Innovation in logistics outsourcing is a hot topic. When asked about logistics outsourcing challenges and opportunities at a CILT meeting earlier this year, industry specialists mentioned innovation more than any other subject. Subsequently, innovation was used as a topic at the CILT Outsourcing Life Cycle event on the 19th May for discussion among the 60 delegates including manufacturers, logistics service providers, corporate solicitors, consultants and academics. Despite the different background and perspectives of these delegates, there was strong agreement on these 9 key points:
1. Do your due diligence before agreeing innovation goals in a contract. This goes both ways. Manufacturers should assess whether the logistics provider is capable of the level of innovation you are aiming for (visit reference sites) and vice versa, 3PL should consider whether their client is genuinely interested in innovation, and willing to invest some time and effort. They may be looking for a “commodity” service at the lowest price.
2. Manage expectations. Not everybody means the same by innovation. Radical innovation and gradual innovation (continuous improvement) are both relevant but are different in risk and potential reward and require a different approach.
3. Build up trust – trust is key and trust takes time. Good communication, a broad base, and informal contacts (coffee, dinner) are key. On the other hand, not getting credit for innovative ideas and changes in key personnel in either party can be detrimental.
4. Include gain sharing in the contract. Long open book contracts are considered to be the best, but not the only framework for successful innovation
5. Use a mixed team for idea generation. Successful idea generation requires out-of- the-box thinking. A mixed team with both generalists and content experts and different age groups are most likely to be successful. Both over 30’s and over 50’s are more innovative than the 30-50 age group.
6. Ensure the relationship has a broad base in both parties. Involvement of people from different departments (operations, HR, IT) and levels (work floor, middle management, senior management) will all bring different perspectives and ideas to the table.
7. Start small. Learn to walk before you run. Small, operational, low investment ideas were mentioned as most successful – “work floor low hanging fruits”, or in other words; continuous improvement. This may be the best place to start before moving on to bigger innovation initiatives.
8. Manage the risks. Innovation means risk. Who carries the burden if the plan goes wrong? Are the right people in place? Managers in the age group 30 to 50 are often risk averse and can be an obstacle to implementation of good ideas. Job security, mortgages and school fees were mentioned…
9. Use a change management approach to implementation. In general, 70%(!) of change initiatives fails, due to lack of planning, lack of communication, lack of trials, and other basic change management errors.
To find out more on The Logistics Business’ insight into innovation in logistics outsourcing, contact us on 01527 889060 or email firstname.lastname@example.org.