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Executive Interview Series:

LQ: What are the biggest challenges to cross-border logistics activity? (John Langley)

Jeff Hurley: The greatest challenges in our cross-border business are standardizing operating processes, as well as educating and training people overseas. For example, when we are managing a cross-border business from China to North America, the solutions we use for our North American customer aren’t always achievable. The greatest challenge in this case is to ensure that our colleagues in China are knowledgeable about our firm’s business practices. This means we must have a sustained business model in emerging markets, to enable our associates to manage, develop and execute solutions with the same competency levels that we apply in more mature regions.

Today, there are limitations in the use of certain technology and processes in cross-border operations. It is not as simple as just exporting the capabilities to a new region and beginning implementation. It requires careful planning and development and training. Also, when we look at cross-border opportunities, it is essential to properly define what services we will be performing for the customer. We spend a lot of time providing general training and execution know-how to ensure our supply chain professionals are fully capable with the kinds of processes we will manage. In some emerging markets our firm has opened a research and development centre to develop these logistics capabilities.

We also place regional experts in the developing areas to manage the process and the execution of solutions in the supply chain for customers. We’ve been in markets like China as a major player for three years, and this has created a solid foundation to develop our business in that region and develop the right cross-border solutions. Another transborder challenge involves the volume of business in the last few years. Our cross-border activity has increased fivefold over three years, not only in terms of the number of new business deals but in terms of business growth from existing customers.

Their sourcing and procurement has increased in these emerging markets. We want to be ready to execute as the growth continues. It’s clear that the sourcing of product has changed from the domestic [U.S.] to the international marketplace. The challenge we have identified involves managing all the modes of transportation in the global supply chain and integrating the forwarding and customs requirements with our contract logistics capabilities. This is why CEVA’s merger this August with Houston-based EGL, which operates under the name EGL Eagle Global Logistics and will rebrand to CEVA, was so critical to our company. It immediately afforded us with an inside track to achieve deeper global scope, given that company’s expertise in freight forwarding and customs management, whereas in the past, as a contract logistics company, we were limited in our capabilities.

LQ: What are the advantages and potential disadvantages of “one-stop logistics,” where the customer counts on the 3PL to provide a range of integrated logistics/supply chain solutions? (John Langley)

Jeff Hurley: If you look at some of the complexities in the supply chain, these can be more efficiently managed if you’ve got one firm in charge of all the activities. I think that the integrated capabilities allow us to use our skills most efficiently in managing the total supply chain. We might not provide all of the services; we might contract another party to properly service the customer’s requirements. But in these cases we apply our abilities and knowledge in order to provide a comprehensive solution. A potential disadvantage, from a customer’s perspective, relates to the high level of consolidation of providers in our industry today. They may see a potential risk in having all of their supply chain requirements residing with one provider in this context.

LQ: How can you mitigate that concern? (Fred Moody)

Jeff Hurley: Our customers are managing their supply chain as partners with our firm, and we are constantly sharing business management information. Today’s customers are sophisticated and very interested in how we’re managing their business. We have regular business reviews and weekly performance reviews. This visibility of information and established business practices between the 3PL and the customer helps to ensure the customer is well informed about how the supply chain is operating. This information, along with our professional cooperation in the rare case of a transition make change manageable.

LQ: As 3PLs continue to consolidate, will their business focus shift to targeting larger Fortune 500 type organizations as opposed to small- to medium-sized organizations? My concern is that the consolidated 3PLs will become less flexible in service offerings and less agile. (David Faoro)

Jeff Hurley: Certainly, the larger companies offer big opportunities, but we seek to have a mix of customers who may have expansive global opportunities with those who may have regional or local opportunities. In addition, irrespective of their company’s size, customers are engaged at varying levels of businesses opportunities with a 3PL; they may not outsource their entire global supply chain and instead opt to make the decision to outsource business incrementally. Big projects take lot of resources and plenty of investment. It is healthy for us to have a mix of small, medium and large project opportunities. Our focus is more on a strategic fit with a customer that allows us to capitalize on our core operating strengths to meet business growth objectives.

LQ: Given consolidation in the 3PL industry, what can a small 3PL do to enhance its long-term sustainability? (David Closs, Michigan State University)

Jeff Hurley: I think the smaller 3PLs can attack many different parts of the market, and there are great opportunities. After all, CEVA Logistics was a small logistics company in North America at one time. Whether you’re large or small, if you are providing an excellent product and you have targeted the customers where you can provide the most value, there’s plenty of opportunity across the board. I do not believe that providers can be all things to all customers, which makes room for a variety of providers and capabilities.