LQ’s Top North American 3PL Executive Interview Series
A Conversation with Scott Hooper, Director, Supply Chain Excellence,
Ryder Supply Chain Solutions, Canada
Questions for LQ’s Executive Interview Series on 3PL have been prepared by members of LQ’s Board: Graham Allen, Senior Program Manager, Supply Chain Secretariat, Treasury Board Office, Ontario Ministry of Finance; David Closs, PhD, Michigan State University and LQ Executive Editor; David Faoro, Director of Supply Chain, The International Group; C. John Langley Jr., PhD, Penn State Smeal College of Business; Clifford F. Lynch, President, C. F. Lynch & Associates; Nicholas Seiersen, LQ Executive Editor.
LQ: What are some of the ways that respondents are looking to drive their 3PL relationships deeper? (Graham Allen)
Scott Hooper: Within Ryder, we attempt to gain a very good understanding of the customer. To come in with a cookie-cutter approach is somewhat naive. We need to learn that customer’s business and objectives. To do so, we go through exercises, such as value stream mapping, peer benchmarking exercises, and using financial modeling tools. You look at very specific things and drivers — carrying costs, cost of capital, total landed cost. There are many factors, but not one of them is the key driver that would cut the tone of that relationship. We need to understand their business as much as they do, in order to bring the skill sets to bear on their issues and problems.
LQ: Does this consist mostly of further outsourcing? (Graham Allen)
Scott Hooper: No, not necessarily. Some cases may drive less outsourcing. Although Ryder, like every other 3PL, has its standard out of the box product offerings, we do not force those upon anybody. Each circumstance is different and each application is different. It’s a question of really understanding that customer’s requirement to be able to fit the best solutions together for them.
Another thing to consider is long-term viability. Are we providing the right solutions and the right answers? If those answers mean that we do not believe you should give Ryder 10-million-dollars worth of dedicated business because of “x,” that’s the answer we’ll give. In the long run, they’ll see us as a value-added provider. It’s about trust and integrity.
LQ: How do you effectively communicate with customers given the range of IT systems and the difficulty they have in communicating with each other?(Graham Allen)
Scott Hooper: You can have perfect integration of IT systems, with complete data visibility, and no communication. Our objective is to provide a common visibility platform that cuts across all IT systems, to provide one view to all parties on the key metrics that drive the business results, but I still look at communication as a face-to-face activity. On most of our accounts we typically have weekly management meetings, as well as monthly and quarterly executive reviews. That is the optimum environment for communication. It is about knowing and understanding your business and providing you with the best set of integrated solutions to solve and deal with your requirements. Data is a tool. IT systems are tools. We typically have people on our side doing analytics of data. Customers often have people on their side doing analytics of data as well. Between us, it is often a face-to-face eureka moment, created by communication, that typically drives innovation, cost-saving opportunities, projects and initiatives.
LQ: What initiatives is your firm using to develop talent with a combination of supply chain management and IT knowledge? Do you expect the appropriate talent to be developed through universities or is your firm using unique career paths to develop the appropriate combination of skills? (David Closs, PhD)
Scott Hooper: From an engineering perspective, which is my experience, we participate with a variety of schools in terms of their curriculum and the content of specific courses that they offer. There are probably 20 to 25 different schools in the U.S. and Canada that are specifically targeted for engineering resource development and engineering course curriculum development. We engage with them on a fairly regular basis. Annually, our HR group visits and meets with each of those schools and participates in sessions, career fairs, discussions with faculty, students and staff to discuss our recruitment requirements, our career path for graduates, what opportunities we may have and how their programs fit our requirements.
We have an internal program of education specific to the engineering group called the Ryder Academy. Within Ryder Academy there are a large number of seminars, courses and programs that Ryder employees can be enrolled in. They vary from online web training, that may be a one-hour session, up to and including green belt and black belt certification in Lean Six Sigma. We have some very specific tools that we use, such as data modelers and productivity analysis tools. We have specific training sessions on the use of those tools. Some programs are external, but most of them are internally developed and maintained within the Ryder network and culture.
We have also recently implemented an enhanced Management Trainee Program where we take a recent graduate or junior-level employee and enroll them in this comprehensive two-year program. They are transitioned through every vertical and every product line offering that we have. There is a list of courses that they would have to take from Ryder Academy during those two years as well, but they are also placed as a frontline employee through various accounts and operations within the company. They are assigned to a mentor and they are evaluated weekly in terms of their progress on the management trainee program, then they have semi-annual appraisals in terms of their progress. The concept is that, at the end of the program, provided the person has the right character, they would be a very well-rounded, robust and Ryder-knowledgeable individual for us to hire and put in a junior-management level position.
LQ: How do you think an increased focus on environmental sustainability and carbon footprint will impact distribution operations over the next five years? (David Closs, PhD)
Scott Hooper: Those companies that are leaders have already been doing environmentally friendly activities for some time. The real objective of any transportation operation is to optimize the efficiency of the equipment utilization and to minimize the actual distance travelled. By default, you’re minimizing carbon footprint.
The Fleet Management Solutions side of the Ryder business is working hand-in-hand with companies in terms of engine performance and emission controls and all of the new advancements in diesel engine technologies. I know that in several of our operations we are implementing newer green, and hybrid vehicles.
When you talk about warehousing, we operate under a Lean template, so waste reduction is one of the key elements for our distribution management service offering. For recycling, often we set up programs where the waste is purchased by a recycler and the customer will get the benefit of the cost savings or value delivered by the recycled product. For one of our major clients, we did an initiative to change the corrugate packaging used for the product shipped from the primary manufacture point, so it could be dual-utilized for local store distribution. By doing so, we cut roughly a million dollars worth of cardboard a year out of the system. Environmental diligence or responsibility is a new buzzword or theme, however, in pure supply chain strategy, it has been used hand-in-hand with the objective of minimizing the cost of the supply chain all along.
Short of any drastic government policy changes, I don’t see anything on the short- to mid-term horizon that is likely to change the environment so radically that distribution networks or warehousing operations are going to change. I just think it will be a continued priority and focus.
LQ: How can a 3PL ensure that as customer needs change, their offerings change and adapt to meet their needs? (David Faoro)
Scott Hooper: There needs to be a partnership and a relationship between the two groups. I am not there to sell a product, I am there to provide a solution. This solution might involve a variety of product offerings provided by Ryder or a specialized supplier. That’s the beauty of it; if I have developed that trusting relationship with the customer to be integrated enough to understand their business, their strategic direction, their hit list, their objectives, I can help provide them with solutions that fit those directions and objectives. Having that approach allows you to be able to adapt to those changing requirements of the customer. Being reluctant or slow to adapt to the changing needs of the customer is likely to result in those customers, sooner or later, turning to someone who can provide them with a solution that meets their strategy and sense of direction.
LQ: In the future, do you see 3PLs developing more of their own software and IT, or do you see them relying more so on the commercial sector? (John Langley, PhD)
Scott Hooper: Typically, what we tend to do is take best of breed product offerings off the IT shelf. We work more on the integration of those modules rather than finding the one solution. The multi-million-dollar “I can do everything” answer typically ends up being: “I may be able to do everything, but I don’t do anything very well.”
On top of that, we operate on an account-specific basis. In many of those circumstances we have developed home-grown solutions. Some of those could almost be qualified as industry standards for best of class. They are very specific to a certain application. Across Ryder, I can look at 500 clients and find 287 different IT solutions. But many of those have the same transportation management solution because we designed it or consider it best of class. It’s not about us trying to sell what Ryder has in the cupboard. It’s about us trying to provide the best answer and the right solution for the customer.