Executives more involved in supply chain loop
Supply chain professionals tell Target Logistic Services that senior management support is among the most crucial components of a successful logistics program. During the past year, we have been asking our customers to ascertain the role senior management plays in deciding how, when and where supply chain decisions are made.
Target has found that senior executives increasingly are looking into every aspect of the logistics process. They are putting teeth into supply chain policies, are controlling the budgetary framework under which logistics programs operate and are utilizing their management prerogatives to support or subvert any supply chain initiative. As an international freight forwarder, we welcome this growing interest and cooperation by senior management. We believe this interest aids in Target’s logistics efforts for our customers.
Of course, senior management involvement in supply chain strategy is not uniform. With two million US corporations ranging in size from under $100,000 in annual sales to hundred billion dollar entities, uniformity in logistics strategy and objectives neither is possible nor even desirable. Target finds that management interest ranges from a hands-off policy to being directly involved; from those who solely exercise veto power to those whose interaction with their traffic departments is almost on a daily basis.
While involvement levels are as varied as corporate logistics programs, we do find the trend is definitely toward greater awareness and interest in how, when and at what cost their companies’ finished products and components are distributed around the world. There is any number of reasons for this greater awareness. The potential for terrorism attacks on our transportation infrastructure; Sarbanes-Oxley accountability if the corporation is a public one and perhaps most importantly, the ongoing cost consciousness by senior management in dissecting almost with a surgical scalpel every phase of their manufacturing and distribution operations.
Transportation costs on a company balance sheet are perhaps the second or third most controllable expense at most manufacturing companies. Years ago, when companies could control pricing to a far greater extent than today, with resultant healthier profits, transportation was given little thought by senior management. It was the rare executive who left the comfort of his plush, corner office to visit the bare walls and floors of his traffic department. Today, that picture is changing rapidly. With profits now more elusive, logistics costs now are scrutinized with an almost green eye shade mentality at almost every size company.
Target also finds there is more of a consensus among senior executives at both large and small companies in regard to the importance of supply chain management. Small companies executives, with their tighter budgets, always were far more conscious of logistics costs than officials at large companies who concentrated primarily on the “big picture” of sales, marketing and finance. This dichotomy is narrowing. Now, senior officials at companies in the multi-billion dollar class are very conscious of the nuts and bolts of their logistics operations.
Chris Coppersmith, President & CEO at Target Logistic Services, says that senior management also is more closely immersed in contract negotiations with their logistics providers than ever before. “Not too long ago, we would negotiate logistics contracts with traffic managers. Senior officials simply signed off on them. Now, contracts are reviewed with a fine tooth comb by senior management before a signed approval is given.” The Target head noted that signing the contract “is only the first stage in the customer-forwarder relationship. Senior management now often reviews these contracts periodically to ascertain if price and service conditions are being met.”
Coppersmith also reported that interest among senior executives spikes when logistics initiatives go into effect. “Corpo