Logistics Quarterly Magazine - Volume 15, Issue 3, 2009 - A Conversation With Michael Shaver, Vice President, Gumro & Associates, Inc. - LQ Archives
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LQ’s Executive Interview Series:  Excellence in 3PL Technology
Michael Shaver

A Conversation With Michael Shaver, Vice President, Gumro & Associates, Inc.

LQ: We have seen amazing technology developments in the last few years to support logistics excellence. Have you witnessed any situations, however, where technology overshadowed human considerations? (Elsie Blauwhoff, Corporate Procurement, Apotex)

Mike Shaver: Technology, in a lot of cases, is the force that facilitates the business processes established by the client. [But] in some situations, you run into a scenario where the technology limits you from operating the way you need to.

For example, we have a client that has about 500 stores in the U.S. We deliver to the stores every day. The distribution model is primarily push-style. The merchandisers at the distribution center determine what the stores should have on their shelves based on forecasts and prior sales. While that model works, the pool distribution and supply chain network results in the allocation of 100 percent of the freight to the store for that next available delivery. We are not keeping anything back and we’re really not cycling the merchandise by category or SKU. We receive 100 cases; 100 cases are delivered. We set up our distribution model and technology to support the supply chain push model. For example, our scanning procedures indicate that we have received 100 cases, so the outbound scan should indicate the same. The practice of 100 percent allocations allows us to know if we missed any cases.

Well, one of the client’s stores in New York had a back room with minimal space, as they had maximized their sales floor due to space constraints. As a result, that one store needed to have a pool-style or pull distribution model, and they needed it by category. So if they needed a men’s shoe, they would check our men’s shoe inventory and request us to ship the specific shoe. The technology, initially, would have prevented us from doing that.

However, since we own the software that controls the entire supply chain for that client, we were able to make the changes so that it only affected that one store. If it was an off-the-shelf package, that type of issue would have taken months to change the process to provide the service required by the store; but it took us just under four days. So, there are definitely times when there is excellent software to support the business process. However, you need to also have some flexibility to make sure that you’re doing the job the way your client desires. In that example, we were able to meet our client’s needs, but lack of technical flexibility could have limited the ability to meet the client’s needs in a retail-pool distribution environment.

LQ: An often-overlooked survival tactic is not to take on business that won’t contribute to the long-term benefit of the firm. How do top carriers evaluate which business to pursue? (Elsie Blauwhoff)

Mike Shaver: In our environment—and now more so than ever before—we don’t look at new business and say, “This one doesn’t fit our model so we’re not taking it.” Our mission statement is to adapt to our client’s business model and provide the best possible solutions from our firm’s niche—a retail pool distribution environment. We think that any additional business contributes to our company’s long-term benefit. Specifically, these new business opportunities may offer something that is unique to their environment; and if they do, there are probably 20 or 30 more clients out there facing the same challenges. We look at it as an opportunity. We get on board, see what we can do to provide them with the services and processes they need while keeping the cost down. Once we have that done, we can then service a broader range of scenarios. We want to strengthen our position as a leader in the industry, but we aren’t going to be able to do that unless we take on new challenges and go for it in our retail distribution field of expertise. We have to be able to manage the expectations of the customer, and no one is an expert at everything, so you learn by doing it. Those firms that are backing away from certain types of businesses are reducing their potential for long-term viability.

LQ: As shippers continue to implement transportation management systems and other supply chain technologies, how is the demand for technology solutions from the 3PLs changing? Is technology becoming less of a selling point for 3PLs? (Elsie Blauwhoff)

Mike Shaver: It is a yes and no answer. 3PLs who have not invested in their own firm’s infrastructure are at a disadvantage in getting new business. That’s the bottom line. You’re either growing or you’re not, and to grow means that you have to invest in some technology. Now it becomes a double-edged sword, because 3PLs have an obligation to provide a competitive offering. There is a cost associated with technology purchases and I think executives sometimes don’t realize the ongoing internal cost and infrastructure that is required to maintain it. First, you have the initial investment and then you need an IT staff to ensure it’s working.

We’ve approached this problem differently. Our ePad application is a stand-alone application that we download onto our carriers’ desktops. That allows them to accept loads, enter in their information such as time of pickup, etc. and other pertinent information necessary for a transportation management system (TMS). The advantage is that they don’t incur any additional software or EDI expense. All they have to do is log in, review and enter shipment information, and our system maintains it. There are many great firms out there that are not nationally known. These firms still focus on doing what trucking firms do: pick up and deliver freight on time. There are many different TMS systems for both shippers and 3PLs. The result is that business process and EDI standards are not always the same, so there is often a substantial implementation cost every time you add on a new customer. If you have a customer who is just one or two loads a month, it’s really hard to get a return on investment on that particular product. So it is really a double-edged sword. Is it becoming less of a selling point? Yes, because it’s becoming expected that all 3PLs should have it. By the same token, that’s why we reach out the way we do. We are empowering a lot of these smaller firms in the retail sector to compete on a larger scale, and be able to do what they’re good at. It also provides the Key Performance Indicators (KPIs) that we need to enhance the client’s performance.

LQ: As 3PLs continue to invest in technology, has the playing field levelled off in that most progressive 3PLs have similar technology services and solutions? Is technology still a strategic point of differentiation between competing 3PLs? (David Faoro, Director, Supply Chain, The International Group)

Mike Shaver: The playing field has levelled to a certain degree. Solutions are available for firms that allow 3PLs to meet the requirements. However, when reviewing the shipper’s dynamic environment, the 3PL still needs to be able to react to the everyday changes and challenges, and the software packages that they purchase need to be designed in such a manner that it’s flexible enough to allow for a firm to react while not removing the process discipline that protects you from making mistakes. Bottom line is issues such as turnover of staff, lack of training, mistakes in the system, and failure to audit the information daily can result in a pot-full of bad information. It’s how you use technology that counts. In other words, your executives are making decisions based on information that may or may not be correct, depending on your staff and their daily information management.

LQ: How do you see your supply chain technology solutions evolving over the next five years, and what are your current areas of interest and possible investment? (David Faoro)

Mike Shaver: We have tightly integrated partnerships with our key customers. We talk every day, and we have conversations regarding how our software and processes will have to change within the next five years to meet their requirements. Now, out of 10 customers I may receive 10 different requirements and each one has to be addressed. So we are investing every day into our applications to be able to address their issues.

By utilizing more partners on a smaller scale, we are able to direct freight straight into the designated market. We have it down to a point where we can set up a facility, have a full-scale DC Bypass program, run it for two months, maybe during the peak season if that works for the client, and then reduce it at the end of the two months at a very, very small cost. When I say small, we are probably looking at $10,000 or less, and that includes individuals onsite. Bottom line is trying to take the freight as it’s coming in from overseas and directing it as close to the point of sale as you can, gaining the time-to-market and reducing the stem miles that it has to travel through. Those are the things that we see happening right now. There are so many challenges these days that outsourcing is becoming the ideal scenario.

Our technology investments are focusing on customer defined requirements for the next five years. It’s our responsibility to let them pioneer it. They are our boss, and we are their partners.

This is the first of a two-part interview series with Mike Shaver. To learn more about areas where logisticians are seeking innovation and the greatest value generators that 3PLs can deliver related to creating new IT capabilities, look for LQ Volume 15 Issue 4, this Fall 2009.

Questions for this two-part 3PL IT Excellence Executive Interview series have been prepared by members of LQ’s Board: Elsie Blauwhoff, Corporate Procurement, Apotex; Dave Closs, PhD, Professor of Supply Chain Management, Michigan State University; David Faoro, Director, Supply Chain, The International Group; Joseph Gallick, Vice President, Penske Logistics; Thomas Goldsby, PhD, Associate Professor of Supply Chain Management, University of Kentucky; Cliff Lynch, Executive Vice President, CTSI; Nicholas Seiersen, Senior Manager, KPMG; Ray Tribe, Manager Shared Distribution, Johnson & Johnson; Dale Thomson, Leader of Global Transportation Management, Nortel; Walter Zinn, PhD, Professor of Logistics, Director, Master in Business Logistics, Engineering, Fisher College of Business, The Ohio State University

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