A Full House Can Lose

It's good for 3PLs, but YOU'd better be ready for wild cards.

Around Thanksgiving time last year, The Wall Street Journal was crowing about the beauty of all the full warehouses adorning the U.S. economic picture. The headline read "Full Warehouses Are Good News This Time Around." Funny, only a few years ago that landscape of filled facilities wouldn't have been judged as very pretty at all. What gives, WSJ?

"... retailers and big manufacturers have increasingly relied on outside warehouses to reduce the cost of maintaining their own storage facilities and to take advantage of more streamlined logistic and supply chain systems which allow for just-in-time delivery," the Journal reported. "As a result, economists and trade experts say the current phenomenon of heavy warehouse traffic indicates retailers, consumers and manufacturers expect the market to hold up."

Just remember, warehousing's standard of beauty is as fickle as that of American culture. What was considered a "Rubenesque" figure a century ago is derided as "fat" today. So last Thanksgiving's fat warehouses better be much leaner by spring if they want a long line of suitors coming after them.

That delicate balance of fat vs lean is all part of the art and science of material handling. If well executed in the private sector, it's a thing of beauty. If not well executed in the military, it could mean lives lost. Fat is never pretty in a theater of battle. Our story on page XX shows why it's important to be lean and mean where military logistics is concerned. But if lean and mean were enough to win a war, victory would be easy. Agility is a necessary third attribute. That means being ready for any situation that arises. Our nation's security depends on it. Is industry as ready?

The military does table-top exercises and war games to figure out what-if scenarios. That's contingency planning. But if I were to suggest you follow their lead, you might think I was being unrealistic. What if the advice came from Roger Kallock, former deputy undersecretary of defense for logistics and materiel readiness? He's offered that advice to managers before.

"Senior business guys look at me like I have two heads," he told me. "They don't want to spend time thinking about the unexpected. They have to meet their profit objectives. But folks in material handling logistics ought to be doing drills with their partners up and down the supply chain."

He suggests getting six or eight worst case scenarios from each of 10 or 15 people in your supply chain, then doing some quick probability analysis to narrow the list down to the top five or 10. Put these down on separate slips of paper, toss them in a hat, and have your CEO pick one at 3 p.m. on a Friday. Announce to your organization the emergency du jour, then require a solution by Monday morning.

Won't work? What if insurance companies, as part of a business continuity package, required this kind of exercise and offered reduced premiums? Would you play along then?

Fat inventories aren't a good contingency plan for the long term. Eventually you'll have to develop a better understanding of your customers and their needs. Logistics execution systems can help. Automated cross docking can help. The equipment and systems you'll see at NA 2004, MHIA's material handling and logistics show, can help. In fact, if you take a look at our preview of NA 2004, starting on page XX, I'll bet you get plenty of good ideas to start with. Then, by going through some contingency planning before the show and bringing your hat full of scenarios to Cleveland's IX Center this March 29 through April 1, you'll be better prepared to bring back a handful of more educated approaches and study their potential in your plant or warehouse.

Fat and happy may make headlines, but operations that stay fat won't be happy for long.

Tom Andel, chief editor, [email protected]

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