The announcement on January 26th of 45,000 jobs eliminated at major US companies sent a shock wave across the country, but in coming weeks it became just one more tremor in the shaky state of the global economy.
Among the challenges businesses are facing as workloads are repeatedly consolidated into a decreasing pool of resources are the aftershocks these workforce reductions will cause. Here's a story for our time. I talked to Mike Goldsmith shortly after he formed KLS Logistics by walking into the office of his boss after repeated downsizing and saying, “I think I may be about to talk myself out of a job.” His proposition was to contract a number of internal logistics functions to an outside firm. He said that knowing there would be less need for his role if the company agreed.
He had a backup plan. He wanted to be the company that handled that contract, and so KLS Logistics was born. His phone line was barely installed when his former assistant (already at another company) called in a panic. Someone had taken the “eliminate waste” mantra to heart and stripped him of his transportation department. “I can't move any freight,” he said, “I need help.”
Mike and I had that conversation in 1988, and both his former company and that of his first panicked caller are still clients of KLS over 20 years later.
Right now, many logistics departments are busy managing reduced volumes and working out what impact it has when your inbound containers drop by two thirds. It's difficult to think strategically about network optimization and global supply chain visibility when the group responsible for tactical, day-to-day functions is gone. Despite this chaos, the heavy expletives won't start until the second half of the year when the full impact of the reduced staffing becomes apparent. As Goldsmith observes, in very real terms, it may be when carriers refuse to haul your freight because they haven't been paid and you suddenly realize the people who managed freight bill audit and payment have left the building.
That's also when the interest in outsourcing shifts from strategic to tactical. But the decision shouldn't wait until you are mired in expletives, dissatisfied customers and angry suppliers. The time to build those tactical resources is now. Don't wait for a full-blown strategic plan to be developed and agreed to on multiple functional and management levels. By their very nature, these functions are tactical, day-to-day and, dare I say it, a bit of a commodity. That's even more reason to start planning. You want to apply the best resources, and you won't have time to vet suppliers properly if you're acting under duress.
Don't stop thinking and planning strategically. In fact, it's the perfect time to be doing both. Take care of the tactical details before they escalate into a major problem and use this time to start developing a broader supply chain strategy and logistics plan. Research the resources available and begin thinking of how your updated network will look and function.
This economy is driving a fundamental change in the way logistics will operate. The rapid and severe contraction will eliminate a number of key players and a multitude of smaller suppliers. The remaining resources, and the users who will want to capitalize on an improved supply chain network strategy, will be driven to a more collaborative approach. Collaboration will be a powerful tool for suppliers to balance risk and for users to achieve substantial gains in supply chain efficiency. Necessity will break down old attitudes and open the door for logistics to make a substantial contribution during the remainder of the downturn and into the recovery.
And, even if I'm wrong, you'll still emerge from the recession with more powerful tools and a stronger competitive position. Don't let yourself wallow in the pain, focus on the gain.