Viewpoint: Bringing logistics and transportation back in house

It would be tough to add up the actual pages that the business-to-business press has written, printed, and posted on the advantages that a successful outsourcing relationship can bring to a logistics operation. When a shipper fully understands his needs and a third-party logistics provider (3PL) is attentive and responsive to those needs, that partnership has the potential to result in service levels and cost savings that could make even the stingiest CFO crack a smile. In fact, the LM staff has, time and time again, revealed case study examples of just that scenario. It often starts with transportation costs spiraling out of control and ends with a 3PL stepping in to redesign the distribution network, bringing order to the kingdom.

The story we’ve yet to tell involves a shipper that’s wise enough, and confident enough, to admit when he’s made a bad outsourcing decision—and, in turn, bring logistics and transportation back in house. Enter Marcus Smith, manager of transportation procurement of Armstrong World Industries, a 150-year-old manufacturer of flooring, ceilings, and cabinets—and this year’s NASSTRAC Shipper of the Year. Armstrong’s bold success story begins on page 20. Smith will be the first to tell you that he still believes in the power of a properly outsourced arrangement, and his story certainly isn’t designed to bash 3PLs. Instead, what I liked most about Smith’s tale is that it represents a tight-knit logistics operation that fully understands its customer’s needs—and its diverse modal mix—and was ready to respond quickly when it realized that those needs weren’t being met.

In fact, it took Smith and company just under a year after they outsourced their transportation (January 2007) to realize that things weren’t going to pan out. “New carriers were just sprung on us,” Smith tells Contributing Editor John Schulz. “And as we got into the summer of 2007, it got very busy and the problems started magnifying.”
Complaints, late deliveries, and missed pick-ups mounted, and Armstrong customers told Smith that they wanted the familiar faces back in the cabs. According to Smith, it all boiled down to a failure by the 3PL to understand their customer requirements—and he’s willing to shoulder some of the blame.

“Perhaps we just didn’t properly communicate on the front end, or our 3PL failed to understand how critical the service was,” says Smith. But any way he sliced it, he and the logistics and transportation team knew the poor performance couldn’t continue. What unfolds in the cover story by Schulz is a step-by-step process that brings transportation and logistics, now one of Armstrong’s core competencies, back in house. Smith and company created a seven-person in-house transportation department that consists of three new hires along with four Armstrong employees who are familiar with the company’s processes and culture. And the results have been stunning.

“A good 3PL definitely serves a great purpose, and I still recommend them,” Smith adds. “We just have a business with a lot of specialized needs…and we’re better served being on the team internally.”