Forget Managing Distribution - To Be Successful, Logistics Professionals Need To Manage Change

In 2003, e-commerce revenues were $113 billion, up from $55 billion in 2001. Last year, a record 33,678 new products were launched (6% more than 2002) and there were nearly 1 million new business starts.

It’s an unpredictable, volatile business world, and as logistics professionals we are right in the middle of it. Sometimes picking up the pieces. But hopefully facilitating the change.

Most change is driven from the top. Today’s successful CEOs are not necessarily great marketers or deal makers, but great agents of change. Leaders who can get their organizations to change on a dime in order to anticipate and capitalize on market trends before the competition.

• Egghead software closed all its stores in a day in favor of selling on the net.
• Dell Computer never had any stores. Today, Dell registers $14 million in revenues per day through its web site from customers who have been conditioned to expect custom-built systems in a couple of days.

For changes of this magnitude, logistics leaders can adopt two approaches:

1. Wait for the change to happen (and it will) and say: "This company can’t do that. We don’t have the infrastructure to support it. Give us 12 months"

2. Build an infrastructure NOW - internally or through a partnership with a logistics services provider – that is flexible enough to quickly, effectively and economically manage future changes in business requirements.

Which approach do you think today’s change agent CEOs would support?

All this brings me to public, or shared, warehousing. (Bet you didn’t see that coming.) The ability to maintain inventory anywhere in the world with the added flexibility of paying only for the space and services you require is becoming a necessary strategic advantage.

A major greeting card manufacturer wanted to increase its sales via the web without concerns about distribution capacity. The company now outsources fulfillment of web orders to its logistics partner who increases space and manpower as required.

A major pharmaceutical manufacturer needed to reduce overhead costs to drive shareholder value after a multi-billion dollar merger with another firm. As the two companies merged operations into a single distribution center, some product and all literature and sample distribution was moved to a local shared warehouse to sustain high service levels until the consolidation was completed.

In these cases, shared warehousing provides a strategic solution to a real business need. But despite the advantage of such an option, many third party logistics firms are focusing less on managing shared space for multiple clients and more on building and managing dedicated facilities as part of large, long-term contracts. Why? To minimize financial risk. Most contracts for shared warehousing allow shippers to eliminate services and space with 30 days notice.

But the demand for shared warehousing remains strong. And the ever-increasing pace of change in today’s business world will likely heighten this demand and the availability of such services.

Successful logistics professionals can no longer think of themselves as managers of distribution. That is a tactical response to outside forces and events. Instead, we need to proactively manage change by creating a distribution infrastructure flexible enough to adapt to market changes. We must be the strategic enabler that allows the CEO to aggressively pursue business strategies that will give our companies or our clients a competitive advantage.

Rather than heavily invested roadblocks, our distribution infrastructures must become the secret weapon of the change agent.