How To Succeed In Third Party Logistics


In the logistics industry, there is a fine line between stressed companies and distressed companies. Sometimes, it’s a misunderstanding of capital; other times, it’s a lack of focus on changing customer requirements. For all its complexity, however, logistics has a simple formula for success:

People + Process + Technology = Operational Excellence and Success

While the formula is simple, the consequences of missteps are dire. If you ignore one part of the equation or solve the formula in the wrong order, you will fail. For example, if you invest in technology to improve your process and you expect your people to follow suit, it won’t happen; in fact, it will accelerate your failure.

As the trend of industry consolidation continues, third-party logistics providers (3PLs) that solve for this equation will position themselves as valuable strategic partners, as opposed to low-priced commodities.

Let’s take a deeper look at what it means to ‘get it right’ in terms of the people, process and technology formula.

People

If everyone in your company is “rowing in the same direction,” you’ve achieved the first step to success in logistics. No amount of process or technology will fix the lack of inherent vision in management, as stated in a previous post.

Ten years ago, logistics and supply chain were rarely Fortune 500 boardroom topics. Now, it’s a top discussion point. Organizations are increasingly turning to executives with supply chain expertise; they are often viewed as leaders within the company, instead of specialists.

Apple Chief Operating Officer Jeff Williams has extensive background in supply chain and procurement, and Walmart has maintained a steady influence of supply chain tenure in its executive team for years.

Before you can move to the second part of the formula, make sure you have the right people in place.

Process

Once you have the right people in place, then you can focus on your process. 3PLs are notorious for implementing rules of engagement –as opposed to defined processes– that leave room for error.

In the 1990s, Ron Lentz built Ryder’s Integrated Logistics division from $80 million to $5.8 billion by the close of the decade. It was the largest 3PL in the world at the time. Lentz attributes much of his success to his focus on process.

In the beginning, Lentz says his ‘close ratio’ of deals to total opportunities in the pipeline was about 10%. After taking the time to work with process engineers and establish defined sales process definitions, Lentz saw the close ratio rise above 30%, cutting cost of sales by millions.

Today, every large company has a sales process, but many lack the ability to integrate customer relationships, sales and operations management, pricing and finance into a single process. This holistic view of process, however, is what allows you to spot bottlenecks, define the causes, and ultimately fix them.

Methodologies like Lean Six Sigma and Total Quality Management are good starting points for building processes. Once a detailed process for all facets of your business is in place, it’s time to move onto the technology enablement.

Technology

With your people and process in place, technology will be the platform that drives results and ensures that people administer your process day-in and day-out.

It cannot be overstated, however, that technology is not an add-on that will fix a broken or incomplete process. Any leading technology solution or suite of logistics software can be customizable, but if your process lacks discipline, you will go broke by endlessly changing the user interface and making adjustments. You will end up spending more money in the configuration than the entire software.

American ingenuity has always led companies to outdo each other, even within the same industry…and logistics companies are no different. This leads to an incredible variation in processes. When creating technology for disparate processes, flexibility and configuration are crucial.

As stated in an earlier post, make sure that your solution is a product that your end users will embrace and use day-in and day-out. If the software doesn’t add value to their daily operations immediately, you will fight an uphill battle against employees doing the bare minimum just to be compliant.

Every logistics business needs the support of these three pillars: people, process, and technology.

Lanetix, which creates collaboration, workflow and customer lifecycle apps for logistics companies, helps 3PLs succeed by achieving operational excellence with technology that’s rooted in process. Lanetix is designed to help you visually understand your processes and easily iterate to improve your business, from sales to operations and more. As a result, you unify your people and process to deliver the right services at the right margin.

Learn more about the features that make Lanetix the preferred app for eight of the top ten logistics companies in the world by setting up a solution tour.


 

Ron-Lentz-Lanetix

RON LENTZ

Ron Lentz is Managing Director at G2 Capital, a financial advisory services firm that targets middle-market institutional investors along with transportation and logistics firms. Prior to joining G2, Ron spent 23 years at Ryder, building its largest division—Ryder Integrated Logistics—into one of the top 3PLs in the industry today.