Executive Briefings

Logistics Suffers When Expertise of Vendors, 3PLs is Too Limited

Outsourcing logistics is fine in theory, but in practice many service providers are not experienced in much outside their own small niches.

Columbia Forest Products


Mitch Mitchener

Mitch Mitchener has been director of corporate logistics for Columbia Forest Products for the last nine years. Prior to that, he spent 23 years as western regional manager of logistics for Georgia Pacific Corp. He's also taught transportation and transportation law at numerous colleges and universities. Mitchener graduated from University of Washington and is a Vietnam veteran. He has resided for the past 19 years in West Linn, Ore., with his wife and 4 horses.
Columbia forest Products, based in Portland, Ore., is reportedly the largest manufacturer of hardwood veneer, hardwood plywood and laminated products in North America. Its interior veneers and panels are used in high-end cabinetry, fine furniture, architectural millwork and commercial fixtures. Products are sold through a network of wholesale distributors, mass merchandisers and major OEMs.
Employee-owned, Columbia Forest Products manufactures products in 20 facilities in the U.S. and Canada. It traces its origins to 1957 and its first hardwood plywood plant, in Klamath Falls, Ore.


Q: How has the economic downturn affected technology projects and initiatives of executives like yourself?
A: I think you find a strong consolidation going on throughout the industry, companies buying and selling each other. There is an effort to take the combined technologies they already have and make them work better, as opposed to a bunch of new companies jumping into the marketplace with some "radical" new technology.

Most companies - and certainly there are some exceptions to the rule - don't have the capability to use the technology that's already out there today. Internally, their own systems can't handle it. I find it interesting that there are times when you can watch technology companies leap forward with their capabilities simply because they can, but when they try to put it in the marketplace, people just say 'what, how do we do that?' Many companies that I have talked with have put IT projects on the back burner.

I think all of that is part of the slowdown process, in addition, of course, to the financial situation of the industry in general.

Q: Are companies taking advantage of so-called fire sale prices on technology that vendors can't move otherwise?
A: I haven't run into it personally because I haven't gotten to the point of asking anybody to quote me a hard number. But I have heard comments from some fairly large players in the industry who have signed deals that were every bit as good or better than what they expected.

Q: We may see even more outsourcing of logistics functions in an effort to save money. Any concerns there?
A: My concerns in those areas have more to do with the capabilities of the people selling those services than the concept itself. I think the idea of outsourcing logistics is fine, but what I have typically found is that many of these companies have very strong capabilities in a certain area but are very poor in others.

Q: For example?
A: By that I mean, for instance, they may be good at trucking and intermodal and poor in the rail environment, or good internationally but not very good domestically.

As companies get larger and more international in scope, and as they start relying upon these services, they will need suppliers with broader capabilities; ones that have true experts in their organizations in each area of logistics. I've found it quite frustrating to deal with some of them. For example, I'll start discussing one logistics specialty and everything seems to be OK, but the minute I get into another area I get a lot of blank stares or a string of 50 buzz words that indicate a lack of knowledge.

Q: What do you do then?
A: I usually shut down when that happens because I need help in all arenas.

Q: What logistics needs of the forest products industry are of particular concern?
A: The industry is becoming very international in scope. The requirement for import/export capabilities is quite high. Many players in our industry are geographically very diverse, especially when you get to the larger companies with hundreds of mills. The capabilities of a third-party provider need to be extensive, from both a technology and geographic perspective. Some providers are very good in the east but not the west, or in Canada but not in the U.S., domestic, but not international, etc.

Q: Aside from transportation, what trends in collaborative commerce or e-solutions are there in the industry?
A: VMI [vendor-managed inventory] and CPFR [Collaborative Planning, Forecasting & Replenishment] are looming large for all of us, and part of that has to do with the customer base that is changing today - larger and more sophisticated customers for the forest products industry. Among those would be the "big boxes" - the Lowe's, Home Depots and the Menard's of the world.

The supply-chain requirements for these customers are soaring and our ability to partner with and service them requires that we play in their arena. Take VMI as an example. I think if handled well, it's definitely a tool that's valuable to both parties. If we as manufacturer and shipper do a good job handling VMI, it's actually a benefit to us. And, certainly, the customers who want us to participate in these programs see them as winners for themselves as well.

Their requirements are forcing the process to stretch back to the other side of the coin now, to our vendors and suppliers. This is where we're getting into the true supply-chain process. Cradle to grave, so to speak.

Q: What specifically are your needs for solutions in, say, order management and fulfillment?
A: We are somewhat unique in that everything we manufacture is made to order - so, no inventory, no stock, and only minor amounts of raw material. Unless there's an order on the table, we don't make anything.

Q: When those orders come in, how many SKUs are potentially involved?
A: I haven't looked at it lately, but it is more than 75,000. When you think about hardwood plywood and veneer, you don't have to change very much before it becomes a completely new product. Dimension, grade, wood type (top and bottom), core type - there are hundreds of core types nowadays - there are dozens of veneer types, dozens of veneer grades, and then of course every thickness from paper thin to an inch and half thick by every dimension imaginable. So when you start doing the multiplication, it becomes a pretty large number.

Consequently, VMI and some of these other processes become quite a bit different for us than they would be for a producer of commodity products, such as 2X4 lumber or plywood sheathing. Manufacturers of these products just keep cranking them out and typically work from their own inventory. In our case, we have a delicate balancing act because as we are developing our VMI inventory projections with our customers, we need to back that up into our resource management and production scheduling. That gets pretty interesting at times, because if all of a sudden one of our customers has a big sale and their inventory backs up more quickly than we or they would have expected, then we've got to do a lot of rearranging to make sure we have the proper raw materials and production scheduling capability to get a product back into the inventory chain.

Q: How do you accomplish that?
A: We're quite honestly lacking in technology in that area at the moment. We do have a process being put in place to help us significantly, but we don't expect to see that fully implemented before the middle of next year, so we're still using old technology. But we're making it work pretty well.

Q: How long has your business model been made to order?
A: We've been in business for 45 years and it's been that way from day one.

Q: Is this similar to the so-called Dell model? Should it be called the Columbia Forest Products model?
A: The hardwood plywood industry model would be more correct, as I believe most of our competitors operate the same way we do. In some ways it's more difficult than the Dell or computer products model because there's an adage in our industry that says "you get what the tree gives you." You can predict what grade of wood you're going to get out of a tree with some degree of accuracy, but you never really do know for sure. So when you start building your raw materials inventory, especially on the hardwood side, you buy logs and peel or slice them in your mills into veneer, and you hope and pray that you get what you've predicted. If you don't, you scramble like crazy.

Q: You're talking about quality?
A: Grade would be more accurate because there are people who buy lower grades for different purposes. What you are really looking for is what we refer to in the industry as the mix. You need so many As, so many Bs, so many Cs, etc., which is the grade mix, the high grade, low grade, that sort of thing. You are looking to get an appropriate mix to match what your customers typically buy.

As an example, if you're dealing with a cabinet manufacturer, especially a large one, he's buying product and grade to manufacture cabinets all the way from very inexpensive for a tract homebuilder all the way up to products for an Architectural Digest home. And, as you might imagine, there's a rather large disparity.

Q: The "big box" retailers are IT sophisticates. What about your suppliers?
A: We are generally our own supplier; we're very vertically integrated. However, as we grow, we are reaching out to more and more vendors. Many of those vendors are on the import side of our business. Hence the need for international expertise.

Q: Such as your hardwood panels?
A: We import product from all over the world, everything from finished hardwood panels to what we call platform or core stock material to a variety of veneers and a few other products. We run the gamut of imported forest products in this industry, so we're reaching out constantly. Working with our vendors to match our needs is getting more sophisticated. We travel a great deal internationally to meet with our manufacturing partners to bring them up to speed to be able to match the needs that we have. As you might suspect, in most arenas, they are quite a bit behind us technologically, and that does get to be an issue.

Q: What help can 3PLs or other service providers give here?
A: I'll just reiterate the inability that many of these companies have to supply the range of tools necessary to service the whole industry. I don't want to pick out any names, but there are some pretty large names both in the software side and on the 3PL side that do an extremely good job in one area and a poor one in others. And since we have been looking at these services over the last couple of years, I find that to be a fairly consistent pattern.

As I said before, there are companies that are extremely good on the LTL side, both from a procurement and a rating side. They know everything there is to know about how to deal with the LTL industry, and then when you get into truckload or intermodal, they start to get weaker, and then when you get into rail, they're useless. They don't know anything about how the railroads work. Most of them can probably track and trace on the railroads, but that's probably where their expertise ends.

Another area of concern, whether they're a vendor, a 3PL or an e-commerce solution-type company, is that they often want to go outside the box when you want to talk about only transportation management, or VMI, or international logistics, etc. They always want to figure out how to tie whatever you're looking for into one of the other tools they want to sell.

I've had this conversation with many of my peers in the industry, and they all say the same thing, "We've already got tools to do that, what we really need - as an example - are some good transportation tools to help us with equipment utilization, the truck bidding process, rate management and those kinds of things."

Most of the vendors aren't really comfortable doing just transportation management. I think many of those companies are staffed by people who come out of the IT industry or the warehousing industry. They may be good at inventory management, but they are relatively weak at pure transportation functions.

Q: Is the Customs-Trade Partnership Against Terrorism (C-TPAT), predicated on national security needs, worrisome?
A: In the forest products industry, you don't have quite the concern that you may find in the electronics, or technology industry, for example, but as we venture further into the global market, we are being forced to consider these issues. C-TPAT is referred to as voluntary by U.S. Customs, but I suspect that "voluntary" is a stretch. Regardless of the products you purchase overseas, you will be effected by C-TPAT. We will all have to follow the rules of vendor qualification, documentation, etc.

In another recent move, U.S. Customs has now just instituted a rule that a complete manifest of everything on board any container vessel destined for the United States be available 24 hours in advance of the shipment from a foreign port. That's an important change for not only the ocean freight industry but our industry as well.

It appears at this point that the burden is on the steamship line and our vendors, but that is still a very gray area in the rule promulgation.

Q: A lot of things have changed, if only in name, in the 35-plus years that you have been in logistics. What is perhaps the greatest change?
A: Collaboration, to quote a much-despised buzzword, the partnership between ourselves, vendors, customers and carriers. It was almost an adversarial relationship 20 or 30 years ago. It was either government regulated or was, how much can I negotiate you out of, and how much can you negotiate me out of, and then let's get on with it. Today, I think we are working much closer to make things work better for everyone in the supply chain. We have the tools and technology to identify very small specifics of our industry - traffic lanes that work better, equipment utilization that is better for the carrier, the type of equipment you need, prediction of raw materials supply, etc.

With all these little pieces, I think we can have a better working relationship with our carriers, vendors and customers - and all earn a little money for our shareholders.

Columbia Forest Products


Mitch Mitchener

Mitch Mitchener has been director of corporate logistics for Columbia Forest Products for the last nine years. Prior to that, he spent 23 years as western regional manager of logistics for Georgia Pacific Corp. He's also taught transportation and transportation law at numerous colleges and universities. Mitchener graduated from University of Washington and is a Vietnam veteran. He has resided for the past 19 years in West Linn, Ore., with his wife and 4 horses.
Columbia forest Products, based in Portland, Ore., is reportedly the largest manufacturer of hardwood veneer, hardwood plywood and laminated products in North America. Its interior veneers and panels are used in high-end cabinetry, fine furniture, architectural millwork and commercial fixtures. Products are sold through a network of wholesale distributors, mass merchandisers and major OEMs.
Employee-owned, Columbia Forest Products manufactures products in 20 facilities in the U.S. and Canada. It traces its origins to 1957 and its first hardwood plywood plant, in Klamath Falls, Ore.


Q: How has the economic downturn affected technology projects and initiatives of executives like yourself?
A: I think you find a strong consolidation going on throughout the industry, companies buying and selling each other. There is an effort to take the combined technologies they already have and make them work better, as opposed to a bunch of new companies jumping into the marketplace with some "radical" new technology.

Most companies - and certainly there are some exceptions to the rule - don't have the capability to use the technology that's already out there today. Internally, their own systems can't handle it. I find it interesting that there are times when you can watch technology companies leap forward with their capabilities simply because they can, but when they try to put it in the marketplace, people just say 'what, how do we do that?' Many companies that I have talked with have put IT projects on the back burner.

I think all of that is part of the slowdown process, in addition, of course, to the financial situation of the industry in general.

Q: Are companies taking advantage of so-called fire sale prices on technology that vendors can't move otherwise?
A: I haven't run into it personally because I haven't gotten to the point of asking anybody to quote me a hard number. But I have heard comments from some fairly large players in the industry who have signed deals that were every bit as good or better than what they expected.

Q: We may see even more outsourcing of logistics functions in an effort to save money. Any concerns there?
A: My concerns in those areas have more to do with the capabilities of the people selling those services than the concept itself. I think the idea of outsourcing logistics is fine, but what I have typically found is that many of these companies have very strong capabilities in a certain area but are very poor in others.

Q: For example?
A: By that I mean, for instance, they may be good at trucking and intermodal and poor in the rail environment, or good internationally but not very good domestically.

As companies get larger and more international in scope, and as they start relying upon these services, they will need suppliers with broader capabilities; ones that have true experts in their organizations in each area of logistics. I've found it quite frustrating to deal with some of them. For example, I'll start discussing one logistics specialty and everything seems to be OK, but the minute I get into another area I get a lot of blank stares or a string of 50 buzz words that indicate a lack of knowledge.

Q: What do you do then?
A: I usually shut down when that happens because I need help in all arenas.

Q: What logistics needs of the forest products industry are of particular concern?
A: The industry is becoming very international in scope. The requirement for import/export capabilities is quite high. Many players in our industry are geographically very diverse, especially when you get to the larger companies with hundreds of mills. The capabilities of a third-party provider need to be extensive, from both a technology and geographic perspective. Some providers are very good in the east but not the west, or in Canada but not in the U.S., domestic, but not international, etc.

Q: Aside from transportation, what trends in collaborative commerce or e-solutions are there in the industry?
A: VMI [vendor-managed inventory] and CPFR [Collaborative Planning, Forecasting & Replenishment] are looming large for all of us, and part of that has to do with the customer base that is changing today - larger and more sophisticated customers for the forest products industry. Among those would be the "big boxes" - the Lowe's, Home Depots and the Menard's of the world.

The supply-chain requirements for these customers are soaring and our ability to partner with and service them requires that we play in their arena. Take VMI as an example. I think if handled well, it's definitely a tool that's valuable to both parties. If we as manufacturer and shipper do a good job handling VMI, it's actually a benefit to us. And, certainly, the customers who want us to participate in these programs see them as winners for themselves as well.

Their requirements are forcing the process to stretch back to the other side of the coin now, to our vendors and suppliers. This is where we're getting into the true supply-chain process. Cradle to grave, so to speak.

Q: What specifically are your needs for solutions in, say, order management and fulfillment?
A: We are somewhat unique in that everything we manufacture is made to order - so, no inventory, no stock, and only minor amounts of raw material. Unless there's an order on the table, we don't make anything.

Q: When those orders come in, how many SKUs are potentially involved?
A: I haven't looked at it lately, but it is more than 75,000. When you think about hardwood plywood and veneer, you don't have to change very much before it becomes a completely new product. Dimension, grade, wood type (top and bottom), core type - there are hundreds of core types nowadays - there are dozens of veneer types, dozens of veneer grades, and then of course every thickness from paper thin to an inch and half thick by every dimension imaginable. So when you start doing the multiplication, it becomes a pretty large number.

Consequently, VMI and some of these other processes become quite a bit different for us than they would be for a producer of commodity products, such as 2X4 lumber or plywood sheathing. Manufacturers of these products just keep cranking them out and typically work from their own inventory. In our case, we have a delicate balancing act because as we are developing our VMI inventory projections with our customers, we need to back that up into our resource management and production scheduling. That gets pretty interesting at times, because if all of a sudden one of our customers has a big sale and their inventory backs up more quickly than we or they would have expected, then we've got to do a lot of rearranging to make sure we have the proper raw materials and production scheduling capability to get a product back into the inventory chain.

Q: How do you accomplish that?
A: We're quite honestly lacking in technology in that area at the moment. We do have a process being put in place to help us significantly, but we don't expect to see that fully implemented before the middle of next year, so we're still using old technology. But we're making it work pretty well.

Q: How long has your business model been made to order?
A: We've been in business for 45 years and it's been that way from day one.

Q: Is this similar to the so-called Dell model? Should it be called the Columbia Forest Products model?
A: The hardwood plywood industry model would be more correct, as I believe most of our competitors operate the same way we do. In some ways it's more difficult than the Dell or computer products model because there's an adage in our industry that says "you get what the tree gives you." You can predict what grade of wood you're going to get out of a tree with some degree of accuracy, but you never really do know for sure. So when you start building your raw materials inventory, especially on the hardwood side, you buy logs and peel or slice them in your mills into veneer, and you hope and pray that you get what you've predicted. If you don't, you scramble like crazy.

Q: You're talking about quality?
A: Grade would be more accurate because there are people who buy lower grades for different purposes. What you are really looking for is what we refer to in the industry as the mix. You need so many As, so many Bs, so many Cs, etc., which is the grade mix, the high grade, low grade, that sort of thing. You are looking to get an appropriate mix to match what your customers typically buy.

As an example, if you're dealing with a cabinet manufacturer, especially a large one, he's buying product and grade to manufacture cabinets all the way from very inexpensive for a tract homebuilder all the way up to products for an Architectural Digest home. And, as you might imagine, there's a rather large disparity.

Q: The "big box" retailers are IT sophisticates. What about your suppliers?
A: We are generally our own supplier; we're very vertically integrated. However, as we grow, we are reaching out to more and more vendors. Many of those vendors are on the import side of our business. Hence the need for international expertise.

Q: Such as your hardwood panels?
A: We import product from all over the world, everything from finished hardwood panels to what we call platform or core stock material to a variety of veneers and a few other products. We run the gamut of imported forest products in this industry, so we're reaching out constantly. Working with our vendors to match our needs is getting more sophisticated. We travel a great deal internationally to meet with our manufacturing partners to bring them up to speed to be able to match the needs that we have. As you might suspect, in most arenas, they are quite a bit behind us technologically, and that does get to be an issue.

Q: What help can 3PLs or other service providers give here?
A: I'll just reiterate the inability that many of these companies have to supply the range of tools necessary to service the whole industry. I don't want to pick out any names, but there are some pretty large names both in the software side and on the 3PL side that do an extremely good job in one area and a poor one in others. And since we have been looking at these services over the last couple of years, I find that to be a fairly consistent pattern.

As I said before, there are companies that are extremely good on the LTL side, both from a procurement and a rating side. They know everything there is to know about how to deal with the LTL industry, and then when you get into truckload or intermodal, they start to get weaker, and then when you get into rail, they're useless. They don't know anything about how the railroads work. Most of them can probably track and trace on the railroads, but that's probably where their expertise ends.

Another area of concern, whether they're a vendor, a 3PL or an e-commerce solution-type company, is that they often want to go outside the box when you want to talk about only transportation management, or VMI, or international logistics, etc. They always want to figure out how to tie whatever you're looking for into one of the other tools they want to sell.

I've had this conversation with many of my peers in the industry, and they all say the same thing, "We've already got tools to do that, what we really need - as an example - are some good transportation tools to help us with equipment utilization, the truck bidding process, rate management and those kinds of things."

Most of the vendors aren't really comfortable doing just transportation management. I think many of those companies are staffed by people who come out of the IT industry or the warehousing industry. They may be good at inventory management, but they are relatively weak at pure transportation functions.

Q: Is the Customs-Trade Partnership Against Terrorism (C-TPAT), predicated on national security needs, worrisome?
A: In the forest products industry, you don't have quite the concern that you may find in the electronics, or technology industry, for example, but as we venture further into the global market, we are being forced to consider these issues. C-TPAT is referred to as voluntary by U.S. Customs, but I suspect that "voluntary" is a stretch. Regardless of the products you purchase overseas, you will be effected by C-TPAT. We will all have to follow the rules of vendor qualification, documentation, etc.

In another recent move, U.S. Customs has now just instituted a rule that a complete manifest of everything on board any container vessel destined for the United States be available 24 hours in advance of the shipment from a foreign port. That's an important change for not only the ocean freight industry but our industry as well.

It appears at this point that the burden is on the steamship line and our vendors, but that is still a very gray area in the rule promulgation.

Q: A lot of things have changed, if only in name, in the 35-plus years that you have been in logistics. What is perhaps the greatest change?
A: Collaboration, to quote a much-despised buzzword, the partnership between ourselves, vendors, customers and carriers. It was almost an adversarial relationship 20 or 30 years ago. It was either government regulated or was, how much can I negotiate you out of, and how much can you negotiate me out of, and then let's get on with it. Today, I think we are working much closer to make things work better for everyone in the supply chain. We have the tools and technology to identify very small specifics of our industry - traffic lanes that work better, equipment utilization that is better for the carrier, the type of equipment you need, prediction of raw materials supply, etc.

With all these little pieces, I think we can have a better working relationship with our carriers, vendors and customers - and all earn a little money for our shareholders.