1. Where is the Innovation in
Logistics Outsourcing ?
presentation to
Eye For Transport Conference
Atlanta
June 22, 2010 Jim Eckler
CEO
SCI Group Inc.

2. SCI provides world-class, outsourced
supply chain services …
ENTERPRISE
PROCESSES
 For companies seeking improved supply
chain performance
 A Canadian-based organization with all of
the resources required to operate and
support the most complex supply chain
requirements
 Backed by the strength and breadth of the
SUPPLY CHAIN Canada Post Group of Companies
PROCESSES

3. Providing national coverage with deep
competency throughout the supply chain …
Edmonton
Calgary Halifax
Regina Winnipeg
Vancouver
Thunder Bay
Ottawa Montreal
Kingston
Toronto
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4. What do I know about Innovation?
 15 years as CEO of one of Canada's largest 3PLs
 18 years as strategy consultant to many global
corporations
 Educator to business executives
… and a passionate practitioner of outsourcing to
businesses that demand innovation.
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5. Topics
 What is Innovation?
 Why business needs Innovation?
 What’s the track record for Innovation in Logistics?
 What have 3PLs done?
 Some examples of Innovation in Logistics.
 What does the industry need to do?
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6. To compete today, businesses
need innovation more than
ever …
 Business conditions have intensified more than expected
– Complexity reigns
– Resources are limited with six billion people to serve
– Global competitors are everywhere … many accepting very low
wages
 But competition is everywhere
… and differentiation is a must
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7. The new competitive battleground
is Innovation …
 The competitive battleground has shifted
from machine processes to thinking processes
 The winners are those who innovate … the losers are
those who do not.
 The battleground has become Innovation Capacity
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8. What is Innovation?
Innovation is a change in a process
for doing something that adds value …
– Begins with a creative idea … finishes with implementation
– Radical or Incremental change
– Positive or Negative outcomes
– Success will require Risk
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9. Innovation has many names in the business
environment …
 Continuous Improvement
 Quality Management
 Business Transformation
 Lean Process Improvement
 Six Sigma
 Software Implementation
 Capital Investment
We spend a huge amount of time trying to
innovate … but are we achieving an ROI?
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10. In logistics over the past 30 years, managers
have introduced many valuable innovations
• Services • Relationships
– Intermodal carriage – Dedicated contract
– Cross dock services carriage
– Logistics outsourcing – LLP/4PL
• Information • Structure
– WMS – Supply Chain
– TMS Management
– ERP – Collaboration
– EDI
– Bar Code
– RFID
– Portals
But much more is needed …
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11. To innovate more, many organizations have
chosen to outsource logistics functions …
 3PLs are hired to improve
logistics performance and drive
innovation … transferring the
Innovation mandate to the 3PL
 3PLs operate key functions
… with an important Innovation mandate.
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12. Too many outsourced relationships have
ignored the Innovation mandate due to:
 Transaction/activity based focus
 Functional specifications
 Cost driven
 Procurement driven
Where is the real Innovation?
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13. Published data shows a positive outlook for
the 3PL industry …
North American 3PL Industry Revenue
$140
$120
$100
$ Billions
$80
$60
$40
$20
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
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14. But declining growth in the 3PL industry
suggests serious concerns …
North American 3PL Industry Revenue Trend
30%
25%
Year over Year Revenue Change
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E
Source: Armstrong & Associates
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15. While innovation in logistics is crucial, 3PLs
have not been innovation leaders …
 Conflicted motivation
 Low margins limit risk-taking
 Contract complacency
3PLs must become customer-focused
Innovation Drivers.
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16. 3PLs and their clients need to explicitly
focus on Innovation within the relationship
 Embed innovation in the services contracts
 Motivate innovation through incentives
 Develop innovation capacity in the
operations
 Share risks
 Create a culture of innovation
 Establish open, transparent, collaborative
relationships
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17. Recently, some 3PLs have pursued some
valuable innovations … but much, much
more is needed
 Vested Outsourcing
 Supply Chain Management
process outsourcing
 Supply Chain financing
… Others?
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18. Six keys to outsourcing success …
1. Avoid transactional contracts - Focus on strategic
outcomes
2. Ensure that outsourcing does not become a
procurement exercise
3. Structure compensation to leverage risk and reward
4. Elevate the Innovation agenda
5. Make innovation customer-focused
6. Remain open to change.
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19. “The future success and
growth of outsourced
logistics services will
be directly linked to
Innovation.”
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