The Unsung Heroes of Memphis Logistics
Outside the Box
photograph © Jingaiping | Dreamstime.com
By now, most are familiar with the significant logistics assets we enjoy in the Memphis area. Certainly, the airport has been well publicized since Delta started curtailing their operations here, and the Greater Memphis Chamber has coined the “4-R” slogan (Runway, Road, River, and Rail) to remind us of our motor carrier, railroad, and water assets.
But seldom discussed are what I will call the unsung heroes of Memphis logistics – the Logistics Service Providers (LSPs). Memphis is extremely fortunate in the caliber of the LSPs located here. They are both large and small and range in ownership from the international mega-firm of Exel Logistics to locally owned Patterson Warehouses. Most of the firms offer a full line of logistics services at their facilities and enjoy relationships with a number of the Fortune 500. Patterson, for example, consolidates products of various firms for shipment to major retailer distribution centers all over the country.
In North America, 65 percent of manufacturers and distributors outsource some or all of their warehouse operations, and many of them have chosen to do so in Memphis. While the transportation assets of a city are important, they're only part of the story. A good logistics center must have a solid base of LSPs.
As supply chain managers have been plagued by uncertain economic and industry conditions, they have learned that to offer cost-effective service to their customers, they must be much more flexible than they have been in the past. Shifts in modes and networks have been necessary to ensure lowest costs and maximum service levels. Making these same modifications with company-owned assets is much more difficult and time consuming, particularly when the supply chain manager usually is operating with fewer resources.
If your company is considering outsourcing, Memphis can be a strategic place to do it, but the process will require a great deal of planning and implementation skills. I have found that adherence to the following 10 principles will go a long way toward ensuring a successful and mutually beneficial outsourcing relationship.
Develop a strategy for outsourcing. Outsourcing should always be carefully thought out and measured against an in-house solution. This will help identify relative strengths and weaknesses for each alternative. Include the provider in the process from the beginning.
Establish a rigorous provider selection process. Check industry sources, existing clients, and financial health. Carefully analyze management depth, strategic direction, information technology capability, labor relations, and personal chemistry and compatibility.
Clearly define your expectations. A number of outsourcing relationships have been unsuccessful because of unrealistic expectations. Providers are often asked to submit bids based on inadequate information about volume, size, and frequency of shipments. Such inaccuracies result in providers developing costing for and committing to arrangements that don’t reflect reality.
Develop a good contract. Provide incentives to improve operations and productivity with both parties sharing the benefits. Clearly spell out obligations, expectations, and remedies.
Establish sound policies and procedures. Give the service provider an operating manual, ideally developed jointly with the provider and containing all policies, procedures, and other information necessary for the efficient operation of the outsourcing arrangement.
Identify and avoid potential friction points. Both parties are usually aware of friction points that may arise. Identify them in advance and develop a procedure for dealing with them.
Communicate effectively with your logistics partner. Poor communication is second only to poor planning as a cause of outsourcing relationship failure. Communication must be frequent and two-way.
Measure performance, communicate results. When setting up a relationship, clearly identify, agree upon, and communicate standards of performance, and measure performance regularly.
Motivate and reward providers. Reward good performance; don’t take it for granted. Compliments, recognition, awards, trophies, and dinners are all proven motivators.
Be a good partner. Good partnerships are mutually beneficial. Your LSP’s ability to serve you and your customers often can hinge on your own performance or lack thereof.
Finally, before you start to investigate providers in other parts of the country, take a look in your own backyard. The grass is pretty green.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services. He has authored several books and hundreds of articles on transportation and logistics. He can be reached at email@example.com.