3PL Summit and Chief Supply Chain Officer Forum

I attended the 3PL Summit in Atlanta last week. This conference was organized by EyeForTransport –  a provider of Logistics and Transportation-related information and services and attracted executive-level participation from several leading third-party logistics companies (3PL), Shippers, Retailers, Manufacturers and technology providers that serve the global logistics industry. The 3PL Summit was co-located with the Chief Supply Chain Officer Form and one of the focus areas of both conference tracks was to explore steps and measures that companies were undertaking to prepare themselves as the economy recovers from the downturn and recession of 2009. The event offered numerous opportunities for collaborative sessions and debates that helped accentuate the shared goals and challenges across Shippers, 3PLs, Carriers and Technology providers.

I wanted to highlight and share the key themes and industry initiatives that I came across at the conference:

  • Logistics & Recession: The annual “state of logistics” report for 2010 released by the Council of Supply Chain Management Professionals (CSCMP) was presented and discussed at the conference. As highlighted in this report, the continued impact of the economic downturn on the industry was demonstrated by the fact that in 2009, logistics accounted for a mere 7.7% of US GDP – the lowest in years. Abundant capacity and reduced freight resulted in industry-wide moves to reduce costs. This resulted in inconsistent and fluctuating rates for trucking, rail, ocean and air freight that are yet to stabilize.
  • Driver Shortage: Several speakers alerted the audience to the upcoming driver shortage that has been predicted for the US trucking industry. Many believe that this shortage level could hit as high as 200,000 drivers in 2010 and may double in 2011/2012 unless corrective actions are taken immediately. The driver shortage will be caused by the improving economy as well as stricter government regulations. In particular, the CSA 2010 legislation that is currently under review, was pointed out by several speakers as a key factor that would disqualify thousands of otherwise well qualified drivers. With 71% of all freight in the US moving via truck, this driver shortage and the ensuing capacity constraints will have adverse consequences on product availability as well as logistics costs, margins and revenue.
  • Supply Chain Empowerment:  Shippers expect 3PLs to function as extensions of their own operations. This requires that 3PLs understand, appreciate and internalize the unique industry-specific dynamics and challenges. 3PLs that staff up accordingly and speak in their customer’s language – be it retail, consumer products  or hi-tech are the ones that enjoy loner and more lucrative relationships.  3PLs on the other hand need to be empowered with timely, accurate and actionable data from customers in order to make intelligent decisions on their behalf. This would be key to the transition of the shipper-3PL relationship from problem prevention to problem solving.  Shippers and Carriers alike extolled the virtues of investing what they referred to as “Operational Terminals” powered by Business Intelligence and Supply Chain Visibility solutions to achieve Supply Chain Responsiveness.
  • Monitor, Measure and Mitigate Risk: Shippers and 3PLs have recognized the importance of implementing structured Supply Chain Risk management strategies. Several speakers touched upon how competitive forces attack at the areas of highest profitability or greatest vulnerability. Supply Chains are frequently most vulnerable and 3PLs have a key role to play in making their customers more competitive.  3PLs and shippers that jointly define and agree success metrics such as the “Perfect Order Index” and follow supply chain methodologies such as the SCOR reference model have demonstrated significantly improved operating results. In this context, I came across an interesting service called “Supplier and Risk Monitor” from Dow Jones at the conference. Dow Jones leverages their global news gathering and syndication prowess to highlight exogenous events such as supplier financial health, strikes, labor unrest, economic and trade events, regulatory changes and geo-political events to help stay one step ahead of possible supply chain disruptions.  This seems conceptually similar and complementary to what Panjiva offers in terms of supplier risk monitoring.
  • Ode to Collaboration: A supply chain executive lamented why companies expend so much effort to forecast something that somebody already knows! Several speakers spoke about the quest to make their Supply Chains “Smarter”. One defined the Smart Supply Chain as being ‘Instrumented, Intelligent & Interconnected’ while another speaker alluded to its foundational requirements as ‘Connectivity, Collaboration & Integrated Business Processes’. In either case, effective collaboration between Shippers, Carriers and Freight Forwarders – the troika that make up the “logistics communications triangle” the was highlighted as crucial. Leveraging pre-connected global networks of logistics providers combined with on-demand portals that offer exception-based multi-modal shipment track and trace capabilities such as what GXS Active Logistics offers would offer the competitive advantage many carriers and shippers seek.
  • Sustainability is not the initiative-du-jour:Carriers and manufacturers, especially those based in Europe made it a point to explain that defining supply chain operations based on sustainability goals has gone mainstream. Corporate strategies around sustainability according to several speakers now includes initiatives such as profitable proximity sourcing, global fair trade and fair wage monitoring. I found it fascinating to hear at least two 3PL executives promote the concept of  “competitive consolidation”, by way of which Logistics Service Providers build truck loads by combing shipments from competing manufacturers for delivery to a retail distribution center or store. In a nutshell, companies are starting to focus their efforts on improving what one of the speakers alluded to as the “Triple Bottom Line” with measurable Commercial, Societal and Environmental goals.

Finally, there was a profound comment from the VP of supply chain of a leading retailer, which I am sure will resonate for some time to come:

Inventory, just like cabbage has a short shelf life – you sell if or you smell it!