Much has been written about change management, and the basics of smoothing the way for new ideas and processes are fairly well known. But managing large-scale change in freight transportation deserves its own chapter in the manual.
While the general principles of change management apply to transportation projects, there are nuances that managers need to take into account if they are to avoid costly mistakes. And there is ample room for error. As we explained in our last Logistics Viewpoints post (see “Are You Ready for a Smarter Supply Chain?” by Ronnie Davis, April 14th, 2011), innovative supply chain solutions are in high demand, and often involve new thinking that has to be sold to the organization.
Ensuring that you have buy-in from senior management is one of the most familiar tenets of change management practice. But in a freight transportation context this oft-quoted principle takes on a special meaning.
How many top non-supply chain executives do you know who have a solid grounding in the movement of freight? Literacy rates are high in the C-suite when it comes to functions such as sales or marketing, but in many companies logistics terms don’t tend to trip off the tongue in senior-level meetings. Securing the commitment of these leaders when launching a substantial freight project can be a tough sell when the processes involved are relatively anonymous.
When this lack of awareness is pervasive – as it can be even when it comes to basic freight management practices – the job of changing behavior patterns is extremely challenging.
In a recent project a company was having problems with the cost of its outbound finished goods. The enterprise shipped raw materials into its facility by road, and the trucks usually left empty. An obvious solution – obvious, that is, to practitioners – was to use the empty trucks to carry finished goods on the outbound leg. But managers, even at a senior level, found it difficult to understand that they were already paying for empty backhauls and the outbound solution was a cost-effective strategy.
Most freight managers would have discerned that in such a situation the carrier bringing empty trucks home was probably charging the shipper a rate premium based on their location. While the carrier was not overlooking the cost of positioning its equipment – it understood the importance of maximizing equipment utilization – the transportation buyer was seemingly unaware of this expense.
Another staple of change management projects is getting the right stakeholders to join the project team. In addition to making sure that all relevant disciplines are represented, it is important to recruit team members who can make a meaningful contribution to the endeavor.
But departments that are detached from logistics and regard freight-related activities as being well beyond their sphere of influence may not be motivated to send their brightest folks to, say, the implementation of a new transportation management system. They might see trucks moving in and out of the company’s facilities, but do not make the connection with their responsibilities.
But there are cases where these functions do indeed make decisions that impact logistics. Purchasing groups are usually more than happy to negotiate longer payment terms, for instance. This is a great strategy financially for purchasing managers, but the implications for a small business like a truckload carrier with cash flow constraints may limit the carrier base for a given transportation program.
Still, if logistics is not on their radar screens, departments such as purchasing might decline to become involved in a freight initiative. As a result, the project can stumble because a significant piece of the puzzle is missing. Alternatively, the functional heads send representatives who do not have the clout or motivation to be actively involved in the project. Poor communications is another unfortunate by-product of this lack of commitment.
Overcoming these problems requires effective education and communication, and working with customer stakeholders to identify and recruit the right team members.
A sense of urgency is important when managing change; a burning platform that drives the project forward. This may be lacking in logistics projects for the above reasons. However, a robust, well-presented solution can provide the required impetus. This was the case in a recent project that involved the adoption of an outsourced transportation management system. The proposed solution was cohesive and could be integrated with existing management systems faster than if the operation was brought in-house. These gains won over the shipper’s team and sparked excitement in the project.
This example underlines the important role that third-party service providers should play in helping shippers to implement change. Sometimes it is easy to underestimate the internal challenges. A relatively simple example is the legal requirement to keep certain freight documents for a specified period. While this may be a formality for an experienced logistics services provider, the project champion at the shipper end might have to jump through hoops with his or her CFO or auditor to put the requisite procedures in place. It is up to the provider to be aware of these issues and to help the shipper build the required organizational bridges.
The management of freight affects virtually every part of an enterprise. Helping organizations to appreciate this might be the most difficult change management challenge of all for transportation professionals.
Mark Meier is Manager, Implementation and Assessment at CH Robinson Worldwide (CHRW). Mark’s background is in consulting, project management, information technology and systems integration. Over the past five years at CHRW, he has led projects in the areas of eCommerce, supply chain and logistics.
I think Mark makes some excellent points here. The limited amount of knowledge that some of those in the C-suite have of logistics processes is surprising. We’ve found that while at times it can be easy getting buy-in from shipping managers to make suggested transportation process improvements, it can be extremely difficult getting that buy-in from upper management – usually due to a lack of inital understanding of their company’s current freight management practices. However, it’s those in the C-suite that sign off on the decision to make those improvements and/or implement a new technology (such as a TMS). Education, communication, and a well-presented solution (as Mark points out), are definitely key.