insurmountable hurdles. The best we can hope for may be bills that streamline and improve regulations and programs affecting logistics and supply chains. If such bills do not cost any more and do not undermine health, safety or the environment, but make popular or accepted programs work better, they may be enacted. There are some good bills pending which deserve a fresh start in 2011,even if major legis- lation that is even a little controversial must be placed on hold. Gridlock on Capitol Hill may leave administrative agencies free to pursue their policy initiatives, and those of the White House. Changes in truck driver hours of service rules are expected, which carrier groups like ATA and ship- per groups like NASSTRAC are expect- ed to oppose.New regulations on secu- rity and safety are also likely. Members of Congress may have problems with these policies, but gridlock will reduce the likelihood of effective oversight. By John Cutler Jr. Fall Elections Promise Worse Gridlock Virtually all U.S. elections in “off years” (i.e., when votes are cast for Members of Congress but not for president), lead to gains by the party not in power. In 2010, several factors appear likely to increase losses by Democrats. These factors include a weak economic recovery, concerns about federal deficits and the bank, auto industry and AIG bailouts that contributed to them, the rise of the Tea Party movement, dramatic increases in campaign ads supporting Republican candidates, and gridlock in Congress.

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