James Welch knows a thing or two about business. So when the CEO of trucking operator YRC Worldwide and architect of the largest corporate turnaround in recent memory delivers a message like he did recently to his staff, shippers and carriers of all types should take notice.
That message — “to focus on what we can control” — comes as so much of what drives the freight transportation industry is just the opposite: beyond its control. The industry, indeed, is held captive to external forces that dominate the discussion in this Annual Review and Outlook: the “fiscal cliff” in the U.S., recession in the eurozone, economic slowing in Asia, an increasingly onerous regulatory environment and rising fuel costs.
The overwhelming tone emerging from the executive essays in the 2013 Annual Review & Outlook is familiar to anyone manufacturing, moving or managing goods since the 2008-09 recession: caution.
But more so than in the past three post-recession years, a second theme is emerging, and Welch’s philosophy gets to the heart of it. “We are not tethering our plans to any significant economic recovery,” Welch told Senior Editor William B. Cassidy. “There are so many variables. I have asked our team to focus on what we can control.”
And what companies up and down the supply chain can control is costs. That’s certainly been an industry mantra in recent years, and it’s manifest in familiar strategies: slow-steaming and new, colossal ships that deliver economies of scale; lean inventories; and outsourcing to third-party logistics providers.
The cost-saving trend will only grow in the year ahead, and in ways that could mark the next big revolution in the way trade moves.
We’ll see it in near-sourcing, a regional approach to sourcing that Mark Millar, managing director of consulting firm M Power, describes as “Made in Asia, for Asia.”
We’ll see it in more collaboration among shippers such as Kimberly-Clark, which is teaming with Colgate and CVS Caremark to co-load truckload freight (“Shippers, Sharing the Load,” Dec. 3), and among ocean carriers in the form of alliances and what Metro Maritime Group’s Marcus Arky sees as “buying cooperatives to purchase goods and services they collectively need to run their businesses.”
We’ll see it in the cloud, as technology shifts from expensive server-based operations to shared platforms that deliver the “big data” needed to provide maximum supply chain visibility — and maximum efficiency. Cloud applications are, as Amber Road’s Jim Preuninger says, the road to “less IT investment and involvement” and the “one source of the truth.”
We could see it in ocean carriers’ seemingly endless pursuit of efficient vessel design that can deliver fuel savings of up to $20,000 a day, according to AMA Capital Partners’ Peter Shaerf.
In barely a year at the YRC wheel, James Welch took a company that had lost more than $2.9 billion and shed more than $5.6 billion in revenue since 2006 to a third quarter 2012 profit. He did it in large part by instilling a “control what we can” attitude.
A catchphrase? Maybe. But ignore it at your risk, because as United Arab Agencies President Anil Jay Vitarana warns: “If the industry believes that a knight in shining armor is coming to its rescue, it’s sadly mistaken.”