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LQ’s Top North American 3PL Executive Interview Questions for this interview have been prepared by members of LQ’s Board: John Langley Jr., Ph.D., Georgia Institute of Technology; Walter Zinn, Ph.D., Fisher College of Business, The Ohio State University
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LQ: There are some who would suggest that the 3PL industry is becoming “stalled out” in terms of its relationships with customers. Do you agree or disagree with this statement, and why? (John Langley Jr.)

Jim Butts: We have found that, in general, customers – both shippers and carriers – are presented with more challenges than ever before. With competition increasing in virtually every industry – and coming from a surprising number of new and unexpected sources – customers need more accurate information; and they need it more consistently, more quickly, and more often. This data must often be captured from disparate parts of the supply chains for which we as a 3PL often provide a communications/technology bridge. We collect the data, report it in a relevant format, and often provide interpretation, root cause analysis, and recommendations for remedial and/or preventive action or strategic direction.

Further, cost avoidance, especially going into 2009, may become a critical survival skill. With the prospects of economic growth being challenged on so many fronts, efficiency and productivity will become the paths to profitability. As our team of logistics professionals work with 30,000 shippers and 48,000 carriers, their experience in creating solutions and streamlining processes in many industries serves our customers well. We have developed and implemented best practices, and streamlined processes that improve service, cut administrative burdens, and save hard transportation dollars. We are finding these skills and capabilities are more important than ever.

LQ: To what extent are your customers reassessing their networks? (Walter Zinn)
Jim Butts: Currently, because of rising costs and lower consumer demand, many customers are re-examining their supply chains and transportation plans to find ways to be more efficient and cut costs. Rising fuel costs have certainly been part of the analysis, but we are also seeing customers reassess their networks due to the decreased value of the dollar. Though these events are inter-related, there seem to be different effects. For instance, the high price of fuel has led to an interest in local, regional, and concentric distribution, to reduce the number of miles/gallons of fuel required. Meanwhile, the decreased value of the dollar has increased exports, and many North American shippers that previously had little or no market internationally have increased the amount of their global forwarding activity. Further, some companies are reconfiguring their sourcing from Asia to places like Mexico and Eastern Europe, and even back to the U.S.

LQ: Are they requiring additional or new services as a result? (Walter Zinn)
Jim Butts: Agility and flexibility for a dynamic supply chain have always been expected, and contraction and expansion are two sides of the same coin operationally. Our flexible model and our technology provide a lot of value to our customers in this kind of environment. We can be very creative in finding ways to reduce overall transportation spend. And our financial strength and stability make us a more desirable provider than others in the marketplace. As a customer, you certainly don’t want to be turning over important parts of your supply chain to a company that is in a questionable financial situation or may not ultimately be able to deliver what they promised.

We have seen that network analysis, mastery of a full complement of cultural competencies – the global presence with local execution – are more important than ever. There has been an increased desire for a wide variety of what we view as consultative services; these are capabilities that we are providing to specific customers, and will likely make them more generally available as the demand and deliverables rationalize.
LQ: Are there additional ways in which the relationship with customers was affected by the rise in fuel costs? (Walter Zinn)

Jim Butts: We have, since early 2008, seen an increase in interest and resultant demand for transportation management, including over-arching strategy and tactical execution. Transportation management, with its focus on strategic capacity, route-guide compliance, as well as mode and load optimization, becomes a powerful cost-abatement tool when aligned with the proper service parameters and metrics. It can also reduce pressure on internal budgets by converting many fixed expenses into variable costs by having a 3PL perform the routine, non-core logistics functions.