problems with fresh eyes and not let your current business model blind you to other possibilities. Because of the
enormous amount of capital tied up in distribution centers
and distribution/transportation networks, we tend to
assume that our distribution infrastructure is too big to
tamper with. But that kind of thinking too often leads to a
Band-Aid approach.
I think it is really important for people to ask themselves,
‘If I were starting from scratch now—no legacy IT systems,
Let’s use Wal-Mart as an example. Wal-
Mart built its entire competitive advantage
on being the lowest-price competitor. So in
recent years, they’ve started taking over dis-
tribution for their suppliers simply because
they have such a powerful supply chain.
They know they can do it even cheaper
than the supplier can. So they basically tell
their vendors, ‘Here are the box dimensions; here are the specs. Don’t put anything on a truck. We’re going to come to
you.’ I mean, that is completely flipping, to
use my language, the general understanding of how the whole supplier-retailer relationship works.
But someone at Wal-Mart obviously said, ‘Hang on a second. It is actually going to be cheaper for me to pay my
own transportation given the size of the Wal-Mart supply
chain.’
QAbsolutely.
AIt is a brilliant question to ask: How else could we do this?
Take another example from Wal-Mart. We are now having a crack at the coming supply chain for medical and
health supplies in North America. They know they do this
better than anybody else. So to go back to my question of
how to extract value and how to find new value right now,
for Wal-Mart the answer is obvious. They know their supply chain is so good they can find new value in whole new
sectors because of the power of this part of their business.
QWhat are the biggest challenges logistics professionals face when they try to drive organizational change?
AOne is siloed thinking. If you were to name a part of business that touches every other part of the busi-
ness, you’d have IT and you’d have distribution—supply
chain, logistics, and warehousing, right? Unfortunately,
distribution is too often treated as a silo. But if your marketing people go out and make a promise about, say, speed
and the warehouse doesn’t deliver, you have killed that
promise.
QAny others?
AAnother challenge will be keeping up with changing expectations. Once upon a time in business, it was
good enough to be really, really fast or really, really good or
really, really well priced. But as the marketplace evolved, that all changed. All of a sudden, being just one of those things wasn’t
enough—you had to be two of the three.
For instance, if you weren’t cheap, you at
least had to be both fast and good.
But now, businesses are finding that in
order to stay in the game, they need to be all
three: fast, good, and cheap. And even that’s
not enough to give them a competitive
advantage. What is giving businesses a competitive advantage is what I call the fourth
dimension. It is things like how easy you are
to deal with.
QCould you expand on that?
AThe thing most people are suffering from today that you didn’t see seven or eight years ago is a kind of cognitive overload. Everyone today is under so much pressure
that they’re unwilling to take on even one more thing. So it’s
no surprise that they’re choosing suppliers on the basis of
how easy things are, how easy they are to deal with, how
easy it is to get their order delivered.
Take these five-hour time windows for deliveries of mat-tresses, for example. I’m like, five hours! Are you kidding
me? Those guys are getting 12 bucks an hour and I have to
wait around five hours for you? I will pay you five times as
much if you get it to me at the time I want it delivered. I just
can’t handle having that stuff hanging up in the air because
it adds to my cognitive load.
QHow about the future? What will be the key compet- itive differentiator a few years from now?
AI think in three to four years, we’ll be having a discus- sion about the fifth dimension, which will be design
and green and carbon footprints and all that brand and
social identity stuff.
