Why?

A simple one-word question is all it takes sometimes to bring about change. Earlier this year, at the CSCMP Europe 2010 Conference, Deborah Lentz, Vice President Customer Service and Logistics, Kraft Foods Europe included the following graphic in her presentation (sourced from “2016 Future Supply Chain,” Capgemini & GCI Global Commerce Initiative):

How many “Why?” questions can you come up with when you study this representation of a typical CPG-retail supply chain?

Ms. Lentz made the case that the time for “walking the talk” on collaboration has finally come, especially when you consider all of the trends and challenges facing the industry: urbanization, shift in global populations, transportation network constraints, sustainability, mobile commerce, government regulations, labor (un)availability, and so forth. Here is what the future network will (needs to) look like:

Several times during her presentation, Ms. Lentz challenged the third-party logistics (3PL) providers in the room: What role will you play in this scenario? She was direct in her warning: If you don’t proactively work towards creating these collaborative networks, we will do it ourselves (i.e., we will work directly with our key suppliers and customers to share warehousing and transportation assets and resources, a path Kraft Foods in Europe was already exploring).

A few weeks ago, I received a call from an executive at a leading 3PL here in the US. It seems that over the past few months several of his clients in the food industry have approached him about creating a shared logistics network. We brainstormed a bit on what would be the first step, concluding that having a workshop with a small group of key stakeholders (manufacturers, carriers, and retailers) would be a good way to define the path forward. I’m not sure if anything has been planned yet, but I hope a first step is taken, whatever it turns out to be.

Asking “Why?” and coming up with a PowerPoint solution is not new; taking some committed action would be. Could it be that the recession is truly serving as a catalyst for change and innovation in supply chain management? (See “A Google Approach to Supply Chain Management” for related commentary).

If past attempts and failures at enabling collaborative transportation processes are any indication, I believe that 3PLs (or another type of third party) need to be involved in these shared networks, not only to engineer the solution, but also to manage the day-to-day operations. I also believe that many 3PLs are eager to play a role. But this will only work if 3PLs and customers transform the way they currently work together (see “Have an Economist Negotiate Your Next 3PL Contract” and “The Missing CEO in Logistics Outsourcing Relationships” and “On Courage, Trust, and Patience in Logistics”). In my opinion, applying the principles of Vested Outsourcing (aka performance-based outsourcing) in creating a shared network solution is the ideal approach, even if the process would be more challenging than normal due to the various stakeholders involved.

Instead of asking why all of this wouldn’t work, keep asking why it will…and take some action!