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Sage Advice: Sharing the logistics landscape

By Wayne Bourne -- Logistics Management, 6/1/2007

Are you sharing your landscape? No, I don’t mean your front lawn or your garden. I’m referring to the logistics landscape, that area formerly called distribution and transportation—the department that you’re responsible for running.

How many other departments or executive managers really know what you and your group do? Oh, sure, they know the DC is where the product is stored, and they know about the trucks that bring everything into the DCs and then out to the stores. They know that part, but do they know the strategic side, the one that enables their businesses success? More importantly do you think they have a solid understanding of the many influences that shape your ability to serve those needs?

They probably don’t. And you know what? It’s your fault. We tend to make the mistake of confusing the confidence they have in us with the fact that they are knowledgeable about what makes us tick.

Let me give you an example: It wasn’t that long ago when the investor relations department of a very large retailer received a phone call from an investment firm that wanted to know what impact the rising fuel costs were going to have on next quarters’ earnings. The department head called the CFO who then called the head of logistics who then called the transportation department and asked what they should say in response.

Top management was told that fuel, in fact, had been un-bundled from freight rates—incorporated into the budgets and forecasts as separate line items at the department level—but sent forward as a single line item. Therefore, rising fuel had indeed been accounted for in the overall budget and the variance of actual versus plan had been negligible. The head of transportation, obviously very pleased with his foresight, proudly said, “Tell the investment firm that it will have zero impact in that this company has proactively provided for it.”

Now, what if the head of transportation, way back during the budget development stage, had set up a strategy session with other interested departments and reviewed the types of challenges he was expecting to deal with and how those challenges may or may not affect them? In this case, a heads-up meeting would have identified the fact that fuel surcharges were going to be an economic issue and, more importantly, that this is how the company would prepare and accommodate the impact. Therefore everyone within the management chain could have subsequently spoken on this issue with confidence.

There are some challenges that are ongoing and somewhat predictable, such as rising fuel, driver shortages, legislative rulings, and capacity constraints that impact your day-to-day operations, and in turn the entire business. The executives should not only be briefed on the potential issues surrounding how these issues affect your capabilities, but they would be relieved to know that you have a plan firmly in place to address the challenges as they occurred.

Meeting protocols for disaster and recovery incidents need to also be firmly established as part of the ongoing communications stream. These impromptu emergency meetings would have to be called when the unexpected happens: for example; a freak storm that closes a DC for days; a strike at a port, a major LTL carrier that suddenly ceases operations, a drop in driver productivity brought on by regulatory action, and so on.

These meetings need to be called by your team immediately and should include your marketing and merchandising departments as well as finance, investor relations, IT, sales, and operations. They all need to know the potential impact to their areas of responsibility and what the costs going forward are going to amount to. Budgets and forecasts will be modified, inventory will be adjusted, and advertising may need to be reworked.

The days of logistics providing merely great service are over. You need to provide clear and timely information to the entire company as well. Make them your internal partners; teach them as much about your department’s competencies as you can squeeze into a reasonable time frame without boring them to tears. Deliver your message so that it hits home to them. Home is where the wallet is, after all, so share with them your strategic plans as well as your disaster plans.

Logistics is tough enough as it is. Receiving assistance, support, and greater understanding from internal partners can only make it easier. The value inures to all sides as now; the new landscape can be viewed equally by everyone.

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