“File and forget it,” may be the approach too many managers (and their bosses up the corporate ladder) probably have when they receive the latest memo from the logistics folks. The dirty little secret is that, for all the talk about the importance of the supply chain, too often logistics is treated like the least favorite child in the corridors of corporate power. But not always and not everywhere.

And, as is increasingly clear within ‘best practices’ organizations, the supply chain (and the logistics processes and systems which transports it) can be a core competitive asset.

So how do you get your colleagues and superiors to take you seriously? How do you push logistics into the forefront of concerns? Get it on the screen?

In a word, how do you ‘sell the supply chain’ upwards? 

Turns out that, in tough times, the supply chain occupies a much more prominent importance in the enterprise than in periods of more prosperity. And these times are certainly tough. So, all things considered, this is an opportunity to drive ‘logistics awareness.’

Peggy LaRue, director of international transportation at urban clothier Abercrombie & Fitch (www.abercrombie.com) understands the “file and forget” mindset, but doesn’t subscribe to it.

“The more profitable a company becomes, the less managers see the need to address supply chain issues,” she explains. That inattention is based upon profit margins. “For a commodity, like fencing, transportation is a major cost,” LaRue says, so commodity goods have tracked costs quite closely. For higher margin goods, like fashions, however, transportation is a relatively minor expense, so managers focus on issues with higher rates of return. Today, as profits decline, organizations are beginning to eke out savings wherever they are found and so are looking at the supply chain for its cost-cutting potential.

“Now, as margins are deteriorating. I believe that forward-looking companies will see the supply chain as a competitive advantage,” LaRue suggests. Supply chain managers can nudge the organization towards that realization, along with an understanding that supply chain activities affect departments throughout the enterprise. But as they already know all too well, this can be a hard concept to get for many managers comfortable in their organizational silos.

“Logistics is unique in that it takes procurement, sales, distribution, finance, legal and other areas, and ties them together,” LaRue continues. Logistics extends across many areas, she points out, and managers typically need more education from the supply chain manager to fully grasp the implications and the opportunities for collaboration. The typical approach taken by senior management begins with a focus on transportation costs and expands to process improvement, “but the supply chain is so much more than that!”

Managers at 107-year old Abercrombie & Fitch know that. The company began a global expansion a few years ago, and now has nearly 1,100 stores in the U.S. and Canada, and five in the UK. A flagship store is set to open in Tokyo later this year. Speaking at last year’s CSCMP Annual Conference in Denver, she says the expansion offers “a great opportunity to affect costs and develop the logistics processes that get inventory to the right place at the right time and ultimately drive down cash involvement of the company.”

To effectively sell the supply chain upward throughout the organization, managers need to sell the benefits of implementing supply chain improvements.  “Show how you can contribute to help position the product and price it appropriately without driving up inventory.” Winning the point, however, requires metrics to support the premise. 

Another ‘sales’ option is to propose initial projects maybe based upon case studies from similar companies or even from other industries. Subsequent follow-up projects, on the other hand, should be supported with ‘before’ and ‘after’ assessments from your own company’s experience (so keep good records and build up a library of metrics to lend credibility to your argument).

The point, LaRue says, is to argue-and demonstrate-that better supply chain/logistics processes, or better training or the better use of technology can pull costs out of the system and thereby reduce the per unit costs of inventory items.

Logistics service providers, such as 3PLs or 4PLs, can be allies in this endeavor. By virtue of their wide exposure to many different companies and practices, they have developed best practices that can be leveraged to minimize the trial and error aspects of new endeavors. And, they have the metrics to support their positions. These outside experts also are well positioned to persuade nay-sayers within the corporation of the value of improving the supply chain, because they tend to be politically neutral.

Selling the supply chain up the enterprise also requires knowing which data to use for which audience. As she advises, “You have to know the soft spot of your audience.” The CFO, for example is most concerned about cost, while the sales person may be most concerned about transit times. The procurement officer is concerned about cost and transit times, as well as other factors. So, she says, “Tailor your phrases and prepare your slide deck…” to address the soft spots of the audience.

Here’s another shrewd coaching tip.

LaRue strongly advises managers to read their own company’s annual report. “You’d be surprised at how many don’t know their corporation’s goals!” she exclaims. “At age 25,” she recounts, “I’d sit down and write how my job contributed to the corporate objectives.” “What has the CEO identified as being important to the organization?” she asks. “Service time? Gross margins?” The answer will vary among companies, but should frame how logistics managers pitch their presentations. “Read your annual report and understand the CEO’s goals. What are we as a company doing to affect those goals, and how can the supply chain affect them?” she asks.

And don’t just ‘think’ about your arguments. Write them down! The act of physically writing the correlation makes them more tangible, she insists, and helps her formulate strategies to advance those goals.

A little bit of humility also goes a long way in becoming more persuasive. Understanding how the supply chain can collaborate with other departments doesn’t come naturally for many folks, but that’s changing. The extent of that change depends upon the industry and the business climate.

 “When you talk about the economic downturn, it’s very depressing,” LaRue admits. “Every day you hear about layoffs and plant closures.” LaRue says she has made a conscious decision not to think of this as a bad thing but as an opportunity. “This economic situation gives us a way to educate senior management and put forward things to do that can benefit the company,” she maintains. “Let’s sell ourselves now!”

LaRue isn’t alone in seeing opportunity in crisis. Savvy executives in a variety of industries push the notion that downturns drive innovation because of the simple need to find ways to do something better, faster and more efficiently. Even the Chinese character for “crisis” is composed of the two characters for “danger” and “opportunity.”

For the supply chain, she says, opportunities exist to drive efficiencies by adjusting transportation modes, transit times and data flows. As a logistics manager, “You’re always looking for good rates,” she says, but there are other tradeoffs that are possible that also reduce costs. For example, she asks, can decisions be made earlier that would change the mode of transportation to less expensive options? Can merchants accept a one-day shipping delay in exchange for lower shipping costs? If shipments arrived at different ports, would overall costs be lowered? These all are among the questions that must be addressed, she says.

At Abercrombie & Fitch, logistics works directly with vendors, LaRue says. “I believe in going in as a team.” That involves working closely to meet the goals of her own company as well as those of the vendors. “Vendors are our eyes on the ground and we work together to increase efficiency,” she says.

Other industries also are getting vendor input into product design. Emerging markets are, increasingly, driving design. Oftentimes, the solutions to the challenges faced by those markets can be applied to segments of Western markets also. The IT industry, for example, has learned to design Web content for cell phones and Blackberries because PCs aren’t widely available in parts of Asia. Likewise, text messaging in Europe and North America has evolved into short message service (SMS) and video SMS in India, which overcomes a cultural bias against voice messaging and is a boon to the illiterate.

For the supply chain, the real-time order tracking systems that are commonplace in the West are not yet a matter of course in Asia. Helping a vendor implement such a system can provide better visibility into the supply chain, thus minimizing the disruption caused by delays.

LaRue leverages vendors’ local and industry knowledge to increase efficiency. One recent example of this type of teamwork came from an “onboard” meeting with a new swimsuit vendor. “I said, ‘You’re packing your tops all wrong. You need to get more density,’” she recalls. By working together to change the packing, tops per shipment increased, which decreased the unit cost of each top.

Collaboration is evident within Abercrombie & Fitch, also. Headquarters favors an open office floor plan. “There are no doors here,” she notes. Although that took some adjustment at first, LaRue says she likes it. The open floor plan changes the way people interact. For example, “There’s more open communication and more casual communications, and it removes the concept of titles.”

By facilitating casual conversation, the open office concept also promotes the cross fertilization of ideas, thus resolving issues faster. In her situation, that means, “I sit closer to my internal customers.” Proximity to the product managers puts her in a position to have the casual conversations that can provide the background and context needed to improve more formal plans.

The concept is just as valuable in other disciplines, too. Nowadays, even scientific laboratories are being designed to share space among disciplines. By creating situations in which various disciplines are forced to interact, researchers often find that, for example, the chemists and biologists have insights that solve the challenges or change the approach of one another. An informed, outside perspective shone new light on the subject.

Networking extends beyond the company walls as well. “It’s important to stay one step ahead of your industry,” LaRue emphasizes. “Stay in touch with your peer groups. See what other people are doing. Meet with people. We all can help each other.” Her goal, she says, is to have as much information as possible on aspects of the industries that affect her own, and so improve her chances of success. That means listening to and evaluating the scuttlebutt about, for example, which suppliers and carriers are doing well and which are struggling, as well as staying abreast of new technologies and best practices, and incorporating that information into her planning.

Abercrombie & Fitch currently is centralizing its supply chain data so every player can access the same information. “That allows us to focus on exception management,” LaRue explains, “and to push actionable information to the user community.” Knowing, for example, that a dock strike is planned for a particular port, or that procuring a certain raw material is taking longer than expected helps the enterprise plan accordingly. By concentrating on the exceptions, resources can be optimized and three or four people easily can handle a user community of 300 to 400. Freeing those resources from routine operations allows people to concentrate on activities that add value to the supply chain. “The larger the company is, the more critical that becomes,” she adds.

Knowing what’s important to each department touched by supply chain operations is the key to selling the supply chain up the organization. The overarching idea is to show, through before and after data, that supply chain solutions can remove costs and improve performance.  wt



Contributing writer Gail Dutton specializes in reporting on the intersection of business and technology.