Shipper Says Downturn Drives Supply Chain Innovation

With the economy still struggling to emerge from its deep recession, logistics departments have a tremendous opportunity to prove their worth to the corporation.

"When revenue is down and costs are volatile, operations have the opportunity to shine. It's our Carnegie Hall," said Reuben Slone, executive vice president supply chain at OfficeMax, in an address to the Los Angeles Transportation Club.

Corporate executives are often reluctant to devote additional resources to transportation and logistics because they don't understand how supply chain performance translates to profits for the company and value for shareholders.

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Companies that do understand the value of logistics are often very successful. When Wal-Mart entered the grocery business, it soon became the industry leader because "they understand they are a supply chain company," Slone said.

The most effective tool for driving supply chain value is collaboration with suppliers, but collaboration must be undertaken with the goal of fostering success for both parties, he added.

For example, a retailer that improves efficiency at its receiving docks should reduce its transportation costs but also make it easier for the motor carrier to reduce its costs.

Conversely, a company that attempts to reduce its costs by grinding down its suppliers to the lowest possible level may enhance its profits, but in the process will bankrupt its suppliers. It is better to take a long-term holistic view of the relationship because sustained performance depends upon healthy suppliers, Slone said.

The lengthy economic recession that is just now ending was actually a golden age for collaboration. Companies and their suppliers had a greater desire than ever to collaborate for their mutual success. The desire for change resulted in widespread innovation and greater efficiency throughout the supply chain, Slone said.

Now that corporate executives are beginning to realizing the value of supply chain performance, the goal of logistics professionals should be to make it part of the strategic agenda of their companies, he said.

-- Contact Bill Mongelluzzo at bmongelluzzo@joc.com.