What's in a title?

Nearly $17,000 if that title is supply-chain manager. Our latest salary survey shows that executives who oversee supply-chain activities far out-earn the average logistics manager.

By Jim Thomas -- Logistics Management, 4/1/1998

Follow the supply chain: It leads to the money. That's one of the conclusions you can draw from Logistics' 14th annual salary survey of more than 900 readers. The average salary for those who list supply-chain management as their single most important job function is $77,063. By comparison, the average for all managers is $60,458.

Through interviews with logisticians and industry observers, Logistics found four major reasons for this gap in compensation levels:

* The supply-chain management function normally rests with higher levels of management, usually vice presidents and directors.

* The supply-chain function is more common at larger companies, which often provide better compensation.

* Supply-chain managers generally take responsibility for greater dollar and volume levels than do managers who focus specifically on such functions as traffic, distribution, or logistics.

* The recent surge in demand for supply-chain managers has forced companies to offer these professionals more attractive compensation packages.

While demand for supply-chain management expertise is high, the supply of qualified individuals is low. "The companies looking for supply-chain managers are those that seek to increase their shareholders' value," says Gayle Gorfinkle, a partner with Executive Search International. "They have been through re-engineering, they have increased their market share, and now they ask, 'How can we do better?' Supply-chain management is the answer. But qualified people--those with masters' degrees in logistics or business degrees in logistics--are scarce."

Room to Move

If you aren't qualified for a supply-chain position, don't fret. There is plenty of opportunity in the job market for lower- and mid-level logistics managers. Credit this bull market to a healthy economy, record-low unemployment levels (a 4.7-percent nationwide jobless rate in December 1997), and a greater awareness of logistics among senior management.

Companies look for hundreds of different qualifications in logistics hires, but there are several basic keys to landing the right job. The first is computer skills.

"There are many companies [that] want to go paperless, and they will pay good money to do it," reports one distribution-center manager. "The challenge is to maintain your skills, because hardware and software change all the time."

"Five years ago, computer skills were considered a plus," adds Gorfinkle. "Now they are a must. Few companies will consider senior-level managers without solid computer skills." This is especially true of supply-chain management, where executives need statistical analysis skills and modeling skills to integrate various departments under one large umbrella.

It also is important to gain experience in a number of different functions. "You don't want to hang your hat on just outbound or inbound experience," says a DC manager. "You may have to make a lateral move before you move up, and that could mean a pay cut. Is it worth it? That depends on your long-term plans."

Employers today are more particular about a candidate's educational background than they were in the past. Degrees in business logistics or transportation used to be a plus; today, an advanced logistics degree is a "must" for candidates at the senior executive level, says Gorfinkle.

The survey results reflect the importance of education. (See Figure 1.) High-school graduates earn an average of $53,267, college graduates earn $61,563, and MBA holders earn $84,632. By the way, 45 percent of Logistics' readers possess undergraduate degrees and nearly 11 percent have MBA degrees.

As for other "career-makers," in the right environment, international experience becomes an asset. And all those interviewed agree on the three final keys to career success: Network, network, network.

"I stay active in university activities, the community, the local Council of Logistics Management chapter, and other trade organizations and clubs," says a logistics manager. "I even stay in touch with some past associates who are in sales, even though I don't foresee a career move."

"It usually comes down to who you know," confirms a transportation director. "And that's not always a bad thing. If a candidate has a lot of industry contacts, it may demonstrate [his or her] level of interest in logistics. It also may show that the candidate is a good communicator."

The search for a better-paying job may lead logisticians to other cities--a strategy that is not always wise. The three "best-paying" metropolitan areas--Los Angeles/Orange County, New York City, and Northern New Jersey--also are known for their high cost of living. When evaluating a relocation, it is wise to calculate the cost of living (housing, insurance, taxes, education, etc.) as a percentage of total compensation. (See Figure 2.)

No Place Like Home

Though changing jobs is one way to advance, the outlook is also bright for the logistician who does not seek a new position. The salary survey results show that the respondents' average compensation increased by 6.09 percent last year. Logistics compensation has grown steadily since 1994, when it averaged $50,412. (See Figure 3.) When the survey began in 1985, the average annual salary was $36,510.

On an equally positive note, salaries increased across all job titles reported in the survey. Average annual compensation among private-fleet managers averaged $56,122, a 16-percent increase over the average reported in last year's survey. (See Figure 4.)

Vice presidents and general managers also fared well, averaging 9.5-percent increases on an already high base. That brought their average pay into the six-figure range for the first time. Managers with other titles did not do quite so well. The average pay for traffic managers, at $50,772, was 5.4 percent ahead of last year's level, and purchasing managers' salaries, at $50,708, gained only 2.4 percent over 1997 levels.

When compared to last year's averages, however, logistics salaries--measured by job function--fell in a number of categories, including planning, materials handling, and warehousing. (See Figure 5.) Year-to-year comparisons may be deceptive, however, because different managers participate in the study each year. Still, the greatest number of functions--computer systems, inventory control, traffic/transportation, warehousing, purchasing, and materials handling--continue to pay somewhere in the high $40s to low $50s.

The profile of the Logistics reader has remained consistent over the 14 years of the survey. (See Figure 6.) Most striking is the level of loyalty: The average Logistics reader is 43 years old and has 16.3 years of experience in logistics. The respondent has worked at the same company for 10.2 years and has logged 5.7 years at his/her current position.

No Cracks in Glass Ceiling

Looking at the results by gender, women's salaries averaged $48,144, a 6.3-percent increase over 1997, while the average man's salary increased 5.9 percent, to $62,891. (See Figure 7.) Some of the differences can be explained by statistics: A significantly larger number of men possess college degrees (63.8 percent for men vs. 48.9 percent for women). On average, men have clocked 17 years of experience, compared to 12 years for women. And men generally manage a larger number of subordinates.

Some of the statistics show great similarities between the two genders, however. The difference in average age is only three years. And men have spent 5.6 years in their current position, while women have spent an average of 5.8 years in their present position.

There are signs that the gender gap may be closing. The percentage of women earning college degrees grew 5.6 percent in 1998, compared to 0.7-percent growth among men. Women also manage more employees than they did a year ago, while the number of subordinates remained flat for men.

There are other variables beyond gender that affect logistics compensation levels. For example, companies with larger freight expenditures generally spend more on logisticians. (See Figure 8.) Respondents earned an average of $47,982 at companies that spent less than $500,000 on freight, while at companies spending more than $20 million, the average logistics salary was $74,613. However, salary levels increased at the fastest pace in the last year (7.3 percent) in the "less than $500,000 in freight expenditures" category, perhaps an indication that smaller companies are becoming more aware of logistics' value. By contrast, logistics salaries at the companies with the highest expenditures grew by less than a percentage point.

Experience pays as well. (See Figure 9.) Average salaries tend to increase with experience levels, spreading from $46,457 for logistics professionals with less than five years' experience to $75,316 for those with 30 years or more.

The salaries for the least-experienced managers didn't budge from year-ago levels, while those who have spent the most time in the logistics trenches have been rewarded. Salaries for those with 30 years'-plus experience were up 6.0 percent over last year.

With age come greater rewards--with one exception. Survey respondents age 51-60 out-earned the over-60 crowd by an average of $2,334. (See Figure 10.) Respondents reported that the greatest jump in salary came in the 41- to 50-year-old range, where salaries were $10,086 higher on average than they were in the 31- to 40-year group.

The Word on Managing People

Salaries used to be closely connected to supervisory loads. Before re-engineering, supervisors who managed a greater number of subordinates generally made more money. This is no longer the case. (See Figure 11.)

Managers who supervised between six and 10 employees earned an average of $72,251, followed by those who supervised more than 25 employees ($68,173), 11 to 15 employees ($62,983), and 16 to 25 employees ($61,752). Fifteen percent of the respondents managed themselves alone and were compensated an average of $48,500 for the task.

Logistics salaries vary greatly by industry, from an average of $47,092 in machinery to $70,968 in transportation services. (See Figure 12.) Some of the more lucrative industries include paper, furniture and fixtures, public warehousing, chemicals, and primary metals, all earning better than $63,000. If you are in this only for the money, avoid machinery and fabricated metal products.

Success in winning salary increases since last year also varied substantially by industry. In several industry groups--furniture and fixtures, primary metals, chemicals, printing and publishing, and electrical and electronic equipment--pay was up by 11.0 percent or more. In several other industries--paper; food and beverages; retail trade; rubber and plastics; stone, clay and glass; instruments; fabricated metal products; and machinery--average pay levels reported were flat or below year's levels.

Finally, using the responses to this year's survey, Logistics created a profile of the typical "high roller," or highly paid logistics executive: He lives in Los Angeles and works for a transportation-services company, where he earns $260,000. His company spends more than $20 million on freight annually. At 55 years of age, he has more than 30 years' experience in logistics. He supervises 10 employees and holds the title of vice president. He holds an MBA. His main job function is...supply-chain management.

Editor's Note: The information appearing in this article represents only a small portion of the data tabulated for this report. Customized salary reports cross-referenced by title, job function, company size, geographic region, industry, and more are available for a small fee. For information, call Andrea Turtle at (617) 558-4473.