Chain of Thought

Curing the Logistics Identity Crisis

As if companies haven't seen enough crises in the last couple years, The Wall Street Journal recently added another: It's an identity crisis. That's right, WSJ cites several big companies whose growth into new areas of business has challenged their marketers to come up with a concise catch-phrase for what their companies do.

Here are some examples followed by their translations:

--“A power management company.” (Gears and pumps.)

--“Active and passive safety.” (Brakes and safety belts.)

--“World leader in creating and sustaining safe, comfortable and efficient environments.” (Air conditioning.)

--“Leverage an innovative, outcome-based, managed service engagement model with committed productivity benefits over the long term.” (Consultants—what else?)

Some elements in the material handling and logistics industries have a similar problem. They're trying to escape the narrow confines of their customers' conceptualizations of them. Take transportation, for example. Carriers are too often seen as providing warehouses on wheels, and worse than that, being part of their customers' waste problem. The cost of fuel tends to overshadow the value-added services many carriers are trying to promote.

A member of MH&L's own editorial advisory board sees transportation as one of seven deadly wastes, on a par with overproduction, waiting, overprocessing, inventory, motion, and correction of defects.

“These are production costs that create no additional value in the product,” says Thom MacLean, vice president of operations for Osborn International, part of Jason, Inc. “Transportation in production is normally viewed as a waste in a lean view of the supply chain. It is no coincidence that many Tier 1 automotive suppliers build plants right by the plants they supply. If you have a customer 500 miles away and your competitor is in their backyard, you will frequently be asked to normalize freight to your customer's location. Any dollar of transportation cost eliminated drops right to your bottom line.”

Even lift truck dealers are trying to get beyond that narrow definition of what they do. Associated, a Raymond dealer serving the Chicagoland region, has “Integrated Supply Chain Solutions” as its tagline. I asked Mike Romano, Associated's president and CEO, if the days of lift-truck-centric, brand-affiliated dealers are coming to an end. He answered no, but with a caveat:

“I think that brand exclusive lift truck dealers are realizing, more than ever, they need to provide value to their customers other than in just supplying lift trucks and related support thereof. Dealers must find ways to differentiate themselves to be able to avoid the commoditization of their businesses and continue to provide a compelling value proposition that will drive continued demand for their role in the marketplace.”

According to Romano, the smart lift truck OEMs will support their dealers in this brand reinvention, while others may fight what they perceive as a reduction in the “mindshare” they get from their dealers. But I like Romano's take:

“The businesses that define their vision, develop definitive plans to accomplish that vision and ensure that they have or acquire the core competencies needed to execute their plan will end up on top.”

Bruce Pelynio, president-CEO of Heli Americas, a Memphis-based distributor for China's Anhui Heli lift trucks, agrees with Romano. He told me it will be more difficult for single line lift truck dealers to sustain themselves.

“We've seen it go away on the car side of the business, and in the construction equipment business, and the lift truck business may be one of the last bastions of it," he said. "I think it will be a more open market going forward and you'll see in the next five years the end of proprietary dealerships except for the factory stores.”

The marketers in the material handling and logistics worlds have their work cut out for them and not much time left. A certain southern region—way, way south—is starting to freeze over.

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