Why it's important to see the forest

By William C Copacino -- Logistics Management, 1/1/1998

Most of the time, we are caught up in the frantic pace of our jobs. We are constantly busy, meeting the challenge of getting our products shipped out the door and dealing with the day-to-day (and minute-to-minute) activities required to "execute with excellence."

Most of us, therefore, do not have time to step back and get a broader perspective on what we are doing. It's the classic dilemma of needing to view the entire forest, but being unable to do so because we are distracted by individual trees. Although it may be hard to find the time, it's important to step back and view the forest because it helps us gain perspective that will allow us to execute our responsibilities with greater effectiveness.

One of the best ways to gain such a perspective is to find analogous situations in other industries or functions that may be several years ahead of developments in your own industry or function. One comparison that is particularly meaningful for logistics managers is between information technology (IT) and logistics.

In the field of information technology, we are seeing a great surge in the outsourcing of data-center management and software-applications maintenance and development. Entire IT departments are being replaced by contract employees managed by third-party providers.

This phenomenon is being driven by several factors, but the key driver is the fact that companies are unable to keep up with the pace of change in computing technology. In the last decade alone, we have evolved from mainframe computers using COBOL language applications to C-language programs, to client-server applications with object-oriented programming, and now to Internet applications in Java language. Individual companies are unable to keep up with these changes, and they have not been able to find, attract, retain, train, and retrain the workforce needed to manage information in this new environment. They have turned to outsourcing, therefore, to meet those needs.

I believe that a similar phenomenon is developing in logistics. The specialized skills required for success in supply-chain management are rapidly becoming more advanced and complex. These specialized skills include having the ability to effectively use handling and storage technologies; planning software and supporting infrastructure; data-communications technologies; and decision-support, demand-planning, and advanced transportation-planning and control tools.

Fewer and fewer companies can keep up with the depth of skills required for excellence in this rapidly changing environment. It is not surprising, therefore, that the gap between the leading performers and the average performers is expanding.

To close this gap, companies will need to develop more "virtual" supply-chain capabilities. This will include more outsourcing of selected functions and/or outsourcing broad portions of the supply chain. To take on that responsibility, third-party providers will need to develop more comprehensive capabilities than they now have. They also will be required to operate in alliances with various players in the supply chain.

This movement toward "virtual" supply chains is most advanced in the electronics industry, where Cisco Systems, which makes switches for computer servers, has created an entirely "virtual" channel, in which it outsources all parts of its supply chain or manages them through alliances.

The electronics industry has characteristics that encourage these kinds of approaches to channel management. But the way in which the electronics industry is changing holds lessons for other industries. Each of us must periodically step back, gain a broad perspective, separate the forest from the trees, and ask, "Are the dynamics in my industry and function changing, and if so, should my company consider adopting proven approaches from other environments?" I suggest we all ask ourselves this question before it is too late.

William C. Copacino is the managing partner, strategic services, Americas, of Andersen Consulting. A frequent speaker before business and professional groups, Mr. Copacino has a number of publications to his credit, including the book Supply Chain Management: The Basics and Beyond (The St. Lucie Press, 1997). He is based in Andersen Consulting's Boston office, 100 Williams St., Wellesley, MA 02181. Phone (617) 454-4480.