3PL Q&A: Marv Schlanger, CEO of CEVA Logistics

At last week’s 11th annual eyefortransport 3PL Summit in Chicago, LM Group News Editor Jeff Berman conducted an on-stage interview with Marv Schlanger, CEO of CEVA Logistics. Schlanger offered up various insights on the 3PL sector, including global logistics, and how he views things as a “new guy” to the sector, among other topics. A full transcript of the conversation between Berman and Schlanger is below.

Logistics Management (LM): Being relatively new to the 3PL world, having assumed your position at CEVA last October, how do you view this sector?
Marv Schlanger: The one overwhelming takeaway I get from being involved with CEVA and the supply chain industry is the breadth and depth of what we do for our customers and what 3PLs do for their customers. The way we are involved in their business and the fact that we are immersed in it and the critical nature of what we do in terms of the knowledge, skills, dedication, and commitment that 50,000 people in CEVA bring to their work every single day to assure the success of our customers’ business is something that is breath taking and gives me great pride in leading this organization. That is the most positive takeaway and the one thing that I think about daily. The other thing I think about is the personal nature of the business, which is somewhat surprising, and I think it is a really important characteristic of the business. The fact that our customers care about who we are and how we think about the business and how we want to operate and interface with them is also a real important feature and one of the reasons I spent most, if not the majority, of my time over the past six months meeting customers. Over the last six months, I have met and spent time with 40 or more of our top 50 customers, because it is important for them to understand how I think about the business and how CEVA thinks about it, too.

LM: What are some of the negative things you have had to deal with?
Schlanger: On the more disappointing side, [some] of our customers don’t really acknowledge the importance of the role we play for them or the importance of our operations in their business. What we do is critical to their success and for their own reasons, frankly, they are trying to “commoditize” the business that we do and what we bring to the table. The pitch I give is that the real value in supply chain is not so much the cost of moving things from point A to point B. The real value we bring is thinking about how the supply chain should be organized and approached. And that is where the value-added activity occurs, and we at CEVA have taken steps to organize how we bring that value to the table.

LM: What is your take regarding bringing people into the 3PL sector from the outside?
Schlanger: What we do every day requires an immense amount of in-depth knowledge. If you think about what we do, the knowledge base we need to have for things like freight forwarding, contract logistics, air or ocean products, IT applications all require deep knowledge to serve our customers properly. It is critical. We have to start from that standpoint. Each one of our companies needs that in-depth knowledge to meet the needs of our customers, regardless of which niche of the supply chain sector you are in. And any honest assessment will say the industry has been somewhat insulated. If you look at people’s resumes, many have people being in the same role for three years at a time at different companies and you need to ask yourself where the new ideas are going to come from, where the new approaches will come from and how will they get introduced to the industry? There is a natural evolution and to accelerate that and bring new ideas and dynamics in, having a mix of backgrounds and skills can only be positive. You can never give up on the in-depth knowledge of the business, which is what we need to do to properly serve our customers. But on the other hand, having some outside perspectives can only be a positive.

LM: How do you see the 3PL sector positioned today and what are the key issues facing it and also evolving in the future?
Schlanger: You have to start with the current environment we are in. The economy is much different in 2013 than anybody would have thought from 2007-2010. Growth is a lot slower than one would have thought, and if you look around the world economies are not great. Europe continues to suffer, particularly in the southern region. Growth in Asia, while positive, is nowhere near as high as hoped and forecasted. There is growth in the U.S. but not robustly across the board. Our customers are under enormous press in terms of where there growth will come from, and their profit growth. It is very hard for them to grow their top line and they need to grow their bottom line as there is pressure on their entire system, and we in the supply chain sector are feeling that pressure. I don’t think that there is a 3PL out there that does not feel customer pressures every day to find ways to make customer business more efficient and effective. That is just the business we are in, and that pressure is increasing as our customers don’t have a lot of places to go to improve their bottom lines. Our industry has a tremendous amount to offer, with a collective huge amount of experience and intellectual property, a depth of knowledge and application skills. The bulk of what we can bring is intellectual property; it is not as much the cost of moving freight as much as what supply chains should look like and how can our customers increase velocity and reduce inventory or have the right warehouse location or applied lean manufacturing techniques to how they move and store their goods. Those are the kinds of advantages that we in the supply chain sector should be bringing to our customers’ tables, and are a focus for use at CEVA.

LM: Getting back to Europe and the global economy, the numbers coming out of Europe continue to be poor. Given CEVA’s presence there, just how bad are things there and what is the approach you take to business in Europe.
Schlanger: It is weak, especially in southern Europe. The legacy businesses that compose CEVA have a substantial portion of our revenue originating from southern Europe, and our approach is multi-fold. First, we have to right-size our cost structure. We started that in the fourth quarter in 2012, with a cost reduction program, which is one of many announced and implemented throughout the industry. A number of competitors did the same. You need to make sure the cost structure is appropriate for the amount of business available. Regarding the rest of Europe, you can see and feel the weakness spreading north. It is not a surprise to say the UK consumer market is not particularly strong, and we see central Europe and the German economy as not getting stronger and getting slightly weaker.

LM: How do you see current conditions in North American markets?
Schlanger: I am really optimistic about things here and therefore the global economy in general. It comes from what I see as an energy revolution. We are witnessing today a watershed event in the global energy picture, with the development of natural gas and oil properties in the U.S. through fracking, which will provide low-cost natural gas and low-cost liquid fuel (LNG and crude oil) which can fuel a manufacturing revolution in the U.S. We are seeing it already in certain segments with the amount of investments in domestic chemical industry as people in that industry believe that low cost energy will refuel their growth and competitiveness on a global basis. And U.S. manufacturing is going to have access to substantial reductions in energy costs, which could lead to a revitalization of manufacturing here leading to good, middle-class, high-benefit providing jobs that will result in an improvement in domestic consumer spending. When the American consumer starts buying, he has the ability lift the world up and creates demand for goods in various locations like cars from Germany or consumables from Asia. A source of low-cost energy which is here and having an impact today can have an even bigger impact in the future and I am really optimistic about the prospects for North America and its consumers and for the global economy in the upcoming years.

LM: What is your take on the role of technology in the 3PL sector?
Schlanger: The use of all technologies is theoretical from a boardroom level but being in the company you see it as work every day. We can bring a lot to the table for customer by providing a full range of supply chain services and opportunities, part of which come from IT for things like track and trace, and visibility. Younger people are bringing an e-commerce attitude the business they run and we need to provide IT and e-commerce solutions as a natural evolution of the business. It is one component of the future of our business.

LM: Do you think we will see a return to a more traditional Peak Season this year?
Schlanger: I would say I am cautiously optimistic. There is a little momentum in the U.S. economy with a somewhat brighter employment outlook and the auto market is very strong and some life in housing. Those are pretty good principles to start from and would lead me to believe this year will be better than the last few years, but it is still a little too early to point to at this point.