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Contexts for Leadership in Logistics

This issue we are pleased to bring you a Special Report prepared by Richard Armstrong about 20 logistics providers that have demonstrated leadership in the North American context. It's noteworthy that there are outstanding Canadian and American 3PLs not included in this report as they did not meet the criteria of being sufficiently North American in their scope.

The hunt for the right 3PL is not always related to its size and scope of service offering, though, as Jim Davidson points out in his commentary this edition. It is also predicated on culture, and the size of the client's requirements.

LQ's Executive Editor, David Closs, goes beyond this framework to register the dearth of students' exposure to information about 3PLs at America's and Canada's finest institutions, which makes the task of seeking the right 3PL, or evaluating outsourcing decisions, all the more onerous when they begin their careers. In fact, at the time of graduation, most  logistics and supply chain management students have had only a few hours of classroom sessions to discuss the rationale, benefits and risks for outsourcing a company's logistics and supply chain requirements to a 3PL.

Benjamin Gordon puts 3PLs into other contexts. In his analysis, he places the widespread growth of 3PLs into the context of seven mega-trends, from lean logistics to RFID and other technologies, to the explosion in growth in manufacturing in China.

Of all the different contexts for 3PLs and leadership, doing business in China, for 3PLs and logisticians alike, has a particular resonance for this continent's senior most executives, as a new frontier to demonstrate the dynamics of business leadership.

This was not only evidenced by the attendance of CLM's session on the Economic Situation in China and Logistics Services at that association's annual meeting in Philadelphia. As the president of the CLM Toronto Roundtable, I recently had the pleasure to introduce delegates to a symposium chaired by Kurt Ritcey, a partner of Deloitte, and former CLM Toronto president, regarding "The Impact of China on North American Supply Chain Professionals."

The distinguished panel of keynote speakers at this CLM Roundtable included: David T. Fung, Ph.D., Chief Executive Officer, ACDEG International Inc; Michael D. Scott, President and CEO, PBB Global Logistics; Victor Deyglio, President, the Toronto-based Logistics Institute.

Mr. Deyglio, who was recently appointed to be advisor to the Mayor of the City of Shanghai regarding human resource development in the field of logistics, shared insights about the exigencies of business protocol and an intimate look at leadership in this context. Mr. Deyglio's  presentation focused on the evolution of the Institute's agreement with the Shanghai Foreign Service Company (SFSC) to train and recruit skilled workers for a successful Expo in 2010 and to develop a labor market for supply chain logistics for the City of Shanghai.  Mr. Deyglio noted, summarily: "...these are indeed exciting, audacious and wonderful times."

The Institute's exciting initiative into China is in step with what underlies much of the talk today about global supply chains. After all, China is a key component of any competitive global supply chain, as the third largest importer and fourth largest exporter in the world. Today, more than 100 cities in China have more than one million people. In China's five-year plan it aims to create another 40 cities with more than one million people in each of them.

Here are a few other noteworthy facts that were shared by the CLM panel. Even though China is a Communist country, it lacks a national pension plan, a national health plan, and education is free only up to grade six. Still, it produces an estimated 450,000 engineers annually. (Canada has an estimated 180,000 professional engineers.) Dr. Fung likened these circumstances to "...a freight train coming down the tracks at us. If we stand on the tracks, it will roll over us. If we are clever and get on the train, those engineers will welcome us."

Ideas are free in China, each of the delegates noted, even though world-class patent laws exist. Enforcement by that country's judicial system, however, is ofttimes not up to par if companies turn to the courts. Often, a moral high ground is more effective insurance, delegates were told.

In this context, Dr. Fung depicted an organizational structure companies should consider  by providing an anecdote about his childhood. "My father was a herbal doctor. As a child I followed him to the stores he used to get the 64 ingredients for his magic formula. He would go to one store, and get 30 of them, and second one to acquire another 30, a third store to get three, and a fourth to get the last one. That is how he learned to protect his formula. You need to think about that because as logistics professionals you need to help your employer and clients and determine how to setup so that your intellectual property is safe."

He emphasized that he was not suggesting that business practices in China are unethical. "I use the analogy of soccer; if you play soccer, you do not use your hands and there is no reason for this, excepting the for the goalie.  When you go into China, understand the law, the procedures, know the way things are done," he cautioned. You also need to invest in community service, and he recommended that a company entering China possess a budget to invest into community support. In summary, Dr. Fung stated: "If you go to China you need commitment, a budget, start early, experiment, persevere, and you will succeed."

Logisticians and 3PLs will also need to mitigate other hurdles. As you move away from the east coast of China there are significant transportation challenges, for example. "Trying to move freight by truck between major cities, any distance at all, is a real exercise. It is not an exercise that I would want to go through on a regular basis," noted PBB's Michael Scott, adding: "If you are doing anything on the interior of China you need to use rail. You have 14 rail companies in China that may or may not cooperate with each other. Cross-country delivery can take up to 60 days within China." There are many bureaucratic challenges to face in interprovincial transportation systems as well.
Clearly, in light of these contexts for 3PLs and logisticians, and their business practices, leadership will be related not only to education and experience; it will encompass a groundbreaking set of circumstances and new contexts that will redefine what leadership means in this dynamic and exciting field.

Peace and Prosperity

Fred Moody, Editor and Co-Publisher