Andel and Handling: Peace for Warring Priorities

MH&L's 2012 Buyers Guide can offer sales and logistics teams common ground as they plan their company’s next steps toward 2013.

Welcome to MH&L’s 2012 Buyers Guide. When I say “welcome,” I’m addressing not only our readers in material handling and logistics management, but their colleagues in sales and operations planning (S&OP). This Guide is a good solid tool you can use to help break the ice between your two organizations. Once that’s done, it can also be used to establish some common ground.

The problem is that S&OP and logistics are often given two different sets of incentives. The sales side is encouraged to manage within short-term projections and make price-driven supply and demand decisions—sometimes at a moment’s notice. That could mean quickly stocking up on certain raw materials before their price goes up.

This is typically a different skill set from the kind logistics people are incented to develop. They are more often compensated for setting up the internal and external material handling infrastructures to flow products from source to destination. This requires time to strategize on the most cost-efficient transportation and subsequent storage or transfers. Having to respond cost-effectively at a moment’s notice to a last-minute price-driven purchase is not conducive to efficient logistics.

The people doing these respective jobs don’t always coordinate their efforts. In fact for our story on sourcing, Mike Gray, a teacher in Penn State’s executive education program and a self-described Supply Chain Evangelist, told me that when he asks logisticians about their involvement in the S&OP process they typically don’t know what he’s talking about.

“Part of the trouble I see in supply chain organizations is they don’t have 30-plus year practitioners,” he says. “They have new graduates with supply chain degrees coming out. They’re smart but coming in with a big picture view and at most universities you have to take eight courses to get a concentration in supply chain.”

So these young people get hired into an organization bringing with them a pretty good idea how the big pieces of a business are supposed to work together, but when they get put into an entry level position, they’re not asked to look at the big picture any more. They become operators and they’re trained to use much of the equipment and technology you see listed in this Buyers Guide. But their goal soon becomes performing up to a specific measurement for a specific task and they’ll do all they can to optimize that measurement—even if doing so interferes with how someone else in the organization is measured.

Elsewhere in this Buyers Guide you’ll read our State of Logistics Report, which predicts that purchasing strategies for transportation and logistics services will have to change as well. With trucking capacity on the way down and costs on the way up, logistics managers will have to shift mental gears to consider alternative arrangements for sourcing and shipping. For example, as our report suggests, shippers may have to consider working more with warehouse-based third-party logistics providers to access a mix of intermodal and other services.

This is a situation logistics needs to share with their colleagues in S&OP so the business plan their CEO lays out to stockholders and/or stakeholders can be based in reality. You would think this was standard operating procedure in most companies, but not according to Gray.

“With today’s employment situation there’s not a lot of truth telling to authority because people are afraid,” he says. “They don’t want to lose their job. They’ll do the best they can by how they’re measured. Some organizations have measurements that don’t conflict, but very few.”

When you’re done reading the editorial content of this Buyers Guide, hang onto it for future reference to the product and service listings. And e-mail your colleagues on the other side of the wall a link to its content. Better yet, walk the Guide over there and get acquainted.

Follow me on Twitter @TomAndel.

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