DEAR SANTA,
This will be the first year in several that I have not asked you to nudge Congress into doing something about the nation's infrastructure. It appears that finally, after 35 extensions of other extensions, Congress is finalizing a long-term highway bill. This is particularly significant since if it had waited much longer, the upcoming presidential election would have brought meaningful activity on that front to a halt.
There are two other things, however, that I would appreciate your giving us some help on. One of the most critical, in my view, is our ability to effectively manage the continuing change in our industry. We all agree that two of the most important influencers on our supply chains are technology and collaboration, but sometimes the two are not compatible. Without new techniques and technology, and people who understand them, a supply chain manager's task would be impossible. The same is true of collaboration. But collaboration requires a strong human element, and with the increasing but necessary reliance on technology, we have seen breakdowns in personal communication as well as sensitivity to our colleagues and subordinates. I see this as a huge risk. What you can help with is reminding educators and decision-makers in the industry that the future belongs to the supply chain manager who can master the technology as well as the human relations part of the equation. For that, technology will never be a substitute.
Another change we are seeing is a creep toward the commoditization of logistics service provider (LSP) solutions. Change is great. We need it, but with every change comes some element of risk, and I see a big one here. Major outsourcing failures occur when the client outsources an activity its own personnel do not totally comprehend, and when the provider promises to meet requirements that have not been fully defined, communicated, or understood. Major failures also occur when the user company treats outsourcing as a commodity purchase rather than the establishment of a strategic relationship.
Many outsourcing relationships have been developed by traditional methods: The interested party prepares a request for proposal (RFP) that outlines the tasks to be performed. It then presents the RFP to three or more providers, who are asked to submit bids to perform precise tasks in precise ways. The contract is then awarded to the provider who demonstrates the best cost/benefit ratio or, in an increasing number of instances, comes back with the lowest bid.
The RFP makes providers' proposals easier to compare and evaluate, but it ignores the basic issue of determining the most cost- and service-effective logistics process. Basing an outsourcing decision on cost alone overlooks the real value that an LSP can provide. Surprisingly, some companies have turned outsourcing negotiations over to managers who have little, if any, knowledge of the supply chain or the LSPs being considered. This complicates the negotiations even further and can lead to bad decisions, usually based solely on cost. Not too long ago, I was talking with an LSP CEO who had just lost a very long-term, problem-free relationship, based on cost alone. The client negotiation had been turned over to strangers. He noted that one of the things that hurt the most was being terminated by someone he had never met. Please see if you can bring some good judgment and experience back into this process.
There are several other issues, but space does not permit me to go into detail. For one, the new Panama Canal is leaking. You might want to drop off some Super Glue or Silly Putty down there. And for gosh sake, watch out for the drones. The last thing we need is Rudolph's red nose being clipped off.
Merry Christmas!
Cliff Lynch
Gartner, Inc.
