Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
Although "third party" has become industry shorthand for contract logistics service provider, LSPs are not the only third parties lurking in the underbrush of supply chain management. The weeds are also full of management consultants.
They're everywhere. They're at every conference, seminar, and convention. They're on the Internet with Web sites, e-newsletters, webinars, and spam. They're in all the trade publications—and that includes the authors of this piece.
Who are they? What do they do? Do they help—or hinder? Is there really a value proposition involved? In answer to that last question, we contend that management consulting at its best is a high calling and a noble endeavor, requiring enormous amounts of both talent and integrity, as well as strong senses of mission and urgency. At its worst, it is an embarrassment on a good day, and a scandal when all the results are in.
Big fish in the global pond
As for who they are, consultants come in all shapes, sizes, and flavors. But in general, a consultancy will take one of the following forms: mega-firms, other big (but not enormous) players, small/midsized houses, sole practitioners, and academics.
Let's start with the mega-operators. This category is made up of huge organizations with thousands of people. They may be partnerships; they may be corporations. They are increasingly multinational.
Many have their roots in the giant public accounting firms.Severalyearsago,eachof theso-called "Big Eight" U.S. CPA firms had enormous consulting divisions. They generally attempted to be all things to all clients and would undertake consulting in any channel that held the promise of growth and/or profit, including public sector operations. As they created multinational accounting conglomerates, their consultancies likewise added at least the appearance of international capability, which tended to be more promise than practice.
Today, as a result of mergers, acquisitions, and divestitures, those origins are not always obvious. Accenture spun off from Arthur Andersen, which itself disappeared, thanks to Enron. KPMG became BearingPoint. Ernst & Young, itself a merged operation, was folded into Cap Gemini to form CGE&Y, which later changed its name to Capgemini. PwC, another merger product, was acquired by IBM after an attempted purchase by HP, and disappeared as an entity. Deloitte Consulting, yet another merger/acquisition, retains its corporate identity but is legally a separate LLC entity.
The overall business model for the mega-firms is a hierarchical organization dependent on sales genera- tion by a relatively small number of rainmakers to provide billable hours for large numbers of analysts and managers. Thorough methodology and process development is supposed to allow relatively inexperi- enced consultants to tackle complex problems in consistent ways.
The model has been likened to bringing in busloads of bright kids who have been indoctrinated into the corporate culture and provided with workbooks full of process descriptions and solutions. They must then hope to come across a client who is asking the right questions. Sometimes they become confused and come to believe that the answers are more important than the questions.
(Full disclosure: Both authors are alumni of one of the mega-firms.)
The next tier
In the next tier down from the mega-firms are a handful of companies that might be described as big and important but perhaps not overwhelming in size. This category is populated by consultants that have all con- centrated on strategy but have taken differing direc- tions. Some (e.g., McKinsey) tried their hand at tactics and implementation to grow the business, but strug- gled to bridge the gap. They remain successful in oper- ational issues with strategic implications. Others, like Bain, have opted to take equity positions and manage cor- porate operations. Still others, like Boston Consulting Group, have stayed focused on strategy and related topics.
Several entities opted to concentrate on performance standards, productivity, and cost reduction. Alexander Proudfoot was a pioneer and the model for much of the productivity consulting segment. The practice survives today as a unit of Management Consulting Group PLC.
The business model for these companies is often based on the engagement of contractors, who are off the payroll as soon as their assignment is complete.
Small and midsized houses
The small and midsized consultancies tend to be built upon limited, but deep, functional experience. They come and go, and wax and wane while they are here, but some have demonstrated remarkable staying power. These players, which are too numerous to name here, can be local, nation- al, or global in coverage. They may be franchises, or they may be real companies. They may affiliate with "stringers" in several locations, handing out business cards to anyone with a suit and a laptop, or they may grow more organically. Some achieve greater functional breadth through working partnerships with other consultancies or broaden their geographic coverage with multinational alliances. They may follow the hierarchical organization model or they may be flatter partnerships, with more hands-on consult- ing involvement from senior partners.
The supply chain field has spawned quite a few of these operations, and many of them deliver cost-effective and sustainable results. Some are highly specialized, while others offer a broad range of supply chain strategy, planning, and execution services.
(More disclosure: One of the authors is a partner in a small/midsized supply chain consultancy.)
Hanging out a shingle
Next come the sole practitioners. The solos run the gamut from internationally renowned specialists to prematurely retired managers to those who set up shop after being shown the door by their previous employer. The subcategories are not mutually exclusive.
There are many excellent one-man (and one-woman) shops. For the right kind of problem, they can often offer an on-target solution at the right price. The best of them recognize their limitations and are brilliant at enlisting other specialists to work on solving the fundamental problems. The worst of them believe their own press clippings and hesitate to bring in people smarter than themselves to help deliver the right answers.
(Still more disclosure: One of the authors is a sole practitioner, and the other not only has been but will be again.)
Tales out of school
There is one other important category of consultants to consider. Many respected academics practice consulting, on either an institutional or a private basis.
Often, their consulting contains a research component directed at a technical solution to a specific, knotty problem. Sometimes, they are able to assemble teams of students to observe and assess operational problems and practices. Other times, they might conduct and analyze industry surveys.
There are times when the right approach to a problem is to build a team with academic and consulting components, to develop an effective blend of esoteric and practical solutions.
One other category deserves mention—and caution. Many service providers—3PLs, motor carriers, parcel com- panies, real estate firms, and the like—offer consulting services. It is possible for a service provider to dispense honest, independent advice. The test—often difficult to evaluate in advance—is whether the "consultant" describes, and offers up, competitive alternatives to his own service.
Editor's note: Next month, we'll look at why companies use consultants, what services they can provide, and how to find and select a consultant.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."