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An Interview with John Motley CEO of LOG-NET

Questions for this interview have been prepared by LQ’s Board:Tom Goldsby, Ph.D., John Langley, Ph.D., Diane Mullenkopf, Ph.D., Tom Nightingale, Chris Norek, Ph.D., and P.S. Ravi, Ph.D.


LQ: To begin, please provide us with some background information on your company.

John Motley: We are an end-to-end logistics management company, from planning and optimization through to execution: that’s our space. We are more focused on the international multimodal logistics area than on domestic planning and operations management. Companies need to know where every single container or carton on a plane has been, what’s inside it and who has touched it. We offer the combination of order and operational management on an end-to-end basis. We can show clients who has touched their product after leaving a factory in Asia until the time it is delivered to a store in North America. It sounds straightforward. The challenge is how do you get bulk volume across the ocean and distributed efficiently in North America?

We offer planning and optimization capabilities. Our clients are getting pretty close to being able to pack multiple SKUs per carton — and to do this electronically with bar coding — and have product tracked across the entire supply chain. More of our clients are heading in that direction and utilizing things like radio-frequency identification (RFID) codes to ultimately look at their return on investment. These are the top areas of interest that we see from our clients. We market to both the 3PL community and logisticians. Our business in this area is evenly split between these two groups.

On the 3PL side, companies such as DHL, Eagle, Agility, Summit Logistics and Norsewood, for example, are important clients. We are a high-end end-to-end solution provider with order management capabilities that our 3PL clients use to provide to some of their clients. We also work with manufacturers and retailers, including companies such as Avon, Jones Apparel Group and the Dollar Tree stores.

LQ: To what extent might we see technology providers collaborating with 3PLs to improve their software that might be used by 3PLs to manage themselves and the customer’s relationships? (John Langley, Ph.D.)

John Motley: All of our 3PL clients are interested in configuration capability because they realize that every client wants a custom solution, but they need to have a common operational backbone. They can build a scaleable solution. We have worked with 3PLs for over 15 years with this specific objective: to build a common operational backbone with a custom front end.

The customization is created through configuring the application, not by writing custom programs. One example is in the high fashion arena: In this industry, you have “shade lots,” which are created each time they set a dye. Let’s say, for the sake of convenience, it’s a red color that they use to dye a shirt and when they run out of dye they will make another batch that is similar, but not exactly the same color. In high end apparel, they cannot ship apparel to a store that’s across a “shade lot,” because they don’t want two shirts, blouses or dresses hanging next to each other and a customer perceiving a difference in color. So for logistics operations with clients in high end fashion, the software must be capable of tracking this shade lot information.

We enable 3PLs to configure those capabilities for their clients, add it to a computer screen or an internet board and put their requirements into our electronic data interchange (EDI) system without any programming required on their part.

LQ: What is going to happen long term to the supply chain software companies who clearly have a narrow functional focus instead of a broader supply chain focus? (John Langley, Ph.D.)

John Motley: I think the generalist who lacks depth will not survive. If you do cross-planning optimization and execution capabilities, you must be very capable. This might be as a niche player. There are many niche players those areas, but the industry is in the process of consolidating. With the many compliance issues from customs entities and legislation such as Sarbanes Oxley (SOX) [the 2002 U.S. law that establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms], executives want to invest in software that has deep capabilities. You might be planning and optimizing and require routing information as well as schedules from multiple carriers. If you show information graphically with maps, you’ll need GPS data. All of those things require a robust system for executives in logistics who use multiple modes of transport internationally. If you’re only providing a service that relates exclusively to truck moves or is limited to a particular geographic area, you’ll probably be gobbled up by some of the other players.

LQ: What are the likely directions for technology providers being able to successfully combine enterprise resource planning (ERP) and supply chain functional software? Who are or who will be the leaders in making this happen? (John Langley, Ph.D.)

John Motley: All of the technology companies with ERP capabilities are making a push to get into the supply chain. We have not really seen them do the multimodal and international supply chain as well. They offer solutions for domestic source or one-tier of product allocation. We just finished several deployments with two leading technology companies. We’ve led the process in their deployment of these capabilities and finished an implementation where SAP hands off all the purchase orders to us. We embellish them with international purchasing information and send them to suppliers, because we have an infrastructure that permits delivery if suppliers are automated. If you took a snapshot of the world today the 80/20 rule is accurate: 80 percent of the shipped volume is coming from 20 percent of suppliers who have EDI capabilities. But then you have 80 percent of the suppliers that don’t have this capability and to get 100 percent of the supply chain managed electronically, we’d be required to provide accommodation for that 80 percent that lack EDI capabilities. Our key players tend to leave out that 80 percent.

LQ: What are the major impediments to achieving global supply chain visibility and how will the technology sector step up to help improve in this area? (John Langley, Ph.D.)

John Motley: We’ve switched to offering on-demand models. This means you pay when you use the software. If you don’t use it, it’s very easy to leave and easy to replace. This has shifted the risk of deployment from the purchaser of the software to the supplier. We have had to completely change our deployment model. The resources that deploy up front now are a hundred times bigger than what they were. We are prepared to go to a client, show them our system, configure the system for the way they do business and then write standard operating procedures.

In the majority of our deployments we write their standard operating procedures. From a business process perspective we’re finding that’s one of the big keys, but we have to take the leadership position to help them mitigate that inertia. The second impediment is something we call “internally simple sophistication.” They want everyone to link in electronically, but that’s difficult. We’ve processed more — for example, ocean carrier interfaces — than probably anyone in the world.

LQ: How are you using that to create competitive advantage for their supply chains? (Diane Mullenkopf, Ph.D.)

John Motley: One involves day-to-day operations. How do you collaborate effectively? I think between a supplier and a manufacturer a lot of work has been done with collaborative planning and forecasting and replenishment. Transportation and logistics, however, has not matured as quickly. We’re trying to push a few initiatives in the areas of automatic communication regarding both the manifest as well as the process of forecasting volumes, booking those volumes and getting the documentation that goes with those volumes — all integrated with carriers. Today, unfortunately, particularly in international trade, a lot of those requests go to centralized service centers that could be anywhere.

If you’re managing a global network for logistics you might submit a request that first goes to the data centre in India and then gets forwarded to the office in Brazil, which is where you want to send your freight. In that model, it’s often 24 hours before you know whether or not you can move with that carrier. There’s also the practical problem of the truck driver who drives to the pier to drop off a full load from the factory and pick up an empty and knows it will take two hours to get there. So the constraint is that we need an answer within two hours. It’s service oriented architecture that allows for communication to go real time to a carrier, request required space and convey an answer back immediately. You can do that in Expedia now for an airline seat, but you can’t do that today in most of the transportation world. We’re getting a group of customers together to work with carriers and their intermediaries to find out why we can’t get to a two-hour response time — or an instantaneous response time.

LQ: How are technologies helping to overcome the uncertainties we face in supply chain management — and specifically the uncertainties of supply and demand? (Tom Goldsby, Ph.D.)

John Motley: A lot of people cite visibility as one of the biggest ways to improve risk mitigation. I think you must also add management and control to visibility. If you can integrate all three of those capabilities then you’re doing the best job possible. A good example would be if you’ve got complete end-to-end visibility on product that ships out of China and there’s a port strike somewhere in the United States. Provided you have the management control to divert freight and move it around that area of congestion or a strike, you are in good shape.

Another alternative would be to find alternative sources of product and supply to adjust and accommodate those demands. Conversely, if your demand drops, you can slow stuff down. You can go out, find out where it is, take it off those fast or medium methods of transportation and put it in a little bit slower mode of transport.

LQ: In your opinion are companies willing to share critical and strategic operational information necessary for supply chain collaboration? What are the most effective ways to share this information? (Tom Goldsby, Ph.D.)

John Motley: In order to be successful companies have to share very detailed information, and I look again at the 80/20 rule of suppliers and third parties being either e-commerce enabled or not. When people throw technology around, they always think about EDI and commerce capability. We still get 100 percent compliance across the board on data requirements and integration. In general, we see that the most integrated 3PLs are doing a an excellent job of developing a deep relationship with their clients in order to understand what’s essential for success. When you outsource that process you’re basically saying the outsource party is part of my company. If you don’t take that approach, they will operate in a disconnected way and that is not going to work.

LQ: Given the lengthening of supply chains, how can supply chain technology help build resiliency into global supply chain networks? (Tom Nightingale)

John Motley: A lot of systems can provide event management, usually involving matters regarding a container or a truck or plane and where it was last seen. This is often not fully integrated with the purchase order and product information describing what’s in a container. So to get management and control working with visibility, you require multiple tiers of information. I think the level of visibility today has gone from the shipment on a truck or plane down to the individual item in the case; now we want to know the fact that it’s the red, size 6 wide shoe, not just that it’s this shipment on a plane that’s flying over the ocean.

LQ: Does the use of supply chain technology with a poorly designed, poorly configured supply chain provide any benefits? Have you come across instances where technology resulted in a negligible improvement or even deterioration of supply chain performance? (P.S. Ravi, Ph.D.)

John Motley: If there is a negative to implementing our technology, it’s the fact that we can be as detailed as an electron microscope if a client wants, and that blemish may not look that bad from a distance, but when you turn on a microscope, it’s heinous looking. People tend to find what they’re looking for and when they do it’s not always what they wanted to find. When you provide end-to-end solutions, you can’t make mistakes at one end. We’ve developed what we call our Logistics Maturity Model (LMM), and when you’re a level 1 in that maturity model, you’re still sending paper purchase orders and advance ship notices, whereas a level 5 client has every single process from freight audits to purchase orders e-enabled. We may meet a client who has hired a well-meaning vice president who thinks at level 5 and walks at level 5, but they’re in a company that’s at level 1. It’s a four- or five-year journey to get to that fifth level. The maturity model basically assesses what level of maturity you’re at and prioritizes processes to improve.

LQ: Does the initiative for increased use of technology always come from the P&Gs and Wal-Marts of the world? In other words, from large and dominant members of the supply chain. Or does it occasionally come from the smaller and weaker players in a supply chain? (P.S. Ravi, Ph.D.)

John Motley: I think that a side benefit of the shift to an on-demand model is that it’s pay-as-you-go, which is great for small to medium-sized companies. We have seen a big surge in our volume of business from that kind of company. For instance, a company we just deployed with was the Boy Scouts of America. They wanted to buy overseas and create an international supply chain, but their scale wasn’t there. We trained them and trained a group of suppliers overseas for them and they’re now reaping the benefits. I would say they started at that first level of maturity and now they are hitting our third level of maturity. The on-demand model helps enable smaller groups.

LQ: Are the barriers to the implementation of supply chain technology solutions primarily (i) technological (existence of legacy systems), (ii) organizational (presence of power structures and “information gatekeepers” who feel threatened by increased information visibility and transparency resulting from new systems), (iii) human resources-related (lack of skilled supply chain professionals in the client organization), or (iv) structural (poorly designed and poorly configured supply chain networks)? (P.S. Ravi, PhD.)

John Motley: We have the Logistics Maturity Model  to identify any potential problems and barriers. This model assesses about 50 business processes in the end-to-end supply chain. We try to get people to slow down and acknowledge, for example, that if you don’t have an automatic way to do freight audit and payments today, you will first need a group of people from multiple departments to agree on the best process for this new automated system. Too often we see that people with the five-star vision try to get too aggressive on deploying inside a two-star company.