Supporters of supply chain technology see the slow-down in production and a slower rate of growth in inventories as evidence that B2B Internet technologies finally kicked in, enabling manufacturers and distributors to get a handle on inventory and supply chain management problems. Others argue that there still aren't enough companies with end-to-end supply chain management and e-logistics systems in place to have made a difference. But they point out that, like Cicso or Nortel Networks, a key component of these networked systems, demand forecasting, either failed miserably or came online too late to do any good.
The ugly truth is that inventories are bulging with more than $1.2 trillion worth of materials and finished goods. Barring a miracle, reasonable projections peg recovery at 12 to 18 months while demand and supply catch up with each other. It takes perfect information to have perfect inventory balance, says Chuck Lounsbury, Ryder's senior vice president for global electronics, high-tech and telecommunications. We're a long way from it, but we're on the way to doing a better job. One of the things we use is knowledge management. We'll capture the best practices we use and adapt them to a particular industry.
As an example, Ryder is building a significant postponement program in Singapore for Hewlett-Packard. It takes a standard HP printer and configures it specifically for each of HP's markets. The same process is employed in configuring Caterpillar's forklifts and Wal-Mart's computers. According to Lounsbury, A retailer can put [items] right on the shelf. We did a program for Wal-Mart. Many of its customers were first-time computer buyers and didn't want to buy components. We did a kitting operation where we packaged everything in one box. The boxed computers are priced and ready to stock by the time they reach the stores.
While the renewed faith in Ryder has a lot to do with its restructuring, it has everything to do with its logistics strategy. As we're now learning, efficiency and recession are no longer mutually exclusive like they were throughout the 1970s and 1980s. And as we're about to learn, outsourcing non-core business functions is a long-term feature of the competitive landscape. e-Logistics, properly executed, is seen as the key to balancing demand and supply, protecting individual companies and the economy as a whole from getting stung by future downturns. (And rest assured, there will be others.)
The numbers alone show that logistics is big business. Recent estimates suggest that a whopping $921 billion was spent on logistics, or 9.9 percent of GDP. At the same time, most analysts are saying these costs will not come down because organizations are increasingly identifying the logistics and transportation process as being strategic.
The Proper Provider
So, if a transportation and logistics company (or any type of company for that matter) knows it must properly execute its logistics strategy, what does it begin to consider? This decision is often complicated by the continually shifting value proposition of many of the players. AMR Research identifies six Internet-based technology and service providers in this area: Third-Party Logistics providers (3PLs), Fulfillment Service providers (FSP), Lead Logistics providers (LLP), Logistics Software suppliers, Logistics Exchanges (LX), and Logistics Visibility providers.
Before a company wades through the quagmire, itshould ask if it truly wants to outsource the entire logistics function, or merely improve the way it manages its own internal logistics operations. Ryder, which is generally considered a traditional organization, not only e-enabled itself in the logistics arena, but also leveraged its technology and core competency as a truck leasing company. This allowed it to become a service provider with its Integrated Logistics service, which, in turn, classifies it as a Lead Logistics provider. Yes, an array of e-logistics providers exist, but it's no excuse to not choose wisely.