Manufacturers and retailers usually see logistics as a cost-center whose price they need to squeeze. 3PLs have been fighting against this pricing trend by creating value-added services and differentiating themselves from their competition. Innovation is the key driver 3PLs are banking on to increase margins. They have had significant difficulties driving innovation without buy-in from their customers.
Transforming Corporate Culture
Despite the positive revenue increase, the growth trend in the 3PL industry is in jeopardy. This is because shippers tend to view the interactions they have with their 3PL partners as mostly transactional. This means, companies are less likely to foster the collaborative relationships necessary for solving the challenges facing today’s global supply chains.
3PLs are beginning to understand that the deficiency of collaborative relationships is the death knell for innovation. Moreover, they are realizing they can transform their corporate culture, and their financial results, through increasing collaborative behavior both internally and externally.
Current Problems and Critical Questions Facing the Supply Chain Industry
The deficiency of collaborative relationships between 3PLs and shipper-partners, and their resultant lack of organizational innovation, is evidenced by the following:
- Nearly 3 in 5 shipper-partners plan to reduce their use of 3PLs
- Partners do not believe 3PLs are capable of providing disruptive innovation
- 3PLs are not currently structured to provide innovation because the exchanges are seen as transactional versus being strategic and collaborative.
- 3PLs are lacking a culture that embraces collaboration and innovation
- If the deficiency of collaboration trend continues, 3PLs could lose market share which could lead to an eventual decline in revenue and profit.
A broader consequence could be the continued stagnancy within the 3PL industry. The critical questions being asked by those in the 3PL and Supply Chain Industry are:
- How can we increase internal and external collaborative relationships?
- How can we create an environment that promotes innovation and creativity?
- How can we engage employees, at all levels, to create sustainable solutions?
- How can we improve communication and break-down internal and external silos?
3 Steps to Increasing Collaborative Relationships
All companies are interested in increasing profit and growth, building a culture that innovates daily, motivating their employees to be engaged, and improving effective communication. These goals cannot be achieved without a specific strategy.
There are three intuitive and integrated steps designed to increase collaborative relationships leading to innovative solutions while, at the same time, building an engaged and motivated workforce.
The saying “what gets measured, gets done” is a testament to how important it is to not only measure but to create smart metrics that are linked to both strategies and strategic goals. Measuring allows one to make decisions using data versus emotion or personal preference. It also enables accountability and action, while driving both employee engagement and success.
The goal of this step is to align people with strategic goals and initiatives, while building engagement, ensuring collaboration, and improving communication. One element of this process is the Collaborative Huddle. Collaborative Huddle Sessions are brief, structured meetings designed to:
- Engage and build unity
- Motivate employees
- Communicate vertical and departmental news
- Share knowledge
- Applaud and recognize positive work
- Set expectations
- Initiate action to address gaps
- Align resources with strategies, goals, and metrics
Impactful workplace ideas come from a variety of sources in a wider variety of ways and these ideas need a place to germinate. One way to create such a place is to develop an all-inclusive, comprehensive ideas and improvements program. This type of program is designed to provide training, tools, and methodologies to all levels of employees so they can learn how to turn ideas into realities.
Next Steps for Senior Leaders
Senior leaders should strategically consider practical steps to increase collaborative relationships as part of their organizational culture. This involves a paradigm shift in corporate culture along with new policies, training programs, and a knowledge sharing intranet site hosting best practices. 3PLs may need to consult with outside organizations specializing in creating advanced collaboration within companies and sustaining the collaborative relationships over time. Improving collaboration with shipping partners could lead to 3PLs becoming a viable outsourcing option while building long-standing business relationships.
Dr. Richard Bushart, Kettering University Master of Science Operations Management instructor and author of “From a Spark to a Change” a transformational Lean Performance Excellence System, offers concrete ideas about the role senior leaders must play in igniting the cultural transformation of their organizations.
“From an interpersonal communication and collaboration view, senior leaders must be willing to embrace and support change by being open about new ideas from the bottom-up versus top-down. All too often senior leaders feel compelled to drive change, which often times inadvertently discourages positive communication, collaboration, and idea generation from the front-line people. The reality is front-line employees need to be empowered to impact change and communicate effectively with peers and upward because after all this is the group of people most closely aligned with the actual work being done. Senior leaders will then be freed up to focus on the vision and strategy at hand.”
3PLs now have empirical evidence and concrete recommendations on how to produce the disruptive innovations that are desperately needed to move the third-party logistics industry forward. Dr. Bushart explains the idea of disruptive innovations:
“Think of different levels of innovation; incremental and disruptive. An incremental improvement can be defined as a small step forward or enhancement to an existing product or service; a single or double to use a baseball reference. A disruptive innovation can be defined as the next great thing or invention; a home run or grand slam. An example would be the iPhone; the initial launch of the Apple iPhone was a disruptive innovation to the market as it was brand new and a game changer. Subsequent iPhone releases are more incremental improvements, which are important but not quite disruptive.”
Awareness of the connection between collaborative relationships and organizational innovation may assist 3PLs in actually building collaborative relationships with shippers. Doing this effectively is likely to lead to disruptive innovation, creative solutions, and gains in market share, profitability, and sustainability.