The Role of the Logistics Leader in Driving Supply Chain Value

Co-Authored, Frito-Lay and TransportGistics (3^rd in the series)

 

 

Introduction

We are pleased to present the third white paper in the series, Purchasing Freight Transportation.  This paper respects the underlying principals in each of the preceding white papers and embraces them in this subject. 

 

“The Role of the Logistics Leader in Driving Supply Chain Value”, was created by Keith Thurgood, Director, Strategic Sourcing, of Frito-Lay and co-authored by TransportGistics, Inc. 

 

About the Authors

Keith Thurgood holds a BA in Political Science from Brigham Young University, an MBA from Boston University and is a candidate for his PhD in Organizational Management and Leadership at Capella University.  Additionally he holds certificates from the University of Tennessee in Logistics Development and from Northwestern University in Finance.  Today, Mr. Thurgood is the Director, Strategic Sourcing, Frito Lay, Inc, in Plano, Texas.  He is responsible for the procurement of over $350 million in raw material purchase for 42 North American manufacturing plants and has responsibility for the operation of 2 corn storage facilities in Nebraska and Illinois.

 

TransportGistics, Inc.

TransportGistics is a global, multi-product and services company that provides market leading, simple, incremental solutions for transportation management and logistics functions within the supply chain.

 

TransportGistics commitment to education is portrayed through its advancement of professional logistics and transportation programs.  Its white paper site presents important and timely transportation and logistics subjects each month, and is regularly visited by more than 22,000 companies, universities and governments, worldwide.

 

Through its question and answer section, TransportGistics and its readers are actively engaged in asking and answering questions.  This activity has created a forum through which logistics and transportation professionals exchange ideas and information. 

 

TransportGistics, Inc. is an active partner at the Center of Excellence in Wireless Internet and Information Technology at the State University of New York-Stony Brook.

 

Executive Summary

There are an infinite number of ways to describe a leader and for good reason, but there is essentially one reasonably universal definition of a leader, “A person or thing that leads; directing commanding or guiding head, as of a group or activity”. [1]   In this context, the Logistics Leader compares equally with all others who have been assigned this title. Additionally, it could be agreed that those unique characteristics that make up an effective leader are no different for a logistics leader when compared with others.  While the core description of effective leadership is universal, logistics leaders are favored with a unique perspective. The pervasive characteristic of micrologistics; logistics’ central and relative roles coupled with its ability to identify and continuously work with inter and intradepartmental and inter and intradisciplinary relationships  provides the opportunity for the Logistics Leader to stand out amongst other leaders.

 

The purpose of this white paper is to discuss those unique characteristics of Logistics Leaders and the role they play in purchasing freight transportation.

 

Frito-Lay

Frito-Lay is an industry leader in the manufacturing and distribution of salty snacks world-wide.  Frito-Lay has the largest share of the snack chip industry representing 59% of the U.S. snack chip market and services four primary distribution channels in the U.S. (foodservice & vending, mass merchandisers, supermarkets / grocery and convenience.  Frito-Lay sells eight of the top 10 selling snack chips nation-wide and is an operating division of PepsiCo, Inc.

 

The Logistics Leader

Good is the enemy of great -- and that is one of the key reasons why we have so little that becomes great [2] .

 

According to Mr. Thurgood, “whether purchasing freight, negotiating contracts or working through a difficult marketing proposition, logisticians are at the core of the connected economy and are increasingly looked to as innovators that drive “great” business results.” "Great leaders share many common characteristics.  Logistics leaders, however, play an increasingly important role in setting the agenda and delivering results across the supply chain by improving systems and flows.   Their activities will be cross-functional and focus on inter-enterprise objectives that enhance company equity.  They will lead integrated teams that provide new sources of logistics value add (LVA) via their re-conceptualization of the business system.  Logistics leaders must lead the transformation efforts that will define how business is done in the future. To this extent, logistics leaders play a unique role.” 

 

“Greatness, in the final analysis, is built on the foundation of individual worth—a foundation that is centered on integrity; grounded in principles; focused on service and tempered with experience.  The singularity and strength of the individual is at the same time the strength and weakness of high performing organizations.   Nowhere is this truer or more important than in developing relationships with our internal and external business partners.  At the end of the day, the credibility of the leader, which Kouzes and Posner define as culminating in the character of the leader, is the cornerstone upon which sustainable performance and greatness is achieved. While the character of the leader is of primal importance, the attributes and subsequent behaviors are only useful as they provide a bridge to achieve the desired results.  Results, after all, are what managers and leaders seek.  It is the combination of leadership styles, attributes and results that defines an effective logistics leader.

 

Writing for Chief Executive, Robert Bennett said that “by today’s standards, David Rockefeller, American’s corporate icon during the 1960s and early ‘70s was a poor businessman…. (and) had been producing mediocre returns, at best.”  We certainly don’t think of Rockefeller as someone who produced “mediocre returns”, and indeed revere him as a model to follow.  Interestingly, Rockefeller and other leading businessmen of his day viewed their success in terms that were much broader than maximizing shareholder value.   Bennett goes on to say that “they worked not only for the well – being of their shareholders, but of their employees, their communities and the world.”  Logistics leaders are in a unique position to influence a broad business base and constituency beyond traditional functional silos.  Living in a connected, globalized economy, we can carry this one step further and incorporate our trading partners as important resources to achieve our desired end state – transformational results that make a difference now and in the future. 

 

The Role of the Logistics Leader in Purchasing Freight Transportation-Driving Supply Chain Value

Purchasing transportation services in an optimal fashion is one way that logistics executives can drive supply chain value.  The key is to simplify, integrate and innovate.  Here are 3 touch points that can be integrated into an overall purchasing strategy that is based on centralized planning and decentralized execution.  The future belongs to leaders who think about the system and integrate supply chain activities into the "whole" rather than segmented pieces."

1. Understand the desired end state or vision:  define this based on customer feedback, service, cost, and quality metrics, technology, and organizational capability.

2. Define strategies and supporting tactics to achieve the vision:  understand where you are today, where you want to go and identify the gaps – the strategies should close the performance gap; complete a SWOT (strength, weaknesses, opportunities and threats) analysis.

 

a.      Strategies that could be employed include: 

                                                                          i.      A rigorous process or method for data collection and analysis 

                                                                         ii.      Integrate data (mode, lane analysis, costs, delivery windows, equipment constraints).  Data is raw material for creativity, hence the more useful data that can be gleaned from the network, the more opportunities there are to connect the network dots and leverage other synergies.  The macro and micrologistics (MML) process (Logistics is Not a Chain) was designed to gather data in the transaction stream.  For further reference refer to the following white papers: Transportation and Distribution Management-Automating the Process and Logistics, the Beginning of the New Potential.  Identify patterns across multiple customers and networks.

                                                                        iii.      Smooth planning cycles by reducing peaks – level the distribution network

                                                                       iv.      Fully integrate a reliable demand signal

                                                                         v.      Consider system-wide inventory management activities – consolidate orders and shipments.

                                                                       vi.      Joint planning and consistent performance reviews.

                                                                      vii.      Develop an “Activity Based Costing” basis that can be used to understand margins and operating ratios. 

                                                                    viii.      Develop a balanced scorecard that measures value creation activities for all parties.

                                                                       ix.      Define contracting methods that are “outside the box”.  These could include indexing (+ and -), caps, gain sharing, risk sharing, cost plus, pay for performance, pay for collaboration, and process for dispute resolution.

                                                                         x.      Ensure information technology is integrated.  

3.      Rally resources to execute the strategies: include internal and external capabilities; define the organizational structure and ensure organizational and cultural alignment and “fit”.   

 

Defining the end state, the means or ways to achieve the desired result and ensuring that the right resources are in place to execute the strategies is the responsibility of the leader.  The “way” the leader does this is a key component in developing sustainable long-term relationships.  The “way” to greatness is using the lever of leadership to move the organization to achieve “great” results. 

 

 

 

Conclusion

Some would argue that The Logistics Leader looks essentially the same as any other leader; their responsibilities and characteristics are very similar and for the most part indistinguishable.  However, when you take a closer look at logistics, you begin to recognize important differences.  At the outset, the micrologistics components empower the Logistics Leader with a continuous feed of constantly refreshed data. Because of the pervasive capability of these components, the data can be converted into highly coherent information.  Next, function and performance place logistics in a pivotal role because it is responsible for raw material moving into, through and finished product out.  The inter-intradepartmental and inter-intradisciplinary relationships that are affected by, and because of logistics, makes it organizational centric.  It is this empowered and unique perspective that makes the Logistics Leader highly distinguishable from other leaders.

 

Continuation

Please consider this white paper as a continuum in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com .

 

Disclaimer

The information presented herein represents the opinion of the author but not necessarily the opinion of TransportGistics, Inc. nor is it presented as a legal position or opinion.

 

 

All content copyright by TransportGistics, Inc. All rights are reserved. The authors of the articles retain the copyright to their articles. No material may be reproduced electronically or in print without the express written permission from the individual authors and/or TransportGistics, Inc. (papers@transportgistics.com)