A Conversation with Mike Bible,
CEO, Agility Global Integrated Logistics, Americas Region, based in Santa

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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: David Faoro, Director Supply Chain, The International Group; Thomas Goldsby, Ph.D., University of Kentucky; John Langley Jr., Ph.D., Georgia Institute of Technology

LQ: As the breadth of services offered by the 3PL sector continues to widen, one expectation from the customer base is the respective sales organizations have the ability to knowledgeably discuss and review these new services with clients. The needed focus would seem to be shifting from a transactional selling approach to more of a consultative approach. What steps are you taking to develop this consultative approach with clients and potential clients? (David Faoro)

Mike Bible: All of our sales representatives engage customers in a consultative discussion about their requirements. Customers are looking for different things from logistics providers, and our sales organization is, we have a Field Sales team that engages more transactional-minded customers and a Strategic Account Management team that engages customers with more involved logistics requirements. Outside of sales, we have specialized support to assist the sales rep and the customer in assessing more complex issues and defining a solution for them.

LQ: 3PLs have different approaches to serving their customer base ranging from “one-stop shopping” where one person or group is responsible for delivering all services, to multiple touch points where the customer may have to deal with multiple persons or locations. Which approach are you taking and which approach do you feel offers the best level of service for your customers? (David Faoro)

Mike Bible: The answer is, it depends on the customer and their requirements. As we operate in a global network, we are often providing services that touch multiple points along the supply chain. Our desire is to focus on areas in the supply chain where we can add the most value for our customers; this may involve end-to-end services or just a particular link in the chain. Our goal is to offer more comprehensive services to our most valued clients.
LQ: How far can a 3PL go within a client organization to drive business process improvement and change? What are some of the barriers you have faced in this area? (David Faoro)

Mike Bible: A 3PL typically links into a customer’s overall supply chain. This often involves systems linkage or interface from the provider to the customer in order to give them visibility of their inventory, in-transit goods and goods delivered to DC or store locations. As much of the supply chain is outsourced to a 3PL, it is expected that the provider will not only handle their services, but also look for opportunities to improve other parts of their business, typically either upstream or downstream from the 3PL services. This mainly equates to how the 3PL can save the customer money: higher inventory turns, faster supply chains, reduced cost of transportation, etc.
LQ: As the 3PL industry continues to consolidate and the service offerings come to appear the same, how will the consolidators differentiate their services in the future? (David Faoro)

Mike Bible: This mainly comes down to customer requirements. Consolidation is a means to an end; mainly acquiring added service capabilities and scale in order to better service existing and future customers, and do so more profitably. In terms of differentiation, I believe we shall see more providers moving toward more personalized service to their customers. This should certainly come in the form of more robust service offerings, but also with a capability that can help the customers solve their most difficult problems. Providing a comprehensive, high quality service, will become the norm, and the differentiation will occur with a stronger relationship with the customer’s senior management; to become a business partner, and an extension of the customer management team.

LQ: Do you envision 3PLs assuming a broader role in the supply chain, such as managing supplier and vendor-managed inventory programs, or even assuming some of the inventory risks through inventory financing? (Thomas Goldsby)

Mike Bible: Yes, many providers have already moved into such programs, particularly managing customers’ inventory. We have seen an increasing request by customers for providers to offer inventory financing or even purchase the customer’s inventory, seeking to push the risk of loss and inventory cash flow burdens to the third party providers. I believe that 3PL providers will move into this for very selected customers; those where the added risks and cash flow investments offer the provider an opportunity to build a stronger relationship with the customer and significantly increase the switching costs.

LQ: How can 3PLs ensure that their interests and the interests of their customers are aligned? (Thomas Goldsby)
Mike Bible: It comes down to customer relationship and continuous communication. It is essential that the roles and responsibilities of the providers and the customers are aligned, and it is critical that they meet face-to-face on a periodic (regular) basis to ensure interest are aligned, and that the service providers understand how a customer’s business dynamics are evolving in order to adjust accordingly.

LQ: Has your company had success with forms of gain sharing with customers? If so, can you share an example? If not, what are the pitfalls and hazards associated with such programs? (Thomas Goldsby)

Mike Bible: No, we have not engaged in gain sharing programs with customers. The potential risks of such programs are moving some of the customers’ business risks to the provider, when the provider is generally in a position to only influence part of the outcome; that portion tied to their specific service delivery. When the desired outcome of such a program is not achieved, it negatively impacts the standard relationship of providers and customers to those of joint business partners.

LQ: What are your priorities in the area of information technologies that can support your relationships with customers? (John Langley Jr.)

Mike Bible: Our priorities in IT are mainly in the form of enhancements of existing operations and customer-facing applications. We are looking to improve our freight visibility tools that allow our customers to see the status of their freight along the supply chain. We have standardized and linked our global applications for freight management, warehouse management system, and origin-cargo management and PO visibility applications. These applications will allow us to provide end-to-end services more effectively to our customers and provide them with better visibility and linkage into their systems, as required.

LQ: What do you feel are areas of great interest with regard to innovative, value-added services by 3PLs for customers? (John Langley Jr.)

Mike Bible: I believe there are several, but I’ll comment only on one – greening the supply chain. With an unbelievably sharp rise in fuel prices this year, and the strain it put on the asset-based providers in our industry – air, ocean and trucking providers – it is clear that something has to change. Although the government will eventually pass legislation requiring more environmentally favorable logistics to minimize the impact on greenhouse gases, I believe there are opportunities now for service providers to create innovative solutions ahead of their competition. The question is whether customers have a healthy appetite for a green supply chain, particularly if it initially is more costly than what they do today.

LQ: What do you feel are the greatest areas of market opportunity for 3PLs? (John Langley Jr.)
Mike Bible: International supply chain management is getting more complex and more expensive with the various external factors that shook the industry in 2008 – exponential rise in fuel costs, devaluation of the dollar, environmental risks and move toward more green supply chains, new security requirements, etc.

I believe the greatest opportunities are for those providers that can grow their share of end-to-end services, effectively linking the full international supply chain from product manufacturing to a final product sale. Although not all customers are willing to outsource their full supply chain to a single source provider, I believe those that have this capability are in a strong area of long-term growth. This is particularly critical given the various market factors noted above.

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.)
Mike Bible: I don’t believe this at all. In fact, I believe things are getting more interesting and are creating more opportunity for service providers to enhance their customer relationships. The challenges of global trade are increasing, and in 2008 we have seen close to a perfect storm of industry challenges: explosive growth inthe price of fuel, significant devaluation and variability in the U.S. dollar, capacity challenges in international air and ocean freight, lack of infrastructure development in the U.S. in rail and roads, and finally, the collapse of our financial markets. Although each of these challenges is enough for any company to have to manage in a given year, U.S. companies are facing them all at once. It is a unique opportunity for service providers to navigate their way through these troubled waters and find innovative solutions for their customers.

LQ: If you could ask your customers to change just one thing, what would it be? (John Langley Jr.)
Mike Bible: I would like to see them more engaged with their service providers in addressing macro economic factors that are impacting us today – green supply chain, and added TSA security measures on air export cargo. There is not enough dialog between customers and providers about how these macro factors will impact their business and what they are doing about it.

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