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Contents I W L A
I W L A Ed u c a t i o n & Tr a i n i n g S c h e d u l e Sept. 9-10
IT Conference Embassy Suites Chicago, IL
Oct. 14-15
Safety & Risk Conference SpringHill Suites by Marriott Chicago, IL
Oct. 25-29
*The Essentials Course Ohio State University Columbus, OH
Oct. 26-28
*The Advanced Course Ohio State University Columbus, OH
Dec. 2
Legal Issues Web Cast Internet-based training
The Association for Logistics Outsourcing
Fe a t u re s 8 Improved LSL Is Key to Unlocking Power of Logistics Outsourcing
11 16
20
The China Effect The emergence of China as a world economic power is changing 3PL work on both coasts. By Michael Fickes Facing a Brain Drain Unless industry takes action, a dramatic demographic change will begin to decimate executive, managerial and supervisory staffs by 2010. By Michael Fickes
IWLA-OSHA Alliance A Safe Bet By Nathan Noy
De p a r t m e n t s 5 6 7 25 26
*Qualifies toward completion of IWLA’s prestigious Certified Logistics Professional (CLP) designation.
Perpetuating Success in a Family Business By Kenneth B. Ackerman
23
March 20-23, 2005 *114th Annual Convention The Hilton in Walt Disney World Resort, Orlando, FL
IWLA Education & Training Schedule Letter from the Chairman Legislative News Legal Q & A Buyers’ Guide & Trade List
The 3PL Executive is published four times a year for the IWLA - The Association For Logistics Outsourcing 2800 River Road, Suite 260, Chicago (Des Plaines), Illinois, 847-813-4699, fax 847-813-0115, www.iwla.com by Naylor Publications, Inc., 100 Sutherland Avenue, Winnipeg, Manitoba R2W 3C7, 800-665-2456, 204-947-0222, fax 204-947-2047, www.naylor.com Publisher Kathleen Gardner Editor Leslee Masters Sales Manager Kim Davies Publication Director Derek Kuzina Advertising Sales Bert Eastman, Wayne Jury, Drew Petursson, Darryl Sawchuck, Rui Soares, Dawn Stokes Research Marina Nikolaeva Advertising Art Roy Bauer Layout & Design Catharine Snell No part of this publication may be reproduced without permission of the publisher. Opinions expressed in this publication may or may not reflect the views of the Association and do not necessarily represent official positions or policies of the Association or its members. The association does not guarantee or endorse, unless expressly stated, any advertised product or service. The 3PL Executive staff works diligently to produce factually correct, error-free copy, but does not accept liability for printer or clerical mistakes. Appropriate retractions or corrections will be made upon proper written notice by readers. Published September 2004/IWLQ0304/9452
THE 3PL EXECUTIVE
5
L e t t e r f ro m t h e C h a i rm a n
D “Pick up your glove and get in the game!”
ear fellow warehouse logistics provider: “Pick up your glove and get in the game!” IWLA Vice Chairman Bob Auray uttered the above comment during one of our recent Executive Committee meetings when the discussion turned to encouraging the membership to be more active in IWLA through it’s committee and council structure. His point was that the IWLA leadership wants more input from members. I thought it was an appropriate challenge given my own long history of active involvement in IWLA. In the 30 years I’ve been associated with this fine organization, I’ve served two stints on the Board of Directors and been active in the Education Committee, lecturing frequently at programs. I have found the experience invaluable on both a professional and personal level. The committees and councils are the lifeblood of IWLA, and the board wants your donation – not in pints, but in time and effort. It is through these smaller groups that members can work together to solve common problems, be agents for change and grow IWLA beyond its already solid foundation. The warehouse logistics industry is changing at an unprecedented speed, creating challenges that can best be met through cooperative action. But two-way communication is vital to our success. The executive committee is doing its part. I have asked the heads of the various committees and councils to report their progress in issues of This Week @ IWLA. I have encouraged these reports in an attempt to keep all members informed of Association actions, and hopefully the reports will continue until all chairmen have had an opportunity to be heard. But we can’t let it stop there. For a legitimate exchange of information, individual warehouse members need to provide feedback. To further promote this dialogue, the Annual Convention, which is being held next year in Orlando March 20-23, will set aside an entire day so committees and councils can meet to prepare recommendations that will be presented to the Board of Directors. Time also will be allocated specifically for that purpose during the board meeting. I am confident that the combination of exposure in This Week @ IWLA and the expanded convention format will provide ample opportunity to hear the voice of the members through the committee and council structure. Each of us has a unique perspective on our business, and I urge you to contact any of the chairman listed below to offer constructive input. Better yet, offer to serve. IWLA didn’t thrive for over a century with members that sat in the dugout. As I enter the late innings of my participation in this industry, I am satisfied with the knowledge that I spent many a productive hour fielding difficult issues with my peers at IWLA, improving the business that has provided so well for my company and family. So…where’s YOUR glove? Warm regards, Tony Becker, IWLA Chairman Port Jersey Logistics
COMMITTEES Convention Planning Committee Chairman: Bob Auray, Kuehne & Nagel Logistics Education Advisory Committee Chairman: John Zevalkink, Columbian Logistics Network Procurement Advisory Committee Chairman: Richard Murphy, Jr., Murphy Warehouse Co. Industry Marketing Committee Chairman: Robert Moran, Amware Logistics Services Membership Committee Chairman: Tommy Grimes, Grimes Logistics Services
6
Government Affairs Committee Chairman: David Pettit, American Distribution Centers Political Action Committee Chairman: David Pettit, American Distribution Centers COUNCILS Council of Chemical Logistics Providers Chairman: John Auger, Brook Warehousing Systems Bonded Warehouse & Cargo Council Chairman: Lance McRoberts, Airfreight Warehouse Corporation
Emerging Leaders Council Chairman: Doug Brown, Kuehne & Nagel Logistics Canadian Council Chairman: Robert Dineen, Dominion Warehousing & Distribution Services and Kent Hunter, JD Smith & Son Information Technology Council Chairman: Jock Menzies, The Terminal Corp. Real Estate Council Chairman: To Be Determined Rail Council Chairmen: Paul Delp, Landsale Warehouse and Gary Minardi, San Jose Distribution Services FALL 2004
2 0 0 4 I W L A St a f f and Leadership ELECTED LEADERSHIP Chairman Anthony Becker, Port Jersey Logistics Vice Chairman Robert R. Auray, Jr., Kuehne & Nagel Logistics Secretary/Treasurer D. Robert Dineen, Dominion Warehousing & Distribution Services Immediate Past Chairman Gary Owen, Ozburn-Hessey Logistics DIRECTORS John C. Auger, Brook Warehousing Systems Tommy Grimes, Grimes Logistics Kent Hunter, JD. Smith & Sons Limited Steven S Jacobus, The Olson Company John Kelly, CALYX Transportation Group Darrel Lake, Saddle Creek Corp. Lansdell C. McRoberts, Airfreight Warehouse Corporation Richard Murphy, Jr., Murphy Warehouse Co. David J. Pettit, American Distribution Systems, Inc. Jere Van Puffelen, Prism Team Services, Inc. Gary Shimbashi, Andlor Logistics Systems Doug Sibila, Peoples Services John Zevalkink Columbian Logistics Network STAFF Joel R. Hoiland President and CEO Alex C. Glann Vice President & COO James “Jamie” Wagner Director of Marketing & Communications Nathan Noy Director of Legal & Regulatory Affairs Linda Wood Director of Education Scott Brewster Director of Member Services Brenda Love Assistant to the President Charles Schmidt Consulting Director of Media Relations Barbara Arnold Member Services Coordinator Sheresa McClain Administrative Coordinator – Accounting Barbara Glann Receptionist Rocio Lemke Administrative Assistant THE 3PL EXECUTIVE
L e g i s l a t i ve Ne w s
by Pat O’Connor
What’s Next on HOS?
A
federal court decision vacating the Hours-of-Service (HOS) regulations may paint a bleak picture for 3PLs and others. On July 16, the U.S. Circuit Court of Appeals in Washington, D.C., threw out the federal government’s new HOS rules and sent the case back to the Federal Motor Carrier Safety Administration (FMCSA) for review. The court agreed with a lawsuit filed by the public interest group Public Citizen that the regulations “failed to consider the impact of the rules on the health of the drivers.” The court said that, “FMCSA points to nothing in the agency’s extensive deliberations establishing that it considered the statutorily mandated factor of drivers’ health in the slightest.” The court also said it had additional concerns, but made no ruling on them because the health issue was enough to throw the rule out. At first glance, the court’s decision looks like good news – 3PLs may be out from under the new HOS rules – but not necessarily. First, the plaintiff in the case, Public Citizen, insists that the HOS regulations should be tougher in addressing driver fatigue – further reducing the number of hours a driver can work during a seven-day period and increasing costs to shippers, carriers and 3PLs. Second, it will be 2005 before FMSCA could propose a new HOS rule, and the results of the November presidential election will influence its scope and content. Third, the court decision may have brought to a halt a legislative remedy. Rep. John Boozman (AR-R), with IWLA’s support, has a proposal before the House-Senate conference committee considering the highway reauthorization legislation. Rep. Boozman’s proposal would grant needed flexibility to the new rule without compromising safety standards. Rep. Boozman’s proposal allows for the following:
A twice-weekly exemption for shorthaulers. Short-haul operators have significant responsibilities other than driving and engage in numerous stops during the day to make deliveries, service accounts and perform other non-driving related activities. The new HOS rules grant shorthaul operators one 16-hour day per week to address any contingencies that might occur in operations. Rep. Boozman’s proposed language would allow short-haul operators who return to the normal work reporting location after each shift an additional 16-hour day per week. Allowing for this additional 16-hour day would create greater flexibility and resolve a significant operational issue that the majority of short-haul operators currently have with the new rule. Promotion of rest breaks. With the establishment of the maximum daily 14-hour on-duty period, the new HOS rule creates a strong disincentive for operators to take needed rest breaks and results in unintended stress on the operator. Under the rigid structure of the new rule, vehicle operators will be reluctant to take breaks for meals or to rest or for other reasons in order to beat the clock back to their reporting location. Rep. Boozman’s proposed language would allow operators to take short rest and meal breaks, totaling no more than two hours, which would not count toward the 14-hour on-duty limit. Operators would still be required to take 10 hours of off-duty time before reporting to work again – consistent with the new rule. Whatever the resolution of this issue, IWLA will be involved in the process every step of the way, ensuring our members’ concerns are heard. ■ Pat O’Connor is IWLA’s Washington counsel. For timely updates on this and other legislative/regulatory issues, please see IWLA’s electronic newsletter, This Week @ IWLA, or go to www.iwla.com. 7
Improved LSL
The new, more sophisticated LSL will assist businesses with their warehousing and logistics needs and increase opportunities for our member providers.
8
B
ill has a dilemma. As head of logistics for a mid-sized East Coast producer of industrial solvents, he has just been told by his chief operating officer of a new goal to grow business by 25 percent in the next two years. As part of this push, the company will expand into the Midwest and Canada – places it has never operated in before. Bill’s assignment is to develop an efficient and dependable storage and distribution system that will assure the just-in-time delivery and high-quality guarantees the marketing department will be promising. A successful storage and distribution strategy would be quite a feather in his cap. The problem is that Bill doesn’t have any contacts in the new geographical areas the company will be servicing. On top of that, his boss wants his logistics plan “yesterday.” Where can he find a dependable,
Is Key
quality company with which to partner? How will he be able to quickly determine whether or not a potential logistics warehousing partner has the capabilities to handle his company’s sometimes dangerous products? Bill knows nothing about the requirements of transporting toxic chemicals across international boarders; would a third-party warehousing logistics company be able to help him steer clear of road blocks and regulatory considerations? If he’s smart, Bill will go to www.iwla.com, the website of IWLA – The Association for Logistics Outsourcing, and use the Logistics Services Locator (LSL), a web-based electronic search engine, to locate companies that can help him solve his problems. The LSL is an online matchmaking tool that connects companies looking to outsource some or all of FALL 2004
to Unlocking Power of Logistics Outsourcing by Charles Schmidt
their logistics functions to IWLA member companies that have the capability to get the job done. An added benefit of seeking a business partner through the LSL is an assurance of quality. As the premier trade association for the outsourced logistics industry, IWLA develops standards of excellence and educates its members about industry best practices so they can distinguish themselves as among the very best in the 3PL industry. The new, more powerful version improves upon the first generation LSL tool that successfully generated countless business connections for so many outsourced logistics customers. However, its more sophisticated search engine cuts down on the time both providers and potential 3PL customers spend manually filtering searches and requests for information (RFIs). The new LSL: • Permits qualified searches • Produces qualified leads • Allows searches by location, not just headquarters • Contains a listing of services for all locations • Includes search criteria for value-added services THE 3PL EXECUTIVE
• Offers logistics outsourcing tips to learn about the industry • Enables electronic submission of requests for information. “Through the new LSL, companies considering an outsourcing relationship will be able to explore IWLA’s dynamic database of topquality 3PL providers quickly and thoroughly,” notes Association President and Chief Executive Officer Joel Hoiland. “Businesses seeking 3PL services can obtain the location and contact information of 3PLs in the database and peruse other key information to assist with their selection process.” For example, to apply the new LSL to our fictional Bill’s scenario above, a chemical manufacturer seeking a warehouse or transportation company within 200 miles of Chicago that is qualified to handle hazardous materials and international shipping, can go to www.iwla.com, click on the LSL logo in the bottom left-hand corner of the screen and put in the necessary parameters for a search. In a matter of seconds, the LSL will generate a list of qualified IWLA members that meet the search criteria. Additional informa-
tion about the 3PL, such as a company profile and a listing of just how closely the company matches the search, is also available. With the click of a few buttons, the chemical manufacturer in our fictitious example can then e-mail an RFI to the potential logistics provider or providers selected. On the other end of the transaction, the 3PL can field the RFI, research the potential customer to better understand its needs, and respond – all in an appropriate timeframe. In a relatively short time, the LSL can facilitate a mutually beneficial logistics outsourcing relationship. “The research unearthed last year during the compilation of IWLA’s Trends & Practices Study clearly demonstrated that the demands of 3PL customers are changing rapidly – but so are the service offerings and capabilities of our members,” Hoiland notes. “By successfully melding these two factors, the new, more sophisticated LSL will assist businesses with their warehousing and logistics needs and increase opportunities for our member providers. This will be a win-win for everyone.” ■ 9
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The CHINA Effect
by Michael Fickes
The emergence of China as a world economic power is
B
ill Whelan toured China five years ago as a member of an Oakland, Calif.-based trade delegation to China. “We could see what was about to happen back then,” says Whelan, director of business development for PACAM, a third-party logistics (3PL) provider. “Each time we boarded planes during the tour, flight attendants passed out newspapers to all the passengers. During the flights, everyone studied the business news. Ever yone seemed totally focused on business. It was amazing.”
THE 3PL EXECUTIVE
That was 1999. Last year, China’s export business grew by 35 percent, according to the 2004 “State of Logistics Report,” sponsored by the Council of Logistics Management (CLM). The report predicts overall economic growth in China will range between 11 percent and 12 percent in coming years, with manufacturing exports powering much of this growth. By comparison, the U.S. economy typically grows between four and six percent during expansions. The emergence of China as a world economic power is beginning
changing 3PL work on both coasts.
11
Join IWLA in Beijing Given the importance of China to the 3PL market, IWLA is forming a delegation to the International Federation of Warehousing Logistics Association’s annual convention, to be held May 22-26, 2005 in Beijing, China. The theme of the convention is “Build a Bridge for International Warehousing Logistics Exchange.” Among the topics to be covered are: • The present and future development of China’s logistics industry • An analysis of the supply and demand of China’s logistics market • Chinese customs policies and international logistics It will also include a stop at a Chinese logistics exhibition and optional sightseeing tours. “This is a great opportunity for anyone investigating China and the Pacific Rim,” says Joel Hoiland, president and CEO of IWLA. For more information, contact Joel at jhoiland@iwla.com.
The China Effect cont’d to drive the business models of U.S. ports and 3PLs in new directions. The Port of Oakland, for example, will off-load two million containers during 2004, an increase of six percent over 2003, drawn mostly from trade with Asia. If container traffic in Oakland continues to grow at six percent a year, the port will off-load four million containers in 2016. To the south in Los Angeles, an onslaught of imports from China has begun to clog the roads and fill 3PL warehouses to the brim. On the east coast, 3PLs are angling to absorb the business overload. More And More Imports
PACAM has been handling imports of toys, foods and spirits from Asia since 1987. Chief Executive Linda Hothem has watched the company’s Asian business power
growth over that period. “About half of the products that used to be shipped through our facilities by U.S. and European sources now comes from Asia,” she says. The shift has produced a host of new business opportunities for 3PLs in the region. Take wood shims. For 50 years, a company in Eugene, Ore., manufactured 80 percent of the wood shims used in the U.S. Their products were sold through Home Depot. 3PLs would never have heard of the company nor would they have had an opportunity to do business with it. However, a couple years ago the company lost its Home Depot wood shim business to a lower bidder, laid off more than 1,000 people and closed its plant. Company executives promptly flew to China and made a deal to manufacturer shims there. Manufacturing and shipping costs so little that the company was able to slash its wholesale prices by
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half and regain its share of the market. PACAM and other 3PLs are negotiating with the company to handle 20 containers of wood shims per month flowing in from China. “We’re also seeing new business opportunities from 3PL companies set up by steamship lines,” says Whelan. “The shipping lines are developing business models based on door-to-door service, and they outsource to companies like ours. In this arrangement we’re called a fourthparty logistics provider. It appears seamless to the customer, which deals only with the steamship company.” Currently, PACAM deals with NYK Logistics, a 3PL owned by the NYK Steamship Co. “They don’t have facilities in Oakland,” Whelan says. “When they need that piece of the puzzle, they call me.”
ers. “We always used to unload our own containers with our own labor,” she says. “But for one large-volume project we’re handling now, we have contracted out container unloading to a company that specializes in that work and charges by the container.” Once the containers have been unloaded, PACAM picks up the logistics chain and handles warehousing, repackaging, other value-added operations and deliveries.
To increase efficiency, reduce receiving and shipping errors and perhaps take back the work PACAM has had to subcontract out, Hothem is installing new technologies, beginning with a radio frequency (RF) scanning system. Will the increased productivity allowed by RF help? “We hope so,” says Hothem. “But the up-front costs are so high that it is difficult to see how it will work.”
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PACAM’s Hothem dates the acceleration of the overall Asian importing business to the enactment of the North American Free Trade Agreement (NAFTA) in the early 1990s. NAFTA set off a chain reaction in changes to trading patterns, she says. The agreement initially spawned manufacturing facilities along the U.S. border with Mexico. Soon, parts made in Asia began flowing through California ports to the Mexican plants. Not long after, businesses began to move their entire manufacturing processes to outsourcing providers in Asia. “For our industry, China is the latest country to satisfy an outsourced manufacturing trend that is all about lower costs,” Hothem says. “But it is not just about low manufacturing costs. The trend is also driving logistics prices down.” For example, PACAM handles about 100 containers per day arriving from Asia. Fees for some of that work are so low that PACAM has to outsource the unloading of the containTHE 3PL EXECUTIVE
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The China Effect cont’d Stretching the Supply Chain
Taken together, the Ports of Los Angeles and Long Beach in Southern California’s San Pedro Bay rank as the third busiest container-cargo shipping arena in the world, behind only Hong Kong and Singapore. But Chinese and Asian imports have begun to stretch the capabilities of the two ports. During 2003,
Los Angeles-Long Beach handled approximately 11.9 million containers, up from 8.2 million in 1999. Most of the growth has come at the Port of Los Angeles, where container volumes have risen from 3.8 million in 1999 to 7.2 million in 2003. “The ports are probably at capacity,” says Mike Stark, president and chief operating officer of Weber Distribution Inc., a 3PL based in Santa Fe Springs, Calif. “There is a lot of pressure to go to 24-hour operations
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because of traffic congestion in the area. They want us to begin picking up containers at night.” While Weber manages cargo for customers moving goods through Los Angeles-Long Beach, the company subcontracts out the port work to others. According to Stark, Weber receives about 100 containers per day from these operations. About half come from manufacturers based in China. “Some of our biggest customers are manufacturing furniture, apparel, shoes and house wares in China,” he says. Weber’s growing China business has begun to affect company operations. About one-third of the company’s customers are engaged in the China market, up from virtually none four years ago. The increase has begun to max out existing warehouse capacity. “In the last 12 months, we’ve added about 20 percent to our warehouse space,” Stark says. “We have also opened up a transload center where we bring containers to move the goods directly to a trailer.” The fast-paced work requires technology, too. “If you were in a paper environment, this would be very difficult,” Stark says. “You have to be fully automated to keep up with what is coming in.” The East Coast Gets Ready
October 14-15, 2004 Chicago, IL
For more information, go to www.iwla.com
14
So far, the Port of New York and New Jersey, the largest port on the East Coast, has benefited only indirectly from growing imports from China. Between 1999 and 2003, containers moving through the port increased from 2.8 million to about four million. Only about six percent of this work comes from Asia. FALL 2004
According to the Port Authority, continued growth is likely given the general increase in international trade and a relatively new phenomenon of shifting world trade patterns. During the 1970s and 1980s, the growth of trade with Pacific Rim countries benefited West Coast ports, even for cargo bound for the East Coast. It was cheaper to off load on the West Coast and run freight by rail and truck to eastern destinations. The resulting shift in trading patterns eroded business at East Coast ports. Today, however, Port Authority economic research suggests that the rapid growth of trade with China and Asia combined with the design and construction of larger container ships could begin to shift trading patterns in a way that will re-energize the East. The glut of traffic on the West Coast has led shipping lines to lay plans to move containers to the East Coast by way of the Suez Canal, which would lead to an Atlantic crossing and ports of call in the East. “This began to happen several years ago, when a strike on the West Coast stimulated shipping companies to look for alternatives,” says Anthony Becker, vice chairman of Port Jersey Logistics of Jersey City, N.J. East Coast 3PLs such as Port Jersey are already preparing to handle increased volumes. Port Jersey, for example, has been investigating potential locations for new warehouse space. “I don’t think we’re alone in this,” Becker says. Port Jersey has also retained consultants who can provide advice related to shifts in trading patterns – and partners. “Ten years ago, we geared up to receive goods from THE 3PL EXECUTIVE
Mexico as a result of NAFTA,” Becker recalls. “But suddenly everything moved to China. Just yesterday, we had freight move though our facilities from Cambodia, not China. What does that mean? Our adviser tells us that China has gotten too expensive and that it is important to start thinking about how other Southeast Asian nations, such as Cambodia and Vietnam, may soon begin to affect the trading equation.”
And so it continues. Import trade from the Pacific Rim that began flowing into the U.S. decades ago shifted first to Korea in response to demands for lower prices. Now China has taken over. As China prospers, grows and raises prices, manufacturers will shift once again to Southeast Asian countries. Then, of course, there is India. The ever-changing shift in global trade is sure to spur new challenges and new opportunities for 3PLs. ■
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15
Facing a by Michael Fickes
Brain Drain
Unless industry takes action, a dramatic demographic change will begin to decimate executive, managerial and supervisory staffs by 2010.
16
FALL 2004
A
demographic shift of epic proportions will begin sweeping through the North American economy sometime during the next couple of years. At first, it will seem as if nothing unusual has happened. A few folks will retire. New people will move into the open positions, and business will continue as usual. Soon, though, filling vacant slots will grow difficult. Fewer prospects will apply. Those who do apply will seem less qualified. Several of your most talented people will accept offers from other companies paying higher salaries. Skeptics need only check with the U.S. Census Bureau. Between now and 2020, 70 million baby boomers will retire. But only 40 million new workers will arrive to replace them. “There will be a huge workforce shortage starting in 2010,” says Gail Johnson, editor-in-chief of Training Magazine, a trade publication that covers professional development and other employee education issues. “Companies that don’t focus on succession planning and identify future leaders will be in trouble.” Training and professional development programs can help immunize a company against the problems of tight labor markets, says Florence Stone, a spokesperson for the New York-based American Management Association. “Employees who do not feel loyal to a company will look elsewhere when the economy is booming,” Stone says. “Companies can THE 3PL EXECUTIVE
earn employee loyalty, in part, by training them for their current jobs and by preparing them for opportunities that may arise in the future.” 3PL Professional Development
A number of 3PLs have already begun to integrate professional development into operations. The goal is to improve current service quality and prevent talent drains in the future. Based in Naugatuck, Conn., the North American logistics side of Kuehne & Nagel (K&N) grounds its professional development programs in a set of “anchor principles,” eight cultural imperatives that everyone is expected to buy into. Anchor principles ask employees to act as an extension of a customer’s business; improve constantly; collaborate; keep promises; be accountable; control costs; respect others; and have fun. “These are our core principles,” says Douglas Brown, vice president, critical service logistics at K&N. “They reinforce our culture and set the foundation for professional development in the company.” For example, facility managers are expected to follow the mantra of constant improvement by identifying people in the field who may be rising stars. Likewise, senior executives are told that they should find and develop talented people within the organization. “Part of the job is to grow K&N’s bench strength,” Brown says. Tools for these efforts include the company’s performance appraisal program, pay for performance policies and incentive compensation. K&N also pursues softer, more long-term professional development goals by participating in industry programs. Brown, for example, is the chairman of the IWLA’s Emerging Leaders Council (ELC), a group
that brings together experienced logistics executives to discuss leadership and professional development issues. Most recently, the group has organized a series of monthly professional development conference calls with ELC executives from a dozen or so IWLA members. Before each call, the ELC chooses a management book with relevance to the 3PL industry. Conferees read portions of the book prior to the call. During the conference, they discuss what they’ve read. According to Brown, the group has completed discussions of two books: Good To Great, by Jim Collins, an essay on what makes a company outstanding, and Monday Morning Leadership by David Cottrell, a fictional account of eight mentoring sessions with a leadership guru. “I always leave these discussions with ideas about challenging my organization,” says Robert Russo, president of Port Jersey Logistics in Jersey City, N.J. Russo brings his firm’s entire executive team into the ELC book discussions. “What I like about these sessions is that they make it possible to learn from the mistakes and successes of other organizations,” says John Arcuri, chief financial officer of Milwaukee-based Olson Co. and this year’s ELC vice chairman. Arcuri also attends seminars at IWLA’s annual conventions, along with Olson CEO Steve Jacobus, who sits on the Marketing and Sales Committee of IWLA and is a member of the Leadership Committee. According to Arcuri, the company regularly sends sales representatives to IWLA’s annual Marketing and Sales Conference. In addition to the Marketing and Sales Conference, IWLA offers a host of annual professional development opportunities, beginning with the seminars at the organization’s Annual Convention. 17
Educating your Workforce cont’d “Maintaining high standards of professionalism is a primary mission of IWLA, and we devote countless hours designing tailored educational programs to help our members de-
velop the skills to compete effectively in the marketplace,” says Linda Wood, IWLA director of education. “Because of this, our faculty consists of experienced 3PL practitioners who are willing to share their hardwon real world solutions.
Why Executives, Managers and Supervisors Fail Research conducted by the New York-based American Management Association (AMA) has identified five major areas that dilute the effectiveness of executive and management personnel. These weaknesses are: 1. Oral communications: Executives and managers often garble the instructions they give to employees. “Communications is a process,” says Florence Stone, a spokesperson for AMA. “I say something. You listen and confirm your understanding by saying something in return. Too many managers simply tell employees what to do and don’t listen to hear if the message got through.” 2. Delegating or assigning tasks: Executives and managers too often do not explain why they have assigned a task to an employee, continues Stone. Adding information about why the task is important gives the employee important cues that enable him or her to make judgments. 3. Empowerment: Stone defines empowerment as a step beyond delegation. Instead of delegating or assigning a relatively simple task, an executive might assign a new job or set of responsibilities to employees. This is empowerment. Problems arise when the executive simply makes the assignment and walks away. According to Stone, such an assignment must include an explanation of the accountability, 18
budgets, decision-making authority, quality expectations and deadlines. 4. Lack of management flexibility: Managers delegate tasks or responsibilities in two ways, says Stone. One type of manager, the micro-manager, will demoralize and frustrate employees by hovering constantly. By contrast, macro-managers will assign a task and walk away for six months. Stone says managers must learn to adapt their management style to fit the assignment. “If the employee lacks experience and the assignment is critical, management must be tighter. If the assignment is less important and you’ve assigned an experienced person, you don’t have to hover. The point is that managers have to learn to apply flexible styles to different undertakings.” 5. Change management: In today’s world, business changes constantly, but managers often do not have the skills required to drive change. According to the AMA, a change driver is willing to drag employees through changing processes by helping them overcome resistance to change. According to AMA research, about 50 percent of employees will immediately accept most changes, while 20 percent will resist. The remaining 30 percent will never adapt to large changes.
IWLA Educational Information Technology Conference – Technology connects all phases of the supply chain, and this conference presents the latest in information technology for 3PLs. Managers and MIS directors should attend to keep their companies current. Individual vendor appointments are included. Safety & Risk Conference – Risk control and safety are of vital concern to every 3PL operation. Improve your effectiveness in controlling risk through analysis of case studies, expert presentations and group discussion. Addresses industryspecific risk management needs. *Essentials – This intensive, weeklong course is the industry’s premier comprehensive educational event. Content is updated continuously to present the latest industry trends while still covering the fundamentals essential to successful warehouse logistics management. *The Advanced Course in Logistics Management – This three-day course, taught by leading industry experts, is for anyone interested in improving their logistics management skills. More advanced logistic operations topics are addressed via case studies and group exercises. Legal Issues Webcast – Learn the latest about legal issues and pitfalls impacting the outsourced logistics industry. For example, Bob Moran, president of Amware Logistics Services, has more than 25 years of experience running a 3PL, chairs our Marketing and Sales Conference and teaches the cost-rates RFP responses and Essentials courses.” This year’s IWLA educational offerings included conferences on managing family-owned businesses, growing business through the use of cutting-edge technology and safety. The Association also will run its highly regarded Essentials Course: a weeklong offering that covers the fundamentals of warehouse logistics management. Participants carry out hands-on exercises, review case studies and parFALL 2004
Courses Costs, Rates and RFP Responses Course – The financial success or failure of a 3PL often hinges on a warehouse manager’s ability to accurately assess their costs and price the services competitively, but profitably. Learn the ins and outs of this important operational imperative. *Annual Convention – Discover the Magic of Value-Added Warehousing, to be held March 20-23, 2005 at The Hilton in Walt Disney World Resort, Orlando. Gather to share ideas and gain valuable industry information and insight with other warehouse logistics professionals and industry experts. *Regulatory Compliance – Learn how to comply with the myriad government regulations related to the storage and transport of chemicals in a cost effective manner while meeting customer demands and reducing insurance exposure. *Marketing & Sales Conference – Learn cutting-edge marketing and sales techniques that work in real world situations from seasoned 3PL industry experts.
quarterly magazine or website, or serving on an IWLA committee, council or board. Upon completion, individuals receive the distinguished Certified Logistics Professional (CLP) designation. Starting From Square One
Following a major change in its senior management team, Columbus, Ohio-based ODW Logistics Inc. is currently building a new professional development system. “Our industry today requires an entirely different skill set than it did 10 years ago,” says John Ness, president of ODW. “Today, we still have to fulfill orders flawlessly, but we also have to evaluate the next steps in customer supply chains so that we can add value by lowering costs and shortening delivery cycles. Candidly, I don’t think we developed our executives well enough to prepare for this kind of transition.”
Ness goes on to say that he intends to make sure that ODW has a strong focus on strategic goals and the training and development necessary to reach those goals. “We don’t want to get behind the curve again,” he says. Currently, ODW is discussing general business and strategic planning with a consultant. The goal is to develop a cohesive strategy that senior management will embrace. Next, Ness will compare management’s existing expertise with the skills required to execute the new strategy. Professional development activities will follow, with the goal of helping executives develop the expertise required by the strategy. ODW is proving that companies that have not focused on professional development in the past have time to change and to tailor such programs to a firm’s strategies. Just don’t wait too long. 2010 is only five and a half years away. ■
*Qualifies toward completion of IWLA’s prestigious Certified Logistics Professional (CLP) designation. For a complete listing, including dates, go to the Events section of www.iwla.com. ticipate in discussions related to profits, new business opportunities and compliance with government regulations. To reinforce the need for improved professionalism, IWLA created a certification program for 3PL professionals. Recognized by hundreds of companies, the curriculum includes courses on logistics fundamentals/ regulatory compliance; costs, rates, and RFP responses; marketing and sales and executive development. In addition to passing the courses, individuals must make an educational contribution to the industry by speaking at an IWLA educational event, writing an article for the IWLA’s THE 3PL EXECUTIVE
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Perpetuating Success A
by Kenneth B. Ackerman Top Causes of Failure in Family-Owned Businesses
1. 2. 3.
Conflict within the family Resistance to change by senior family members CEO position inherited by someone lacking leadership
Challenges to Success of Family-Owned Businesses 1. Changing gender roles
2. 3. 4.
5. 6.
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Erosion of parental authority Increased geographic mobility Increased longevity, and people remaining active in the workplace past traditional retirement age Growing number of merger opportunities Succession planning
ccording to research from Harvard Business School, two-thirds of the private enterprises around the world are family owned. With the growth of privatization in countries where socialism has been dismantled, the number of family businesses is destined to grow even further. In many nations, well over 90 percent of the private business enterprises are family owned. So even if your company is not a family business, chances are great that one or more of your major customers or suppliers is. Therefore, it is vital to gain a better understanding of how family businesses function. There are at least four ways for a business executive to get involved in a family business. First, an entrepreneur or founder decides to bring children, siblings or other relatives into the business. Second, the child of a family business owner joins the enterprise and hopes to have a successful career. Third, the owner of a family business wants to sell the company. Fourth, a growing logistics service company wants to buy other enterprises, some of which are familyowned and/or family-managed. While Americans are proud of our strong economy, there is ample evidence that family businesses are more popular in other cultures. Italy is just one example, where even the underworld is referred to as “the family.� The prime reason for this is the strength of the family itself. In cul-
tures where divorce is virtually unknown and three generations frequently live under the same roof, it is easier to maintain a harmonious family enterprise. Family businesses are most likely to flourish in cultures that cherish close family ties. However, there also are many issues specific to the family-owned structure that can contribute to failure. Conflict within the family is a prime cause of trouble. Resistance to change by senior family members may cause a family-owned business to lose its cutting edge. Finally, someone who lacks the leadership qualities required to head a business might inherit the chief executive position. The leadership issue is frequently the most important cause of problems, and it is essential to recognize that leadership is not a universally held or easily learned talent. When leadership is not present, a family business will flounder and eventually fail. Leadership has always been the most important issue in successful corporate governance, and it is even more critical in a family business environment. Twenty-first century North America brings a whole new set of challenges to family businesses. Gender roles have greatly changed. The day when women were primarily interested in marriage and homemaking is over, and the number of women who are ready and willing to take business leadership roles has accelerated and FALL 2004
in a Family Business will continue to do so. Parental authority is less pervasive than it was a few decades ago. Geographic mobility is greater than ever before. Along with increased longevity, more people are remaining active in the workplace long past the traditional retirement age. Wall Street’s fascination with the logistics industry has created a growing number of opportunities for mergers. Succession planning is a particular challenge in family businesses, since it is natural for the owner to want to preserve the power of the family in the enterprise. There is also the added emotional baggage. Biology forces the eventual retirement of every executive, and today’s improved lifestyles could make that event later than ever before. But eventually the next generation must be developed as future leaders. This creates two challenges: creating a “take charge” capability for the heir apparent; and allowing the current CEO to smoothly pass the reins. Looking Outside The Family
To take some of the emotion out of this process, it is helpful to recruit and use an outside board of advisers. The board can provide a neutral and effective source of arbitration in the event of a family dispute. It can provide guidance on executive compensation, particularly where family members are concerned, and can THE 3PL EXECUTIVE
“grade” management effectiveness, both for family and non-family members. In fact, the board can act “in loco parentis.” But all corporate governance models that apply to public companies should also be implemented in a family business. Finally, if you are the founder of the enterprise, how can you protect your children and other family members from landmines? If you are the heir to a family business, how can you strengthen the enterprise? If you are buying a family business, how do you overcome seller’s remorse. If you are selling a family business, are you emotionally prepared to sell without the feeling that you are “selling out”? These are criti-
cal questions that must be answered successfully in the family-owned business environment. The successful CEO of a family business recognizes that his/her obligations to shareholders, employees and customers must take priority over obligations to the family. ■ Kenneth Ackerman is president of The K.B. Ackerman Co., a Columbus, Ohio-based management advisory service that specializes in warehousing and supply-chain management. He was co-presenter of a workshop on family-owned business at IWLA’s 2004 Annual Convention in Phoenix. He can be reached at general@warehousing-forum.com.
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Learn the X’s and O’s of Logistics Management through IWLA’s Essentials Course at Ohio State University The Essentials Course — This comprehensive, week-long course is the industry’s premier “training camp.” To be held October 25-29, 2004, The Essentials Course covers the fundamentals and latest trends essential to your success in warehouse logistics management. These range from warehouse law and human resources management to government regulations and transportation. And the Essentials Course is the cornerstone for the distinguished Certified Logistics Professional (CLP) designation.
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IWLA – OSHA Alliance A Safe Bet
M
any people in our industry see OSHA as a “fourletter” word. It is an agency that is generally synonymous with bad news for a warehouse. However, this is no longer an accurate portrayal of reality, especially for members of IWLA. On Feb. 17, IWLA and the Occupational Safety and Health Administration (OSHA) signed an agreement that established a collaborative relationship between the two organizations aimed at fostering safer warehouses. A driving force behind this alliance was OSHA’s 2003 implementation of strategic management plans at the regional level. As part of this plan, the agency identified public warehousing as having a high accident rate and a high level of injury severity, targeting it for enforcement actions. On a positive note, OSHA changed its emphasis to include outreach and intervention along with its inspection efforts, and IWLA saw its chance. Its alliance with OSHA is an extension of these outreach and intervention efforts, and now, through this educational partnership, IWLA members should soon have the tools to reduce or avoid violations. Initially IWLA and OSHA identified the following areas of focus: to teach warehouse employees how to work more safely
THE 3PL EXECUTIVE
through educational programs and voluntary inspections; to reach out to workers and employers through various media and speaking engagements to encourage participation in voluntar y cooperative programs; and to facilitate a national dialogue about the importance of workplace safety and health by convening forums and roundtable discussions. With these broad goals in mind the project was launched in February. Efforts to date
In March, IWLA began implementing the agreement by forming a steering committee of safety experts from member companies. Currently the steering committee includes: John F. Bauermeister of Freeport Logistics; Todd Currier of Exel; Eric Fabian of Genco; Ernie Harben of Saddle Creek Corp.; Forrest W. Henderson of Inland Star Distribution Centers; Thomas Muscarella of Safety Equipment Services; Fred Schultz of Satellite Logistics Group; and Jeffery C. Tanner of Kenco Group. The committee began meeting in March and holds monthly conference calls to provide updates. The first implementation conference calls between the IWLA steering committee and members of OSHA helped to narrow the initial focus of the alliance’s efforts. The group is currently focusing on er-
by Nathan Noy
gonomics and forklift safety. These are two areas where OSHA intends to step up inspection efforts in the coming months. The group is aggressively looking for ways to help members take a proactive approach to assuring compliance in these areas. The members of the steering committee bring a depth of knowledge about best practices in these areas since they are at the forefront of assuring full compliance within their own companies and have developed numerous ways to maximize safety in their warehouses. Next steps
The committee is working with OSHA to create and enhance tools that can help IWLA members more effectively embrace safety initiatives. Early efforts have included the review of a pocket guide for warehousing, a safety checklist for forklifts and the modification of an e-tool for warehouse ergonomics. Additional efforts include the planning of specialized education courses for IWLA members. Active involvement by members is critical to the success of this alliance. For more information regarding the IWLA/OSHA Alliance, or to become a member of the steering committee, please contact IWLA Director of Government and Legal Services Nathan Noy at nnoy@iwla.com. ■ 23
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L e g a l Q & A by Nathan Noy IWLA receives a variety of legal questions on a daily basis. The team that fields these questions includes litigation experts from Fisher Kanaris, P.C., plus contracts and U.C.C. expert Bill Towle. Coordinating all the action is Nathan Noy, IWLA’s director of Government and Legal Services. If you have a question, please contact Nathan at nnoy@iwla.com.
Q: I have noticed a disturbing trend over the past few months. More and more finance companies and banks are asking me to waive my warehouseman’s lien. The most common form of such a request comes from a warehouse customer that has obtained financing from a lending institution. The lending institution asks the customer to have anyone with a potential secured or unsecured interest to sign a waiver that grants the lending institution the superceding secured interest should a bankruptcy proceeding arise. Should I sign it? A: If a financer is asking you to sign an agreement like this, they simply are asking too much from you as a warehouseman. Most security agreements only call for permission by the financer to release product. ILWA does not recom-
mend signing an agreement that waives the warehouseman’s lien. A contract granting the above would certainly waive some of your rights under the warehouse receipt, and it is suggested that this be modified before signing. If they want most of this language, it is urged that you demand language stating: The terms and conditions of the storage of subject product is pursuant to the storage contract and/or warehouse receipt. The warehouseman, by signing this agreement, does not agree to waive any of its rights and obligations under its storage contract and/or warehouse receipt. If you are asked to sign such an agreement, please contact Nathan Noy at nnoy@iwla.com. ■
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