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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.

This is the second part of a two-part interview series with Mike Shaver. To view the first part of this interview, please look to LQ Volume 15, Issue 3.

LQ: What are significant value generators that 3PL services and IT capabilities provide that may be especially magnified during economic downturns? (Joe Gallick, Vice President, Penske Logistics)

Mike Shaver: Consolidation and DC Bypass enable our firm to process purchase orders closer to point of delivery and bypass the distribution center. We need to reduce product transportation stem miles. When operating volumes are high and everything is going great, you’re able to purchase full containers and drive it in. However, when volumes are lower, we’re starting to see things flow through in a longer pattern. Consolidate at the point of purchase – bring it into one of our facilities, I bypass the DC, and get it right out to the store. We’re able to reduce cost for all parties. That is a significant value generator, but it only works with certain partners. I think that’s one of our strongest advantages right now. We have the ability to provide sophisticated technology to offer a competitive advantage at very little cost to the client’s infrastructure.

LQ: Within your (3PL) organization, what approaches are you taking to address the cost recovery, or ROI, for creating new IT capabilities for your customers or the market in general? (Joe Gallick)

Mike Shaver: Our approach is always to continue to develop a cost-effective and efficient solution that brings value. How can that value be identified and how is it measured by the client? One of our clients does not have the capability to email advance shipment notification through their system to their pool points. They have the capability of sending an Electronic Date Interchange (EDI) file to populate the system, but they really wanted their pool points to receive the shipment information to facilitate scheduling to reduce overall transportation cost. It took us one day. We created the advanced shipment notice based [on] the EDI file that was sent to us. It went to each one of the pool points, indicating when the shipment is to arrive, whether it is a drop shipment, if it’s a live and load, that type of thing. It was specific to that client, and while it’s not this huge technology advance, it brought value to that particular client, in a big way.

LQ: In what areas are customers seeking innovation? Is it the typical dimensions of cost and service or are the parameters expanding to issues like energy consumption, carbon footprint, and security? (Thomas Goldsby, PhD, Associate Professor of Supply Chain Management, University of Kentucky)

Mike Shaver: Right now it’s still cost and service. While security is still a hot spot, we have very little dialogue about carbon footprint at this point.

LQ: Research by Professor John Langley and others has pointed out IT capabilities as a significant differentiator among 3PL providers. What are the key capabilities that separate the best providers from all others in this regard? (Thomas Goldsby, PhD)

Mike Shaver: The big difference is the ability to improvise and adapt. In the supply chain, we don’t have time to contact a solutions provider, develop a statement of work, and wait for a developer who really has no knowledge of how we handle our business to call us up and go through this long process. And that might take a month to change, when the need was a month ago. Improvising and having control of your environment is the key.

LQ: The promise of pipeline visibility is one that we’ve heard for many years now. How close are we to achieving end-to-end visibility or freight from origin to destination? (Thomas Goldsby, PhD)

Mike Shaver: I think we’re there. It’s a matter of the partnerships and relationships that you have, but the information is available; it’s what you do with it.

LQ: It seems that all major firms are trying to better understand supply chain risks and strategies for mitigating risks. How can IT provide you and your customers with greater awareness of risks and the means for their mitigation? (Thomas Goldsby, PhD)

Mike Shaver: There is a risk with IT if there is a lack of redundancy in the system, and the loss of data, loss or lack of visibility, incomplete orders, system shutdowns – things that the application itself could cause. Power failures, system shutdowns, and not having adequate redundancies built into your supply chain are major risks, for example. We want to contribute to make resilient supply chains that can recover from large and small disruptions and enable them to respond to day-to-day demand changes through visibility. At its core, for example, a demand spike is a problem of supply/demand mismatch and providing firms with supply chain visibility enables them to respond to significant demand fluctuations, and it can help them to respond to supply shortages. To build in flexibility for resilience, we look at different facets of supply chain by cross-training employees and applying IT to help to identify risks and possible alternatives in the retail distribution environment. If it’s used properly and information is audited daily, we can forecast and identify risks and the likelihood of them happening.

LQ: Do you believe that the logistics service provider (LSP) IT capability is as sophisticated as that of their clients? (Cliff Lynch, Executive Vice President, CTSI)

Mike Shaver: Absolutely. Our role as logistics service provider is to support their initiatives, and we have many clients that have a wide array of requirements. Our technology needs to be able to support their requirements. Our applications, processes and technology are absolutely as sophisticated as theirs. Our IT developers have to have a full operational background. They need to understand what it means to do the job, so that when they are working they can see ahead and be able to identify risks in their own work as well as everyone else’s processes.

LQ: Is there any weakness in LSP IT capability? Where or what is it? (Cliff Lynch)

Mike Shaver: One of the major weaknesses is lack of redundancy. We maintain all of our systems and how (they handle) our nationwide supply chain, and we maintain that in a world-class data center where we have redundancies in terms of the Internet provider. We have three Internet providers; we have three or four different redundant systems mirrored to work at the same time so that no matter what, if anything fails, something else is picking up that slack. Lack of a network solution is also a key weakness. Many companies and logistics providers have a nice solution, but it’s specific to their market only. Of course, employee turnover is another weakness. Every time that happens, it has an effect through the supply chain. That’s why it’s very important to invest in training employees.

LQ: A recent survey found that shippers are not satisfied with their LSP’s innovation. Interestingly, they expected the higher the price, the more innovation the LSP should bring to the table. How do you use IT to bring innovation to the relationship, and is it true that “more gets you more,” or is it a question of “necessity is the mother of invention,” and if the job requires a new approach, human creativity will find a way to do what has to be done within the means available?(Nicholas Seiersen, Senior Manager, KPMG)

Mike Shaver: Three components have been identified: expectations, necessity, and human creativity. In terms of expectations, if you’re spending a million dollars and your expectation is that you’re buying an IT solution that is going to be the end-all, your expectations are wrong. IT changes every day, and it always goes back to being able to adapt and improvise to the dynamic day-to-day of the supply chain. The second is necessity. Many systems, as big and as grand as they are, need to be able to change with the customer’s request promptly. Our motto is, if the customer calls us and asks, “Can we do this?,” by the end of the day, we must have answered the question one way or another. After the fact, we will examine the likelihood of the issue repeating itself, and we will then come up with a solution to protect us in the same scenario. No one will think of solutions for every unique scenario, and that leads into the human creativity component. You need to have a good team of people who are operationally minded with an IT background, and have a quick response capability when it comes to managing the expectations of the customer. Human creativity will find a way to get it done, if the means are available, and that depends on the human being. They must have the tools to do it, and the knowledge base to support it.

LQ: How would you rate your 3PL on a scale of one to 10? (Dale Thomson, Leader of Global Transportation Management, Nortel)

Mike Shaver: I would never give us a 10, because we work hard every day to be better. I think we have one of the best-kept secrets around in that we have a type of a solution that can be deployed anywhere and we have a team that can respond right away. So I think we have one of the best packages available. It does not do everything, because we’re not familiar with everything, but that goes back to what I said earlier about challenges forging new possibilities, and that’s what we do; so I would give ourselves a pretty high mark, such as an eight, but not a 10. We will do whatever we can to help our clients, but if there is something that we cannot do, we will tell our client and refer them to another solutions provider.

LQ: What new or improved IT functionality do you expect your 3PL to provide to give your firm a competitive advantage in coming out of the current recession? What has your firm offered its customers to help them find a competitive advantage coming out of the current recession? (Dale Thomson)

Mike Shaver: In this recession we have had two customers that had to, unfortunately, close their doors. That certainly had an impact on us. However, we’ve gained more business and grown our operations overall during this recession. The economy has forced firms that had relationships with some of their service providers to step out a little bit and look at what else is available in the marketplace, and we’re showing very well in that category. In terms of a competitive advantage, we have a great solution that’s cost-effective. I also think that people now understand the strength in partnerships, so when the economy moves out of the recession, we are going to be standing here with a stronger customer base and a better product.

LQ: Are you seeing the investment by your 3PL(s) to deliver this? If not, will this encourage you to look for another 3PL that is making this sort of investment? (Dale Thomson)

Mike Shaver: We are a non-asset-based company that utilizes partnerships across the U.S. and Canada to provide a service for us. Our 3PL partners have to be the (kind) that want to strengthen their footprint.

LQ: With so many customized order management and warehouse management systems, is it rare that the customer and the 3PLs share the same version? How are you structuring your IT teams so that they can move beyond supporting the system to actually innovating it and adding value to the customer? (Ray Tribe, Manager Shared Distribution, Johnson & Johnson)

Mike Shaver: That would be our ePad software. It’s a standalone that is specific to us and our customers and network. We provide a system that can do anything for each of our customers. I don’t see very often that a 3PL shares the same version of a warehouse management system as the customer, and I don’t know how relevant that is, as long as you can make changes and identify the information coming through from the client.

LQ: IT professionals have often been niche contributors to a 3PL. Do you have succession planning goals that will mingle IT professionals with the rest of your operations team? (Ray Tribe)

Mike Shaver: An IT developer is different from an operations group. In a lot of cases, they don’t understand the big picture. At Gumro and Associates, we have our IT group at our facilities. They scan the freight, they process and label shipments. They do it all. They use their own applications and they feel the pains of certain steps that could be eliminated to make it more efficient. Our IT staff is in our operation(s) group. They are an arm of it; they work together every day, and they all share the same vision of where we want to go.

LQ: Can 3PLs provide value-add to their clients by providing planning systems and expertise to clients? What are the benefits and risks for clients if they look to their 3PLs to provide such services? (Dave Closs, PhD, Professor of Supply Chain Management, Michigan State University)

Mike Shaver: We provide planning systems for our clients, partly because we hold a lot of data in our systems that is available to the supply chain. So the transportation department can reach out to us and say, “What if?” and we can create different ways of looking at the data so that we can see the peaks and valleys and plan strategically.

LQ: A key characteristic of IT systems offered by 3PLs is the flexibility to integrate with the customer’s system, and with the customer’s suppliers and/or customers. How do you measure excellence in flexibility in your organization? (Walter Zinn, PhD, Professor of Logistics, Director, Master in Business Logistics, Engineering, Fisher College of Business, The Ohio State University)

Mike Shaver: The way we measure our flexibility is by our customer’s satisfaction with our response to their needs. Timeliness is key. In our organization, if a customer calls and needs assistance, we are prompt. We believe that we have to walk in step with what they are doing.

LQ: What is the process used to ensure excellence in IT execution in your organization?(Walter Zinn, PhD,)

Mike Shaver: This week we’re going through inventory, so we’re inventorying every pool distributor across the U.S. for one of our customers, and they are going through an entire inventory across every one of their stores across the U.S. We have worked with them to clarify the process and what will be done at all levels with inventory control, loss prevention and with the transportation groups. We are involved with each one of those departments. We put together a statement of work; we understand the cause and effect of everything we do, and in this particular case, how we do the inventory; is it something we should be able to release to the network; and of course, the likelihood of this particular inventory happening again later. In that case, we would build something systematically to make it easier in the future. The problem-solving is having an IT group and an operation(s) group that can work in both areas. Our operations group aren’t developers, but they definitely understand the process so that the developers can understand what they are talking about on a module-to-module perspective – then, documenting the statement of work and releasing it, and measuring the expectations.

Questions for this two-part Excellence in 3PL Technology 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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