Is Logistics Getting A Fair Shake In Your Organization?

June 1, 2007
Remind senior management to view logistics as a center that contributes results and not one that adds expenses.

In many organizations logistics is thought of as processes that happen behind the scenes and is viewed as an expense typically discussed when problems occur. Do you want to change that perception? Then rethink about the way you communicate to your senior executives.

First, think about your department's role in the organization. Logistics supports the business through increasing speed to market, improving inventory turns, reducing inventory obsolescence risks, creating leaner supply chains, enabling entrance to new markets faster -- all contributing to a faster cash-to-cash cycle.

The key to changing perceptions of logistics is to measure the impact of this area and communicate results in a way that causes senior management to view this area as one that contributes results not one that adds expenses.

Communicate your value to c-level executives by positioning the value of your work from their mindset. Think like a CEO and use words, references and content that reflect what is important to them. Senior executives are concerned about cost competitiveness. This is often the driving factor behind sourcing products from around the world.These extended supply chains can have a negative impact on customer responsiveness. Service failures can't be tolerated, as customers demand flawless execution on service commitments. Helping executives understand the value of logistics in supporting precise material movement within the supply chain in their terminology, namely financial terms, will help change the mindset of executives.

CFO's want to actively manage cash the same way supply chain managers manage inventory and logistics managers manage material movement. As the supply chain becomes longer, so does the cash-to-cash flow as more cash is tied up in inventory. As companies engage in global business, lead times are often extended resulting in reduced inventory turns and extended supply chains. The longer lead times stretch the cash-to-cash cycle making it difficult for the finance organization to have clear visibility of availability and timing of cash flow. Being proactive in helping finance calculate the impact on cash flow before committing to global procurement or sales is critical. Alternatively, finding ways to reduce the days sales outstanding, days in inventory or in-transit time will help bring cash into the company.

Rather than talk about the cost of logistics as an expense, deliver facts that speak of the contributing value it provides from a global supply chain. Global supply chain uncertainties such as late or incomplete shipments cost the business with higher buffer inventories and freight expediting expenses. Measure and report on the impact of your proactive measures taken to minimize the negative impact of suppliers who miss commitments.

Demonstrating value in financial terms will get the attention of others who may not fully recognize the value of your business contributions. It is also very important to have these conversations with organizational colleagues whose decisions impacts logistics or whose work is impacted by logistics decisions. This will help keep all departments in synch and supporting the same logistics and supply chain strategies.

The goal is to help senior executives see logistics as much more than a necessary cost center, but a competitive opportunity. Conveying the contribution of logistics to the business, and its alignment with corporate goals will change the dynamics of your business role.

Linda M. Taylor is in the Industry Marketing division of FedEx Corp. FedEx provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. The company offers integrated business applications through operating companies competing collectively and managed collaborative, under the FedEx brand. For more information, visit

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