Will Disruption in The Inefficient Transportation Market Come From Within

Many of you who have read my blog over the last many years know I am a bit critical of our industry.  Innovation has been very slow in coming (Thus resulting in a somewhat man made crisis), executives at major trucking companies treat their service as a commodity (Talk about pricing relative to supply and demand not relative to value) and when measured by performance, our industry has not performed well.

I have advocated for outsiders to come in and disrupt the industry which led to my excitement when Elon Musk put his crosshairs squarely on the industry.  Unfortunately, the "outsiders" have almost the reverse problem of the insiders - the outsiders just don't understand the industry.  They think a driver is going to be on his iPhone all day.  So, if the insiders are stodgy and not innovative and the outsiders are not knowledgeable enough to matter, where will the industry get the innovation it needs to defeat the current crisis and truly add value to consumer's lives?

Well, it appears the disruption is coming from within which is probably the best we could hope for.  Two companies, Lanehub and the BiTA alliance are really driving significant innovation and both are led by long term industry experts.  Even the major carriers are providing some innovative solutions such as JB Hunt's 360 solution for both carriers and shippers. 

Our industry is on the verge of a major crisis and while clearly there have been some externalities which have exacerbated the problem, most of the issue is within the industry.  A lack of looking forward, a lack of innovation in productivity and finally, even leaders of the industry, treating it like a commodity, have all contributed to this crisis.  Look to the innovators, some of whom I have mentioned above, for leadership. 

What Exactly is Amazon... 3PL? Retailer? IT Company? Delivery Company? - Answer: All of the Above

I have written about the growth of Amazon as a 3PL / Logistics company for a long time and yet even I, after following them very closely, did not fully understand their reach into all facets of the value chain until this week.  This week I had the privileged of attending the Council of Supply Chain Management Professionals' (CSCMP) Annual Global Conference where I heard Dave Clark, SVP of Global Operations and Customer Service at Amazon speak about their plans.

Amazon Prime, Amazon Flex etc etc. were all discussed at this conference and I found it fascinating. A couple of key points:

1. They take care of back office technology to support the front end.  Too many times companies will roll out slick apps or websites but do nothing different in the back room.  This leads to sexy presentations but bad customer experiences.
   
2. Innovation is a way of life at Amazon.  Amazing amount of innovation and amazing how much of it bubbles up from the working level.  This, of course, does not happen by accident and the culture along with the infrastructure to support this environment has been nurtured over a long period of time.
   
3. The concept of one way and two way doors in innovation was critical.  A two way door is where an innovation can easily be backed out of if it does not work. In this case, the innovation is moved along quickly, tried and adjusted if needed.
   
   The one way door is an innovation where the ability to come back is severely limited (Think Hernan Cortes burning of the boats).  This means there must be very careful thought, due diligence and research before going forward. 

   

   Hernan Cortes burns the boats

   This structure allows for a lot faster innovation on a lot more products and services?  He did not say this but I would think for every 1 "one way door" innovation there are at least 10 "two way door" innovations.  Why make those 10 go through the grind necessary for the one way door innovation?
   
4. Speed is clearly their goal.  They measure order to delivery time from the time the customer hits "buy" to the time the product is out the door.
   
5. When asked how they balance service and cost his answer was clear:  They don't.  They provide the service then figure out the cost.  When asked about profitability he responds that Amazon is very profitable... they just choose to reinvest all the money back into the company. 

If you are in any of the industries I mentioned above, don't think Amazon is not coming for your business ... they are.  

See all my writings on Amazon here. 

Where is The Elon Musk of the Logistics World?

I am currently reading the book  Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future I highly encourage everyone to read it.  However the book gave me pause to think about our industry. An industry that at one time was filled with innovative giants such as Don Schneider and J.B. Hunt. Now, I have to ask, where have they all gone?

Where is the innovation in logistics and supply chain?  Think of it... with all the technology, education and advanced degrees, we still shut down the West Coast ports.  And when they shut down, supply chains came to a swift halt.

I consistently hear trucking and intermodal company executives talk about "supply and demand" as a driver of price.  They say "Watch out, capacity is low.. prices are going up and you need to be a shipper of choice".  Of course, this is nothing more than commodity pricing.  They are admitting they are out of ideas and they are pricing their service as a commodity.

In my early days in the industry I was able to see huge risk takers and innovators develop the use of satellite tracking for better routing (Don Schneider) and the proper use of trains and the overall development of intermodal (J.B. Hunt).  It was a thrilling time.  Lots of change, lots of risk, great growth and huge innovation.   Today, it appears innovation is either becoming a broker or buying a company.  In some cases, financial engineering has become the innovation of logistics.

I ask, where is our Elon Musk?  Where is our Steve Jobs?  The industry is screaming for someone to innovate.


 

Execution IS A Strategy

At Logistics Viewpoints Adrian Gonzalez writes a post titled: "Forget Innovation, Just Execute Better" and I found this to be extremely interesting on two fronts.  First, it is interesting that "flawless execution" does not get the respect it deserves and if you dedicate your life to this you are somehow working on something "less" than strategy.  The top performers deal with strategy and all others deal with the day to day execution - or so the top consultants will say.

Of course, while that is a highly held belief of HR departments and other strategy people what we find in real life is it usually is the execution portion of the business that makes or breaks the company.  As Adrian rightly points out: does anyone believe HP needs different strategies or innovation?  No.  It is a company which just executes very poorly.  While the "big 3" were trying to innovate and develop high level strategies (Remember Jacque Nassar at Ford rolling up junk yards under the Greenleaf subsidiary - Ultimately a failure.) Toyota was focusing on execution and doing it really well.

Second, more and more it is execution which differentiates companies.  Does the product sold at Wal-Mart really differ that much from Target or J.C. Penny?  They are buying from the same vendors and even when they have an "exclusive" it usually is a SKU number change versus a true differentiation.  So, what makes the experience different between these stores for the consumer?  Execution is what makes it different.  Items such as:

1. Low Cost
2. Availability
3. Easy in and out
4. Presentation
5. Customer Service
6. Web availability

These are all execution actions and they truly differentiate these companies (I will leave it to the reader to determine which does it best / worst).  

To further the study of this topic, I highly recommend everyone read: "Execution: The Discipline of Getting Things Done" by Larry Bossidy and Ram Charan.  This book really talks about the importance of elevating the discipline of "getting things done" to a very high level - at least to a level equal to strategy and innovation.  Remember, innovation is not always just new products but if you can innovate on ways to execute tasks that could reap huge rewards (Think about all the innovation of basic processes like "checking out" which makes an Apple store such a great place to shop) you may find huge competitive advantage. 

Here is how Bossidy and Charan define Execution: 

1. The missing link
2. The main reason companies fall short of their promises
3. The gap between what a company's leaders want to achieve and the ability of their organizations to deliver it. 
4. Not simply tactics, but a system of getting things done through questioning, analysis, and follow-through. A discipline for meshing strategy with reality, aligning people with goals and achieving results promised.
5. A central part of a company's strategy and its goals and the major job of any leader in business
6. A discipline requiring a comprehensive understanding of a business, its people and its environment.
7. The way to link the three core processes of any business - the people process, the strategy and the operating plan together to get things done on time. 

I highly recommend the book and you can buy it here: