World Trade - December 2008 - (Page 38)

SUPPLY CHAIN MANAGEMENT John Langley Dr. John Langley is Professor of Supply Chain Management and Director of Supply Chain Executive Programs at Georgia Tech. He received his B.S. (mathematics), M.B.A. (ﬁnance) and Ph.D (business logistics) degrees at Penn State University, after which he taught for 28 years at the University of Tennessee. He serves on the Board of Directors of Averitt Express, Inc., Forward Air Corporation, and UTi Worldwide, Inc., and participates as an advisory board member to a number of ﬁrms in the supply chain technology and outsourcing businesses. How is ‘economic pain’ in 2009 going to impact supply chains? Is there a standard proposition or metric that enables management to weigh these two factors, supply chain costs vs. supply chain value? Actually, meeting this objective requires part art, part science. The important thing is to make sure that any time you make a change, you make sure you develop a meaningful and comprehensive statement of beneﬁts and costs. Unfortunately, many companies will succeed in reducing a speciﬁc type of cost, for example transportation, and then fail to identify and quantify adverse consequences that may result from purchasing lower-priced transport services. In a case like this, the direct cost savings may be wiped out by the detrimental impacts on areas such as customer service and operating efﬁciency. Are you concerned that a lot of companies are unable to analyze the impact of supply chain decisions on a holistic enterprise level? That they don’t even have the capacity to do that? In the next couple of years the likelihood is that our global business models aren’t going to be at the top of their game so it’s going to be really important for companies to be scalable. With regard to supply chain activities, it means that in good years the priority will be on growing in response to economic health and in years In current times, many companies are trying to work effectively with their suppliers and customers to try to take cost out of the supply chain process so there’s a built in motivation to take a holistic view, which we may not have had prior to this time. There’s “There’s going to be a great good reason to think that there will be more collaboopportunity to achieve ration, working together, and identifying how proefﬁciency and effectiveness cesses can be improved at by professionally managing an organizational level. supply chains.” when things are ‘re-building’ (as they like to say in this framework) you need to be scalable in a downward context. That means take organizations and be sure that costs don’t grow while in the meantime still continuing to provide levels of service customers expect and also do whatever is possible to use supply chain abilities as a differentiator amongst the competition. From a very practical, operational perspective you have to be careful about talking about cost savings achievable through supply chain so that at the same time you don’t dampen service levels. There’s going to be great opportunity to achieve efﬁciency and effectiveness by professionally managing supply chains. In taking out supply chain costs, what are the ‘impulsive mistakes’ that management might make? What do you expect to see in the area of 4PLs in the next year? The most impulsive mistake is to pressure your suppliers of all types for lower prices. On the one hand with the economic situation like it is, suppliers are likely to be responsive to pressures to cut cost, but on the other hand if you’re not careful you will impair your supply chain by focusing more on taking out cost than building in value. 38 WORLD TRADE DECEMBER 2008 There are a number of different deﬁnitions as to what constitutes a 4PL. The most common ones are that a 4PL might be a manager of 3PLs, another might be that they provide a ‘control tower’ for the customer to provide visibility across the supply chain and help the customer identify needed changes and provide leadership for seeing that those changes occur; and a third deﬁnition for a 4PL is that it provides information for the customer and leverages the beneﬁt of IT. Regardless of how you define it, the 4PL concept reflects a bundle of services that need to be accomplished somewhere by some party. It’s absolutely essential that the companies ﬁgure out how to do these things effectively and efﬁciently. The report card so far on 4PLs has been a little bit of a mixed picture. We’ve seen a number of successes, and we have seen some instances where improvement was needed. Overall, my feeling is that the concept is quite valid, and that over the next several years we will see an increasing number of examples of success with the 4PL concept. Are you concerned that the results have been thus far mixed? Any time you’ve got a new product concept, you will have stops and starts. The 4PL concept is still in its infancy,

Table of Contents Feed for the Digital Edition of World Trade - December 2008

World Trade - December 2008 Contents The Promise of Peril The Current Reality with IP in China Supply Chain Watch Tradewinds Performance Partners: Awards of Excellence Managing With Mobility What 2009 Bodes for the Supply Chain Small Business Takes to Export Green is Here for Good Fast Fashion

World Trade - December 2008

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