As the retail supply chain becomes increasingly complex and integrated, strong partnerships between retailers and transportation providers become even more critical to ensuring an efficient, effective supply chain. Building those partnerships is key, and that’s what many supply chain executives will be doing at the NRF Global Supply Chain Summit, May 6 to 8 in Atlanta.
To kick things off for the upcoming Summit, I asked asked Michael Noone, executive vice president and chief operating officer of Yusen Logistics (Americas) Inc., to share some insights into supply chain challenges for the year ahead, the value of collaboration in an increasingly complex environment and how transportation providers are taking corporate social responsibility seriously.
We are entering the traditional contracting season for retailers and their transportation providers. What do you see as the major issues that both sides need to consider during this year’s negotiations?
Both parties need to continue the dialogue to help cover fluctuating costs. This is especially important when it comes to fuel so that the cost exposure is not borne solely by the carrier. Both parties also need to work together to manage multi-year contracts and discuss rate changes to reflect not only market changes (rates going down) but also cost changes (that usually go up).
When a retailer and their transportation provider have a partnership in which the value to both sides is widely recognized within each organization at the highest levels, it creates its own momentum to move the relationship beyond the standard transportation transaction. For the retailer this usually means competitive ocean rates, responsive customer service and accurate invoicing, reliable space and equipment access, and extensive EDI connections. For the transportation provider, this is seen in good destination/origin cargo mix, slack season support, cost burden sharing, and annual volume growth. It can also lead to multi-service opportunities that lead to their own benefits.
How important is collaboration between retailers and their transportation partners?
The easy answer is ‘very’, but that has always been the case. What we are starting to see now, though, is a real appreciation for the value collaboration can bring, and this comes down to the increasing sophistication and integration of supply chains.
As 3PLs (third-party logistics providers) and logistics companies offer more integrated services – for example, NVOs (non-vessel operating common carriers) as well as domestic transportation services – the relationship between the retailer and transportation provider is more involved, simply because of more touch points. That adds a new dynamic that can offer more value to both parties.
Collaboration while working across multiple transportation modes delivers more benefits to the shipper and the retailer. The greater the collaboration, the better the opportunities to reduce cost, improve efficiencies and manage risk.
Collaboration is also about communicating the issues, too. Not everything goes right every time, and there are also external pressures and challenges that need to be addressed. Good communication lines stop these from becoming big problems and instead allow people to work together on solutions.
What can retailers do to strengthen partnerships with their transportation providers?
Retailers continually ask their providers about the next trends in logistics or where the next savings and efficiencies are going to come from. These are great questions that keep the providers constantly innovating, but without real insight into where the retailer is heading, the transportation provider can’t provide a real answer. It would be easy to throw out new IT ideas or suggest new sourcing areas, but the provider has to be sure it is really aligned with the retailer’s growth plans and direction. Insight into the retailer’s vision also allows a provider to offer better planning and investment strategies.
This comes back to my point about collaboration. Collaboration isn’t one way. It’s a partnership, and that means that both parties have to be open and willing to talk.
Another way to help strengthen partnerships is by using a multifaceted logistics provider. Transportation providers who can offer multiple services can better understand retailer’s needs overall.
What are the biggest challenges facing ocean carriers today? How do you see these issues playing out?
Right now carriers are enjoying some tightening on certain strings, so as a result they are standing firm on rate increases. However, they are facing a market where there will be over capacity, and that will be putting pressure on rate levels. This is partly due to the economy and consumer demand, but also because of new ship orders entering the market. Most likely we’ll see a lay-up of capacity to balance the supply-demand, which will lead to a capacity crunch. Then the challenge will be for retailers to secure space. Fuel costs will also remain an immediate concern in 2012.
Many carriers are heightening their commitments corporate social responsibility and this is becoming very important to your retail partners as well. Tell us about what you’re doing in this area.
We were just recognized as part of the NYK Group as one of the ‘World’s Most Ethical Companies‘ for the fifth year in a row, which, for us, speaks volumes about the overall vision and direction of the Group. Yusen Logistics itself also now has global certification under ISO14001 for Environmental Management Standards and Green Management Standards. It’s a very important area for us, and something that really makes us stand out from other companies.
These are just two examples, though. There is more to Corporate Social Responsibility (CSR) than recognition or certification. CSR and Environmental Management are concepts that are pushed through the organization at every level, so it’s an area we take great pride and care in as a daily activity. We have an ever evolving list of projects underway in our Warehousing and Transportation divisions designed to cut waste, reduce emissions and energy consumption and provide more sustainable transportation options to our customers.
What got you into this business and what keeps you here?
It started in college with coursework on multinational trade and development, and I was hooked from there. A lot of it came down to, and still does, the dynamics of change in world economies, sourcing shifts and trade growth. Essentially, the ever changing nature of the global economy fascinates me. These changes require us to develop new strategies, and it’s this constant evolution of new challenges to be solved that keeps me interested.
In my 27 years in the industry, I’ve worked for three great, global companies, so the experiences have also been personally rewarding. I’ve had the opportunity to travel, and have met a lot of interesting people through my career. The relationships I’ve built up over the years are very important to me, and I’m glad to say I now count a lot of these people as close friends.