Executive Briefings

A Look at Some Major Forces Impacting Supply Chain Management

A conversation with John Langley Jr., clinical professor of supply chain management at The Pennsylvania State University.

Now at the Smeal College of Business at Penn State, Langley has been involved in supply chain management and business logistics for more than 35 years. Prior to joining Penn State, his alma mater, Langley taught at Georgia Tech and at the University of Tennessee. He was at the latter for 28 years and while there he co-founded the Center for Logistics Research, Supply Chain Forum, and Office of Corporate Partnerships.

Langley is the co-author of three books on logistics and supply chain management. He has written numerous articles, technical reports, and presentations in those areas and has addressed countless conferences, forums, universities, groups, and industries. He serves on the boards of Averitt Express, Forward Air Corporation, and UTi Worldwide, and actively consults with both logistics user and provider firms. Langley is past president of the Council of Supply Chain Management Professionals and has received the council's Distinguished Service Award.  In 2005, he was honored as one of the profession's top five logistics executives at the Richmond Events Logistics and Supply Chain Forum. In 1992, Smeal recognized him as an Outstanding Alumnus of its Business Logistics Program.

Langley holds a bachelor's degree in Mathematics, an M.B.A., and a Ph.D. in Business Logistics from Penn State.

SupplyChainBrain caught up with him at the annual Nasstrac conference.

Q: Let's begin by talking about the future of 3Pls and 4Pls.

A: Langley: I think we're seeing shippers being more receptive to understanding the kinds of services and values this commercial sector can provide. That doesn't mean, of course, that every 3PL or 4PL is going to be aligned with all of the needs of every company, but shippers do need to take the opportunity to learn about the capabilities of the commercial sector with its continually improving and evolving set of capabilities.

Q: And what's the benefit when they do investigate that?

A: Langley:  The benefit comes in a couple of ways to companies that see some utility in using 3PLs and 4PLs. One is that they gain confidence when the realize they can't afford or have the luxury of managing internally. The fact of life is that not all companies have all of the resources internally that they need to manage their business, and logistics capabilities are no exception.

The second thing is, they should expect from using a commercial provider that it would help in terms of a strategic fit with the organization. Sometimes the best approach is to hire the experts and then you free up other people internally. Companies are always concerned about cost. It may be that a commercial alternative is less costly - although quite honestly I wouldn't say that should be a prerequisite. And sometimes to get the service you desire may actually cost more than you would have spent internally - but you do have your people free now to do other things.

Third, a commercial service can sometimes help companies learn how to improve their own operations internally. That's another step in the direction of professional development or awareness of best practices in how to improve logistics and supply chain activities.

Q: Government policies and regulations are in the news quite a bit of late as they relate to transportation. Is there an appropriate role of government in that area?

A: Langley: One of the things we're facing is that the global economies are not in a boom cycle at the moment. One of the impacts of that is that it is hard to find a governmental unit, whether you're talking about a country or state or local kind of unit, that is not trying to figure out ways to raise more tax revenue. You could conclude generally that most governments are trying to figure out ways to regulate industries, including transportation. And it's a very handy industry to regulate because the general public is well aware of trucks up and down the road, the rails, we see ocean shipping - so it's a very obvious thing to do.

One of the problems is that every layer of government tries to impose its own regulations on modes of transport, and honestly, what we're seeing isn't far from that. Also, you find when any two levels of government have their own regulations, they are conflicting to some extent.

Q: What's our recourse?

A: Langley: So we need two things. One has to do with these levels of government. For international and global shippers, it's particularly obvious that when you try to do business in multiple countries in the world - 50, 60, 70 countries - and be in compliance with the regulations of all of them, mathematically it becomes impossible to do so. We need to work on that.

The other thing we need to work on is partnership between industry and the levels of government. That way there stands a better chance that regulations and policies that work their way into law will be practical and make the most sense in a holistic way from the perspectives of providers of transportation services and the companies using them.

For example, there's a trend toward not only regulating some activities of providers of transportation services but also on those using the services. We have to get to the point where we look at the business interests of everyone involved.

One final comment: Here in the U.S., one of the highest macro priorities we're facing is job creation. Most would agree that's a positive thing, but to the extent that regulations are imposed on companies, including transporters, they just make the cost of doing business higher. That ultimately translates into increased cost of goods, so there's less of an ability to hire more people. It makes it more difficult for the entire food chain, if you will, and you end up with a net result of no job creation.

Sensible regulations can be responsive to the needs of all constituencies, and that would be an improvement over what's going on recently.

Q: I want to turn to talent management, something that's also very much talked about now. Given your career in education, what are your views on the trends in that area?

A: Langley: I have observed logistics and supply chain and transportation for a very long time, and we're now to a point where we have a number of universities prominent in producing graduates specializing in these areas. There really is no shortage today of institutions that can provide students with baseline knowledge of the management of transportation and logistics and supply chains. But when you look at the needs of the industry, we need a continuing supply of people not only educated well but also with the strategic aspects that let them step into key management roles.

Q: Do we have that now?

A: Langley: It's interesting today to see the younger generation, our younger colleagues in their 20s and 30s. The capabilities they have are outstanding. I think we will see them actually begin to step into middle and senior management roles maybe even more quickly than people did at an earlier stage. The key here is talent management. We must make sure we have a steady supply of well equipped people. And then on an individual-organization level, one of the highest priorities is to look at people in place today, realize they won't be there tomorrow for various reasons, and have a cadre of people that are ready to step into those executive slots.

So whether it's an executive search firm or just good guidance in terms of succession planning - we have to look at everyone in the organization and ask what would be the plan of succession if something were to happen tomorrow.

Being on the boards of a couple of publicly held corporations, I know our shareholders are asking that type of what-if question. And it is a good one. We need to be able to answer it.

Q: Let's turn to challenges to efficient supply chain management. What's the greatest one?

A: Langley: The greatest is to make sure we can innovate and transform our supply chains into creating additional value beyond what we're providing today. The greatest threat to any organization is to become a commodity kind of product or service.

Q: Elaborate on that, please. How are we commodities?

A: Langley: By commodity, I'm referring to something that may be of great value but it becomes repetitive and easy to imitate, so it becomes a commodity item. Companies that specialize in commodity services are not built to last. Companies that innovate are the most useful ones. To become more efficient, they work with customers, figure out the directions where they're headed and make sure that whatever the needs of the customers are, that the organization is johnny-on-the-spot with the products and services they need.

In trying to understand the transportation industry, people are inclined to look at other companies in the same industry for direction. But if you take a company like Apple, for example, which is on anybody's list of innovative organizations, just take a look at their new-product development process. Or look at the newer automobiles these days. They have features that create benefits, and no one told them to do that. They learned that by looking at consumers and figuring out just what consumers really need, and they designed products and service offerings that meet those needs. So the ones that will succeed are the ones who are efficient and able to differentiate themselves from competitors by innovating and transforming their organizations.

To view video in its entirety, click here

Resource Link:

Smeal College of Business, Penn State


Keywords: supply chain management, supply chain jobs, logistics & supply chain, supply chain trends

Now at the Smeal College of Business at Penn State, Langley has been involved in supply chain management and business logistics for more than 35 years. Prior to joining Penn State, his alma mater, Langley taught at Georgia Tech and at the University of Tennessee. He was at the latter for 28 years and while there he co-founded the Center for Logistics Research, Supply Chain Forum, and Office of Corporate Partnerships.

Langley is the co-author of three books on logistics and supply chain management. He has written numerous articles, technical reports, and presentations in those areas and has addressed countless conferences, forums, universities, groups, and industries. He serves on the boards of Averitt Express, Forward Air Corporation, and UTi Worldwide, and actively consults with both logistics user and provider firms. Langley is past president of the Council of Supply Chain Management Professionals and has received the council's Distinguished Service Award.  In 2005, he was honored as one of the profession's top five logistics executives at the Richmond Events Logistics and Supply Chain Forum. In 1992, Smeal recognized him as an Outstanding Alumnus of its Business Logistics Program.

Langley holds a bachelor's degree in Mathematics, an M.B.A., and a Ph.D. in Business Logistics from Penn State.

SupplyChainBrain caught up with him at the annual Nasstrac conference.

Q: Let's begin by talking about the future of 3Pls and 4Pls.

A: Langley: I think we're seeing shippers being more receptive to understanding the kinds of services and values this commercial sector can provide. That doesn't mean, of course, that every 3PL or 4PL is going to be aligned with all of the needs of every company, but shippers do need to take the opportunity to learn about the capabilities of the commercial sector with its continually improving and evolving set of capabilities.

Q: And what's the benefit when they do investigate that?

A: Langley:  The benefit comes in a couple of ways to companies that see some utility in using 3PLs and 4PLs. One is that they gain confidence when the realize they can't afford or have the luxury of managing internally. The fact of life is that not all companies have all of the resources internally that they need to manage their business, and logistics capabilities are no exception.

The second thing is, they should expect from using a commercial provider that it would help in terms of a strategic fit with the organization. Sometimes the best approach is to hire the experts and then you free up other people internally. Companies are always concerned about cost. It may be that a commercial alternative is less costly - although quite honestly I wouldn't say that should be a prerequisite. And sometimes to get the service you desire may actually cost more than you would have spent internally - but you do have your people free now to do other things.

Third, a commercial service can sometimes help companies learn how to improve their own operations internally. That's another step in the direction of professional development or awareness of best practices in how to improve logistics and supply chain activities.

Q: Government policies and regulations are in the news quite a bit of late as they relate to transportation. Is there an appropriate role of government in that area?

A: Langley: One of the things we're facing is that the global economies are not in a boom cycle at the moment. One of the impacts of that is that it is hard to find a governmental unit, whether you're talking about a country or state or local kind of unit, that is not trying to figure out ways to raise more tax revenue. You could conclude generally that most governments are trying to figure out ways to regulate industries, including transportation. And it's a very handy industry to regulate because the general public is well aware of trucks up and down the road, the rails, we see ocean shipping - so it's a very obvious thing to do.

One of the problems is that every layer of government tries to impose its own regulations on modes of transport, and honestly, what we're seeing isn't far from that. Also, you find when any two levels of government have their own regulations, they are conflicting to some extent.

Q: What's our recourse?

A: Langley: So we need two things. One has to do with these levels of government. For international and global shippers, it's particularly obvious that when you try to do business in multiple countries in the world - 50, 60, 70 countries - and be in compliance with the regulations of all of them, mathematically it becomes impossible to do so. We need to work on that.

The other thing we need to work on is partnership between industry and the levels of government. That way there stands a better chance that regulations and policies that work their way into law will be practical and make the most sense in a holistic way from the perspectives of providers of transportation services and the companies using them.

For example, there's a trend toward not only regulating some activities of providers of transportation services but also on those using the services. We have to get to the point where we look at the business interests of everyone involved.

One final comment: Here in the U.S., one of the highest macro priorities we're facing is job creation. Most would agree that's a positive thing, but to the extent that regulations are imposed on companies, including transporters, they just make the cost of doing business higher. That ultimately translates into increased cost of goods, so there's less of an ability to hire more people. It makes it more difficult for the entire food chain, if you will, and you end up with a net result of no job creation.

Sensible regulations can be responsive to the needs of all constituencies, and that would be an improvement over what's going on recently.

Q: I want to turn to talent management, something that's also very much talked about now. Given your career in education, what are your views on the trends in that area?

A: Langley: I have observed logistics and supply chain and transportation for a very long time, and we're now to a point where we have a number of universities prominent in producing graduates specializing in these areas. There really is no shortage today of institutions that can provide students with baseline knowledge of the management of transportation and logistics and supply chains. But when you look at the needs of the industry, we need a continuing supply of people not only educated well but also with the strategic aspects that let them step into key management roles.

Q: Do we have that now?

A: Langley: It's interesting today to see the younger generation, our younger colleagues in their 20s and 30s. The capabilities they have are outstanding. I think we will see them actually begin to step into middle and senior management roles maybe even more quickly than people did at an earlier stage. The key here is talent management. We must make sure we have a steady supply of well equipped people. And then on an individual-organization level, one of the highest priorities is to look at people in place today, realize they won't be there tomorrow for various reasons, and have a cadre of people that are ready to step into those executive slots.

So whether it's an executive search firm or just good guidance in terms of succession planning - we have to look at everyone in the organization and ask what would be the plan of succession if something were to happen tomorrow.

Being on the boards of a couple of publicly held corporations, I know our shareholders are asking that type of what-if question. And it is a good one. We need to be able to answer it.

Q: Let's turn to challenges to efficient supply chain management. What's the greatest one?

A: Langley: The greatest is to make sure we can innovate and transform our supply chains into creating additional value beyond what we're providing today. The greatest threat to any organization is to become a commodity kind of product or service.

Q: Elaborate on that, please. How are we commodities?

A: Langley: By commodity, I'm referring to something that may be of great value but it becomes repetitive and easy to imitate, so it becomes a commodity item. Companies that specialize in commodity services are not built to last. Companies that innovate are the most useful ones. To become more efficient, they work with customers, figure out the directions where they're headed and make sure that whatever the needs of the customers are, that the organization is johnny-on-the-spot with the products and services they need.

In trying to understand the transportation industry, people are inclined to look at other companies in the same industry for direction. But if you take a company like Apple, for example, which is on anybody's list of innovative organizations, just take a look at their new-product development process. Or look at the newer automobiles these days. They have features that create benefits, and no one told them to do that. They learned that by looking at consumers and figuring out just what consumers really need, and they designed products and service offerings that meet those needs. So the ones that will succeed are the ones who are efficient and able to differentiate themselves from competitors by innovating and transforming their organizations.

To view video in its entirety, click here

Resource Link:

Smeal College of Business, Penn State


Keywords: supply chain management, supply chain jobs, logistics & supply chain, supply chain trends