“Transportation Managers” are outgrowing that title. In these complex times, that two-word designation is rather limiting. The people answering to it are also customer service managers, packaging specialists and sometimes, even political scientists. Those words might not be in their titles, but such functions are in their strategies.
This report will introduce you to three logistics professionals whose jobs have changed radically in the last few years to help their companies cope with turbulent times.
Combine Visibility with Timing
Caterpillar can take pride in being an anomaly. While meeting the needs of earth-moving and mining equipment users working in troubled economies around the globe, the company has been enjoying robust health. Last year business grew 20%. Its revenue was about $58 billion and it expects to reach $70 billion this year. Its products are used mostly in the construction industry and also at the mine sites of commodities producers that are driven by price. It takes smart logistics management to develop global transportation and distribution strategies that keep your company financially healthy in these environments.
That’s Tom France’s job. As director of global transportation for Caterpillar, he manages a team that has to be a master of market timing.
“There’s a threshold cost for what it takes to get those materials out of the ground,” he explains. “As long as that commodity is above threshold those companies want to go 24/7 because sooner or later it will fall below that and they’ll shut down. Our machines have to be available when the customer needs them. If not they’ll find another alternative. Right now [where logistics decisions are concerned], everything has to be a home run.”
When France first started as a transportation manager he could design a distribution network that would be good for 15 years. Now a network serves its market for three to five years before needing a redesign. Someone in France’s position needs flexible options to constantly change their network.
“We don’t want a lot of transportation assets tied up that we’re stuck with as our network changes,” he says. “It’s better to have flexible solutions through third parties and leased space that we can quickly change.”
He boils his strategy down to the following musts:
- Establish visibility throughout your network. That’s the only way you’ll know when changes are needed. He recommends applying cloud-based tools.
- Be asset light, in case you need to change your network quickly.
- Design big hub-and-spoke networks because transportation responds to scale.
- Spend time getting your story out to legislators so they understand the needs of your business.
That last item is not an aspect of the job France relishes, but it’s a necessary evil if this country’s creaking transportation infrastructure is going to be fixed.
“Inventory in transit is a cash drain on your company, so velocity and getting turns so you don’t keep things on your books is more important than ever,” he says. “For a company like Caterpillar, that on any given day has over $1 billion in parts either on the water, in the air or in a truck, we would do anything to take one day out of the system. But as a top 10 exporter, it’s difficult to be competitive when our infrastructure doesn’t allow us to move things quickly. We’re competing with emerging markets like China that has been developing an updated infrastructure.”
He cites U.S. ports as one of the biggest challenges. Even with the 2014 opening of an expanded Panama Canal and the prospect of its handling larger ships with bigger payloads, France doesn’t believe that most ports in the Eastern U.S. will be able to accommodate those ships.
“Harbor deepening projects have been delayed forever,” he says. “That makes us less competitive compared to the rest of the world. And we’re competing against worldwide companies.”
That’s why France is focusing on designing bigger hub-and-spoke networks—and to flow product out of fewer ports. There are risks to that, he admits, but he’s trying to make his network’s nodes and flows flexible enough so he can react quickly when he needs to change strategy.