Bob Delaney's Strange Ride

March 1, 2004
Now he quantifies the results of one of the most significant commercial restructuring efforts in U.S. history and raises questions that must be addressed

Now he quantifies the results of one of the most significant commercial restructuring efforts in U.S. history and raises questions that must be addressed by logistics professionals who control a cost equivalent to roughly 10% of the U.S. Gross Domestic Product. Bob Delaney didn't volunteer for the job that put him at the center of the efforts to deregulate the U.S. freight transportation industry, but neither did he shirk the responsibility once it was thrust upon him. He set about to quantify the impact of economic regulation and the value of deregulation and has been reporting on the effects of those legislative actions and market forces ever since.

The Council of Logistics Management (CLM) has agreed to pick up sponsorship of Delaney's annual State of Logistics Report after 14 years of support by Cass Information Systems and ProLogis. CLM picks up the ball at a very turbulent time for logistics. Delaney comments that he has already selected a focus for the 2004 State of Logistics Report. Though he hasn't seen the data for 2003 yet, Delaney says the discussion will have to focus on globalization. This is only the second time he and his colleague Rosalyn Wilson have selected the subject of the report in advance. The other time was in 2000 when the issue was the impact of the Internet on logistics. "Everyone was saying the Internet would transform everything," Delaney recalls. "Well, it didn't. But globalization is."

"We have 14% fewer manufacturing jobs in the U.S. and 14% fewer information technology service jobs," Delaney points out. "You can't politicize it, you just have to adjust to it and consider what we are going to do to make ourselves more efficient."

Delaney learned about logistics in the Army. Later, in 1960, he obtained his Interstate Commerce Commission Practitioner's license, which was required to practice before transportation's principal regulatory body. The next career step was gaining certification by the American Society of Traffic and Transportation (now the American Society of Transportation & Logistics). Here's where the politics started. At that time one of the exams for certification focused on economics and, as Delaney describes it, you had to make the moral judgment how you were going to respond. If you wanted to be certified, you had to write things you didn't believe, he says. But certification was how transportation professionals got promoted.

Working for Monsanto, Delaney traveled to Europe to meet with a company that had been handling textile logistics since 1617. You could buy trucking, warehousing, and customs brokerage from the same source, he recalls. He brought that information back to Monsanto executives in the U.S. and was asked, "Why can't we have that here?" All Delaney could say was, "We have regulation." They looked at him and said, "You just got a new job," and Delaney was off on a quest to quantify logistics costs and, ultimately, to demonstrate that in the regulated environment those costs were inflating faster than the gross domestic product.

"Service was bad. It was constrained, so we had excess inventory and multiple warehouses." Today, Delaney explains, a logistics manager may have five warehouses. In the 1970s, that same operation would have had 35, one in every major market.

Gains in reducing raw material and work in process inventories have come with the growing sophistication of the logistics function and marked improvement in transportation. The cost to the transportation industry has been huge for those companies that couldn't adapt to the new environment. Thousands of trucking companies have ceased to exist, and not all of them small businesses. APA Transport was a $200 million carrier and Consolidated Freightways had $2 billion in revenues, Delaney points out.

There was also a personal cost for Delaney. Both sides of the industry -- shippers and carriers -- liked the status quo. Delaney, who was building arguments supporting deregulation, became one of the visible targets for their wrath. But the stronger, faster, more reliable transportation system that has evolved has helped companies operating in the U.S. to save billions of dollars. The job is far from done. Delaney has continued to call attention to finished goods inventories, which have not been reduced to the same degree as other types of inventory. He'll also have some powerful questions on the impacts of globalization in June when he and Rosalyn Wilson present the 15th Annual State of Logistics Report at the National Press Club in Washington, DC. The two colleagues will also present their findings in a public forum at the Council of Logistics Management's annual conference in Philadelphia October 3-6.