Genesis Engineering

Description

In the 28 years since transportation deregulation allowed logistics managers and their service providers the freedom to bargain and innovate, much has been accomplished in the industry. The initial stage was simple. Shippers picked carriers based on the lowest rate. Supply, demand and competition drove prices down. Carriers began to pay more attention to their costs as their profit margins shrunk. Then, as businesses began to focus on leaner inventories, adopting just-in-time and similar strategies, service reliability took over center stage. New value added services were developed. Expansion of global sourcing and sales created more opportunities for smart logistics providers. Much of the focus in the past two decades has been on logistics efficiency. From 1980 to 1993, logistics costs as a percentage of gross domestic product dropped from 16.5% to 10.2%. Unfortunately, from 1993 to the present these gains have stalled. There is still a strong movement to force down transportation costs because they typically make up almost half of a companies logistic expenses while providing only a small part of the revenue. Now the focus is on the financial side and balance sheet management. More and more financial officers are looking to reduce working capital, taking assets off the balance sheet and turning them into cash. Many companies ’ processes have evolved over the course of doing business. They are now turning to third party logistics providers (3PL) to assist them in making the changes required. A paradigm shift within an existing organization could take years to accomplish. For many, the time spent attempting the change from within would be devastating. They realize that market share comes from not cutting price, but by doing such a superb job that you can attract profitable market share. In others words, you not only need the right product but also the right processes. Activity Based Compensation gives us the opportunity to identify specific activities. Then they can be tracked and analyzed. After some history has been developed, specific decisions can be made to change a method or process. It's effects can then be monitored for its cost effectiveness and value.

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